Analyzing Trends in Pell Grant Recipients and Expenditures

This post first appeared at the Brookings Institution’s Brown Center Chalkboard blog.

The U.S. Department of Education recently released its annual report on the federal Pell Grant program, which provides detailed information about the program’s finances and who is receiving grants. The most recent report includes data from the 2013-14 academic year, and I summarize the data and trends over the last two decades in this post.

For the second year in a row, the number of Pell recipients fell, going from a peak of 9.44 million students in 2011-12 to 8.66 million in 2013-14. This drop in recipients is almost entirely due to students who are considered independent for financial aid purposes (typically students who are at least 24 years of age, are married, or have a child). The number of independent Pell recipients fell by 13% in the last two years (to 4.87 million), while the number of dependent Pell recipients fell by just 27,000 students to 3.83 million, as shown in the chart below.


Why has the number of Pell recipients declined over the past two years after such a sharp increase between 2008 and 2010? Two factors are at play. First, enrollment at vocationally-oriented colleges (primarily community colleges and for-profit colleges) increases during recessions as displaced workers choose to receive additional training instead of trying to find a job in an awful economy. When the economy gets better, more of these individuals go back to work and forgo college. Second, as the economy has improved, it is likely the case that some families that barely qualified for the Pell Grant during the recession no longer qualified after obtaining a better job.

The next chart shows that the decline in the number of Pell recipients over the last two years is largely due to community colleges and for-profit colleges. The number of Pell recipients at community colleges has declined by 11% since 2011-12, while the number at for-profit colleges has declined by 20% since 2010-11 after more than doubling in the previous five years. This is consistent with enrollment at some of the largest for-profit chains cratering in the last few years due to both the colleges’ actions (such as the University of Phoenix enacting a trial period for students) and actions from regulators (as evidenced in the recent collapse of Corinthian Colleges).


Expenditures for the Pell Grant program declined for a third consecutive year, going from $35.7 billion (in nominal dollars) in 2010-11 to $31.5 billion in 2013-14. However, in inflation-adjusted dollars, Pell spending has still more than doubled since 2007-08.


The big spike in Pell expenditures around 2009 was due to three factors. First, the start of the Great Recession both induced more students to enroll in college and resulted in more students with financial need who met the Pell Grant eligibility criteria. Second, changes to federal laws that took effect in 2009-10 increased the maximum Pell Grant by over $600 and allowed more students to automatically qualify for the maximum Pell Grant by increasing the income threshold (from $20,000 to $30,000) for an automatic zero expected family contribution. Third, students were allowed to receive a Pell Grant on a year-round basis instead of just two semesters during the academic year, driving up short-term costs but potentially helping students complete their studies quicker. In 2011, the year-round Pell provision was repealed and the income threshold for an automatic zero EFC dropped to $23,000 as cost-saving measures. Congress has shown bipartisan interest in allowing year-round Pell again, but changing the income threshold for an automatic zero EFC appears to be off the table for now.

The final chart shows the maximum Pell Grant award (in inflation-adjusted dollars) between 1993-94 and 2013-14. Contrary to what many might expect, the maximum award has increased from $3,696 in 1993-94 to $5,645 today; the average award has also increased from $2,419 to $3,634. But the increase in the Pell Grant’s real value has not kept up with the increasing price of college in all sectors of higher education. As a result, its purchasing power has fallen by two-thirds since 1979.


For those who are interested in learning more about how much in Pell Grant revenue individual colleges receive, I highly recommend the Title IV program volume reports available on Federal Student Aid’s website. In addition to Pell Grant revenue, this site has information on student loan awards going back to the 1999-2000 academic year.

Examining Trends in Living Allowances for College

The National Center for Education Statistics released a new report and data on trends in the cost of attendance for different types of colleges, including data from the 2012-13 to 2014-15 academic years. The report shows that, among colleges operating on a traditional academic year basis (excluding most vocationally-oriented colleges), tuition and fees generally increased at a rate faster than inflation among public and private nonprofit colleges over the last two years. However, tuition failed to keep up with inflation in the for-profit sector and allowances for other living expenses (such as transportation and laundry) declined over the past two years after taking inflation into account.

