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August 18, 2021

What Better Data Reveal about Pell Grants and College Prices

August 18, 2021

It is commonly cited that financial aid for college has not kept pace with the rising cost of pursuing a degree. But too often this trend is simplistically measured. Though the problem has gotten worse over time, the focus on tuition prices misses an important piece of the puzzle.

Data from the National Postsecondary Student Aid Study (NPSAS) for the 1986–87 and 2015–16 school years show that grant aid (from all sources) for the lowest-income students at public four-year institutions nearly doubled after adjusting for inflation. The increase was enough to offset all but $1,358 of the increase in tuition and fees this group of students experienced on average during this period. But when living expenses are added to tuition and fees to calculate total attendance cost, the data show the gap between the available financial aid for low-income students and the total cost of attendance has increased by much more than for tuition and fees alone. 

Doubling the Pell grant

Many advocates and policymakers, including President Joe Biden, have argued that the federal Pell grant, which currently provides a maximum annual benefit of $6,495 to undergraduates, should be increased to $13,000. 

The basis for this proposal—and the claim that the grant has failed to keep up with college prices—is a simple calculation. It compares the maximum grant allowed under the program to the national average price (tuition, fees, and room and board combined) at public four-year colleges and universities. Based on that calculation, as President Biden puts it, “In the 1970s, Pell grants covered roughly 70 to 80 percent (PDF) of the cost of a four-year degree at a public institution; today, that percentage has been cut in more than half, to roughly 30 percent.” (Note the program never actually covered 70 to 80 percent of costs in the 1970s because grants were limited (PDF) to 50 percent of total costs for individual students regardless of the maximum grant). 

Better data on grants and prices

As an alternative, the NPSAS provides information on individual students, the grant aid they received, and the prices they paid for tuition and living expenses. The data also include other sources of grant aid, such as those from state programs or the colleges themselves, allowing for a more complete picture of financial aid and what low-income students pay for college. (The 1986–87 data are the earliest available, and 2015–16 is the most recent year currently covered.)

A table comparing the average prices paid and grant aid received among low-income Pell grant recipients at four-year public institutions in 1987 and 2016.

Grant aid has offset rising tuition

The table shows that the average Pell grant and other grants have increased much faster than consumer price inflation. Total grant aid for the lowest-income Pell students at public universities averaged more than $10,000 in 2016, nearly double the amount provided in 1987, after accounting for inflation. 

The more important question is whether those benefits buy what they used to in terms of college access, regardless of how much they might have grown in inflation-adjusted terms. Here, the data provide two very different answers depending on which part of college costs we examine. 

When the grant aid is applied to tuition and fees, students’ net price for a year of school—the price after grant aid is applied—has increased from $144 on average to $1,501, after adjusting for inflation. Though such an increase can be difficult for low-income families to afford, it shows that rising grant aid has done far more to shield students from tuition increases since the 1980s than is commonly understood. It also suggests policymakers would need to increase the Pell grant by only about $1,358 to bring the tuition and fees that low-income Pell recipients pay back in line with prices in the 1980s.

It’s the living expenses

Though rising grant aid has offset much of the increase in tuition for low-income Pell recipients, the total cost of attendance for these students has still increased substantially since the 1980s. As the table shows, the net price for the total cost of attendance for low-income Pell students nearly doubled, from $6,798 in 1987 to $13,366 in 2016. This is because both tuition and living expenses have increased faster than inflation at these institutions, and although larger grants have done much to offset the former, they have been insufficient to offset the latter. (Grants are typically applied to tuition before living expenses or are often restricted to covering tuition costs in the case of institutional and state grants.)

Put another way, had living expenses for this group of students increased at only the rate of inflation over the past 30 years, most of the increase in net prices at these institutions since the 1980s would never have occurred.

Better, not perfect, data

Though the NPSAS data help us understand the changes in financial aid and college prices, they have limitations. In the 1986–87 NPSAS, living expenses are reported by the students themselves, and missing or potentially erroneous data are imputed by the survey administrator based on several assumptions. Though the 2015–16 living expenses data are reported by the institutions the students attended, the institutions may not have accurate information for the 72 percent of low-income Pell students who do not live on campus. Comparing living expenses among later NPSAS datasets, where the data are all reported by institutions, reveals similar patterns (PDF) to those in this analysis. 

Overall, the NPSAS data suggest most of the decline in purchasing power in grant programs for low-income students has occurred in their living expenses. Policies that reduce living expenses for college students could thus be the most effective at addressing college affordability for low-income students. Though doubling the Pell grant is one way to do that—the increase would effectively be a living stipend for low-income students—finding ways to cut living costs directly could be equally effective and cost the government less.


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