The Federal Pell Grant Program: Recent Growth and Policy Options

By Betsy Prueter and Celia Hartman Sims

A recent report from the Congressional Budget Office (CBO) provides analysis for the increased costs in the Pell Grant program since the 2006-07 academic year. The report also looks at the effects on both the federal budget and on students of various possible changes to the program.

Among the report’s findings:

  • The proportion of all students enrolled in postsecondary education who received Pell Grants grew from 24% to 36% from 2006-07 to 2010-11 which was an increase from 5.2 million to 9.3 million students.
  • The largest number of Pell recipients were enrolled in two-year public institutions in the 2011-12 academic year (3.4 million students), followed by public four-year institutions (2.8 million students), private for-profit institutions (2.1 million students), and private nonprofit institutions (1.2 million).
  • Pell grant recipients make up 63% of the student body at private for-profit schools, 37% at private nonprofit schools, 35% at public four-year schools, and 32% at public two-year schools.
  • The cost (inflation-adjusted) of the Pell grant program grew by 158 percent between 2006-07 and 2010-11, increasing from a cost of$12.8 billion to r$35.7 billion. This increase in the annual cost of the program was the result of two major factors – (1) an 80% increase in the number of recipients; and (2) a 43% increase (inflation-adjusted) in the amount of the average Pell grant.
  • The increase in the number of Pell recipients during this time was the result of the recession lowering the incomes of students and families; a poor job market causing the unemployed and underemployed to return to school to upgrade their skills; rising tuition; the expansion in online learning, especially at for-profit colleges; and expanded eligibility for the program.
  • The growth in the amount of the average Pell grant award which rose by more than 50% (in nominal terms) between 2006-07 and 2010-11 is attributable primarily to legislative changes made to the program, including increasing the maximum Pell grant award each year during this time, with the maximum Pell award increasing from $4050 to $5550); the creation of supplemental grants for year-round students in 2009-10 and 2010-11 which raised the average grant awards if all recipients by more than $200.
  • The report offers analysis on a number of possible changes to the program, including some that would expand the Pell program but a majority that would reduce federal spending for the program. The changes include ideas for reducing the number of grant recipients, reducing the grant amounts, increasing the grant amounts, and simplifying eligibility criteria.