I dug deeper into the data, looking at the percentage of colleges by sector that increased, decreased, or held constant each of the cost of attendance components (tuition/fees, room and board, books and supplies, and other living expenses) between 2013-14 and 2014-15—without adjusting for inflation. I focused on students living off-campus without their family, as colleges have the ability to determine the room and board allowance but do not directly receive any housing revenue for off-campus students. (My blog post on the topic last year ended up connecting me to Braden Hosch at Stony Brook and Sara Goldrick-Rab at Wisconsin-Madison, and we’ve dug deeper into the accuracy and consistency of these estimates in a working paper.)

The results (below) show that for-profit colleges were far more likely to lower tuition and fees than public or private nonprofit colleges. While 75% of public colleges and 85% of private nonprofits increased tuition, just 42% of for-profit colleges did so. For-profits were also more likely to lower books/supplies and other living expense allowances, although the typical allowance was still higher than for nonprofit colleges. A majority of colleges across sectors increased room and board, while most colleges did not change their allowances for books and supplies.


Table 1: Changes in COA components by sector, 2013-14 to 2014-15.
Private nonprofit
Characteristic (2014-15) Public For-profit
Cost of attendance, students living off-campus without family
  Median ($) 18,328 37,900 28,796
  Increased from 2013-14 (pct) 77.8 84.9 56.3
  No change from 2013-14 (pct) 7.2 5.8 8.2
  Decreased from 2013-14 (pct) 15.0 9.3 35.5
Tuition and fees
  Median ($) 4,200 24,670 14,040
  Increased from 2013-14 (pct) 74.9 84.6 42.3
  No change from 2013-14 (pct) 19.5 11.0 38.5
  Decreased from 2013-14 (pct) 5.7 4.4 19.2
Room and board
  Median ($) 8,280 9,000 7,574
  Increased from 2013-14 (pct) 55.1 56.4 59.2
  No change from 2013-14 (pct) 34.6 34.5 28.2
  Decreased from 2013-14 (pct) 10.4 9.2 12.5
Books and supplies
  Median ($) 1,265 1,200 1,380
  Increased from 2013-14 (pct) 37.8 23.1 25.7
  No change from 2013-14 (pct) 54.4 69.3 59.1
  Decreased from 2013-14 (pct) 7.8 7.6 15.2
Other living expenses
  Median ($) 3,742 3,150 5,000
  Increased from 2013-14 (pct) 42.0 35.1 35.5
  No change from 2013-14 (pct) 36.8 48.9 27.4
  Decreased from 2013-14 (pct) 21.2 16.0 37.1
Number of colleges 1,573 1,233 719
SOURCE: Integrated Postsecondary Education Data System.
Note: Limited to colleges reporting costs on an academic year basis.

Yet as was noted in last year’s blog post on this topic, some colleges set room and board allowances that are unreasonably low by any standard. This year, I focused on the 27 colleges that reduced their room and board allowance for off-campus students by at least $3,000 between 2013-14 and 2014-15. Some of the changes may be reasonable, such as Thomas University’s drop from $15,200 to $10,530 for nine months of room and board. But many others are unlikely to meet any standard of reasonableness. For example, Emory & Henry College in Virginia reduced its allowance from $11,800 for nine months to just $3,000, while the College of DuPage in Illinois cut its allowance from $8,257 to $2,462. Good luck trying to rent an apartment and eating ramen on that budget!

Table 2: Colleges with large declines in off-campus room and board allowances, 2013-14 to 2014-15.
Name State 2013-14 2014-15 Change
Emory & Henry College VA 11,800 3,000 -8,800
Atlanta Metropolitan State College GA 10,753 3,160 -7,593
Mount Carmel College of Nursing OH 13,392 6,380 -7,012
Vanguard University of Southern California CA 11,286 4,600 -6,686
Louisiana Delta Community College LA 15,322 8,789 -6,533
Trinity College of Nursing & Health Sciences IL 12,346 5,858 -6,488
Arkansas Northeastern College AR 11,969 6,102 -5,867
College of DuPage IL 8,257 2,462 -5,795
College of the Mainland TX 11,330 5,665 -5,665
Randolph-Macon College VA 9,200 3,650 -5,550
The University of Texas at Brownsville TX 11,495 6,250 -5,245
SAE Institute of Technology-Nashville TN 15,000 10,000 -5,000
Bon Secours Memorial College of Nursing VA 15,000 10,000 -5,000
Thomas University GA 15,200 10,530 -4,670
Davenport University MI 8,692 4,340 -4,352
Southwestern Illinois College IL 8,516 4,280 -4,236
Lee University TN 11,650 7,520 -4,130
Grace School of Theology TX 12,684 8,584 -4,100
Prairie View A & M University TX 11,289 7,197 -4,092
NY Methodist Hospital Center for Allied Health Education NY 17,568 13,496 -4,072
College of Business and Technology-Flagler FL 12,000 8,320 -3,680
College of Business and Technology-Miami Gardens FL 12,000 8,320 -3,680
Anoka Technical College MN 10,356 6,994 -3,362
Central Penn College PA 6,855 3,500 -3,355
St Margaret School of Nursing PA 9,960 6,640 -3,320
Fortis Institute-Port Saint Lucie FL 12,732 9,495 -3,237
Southern California Seminary CA 14,616 11,493 -3,123
SOURCE: Integrated Postsecondary Education Data System.
Note: Limited to colleges reporting costs on an academic year basis.

