Association for Public Policy Analysis & Management

The Federal Pell Grant Program is a policy of the need-based grants that the grant money does not have to be repaid, whether or not a student ever graduates. The Pell Grant Program was established to help low-income students pay for their postsecondary education and to eliminate their debt burden during college. The Pell grant program seems beneficial for prospective students who have financial hardship, while the cost of college continues to increase. However, the program comes with some limitations and challenges in its effectiveness.

Through the policy analysis, I explored the relationship between college students’ debt burden and Pell grant program. To study whether the Pell grants are enough for the low-income students to afford the entire cost of college with regards to different individuals’ backgrounds and institutional characteristics, I fit linear regression models using B&B 2012 data from the Institution of Education Sciences. In this analysis, two regression models were estimated and compared. The Model 1 is a simple model only including Pell grants-related independent variables, while the Model 2 includes various individual and institutional variables in the analysis.

According to the analysis, Pell recipients in 2007-08 were at higher ratio of cumulative federal loans to annualized salary as of 2012 than non-Pell recipients in 2007-08. The cumulative amount received in Pell grants as of 2012 had also a significant effect on the ratio of cumulative federal loans, which should be paid back. While Model 2 included individual backgrounds and institutional characteristics as additional independent variables, only the GPA variable had a significant effect on the ratio of cumulative federal loans. These findings of the analysis support the current arguments of ineffectiveness of Pell grants in terms of college affordability that many students still need much more financial assistance to attend college besides Pell grants.

Considering the initial purpose of Pell grant program, the program does not seem to eliminate low-income students’ debt burden during college, which was growing rather than shrinking. If policymakers want to increase college graduation rate of low-income students, they should consider whether the amount of Pell grants is enough to cover the entire cost of college including opportunity costs such as care elder and child obligations. For Pell students who are from low-income and working-poor families, they cannot pay the ever-increasing price of American higher education at all. Therefore, I would encourage the federal government and legislators of each state to collaborate with each other to ensure that college costs of the low-income students are covered.