Pell grants -- less money for the needy
By Dana Dratch • Bankrate.com

Educators and financial aid administrators have expressed two concerns about the new law's effect on the Pell grant program. First, despite the fact that Pell is designed to help financially strapped families, grant amounts haven't been increased to keep pace with college costs.

"The Pell grant is already too low for most needy students who go to four-year colleges," says Gary Orfield, professor of education and social policy at Harvard University.

The new law also adds two new grant programs for qualified Pell recipients. Academic Competitiveness Grants would give an extra $750 in the first year and $1,300 in the second year to Pell students who carry a B average and graduate from an academically challenging high school program.

The other half of the program, dubbed the National Science and Mathematics Access to Retain Talent, or SMART, grant, will give an additional $4,000 per year for Pell juniors and seniors who maintain that B average and major in science, math or a language of particular national interest.

Many believe that the new additions of the merit-based grants to the program are likely to help the least needy Pell recipients.

Under the current Pell program, students with the least amount of resources get the largest grants, which max out at $4,050 per year. And students with more resources get smaller grants. With the new rules, "higher ability kids get the same award that the grinding poor get," says Edward Elmendorf, senior vice president of the American Association of State Colleges and Universities.

By taking a need-based program and making it a merit-based program, "Congress is putting its money on proven winners, rather than risky kids," he says.

The merit-based awards "are going to affect a relatively small percentage of Pell grant recipients," says Sandy Baum, senior policy analyst at the College Board and professor of economics at Skidmore College.

Some potential problems she sees: The program could funnel more money to kids with lesser needs; the rigorous academic program that is a criteria for the first two years of grants has yet to be defined and might not be offered in some low-income neighborhood schools, and what happens if a recipient changes majors?

Overall, she says, "it's not likely as effective as if we increased the need-based Pell grant."

Larry Zaglaniczny, director of congressional relations for the National Association of Student Financial Aid Administrators, agrees.

"I understand the need for scientists and mathematicians and those proficient in foreign languages, but we have not yet finished the job of providing adequate federal funding for those most in need," he says.

Some educators also worry that the Pell grant plateau and increasing college costs could further widen the gap between rich and poor.

"We have had a quarter century of tuition going up faster than family income," says Orfield. "And we've had completely inadequate increases in the Pell grant. Many states and institutions are shifting from need-based aid to aid based on test scores. At the same time, college has become much more essential for achieving middle-class status in the U.S."

The risk, he says, is "we become a society that's increasingly stratified on race and class grounds where an awful lot of young people can't afford to take advantage of educational opportunity."

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