Why do some colleges feel pressures to cut back living allowances? It’s all about accountability. The amount of loan dollars students can borrow is limited by the cost of attendance, meaning that reducing living allowances (and hence the cost of attendance) reduces borrowing—and potentially the risk of a college facing sanctions for high student loan default rates. The cost of attendance also determines the net price (the COA after grants are applied), an important accountability metric. Since colleges don’t directly benefit financially from a higher off-campus living allowance, they have an incentive to reduce the living allowance while continuing to increase tuition.

Is Student Loan Debt Really a Crisis?

This article I wrote was originally published on The Conversation.

Americans owed nearly $1.2 trillion in student loan debt as of March 2015, more than three times the amount of debt from just a decade ago. Part of this increase in debt is due to more students attending college, but part can also be attributed to just the borrower holding more debt.

Between the 2007-08 and 2011-12 academic years, nationally representative data from the US Department of Education show the median debt among graduating college seniors who took out loans rising from $20,000 to $26,500. This trend has likely continued over time due to rising tuition prices, meaning that the 70% of students who borrow for a four-year degree can expect to take on over $30,000 in debt in the future. Many students are struggling to repay their loans, as evidenced by high rates of default, delinquency and forbearance due to economic hardships.

These concerns have led some politicians (primarily Democrats) to call mounting student loan debt a “crisis,” while offering potential solutions such as reducing interest rates on student loans, allowing students to refinance their loans at lower rates, or more recently, proposing debt-free public higher education.

But is student loan debt really a crisis?

Debt crisis for whom?

As a professor whose research focuses on higher education finance and accountability policy – and who married an attorney with lots of student loan debt – I look at the student “debt crisis” differently.

I can see the types of students for whom debt is a crisis.

Although there are some exceptions, the crisis is generally not with people like my wife and me, who have advanced degrees and the ability to manage high debt payments due to earning more money (and knowing whether and how to use income-based repayment programs that cap debt payments at a certain percentage of one’s income).

Rather, the crisis is among students with relatively little debt but dismal job prospects.

Research by the New York Federal Reserve Bank found that 35% of students with less than $5,000 in debt defaulted within six years, twice the rate of students with more than $100,000 in debt.

Additionally, these students with low debt amounts and low earnings are disproportionately likely to be dropouts. Sixty-three percent of students who started college in 2003-04 and defaulted on their loans by 2009 were college dropouts, while students with a bachelor’s or associate degree were only 4% of defaults.

Impact of debt

Student loan debt has also been blamed for a range of other negative outcomes in various media articles, including delaying marriage, having children and purchasing a home.

The raw data certainly support the relationship between student loan debt and delaying these key markers of adulthood. It is true that the home ownership rate of young adults without debt exceeded the rate of those with debt for the first time in 2012.

But identifying a causal impact of student loan debt on these outcomes is harder to do: the characteristics of the types of people who went to college and borrowed are different from those who either did not go to college or went to college without taking on debt. For example, students may not borrow for college if their parents foot the bill – and these individuals may also get help putting down a down payment for a house.

Part of the declining home ownership rate among those with debt is likely because college graduates are more likely to move to expensive urban areas than those who did not attend college or take on any debt. Most of the students with little debt are dropouts, not graduates.

In my view, the best empirical research examining whether student loan debt affects home ownership is a working paper by Jason Houle and Lawrence Berger that has found a significant, but small, relationship between student loan debt and home ownership.

However, two different factors could be at play to cause this relationship.

