Do Grants Matter
Published May 15, 2014
Do Grants Matter
- Federal Pell Grant Covers Half of What It Did 20 Years Ago
- College Prices Up 49% After Inflation, Family Income Up 10%, But Pell Grants Down 23%
- Low-Income Students Most Vulnerable to Impacts
Washington, D.C., Nov. 17, 1998—A 20-year erosion of student grant aid threatens to undermine college affordability and to widen the disparity of access to college among students from differing income levels, states a new national study. Student grants, the report says, are covering a significantly diminishing proportion of the price of attending college—both average and maximum Pell grants cover about half of what they did two decades ago.
In 1976-77, the average Pell grant covered 19% of the annual price of a private, four-year institution, but in 1996-97 it covered only 9% of the price. Similarly, in 1976-77, the average grant covered 39% of the price of a public, four-year school and only 22% in 1996-97. The maximum Pell grant also covered less over that period, from 35% of the price of a private college in 1976-77 to only 13% by 1996-97, and from 72% of the price of a public institution to only 34%. Over 3.6 million students currently receive a Pell grant.
In addition, while the average Pell grant award declined by 23% (after inflation) between 1976-77 and 1996-97, college prices rose by 49%, and family incomes inched slightly higher (10%). This has resulted in a reduction in the overall affordability of college—that is, whether the net price that students and families actually pay is within their reach.
The “net price” of college—the sticker price minus the total grant aid received—has increased for most families in the 1990s. For example, the average net price of attending a private four-year college for a student from a family with income below $10,000 rose from $8,178 in 1989-90 to $11,591 in 1995-96, an increase of 42% in just six years. The growing gap between net prices and families' ability to pay highlights the critical role of grants and the serious consequences of the low levels of grant aid, according to the study.
One indicator of the erosion in grant aid is that while college enrollment rates have increased in the last two decades, the gap between low-income and high-income students is still wide. While 78% of students from high-income families attend college, only 49% of students from low-income families do so.
The study, "Do Grants Matter? Student Grant Aid and College Affordability," was conducted by The Institute for Higher Education Policy and The Education Resources Institute (TERI).
These trends, the study reports, are leading students to seek out other funding sources, including student loans (up 740% after inflation), other consumer borrowing, and credit cards. They are also a factor in changing the ways that students participate in higher education: working part- or full-time, using "distance learning," or limiting their education to two-year public institutions.
Despite recent increases in funding for grants by institutions, states, and the federal government, the purchasing power of grants has deteriorated. For example, the maximum Pell grant award—which was increased to $3,000 this year—would need to double to more than $6,000 to pay for the same proportion of college prices that it did two decades ago.
“In many ways, these are good times for higher education. Overall enrollments are up, the public is supportive, and funding has modestly increased,” said Jamie P. Merisotis, President of The Institute for Higher Education Policy. “But these trends mask the fact that there is a gap of almost 30 percentage points in enrollment between low-income and high-income students. Shoring up grant aid is the best way to improve affordability for these students and close the gap in enrollments.”
The report urges policymakers to increase need-based grant aid at all levels, emphasizing the need to reinvigorate the "political will" for such support. The study cites an erosion of support for grant aid by policymakers as part of the trends toward budget austerity, smaller government, and fewer entitlement programs. At the state level, the rise of non-need-based grant aid has infringed upon the amount of need-based aid available, while state budget crunches pit education against other expenditures, such as prisons and Medicare. At the federal level, the study points to the recent creation of tuition tax credits as further evidence of this weakened political support for grants.
“For more than 20 years, need-based grants have answered the question, ‘how can I afford college’ for millions of students and their families,” stated Thomas D. Parker, Senior Vice President of TERI. “But with the declining purchasing power of grants, that question has fewer answers. We must revitalize our commitment to these students, and to our own future as a country, by investing in grant aid at all levels.”
The Institute for Higher Education Policy is a non-profit educational research group in Washington, DC. The Education Resources Institute (TERI) is a Boston-based, not-for-profit organization providing education information and financing services.
