“Pell proxy” makes the grant unreliable and ineffective – expansion exacerbates the issue

Policymakers and the media use the Pell Grant program to measure the share of low-income students enrolled at specific colleges and universities, but the reliability of this measure is rarely scrutinized. This paper discusses several key limitations of the “Pell proxy” that could affect its reliability, especially when used to draw conclusions about admissions and recruiting practices at particular universities or categories of schools. Generally, the proxy undercounts low-income students enrolled in institutions of higher education while counting middle-income students as low-income. Using the Pell proxy to compare trends is even more problematic because Pell Grant take-up rates and eligibility rules have changed markedly over time. These trends may have affected the makeup of Pell Grant students differently by institution, reducing the reliability of the Pell proxy further. This analysis also illustrates that when Congress increases the maximum Pell Grant faster than the rate of inflation—which it tends to do over long periods of time—more middle-income families qualify for the program. This eligibility design increases the cost of the program more than would be necessary to increase grant size for only the lowest income students. Policymakers could adopt a number of changes to the program to address this issue and better target aid. Introduction Few statistics in higher education policy receive as much attention as the share of students from low-income families who attend different types of colleges and universities, particularly the most elite and selective institutions. Policymakers and the media use this enrollment information to assess the economic diversity of the student body at individual universities, whether universities are effectively recruiting low-income students, and how access to college has changed over time for students in different income groups. Yet hardly any of these analyses use actual information about a student’s income. Instead, they categorize all students who received a federal Pell Grant as low-income. For example, U.S. News reports the “economic diversity” of what it ranks as the top 25 national universities using the share of undergraduates at each school who received Pell Grants. U.S. News is careful to acknowledge that this is not a perfect measure of low-income status but goes on to say, “Many experts say that Pell figures are the best available gauge of how many low-income undergraduates there are on a given campus.”1 Similarly, researchers at the Georgetown University Center on Education and the Workforce, in a report about Pell Grant recipients at selective universities, write that “the vast majority of Pell Grant recipients come from families with very low incomes—about 73 percent have an annual income of $30,000 or less,” which is why the share of students receiving Pell Grants “has become a widely-acknowledged proxy for how many low-income students a college or university is serving.”2 Similar to these two examples, many analyses that use Pell Grants to count low-income students warn that the measure is not perfect. Even so, they rarely provide much information on what the limitations of using this “Pell proxy” actually are. Some researchers have, however, uncovered flaws in the Pell proxy. In 2005, Jeffery Tebbs and Sarah Turner of the University of Virginia concluded that the limitations were severe enough to make it “inappropriate” for assessing enrollment policies and trends.3 This paper builds on and updates that work. It aims to provide more information on the Pell proxy’s limitations by making the proxy the focus rather than the means of the analysis. The paper first provides a brief explanation of the Pell Grant program, and discusses the available data on recipients and low-income student enrollments. It then illustrates some of the limitations of the Pell proxy through an analysis of five iterations of the National Postsecondary Student Aid Study (NPSAS) spanning the years 1995-96 to 2011-12, the most recent year for which data are available. The NPSAS is a nationally-representative dataset of college enrollees, and unlike other datasets, it includes information on student incomes and financial aid awards. The analysis reveals several key limitations of the Pell proxy that could affect its reliability, especially when it is used to draw conclusions about admissions and recruiting practices at particular universities or categories of schools. Generally, the proxy undercounts low-income students enrolled in institutions of higher education while counting some middle-income students as low-income. Using the Pell proxy to compare trends is even more problematic because Pell Grant take-up rates and eligibility rules have changed markedly over time. These trends may have affected the makeup of Pell Grant recipients and the share of students of students who receive Pell Grants differently at each institution, further reducing reliability of the Pell proxy to make cross-institutional comparisons.