It could be because prospective buyers with debt are unable to obtain a mortgage due to part of their income being needed to pay off student loans. But it could also be because those with debt perceive that they will be rejected if they apply for a loan (even though it may not be true).

Who should be the focus of policy?

Student loan debt is increasingly becoming an unpleasant part of life for millions of Americans, but for many borrowers – particularly those with advanced degrees and high debt burdens – debt is far from a crisis.

For example, the Brookings Institution’s Elizabeth Akers stated in her recent congressional testimony that although the length of student loan payments has increased over time, the average monthly payment has barely increased.

Senator Elizabeth Warren, a darling among progressives, pushed back against Akers, contending that the increasing length of payments construes a debt crisis.

While I’m certainly sympathetic to students frustrated by years of student loan payments, policies designed to help struggling borrowers should focus on students with the greatest need.

Students who left college without a degree and are unable to find a decent job are facing a crisis as they struggle to make ends meet. Our limited resources should be used to help these students complete a credential and repay their loans instead of targeting lawyers with six-figure debt loads.

The Conversation

Robert Kelchen is an assistant professor of higher education at Seton Hall University.

Read the original article.

New Evidence on the Bennett Hypothesis and Federal Student Aid

One of the eternal debates in higher education policy is the validity of the Bennett Hypothesis, first stated by William Bennett (President Reagan’s Secretary of Education) in 1987:

“If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase. In 1978, subsidies became available to a greatly expanded number of students. In 1980, college tuitions began rising year after year at a rate that exceeded inflation. Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.”

Does the availability of federal financial aid give colleges an incentive to keep hiking tuition? I wrote about the existing research on the Bennett Hypothesis last fall, which has been one of the most-read posts in my three years of blogging. At that time, I concluded that although it’s quite possible that federal financial aid is associated with increased tuition, it was hard to draw a solid conclusion given data limitations and the fact that nearly all students can receive federal financial aid—limiting the ability to draw causal inferences.

But two recent studies have pushed the research frontier forward by estimating the relationship between small changes in federal aid and colleges’ pricing strategy. The first is a job market paper by Christopher Lau, a recent economics PhD graduate from Northwestern. Using a rather complicated analytic strategy (read the methods section and see for yourself!), he estimated that for-profit colleges captured approximately 57 cents of each additional dollar of federal grant aid and 51 cents of each additional dollar of federal loan aid. Community colleges captured a smaller portion of federal aid dollars (37% of grant aid and 25% of loan aid), which is unsurprising given that the maximum Pell Grant is larger than community college tuition in nearly all states. Additionally, states often limit the amount that public colleges can increase tuition, reducing the opportunity for strategic behavior.

The second examination of the Bennett Hypothesis is a newly released report from three economists at the New York Fed. They used increases to federal subsidized and unsubsidized loan limits in 2007 as well as maximum Pell Grant awards to see whether colleges responded by increasing tuition. They found that colleges did increase posted tuition (not necessarily net tuition) at a higher rate after loan limits increased, with the magnitude being approximately 55 cents for each dollar of additional Pell Grant aid and 65 cents for each dollar of subsidized loan aid. These effects were largest for the most expensive private nonprofit colleges, where the maximum amount of federal loans ($5,500 for a first-year student) only covers a small portion of tuition.

An even more interesting finding from the Fed paper is that shareholders in for-profit colleges responded favorably to the passage of legislation that increased federal financial aid amounts. They concluded that across three pieces of legislation, the cumulative increase in stock prices was about 10% above what would have been expected without an increase. Given the high (at the time) public valuations of large publicly traded for-profits, this represented a large increase in valuation. It is also worth noting that because for-profits have to get at least 10% of their revenue from non-federal sources or veteran’s benefits, some colleges may have had to increase tuition in order for students to take out private loans to stay clear of the so-called ‘90/10’ rule.

Both of these papers have some major limitations. Most notably, they are unable to account for whether students took out less in PLUS or private loans when subsidized loans and Pell Grants increased and do not look at net tuition after grant aid. However, these represent some of the best evidence of there being some truth to the Bennett Hypothesis for the most expensive colleges. But does this lend credence to the claim that tuition will become much less expensive if the federal government got out of the student aid business? As a researcher, I urge caution with that interpretation for two reasons. First, these studies only tell us what happens when more aid goes into the system. The relationship may not hold when less aid comes in. Second, these findings are based on relatively small changes in aid—often less than $1,000. These ‘local’ effects may not hold for a larger change.