May 22, 2014

College Board Recommends Improvements to the Pell Grant

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The College Board recently released a new report, entitled “Redesigning the Pell Grant Program to Boost Access and Completion,” which provides numerous recommendations for improving the Pell Grant. The report is part of the Bill and Melinda Gates Foundation’s push to research financial aid improvements prior to the reauthorization of the Higher Education Act. The main recommendations involve making the eligibility process simpler by streamlining the FAFSA. The report claims that limiting the necessary financial information to Adjusted Gross Income (AGI) and family size (two measures that are easily obtained from a tax return) would boost completion of the FAFSA and improve access to college. Such an approach would also allow colleges to report average net price for students within given AGI and exemption ranges on their websites, making it easier for students and their families to plan for the future.

The College Board also recommends basing eligibility on “prior-prior year tax data,”[1] meaning families would not need to update their financial information each the spring. This change would help prevent low-income families from missing financial aid priority deadlines which often fall before the current year’s tax data are available. Furthermore, students whose parents did not need to file a tax return in the prior year would automatically be awarded the maximum Pell Grant without needing to enter financial information.

One of the more ambitious proposals in the report is the creation of government-funded savings accounts for families whose income would qualify them for the Pell Grant. Given that many studies find that early communication and college savings are crucial to increasing the number of low-income students enrolled in college, this program would seek to engage students and their parents at a young age. Under the proposal, low-income children around the ages of 11-12 would receive federal education accounts in which the government would deposit up to 10 percent of the maximum Pell Grant each year. The account would earn interest until the child turned 18, at which time he or she could begin to withdraw 25 percent of the balance per year (if enrolled in a four-year degree program). Any unused funds would be returned to the treasury when the student turned 24. The report estimates such a proposal would cost $3.5 billion to implement.

Washington State has long recognized that early communication and engagement are key to expanding college access. The state’s College Bound Scholarship program is a means-tested program that promises four years of free tuition and a book allowance to any Washington State student who is in foster care, whose family is low-income, or who qualifies for free and reduced-priced lunch in middle school. In 8^th grade, students sign a pledge to graduate high school with a 2.0 GPA or better, to not commit a felony, and to submit a FAFSA.  The program has been hugely successful, with ever-increasing numbers of students applying for and using their College Bound Scholarships each year.

To read more about the College Board’s proposal, check out the full report here.

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