Pell Grants and Proprietary Schools

Over the past several years, Congress has upped the maximum Pell Grant considerably from $4,731 in 2008 to $5,550 this year, and a big part of the increase was funded by the American Recovery and Reinvestment Act (ARRA). The program, which provides college tuition grants for students from low-income families, now costs $33 billion, up from about $18 billion in 2008. Given the current scarcity of jobs, this increased funding for post-secondary education is important for low-income individuals that need a leg up in the job market. These funds can be used at both two-year and four-year public, private, and proprietary schools. Some stakeholders are concerned proprietary schools have been aggressively marketing their services to low-income students, earning a disproportionate share of the new Pell Grant funds. According to our analysis, the story is somewhat different – while proprietary schools did receive a big jump in Pell Grants in the first half of the current school year, so did public and private schools, resulting in a nearly identical distribution of funds as before ARRA.

The Department of Education makes available Pell Grant volume data by fiscal quarter by school from the beginning of 2006-2007 to present. This data includes an indicator for whether the school is public, private, or proprietary. Using this data, we calculated the total Pell Grant volume for each school type by semester (adding together the amounts for the first and second fiscal quarters and the third and fourth). After plotting this data on a graph, we see that each school type, particularly public schools, received a large increase in Pell Grant volume between the second semester of 2008-09 and the first semester of 2009-10.

However, when we examined the rate of growth of Pell Grant volume from the first semester of 2008-09 to the first semester of 2010-09, we did find that proprietary schools received a greater percentage increase in grant volume, 71.6 percent, than other school types. Private schools received a 45.0 percent increase and public schools received a 56.4 percent increase. In dollar terms, proprietary schools received nearly $1.5 billion more while public schools received more than $3.0 billion more in Pell Grants.

That said, this larger percentage increase in Pell Grant volume for proprietary schools did not dramatically shift the distribution of grants among the school types. In the first semester of 2008-09, proprietary schools received 23.3 percent of total Pell grants; in the first semester of 2009-10, they received 25.3 percent. Over that same amount of time, the proportion of Pell Grants private and public schools received dropped by only a small amount – 1.5 percentage points or less.

For the most part, it seems, fears that proprietary schools are monopolizing the Pell Grant volume are mostly unfounded. While previous analyses suggest that some individual proprietary schools have received large increases in Pell Grants, the overall Pell Grant volume at proprietary schools does not dramatically outpace that at public and private schools. All school types are receiving large increases in grant volumes both in numeric and percentage terms. However, we do not yet have complete data for the second semester of 2009-10, let alone the grant volume for any of the 2010-11 school year, and this story could change as more data become available.