Pell Grants not linked to higher tuition

The House Budget Committee’s FY2012 federal budget plan would cut Pell Grant funding to “pre-stimulus levels,” eliminating or slashing grants for more than nine million students. Assuming no other changes in the program, this would require a 62 percent cut in the maximum Pell Grant—from $5,550 in school year 2011-12 to $2,090 in 2012-13. [See our statement on the budget plan here.]

To try to justify such a drastic cut, the House Budget Committee references a 2005 study that found “little evidence” that Pell Grants lead to increases in in-state tuition at public colleges, but at private nonprofit four-year colleges, increases in Pell grants appeared to be matched with increases in tuition between 1989 and 1996.¹ However, leading higher education economists agree that there is no clear link between Pell Grants and tuition levels. See our summary for more about research on this issue.

Economist Sandy Baum wrote last year, “There is no convincing evidence that increases in Pell Grants feed tuition increases in either public or private not-for-profit institutions.”² Some studies have found no relationship, while others have found Pell Grants to be related to lower tuition prices. For example, a 2011 analysis found that “past increases in the federal Pell Grant maximum tend to reduce average [published] tuition today” at private nonprofit four-year colleges, by lowering the need for tuition discounting.³

In testimony before Congress, economist Bridget Terry Long noted, “Most studies conclude that colleges are not responding to federal aid, and studies that do provide limited support for the notion are plagued by mixed and sometimes contradictory results. Evidence suggests growth in tuition prices is instead related to a myriad of other internal and external factors.”⁴ Assessing the 2005 study cited by the House Budget Committee, Long explained, “[B]ecause these [private nonprofit four-year] institutions have few Pell recipients (i.e., they have few students impacted by the change in aid policy), the results seem attributable to factors other than government aid policy. Limitations with the data prevent more conclusive analysis.”⁵ According to the President’s FY2012 Budget Request, only 12% of Pell Grant recipients attend private nonprofit colleges.

For more information, see our summary of experts’ comments on this issue.

¹Singell, Larry D., Jr. and Joe A. Stone. 2005. For Whom the Pell Tolls: The Response of University Tuition to Federal Grants-in-Aid. http://pages.uoregon.edu/lsingell/Pell_Bennett.pdf. Accessed April 5, 2011.

²Baum, Sandy. 2010. “Losing Ground.” New York Times, February 3. http://roomfordebate.blogs.nytimes.com/2010/02/03/rising-college-costs-a-federal-role/#sandy. Accessed April 6, 2011.

³Archibald, Robert B. and David H. Feldman. 2011. Why Does College Cost So Much? Oxford: Oxford University Press. 205.

⁴Long, Bridget Terry. 2006. College Tuition Pricing and Federal Financial Aid: Is there a Connection? Testimony before the U.S. Senate Committee on Finance. http://finance.senate.gov/imo/media/doc/120506bltest.pdf. Accessed April 6, 2011.

⁵Ibid.