Federal Pell Grants: Implications of Increasing the Maximum Award

Publication Date: May 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Education

Type:

Abstract:

Every year the maximum Pell Grant award is established during the appropriations process. Debate often ensues during this process about the feasibility of increasing the maximum Pell award. As families continue to confront rising college prices, federal student aid in general, and Pell Grants specifically, become particularly important for needy students. Many researchers and policymakers maintain that the Pell Grant does not keep up with the increasing price of attending college or even with inflation. In light of this, many propose that the annual appropriation for the program should be increased. Policymakers continue to contend with the mounting pressures of rising college prices and the adequacy of the Pell Grant award to offset these expenses.

This report analyzes selected characteristics of Pell recipients and the estimated impact upon these recipients and the costs of the program as the maximum appropriated award is increased. This is followed by a discussion of select legislative proposals to increase the maximum award and the Administration's budget request for FY2006.

Increasing the maximum Pell award by $100, to $4,150, would increase the estimated program costs by approximately $400 million for award year 2005-2006. If the maximum Pell award were increased to $5,800, the estimated amount of aid to students would increase by more than 58% over the estimated amount for a maximum grant of $4,050, to $20.2 billion. Increasing the maximum Pell award also increases the number of eligible participants, both overall and among students in each dependency group.

Closer examination of each dependency group reveals that an increase in the maximum award would change the representation of each dependency group within the population of Pell Grant recipients. As the maximum Pell award increases, the percentage of dependent recipients and independent recipients without dependents increases slightly. Dependent recipients represent less than 40% of all recipients under current law; the percentage would increase to an estimated 41.7% if the maximum award were increased to $5,800. Conversely, independent recipients with dependents would decrease from 41.8% to approximately 39% if the maximum award were increased to $5,800.

Finally, the analysis reveals that an increase in the appropriated maximum Pell Grant greatly increases the amount of the average Pell award for the lowest-income recipients in each dependency group. Recipients in the lowest family income group would have the largest average Pell award under each selected increase in the maximum Pell Grant.

This report will be updated as warranted by major legislation or other relevant developments.