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The Truth About Pell Grants



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If you listened to the Obama campaign, you’d think nothing made Mitt Romney happier than slashing Pell grants.  “Romney’s budget cuts Pell grants,” and “$170 billion cut from Pell grants under Paul Ryan budget” are two lines prominently displayed in the Obama campaign’s new video: “Mitt Romney versus Reality: Student Loans Edition.” In a TruthTeam memo, the Obama campaign wrote that Romney “praised the Ryan budget which would slash Pell Grants, costing the average student nearly $1,000 per year.” Essentially, the Obama campaign is hitting the Ryan plan here; it’s worth noting that although Romney backs the Ryan plan, he did break with it earlier this week when he endorsed the one year extension of the current low interest rate for federal subsidized student loans. So it’s possible he will end up taking a different position on Pell Grants than the Ryan plan, although he hasn’t yet. 

The Ryan budget would “cut” Pell Grants in the sense that it proposes the maximum Pell Grant be $5,550 (the level it is this year), instead of rising to $5,635 for next year as scheduled. But the Obama administration is getting the $1000 figure by this style of reasoning, notes Politifact (emphasis mine):

So the OMB calculates that the Ryan budget keeps the maximum grant at $5,550 in 2013 only. In 2014, the budget’s 14.3 percent cut in nondefense discretionary spending from the year before — applied evenly to the Pell program — would push the maximum award amount down to to $4,595 and leave some students with nothing at all, with an average cut of more than $1,000 per student.

However, the Ryan budget doesn’t rely on that 14.3 percent cut being evenly distributed. Instead, the budget proposes that the program become financially sustainable by in part curtailing eligibility for the program, so that it’s more targeted toward genuinely low-income students. So yes, there would be cuts, but they would be in terms of eligibility, not in maximum amount granted.

Furthermore, the Ryan budget is an attempt to make the program last. From the House Budget Committee’s report on the budget:

Pell Grants are the perfect example of promises that cannot be kept. The program is on an unsustainable path, a fact acknowledged by the President’s own fiscal year 2013 budget. The College Cost Reduction and Access Act of 2007 [CCRAA], the Higher Education Opportunity Act of 2008 [HEOA], the ‘‘stimulus’’ bill, and the Student Aid and Fiscal Responsibility Act of 2010 [SAFRA] all made Pell Grants more  generous than the Federal budget could afford. This, along with a dramatic rise in the number of eligible students due to the recession, has caused program costs to more than double since 2008, from $16.1 billion in 2008 to an estimated $36.4 billion in fiscal year 2013. Moreover, the program is beginning to increasingly rely  on mandatory funding to solve its discretionary shortfalls. For instance, the Department of Education warned in 2012 that without  changes to reduce program costs, Pell Grants would have an ending  shortfall of $20.4 billion.

Instead of making necessary reforms, Congress again resorted to short-term funding patches—a temporary answer that will not prevent another severe funding cliff for the program in the future. The President has increased the maximum Pell Grant by more than $900 since 2008, to $5,635 for the 2013–2014 award year. However, his budget only provides funding for that level of award through the 2014–2015 academic year. This irresponsible spending serves only to put the program at greater risk of ultimately being unable to fulfill its promises to students.

New America Foundation’s Jason Delisle also notes that Obama has yet to put forward a long-term plan to fund Pell Grants at their current levels:

The president’s proposal included only a one-year fix for the massive $7 billion Pell Grant funding cliff. After the one-year fix, the president’s budget simply assumes that an extra $7 billion will materialize in the annual appropriation for Pell Grants each year. But this extra funding must be offset by $7 billion in cuts to other programs funded with annual appropriations, which the president’s budget doesn’t specify.

So yes, it’s fair game to argue about whether eligibility for Pell Grants should be altered. But right now Obama is proposing eligibility stay the same and maximum amounts granted keep rising without offering any way to pay for the program. Ryan — and by extension, Romney — are actually proposing a way that would both allow the maximum amount to stay the same and let the program be fiscally sustainable. 



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