Increased Pell Grant Funding Proposed in Stimulus Package to Offset Higher Education Costs

Feb. 11, 2009 – College students from low-income households stand to benefit most from the educational provisions in the economic stimulus package, but paying for college will remain a daunting task for many Illinois families.

The House of Representatives’ version of the economic stimulus package designates $15.64 billion for Pell Grants, with an additional $1.47 billion in “recovery funding” for the need-based scholarships, for the next two school years starting this fall.

The Senate version calls for less money, but students who qualify for the maximum Pell Grant award would likely see a $400 to $500 increase in the size of their annual grants in the compromise legislation that could be worked out yet this week.

Financial aid experts agree an increase is long overdue.

“It’s the biggest jump we’ve had on Pell Grants in some time. This is a decent jump,” said Bob Anderson, associate director of financial aid at the University of Illinois at Urbana-Champaign. Anderson said the approximately 10 percent increase would be far more than the “1 percent or less” rise seen in recent years.

While he welcomed an increase, Anderson said the additional funds for Pell Grants wouldn’t help everyone.

“It’s a pretty small percentage that would be helped. We have about 28,000 undergrads and about 5,000 get Pell Grants,” said Anderson.

Currently, the minimum Pell Grant awarded is $400, while the average grant awarded in fiscal year 2008 was $2,945, according to the U.S. Department of Education website.

The House version would increase the maximum Pell Grant award by $500 to $5350 per year in 2009-2010 and up to $5500 the following school year, according to Melissa Salmanowitz, press secretary for the House Committee on Education and Labor.

Rep. Dina Titus, D-Nev., said helping families pay for college is “critical” right now.

“With high college costs already making it harder for young Americans to earn their degree, the economic recession has further increased that burden. By increasing funding for Pell Grants… and expanding the Higher Education tax credit, the economic recovery package will help students pursue their dream of a college education,” said Titus in an emailed response from her chief of staff.

“It’s wonderful for a low-income family,” said Gerrie Hatten, assistant director of financial aid at Cal Polytechnic State University in San Luis Obispo, Calif. “It’s not really built for middle-income families.”

Many students seem resigned to working and borrowing their way through school.

Cara Boldarini, a senior art history and women’s and gender studies major at Roosevelt University in Chicago, said she has “over six figures out in loans right now.” She’s working two jobs “just to pay my rent.”

Boldarini said she has never qualified for a Pell Grant.

Neither has Mackenzie White, an advertising/art direction major at Columbia College Chicago.

“If I could get any money, it would make a difference for me. I have a job, but any money would help me out because Starbucks is my only form of income. The rest is loans. It sucks to be middle class going to college,” said White.

Although the increase in Pell Grants funding won’t affect the majority of college students, there are aspects of the stimulus package, formally called the “American Recovery and Reinvestment Act of 2009,” that could help ease the burden of paying for school.

One financial aid expert points to an increase in the amount of the Hope Scholarship tax credit as a means of assistance.

Mark Kantrowitz, publisher of the student resource site FinAid.org and author of two books on financial aid, said both the House and Senate version of the stimulus package calls for a $700 increase in the tax credit, from $1800 to $2500 per student per school year.

“Low- and middle-income families will benefit from this tax credit, which is the same regardless of income,” said Kantrowitz.

He said families of college students can “actually get a refund for part of the credit. Normally, a tax credit can only offset a tax liability.”

Anderson pointed to an increase in funding for college work-study and an increase in unsubsidized loans as being of some assistance to students from middle-income families. Anderson said increasing the amount of unsubsidized loans students can receive is important because “alternative or private loans are drying up all over the place. They’re difficult to get right now.”

Most students who qualify for Pell Grants come from households with a family income “under $50,000,” Kantrowitz said.

In her experiences working with families and students in the financial aid realm, Hatten said, “College seems like a big stretch for most families.”

“No matter how big the Pell Grant gets, it’s just a drop in the bucket. A Pell Grant won’t solve someone’s financial aid issues,” Hatten said. “Loans allow the government to support a wider range of families. Of course everyone would rather have a grant.”