The voices of Urban Institute's researchers and staff
May 3, 2017

Year-round Pell grants are a good first step, but there’s more to do

May 4, 2017

The bi-partisan budget agreement that prevents the government from shutting down contains some good news for college students: it allows recipients of Pell grants—federal grants for low- and moderate-income students—to receive up to one-and-a-half full grants over the course of a year so they don’t have to take the summer off. The return of year-round Pell grants is a positive step, but more remains to be done.

The Pell grant program offers students up to six full-time semesters of grant funding. The size of the grant is based on the financial need of the student (including his or her family) and whether the student is enrolled part or full time. In the 2016–17 academic year, full-time students were eligible for a maximum $5,815 in Pell grant funds. The maximum amount is scheduled to increase to $5,920 for 2017–18. The new provision means some students who take summer courses will receive more than that amount.

For Pell grants, being a full-time student means enrolling for at least 12 credit hours per semester. Right now, however, students who take 12 credit hours in the fall and another 12 in the spring exhaust their Pell eligibility for the year even though they are still 6 credit hours short of the average number needed each year to earn a bachelor’s degree in four years or an associate degree in two years.  

The logic of offering year-round Pell grants to facilitate continuous enrollment and speedy degree completion is strong. Overall completion rates are low; just over half of all students who start college earn a degree or certificate within six years. The longer it takes for students to get through their programs, the more likely it is that life will intervene: the student or a family member will fall ill, the babysitter will quit, or a part-time job will evaporate. Moreover, the sooner students earn their degrees, the sooner they can find work with college-graduate wages.

Year-round Pell grants are also a winning proposal partly because the arrangement doesn’t necessarily have significant budget implications. The budget agreement does not include extra funds for Pell grants, and it maintains the limit of 12 full-time semesters (or equivalent) of funding per student. It just makes the timing of that funding more flexible.

But a two-year experiment with year-round Pell grants from 2009 to 2011 contributed to the Pell program’s record expenditures at the height of the recession.  If students use summer terms to replace extra fall and spring terms, the program’s annual costs can increase, but program costs over time will not. But if students use the funds to spread out their studies, overall program costs could increase without speeding degree completion.

Under the year-round Pell grant proposal, Congress has removed the incentive for students to take the summer off in order to be funded for each term of enrollment, but it has not eliminated the incentive to stretch out the credits required for a degree over more terms.

Under the current Pell program, a truly full-time student (student A) would take 15 credits in the fall and 15 in the spring, completing a degree in four academic years: 8 semesters with no summers. She would be eligible for four full-year Pell grants. If student B, meanwhile, enrolls in just 12 credits per semester, he would receive five full-year Pell grants, taking five years to graduate, at significant cost to himself, the institution, and the Pell program.

A year-round Pell grant system is an attempt to allow student B to graduate in four years, but it still provides five years’ worth of funding by adding the summer grants to the full-time fall and spring grants. With year-round Pell grants, students A and B both graduate in four years, but student B receives an extra year’s worth of funding.

A more equitable and efficient system would not favor one pattern over the other. It certainly would not favor the pattern that requires the student to spend more terms enrolled in school.

Estimates suggest that about a million students will get additional funding from year-round Pell grants that will help them get through college. The Department of Education should monitor the program carefully. How many more students will take summer courses? Will those courses speed up their degree completion? Or will students take lighter course loads in the fall and spring to reduce pressure and maximize their Pell awards? For some students, that will mean four calendar years and more funding. But for others, it could lead to bumping up against the six-full-year maximum in just four calendar years.

Several proposals in recent years have suggested designs for a Pell line of credit or a Pell Well—a program that would allocate the funds to students as they need them. This strategy would eliminate the concept of the maximum annual Pell grant and the oddity that some students receive more than the maximum. Instead, it would base Pell eligibility on the credits for which students are enrolled regardless of academic years.

The return of year-round Pell grants is definitely a welcome policy change. But in the future, Congress should address this remaining flaw.

Students relax and study at Polk Place on campus at the University of North Carolina on March 30, 2016, in Chapel Hill, North Carolina. Photo by Ann Hermes/The Christian Science Monitor via Getty Images.

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