The Other ‘Pell Runners’

According to a recent article in The Chronicle of Higher Education, the U.S. Department of Education is planning to crack down on “Pell runners.” A Pell runner is “a scam artist who bounces from college to college, staying just long enough to receive a Pell Grant refund,” the newspaper reports.

The Education Department is absolutely correct to go after these individuals. Their actions not only hurt the federal fisc, but, if left unchecked, could undermine public and political support for this vital program over the long run.

There is, however, another group of “Pell runners” who may be even doing greater damage to the program’s long-term viability, but are coming under far less scrutiny. We are talking about public and private four year colleges that receive large amounts of  Pell Grant funds but use their institutional aid dollars to attract the students they desire, rather than to meet the financial need of the low-income students they enroll.

As we’ve said before, colleges that engage in financial aid leveraging to buy the best and/or wealthiest students are undercutting the Pell Grant program’s mission of making college accessible and affordable for low-income students. These institutions are, in fact, adding extra hurdles for Pell recipients to succeed, by loading them up with heavy loads of debt, including high-cost private student loans.

Judging by several reports that have been released over the last month, this problem is only getting worse and worse.

For example, in a recent study, the student loan giant Sallie Mae reported that the share of students from middle income and high-income families who received grant and scholarship aid in the 2010-11 academic year jumped significantly from the previous year, while the proportion of low-income students receiving these awards remained “mostly flat.” Among families earning $100,000 or more,  the share of students who received grants and scholarships in 2010-11 more than doubled to 26 percent from 12 percent the year before, the student loan company reported.

This influx of grant aid for middle-income and high-income students helped reduce the cost of college, on average, for these families,  while low-income students generally had to pay more. According to Sallie Mae, the average cost of college for students from families with incomes of $100,000 or more fell by 18 percent to $25,760, while it rose by 14 percent to $19,888 for those from families making less than $35,000.

Sallie Mae’s findings are especially disappointing for low-income students considering the dramatic expansion of the Pell Grant program in recent years. But they are, perhaps, not too surprising considering the ways in which colleges have increasingly been distributing their own aid.

The competition among four-year colleges for top students and those who can pay full freight has become so fevered that even some college leaders and admissions directors are starting to speak out against these practices. In a new report, the University of Southern California’s Center for Enrollment Research, Policy and Practice and the Education Conservancy (a group made up primarily of admissions officers pushing for reform) decry colleges’ “increased practice of awarding financial aid to students without regard for actual financial need.”

The report, entitled “The Case for Change in College Admissions: A Call for Individual and Collective Leadership,”  acknowledges that “there are good arguments for institutions to make limited and judicious use of merit aid to attract some students who could add to the vitality of an incoming class.”  However, "this practice has grown to the point of significantly reducing the funds to qualified students from lower income households who could benefit from a college education,” the report states.

Perhaps the most interesting of the new reports comes from the financial aid expert Mark Kantrowitz. His paper, “The Distribution of Grants and Scholarships by Race,” shows that the so-called merit aid that colleges give out often doesn’t go to the most meritorious students. On the contrary, colleges often use their institutional dollars to bring in full-pay students in order to maximize their revenue. “A full-pay student -- even with a significant discount in the form of a merit-based grant -- still yields more net revenue to the college than low or moderate-income students,” he writes.

The report shows that at both public and private colleges, white students, who tend to come from more-affluent families, are much more likely than minority students to receive merit aid, regardless of their qualifications. For example, Kantrowitz found that nearly 30 percent of white students with "a combined SAT score (or equivalent ACT score) of 1400 or more out of 1600" received merit aid from their colleges, compared to only 8 percent of black students with similar scores.

Despite these disheartening findings, there are some colleges that have been brave enough to buck these trends. We will soon profile one such institution that we hope could serve as a model to others. Stay tuned.