To Give or to Take: Exploring Effects of Reductions in Pell Lifetime Eligibility

The Pell Grant plays a critical role in helping students across the US to afford undergraduate education. Despite its importance to the US system of higher education finance, little is known about the optimal amount of time students should be eligible to receive Pell or other need-based grant aid programs. I exploit changes made during the Obama administration in 2012 that effectively lowered the maximum lifetime eligibility for Pell from 9 to 6 years of full-time equivalent study. I use a student fixed effects model that estimates the impact of reductions in lifetime Pell eligibility on student enrollment and degree completion outcomes for community college and four-year college students at a large, urban public university system. Findings suggest that lower lifetime eligibility reduced the likelihood of student re-enrollment and lowered students’ academic performance. The policy change reduced the average amount of grant aid students received. Black and Hispanic students and community college entrants were most impacted by the policy change and attempted to offset declines in grant aid through increases in outside earnings and loans. These results suggest that there are more effective policy levers to encourage enrollment through degree completion outside of the threat of financial aid loss.