A growing number of college students are entering school with fewer resources to cover the cost, according to data from the Education Department. (iStock)

A federal program for the country's neediest college students is witnessing a troubling trend: an influx of students with fewer resources to pay for school.

In its latest report on the Pell Grant program, the Education Department said nearly three-quarters of the 8.6 million students who received the federal grant to attend college last year reported having no savings or other cash on hand. That compares to 60 percent of federal grant recipients five years earlier.


It is entirely possible that these students come from families with a house and retirement funds, which are not factored into financial aid calculations, but those assets are not easily converted into money to cover expenses. It is also possible that they come from households without any assets. Either way, these students would have a hard time weathering the loss of a job, scholarship or any other financial setback. And that could lead them to drop out of school.

"Pell recipients are a bit more impoverished than ever," said Sara Goldrick-Rab, a professor of educational policy studies at the University of Wisconsin at Madison. "When these students get into trouble, their families have nothing to give them. They have nothing to fall back on."

One in three undergraduates who apply for financial aid qualify for Pell, a federal program that awards money that does not have to be repaid to students from low-income families. Roughly 91 percent of recipients in the 2013-2014 academic year had household income of less than $50,000 a year, and more than half came from families making less than $20,000, according to the Education Department.


In the past two years, the number of students receiving Pell has started to ebb. Fewer students are qualifying as the economy recovers and more people are forgoing college because the job market is better, said Robert Kelchen, a professor in the department of education at Seton Hall University in South Orange, N.J.

Pell, he said, is also less generous than it was five years ago when the Obama administration changed the formula to get money in the hands of more families. The formula has since been reversed and benefits have been pared back, with students no longer getting grants for summer courses.

Even with the economy on the mend, Black and Hispanic students, who make up a growing percentage of the college population, still come from households with far less income and wealth than white students. Nearly two-thirds of African American undergraduates receive Pell funding, as do 51 percent of Latino undergrads, according to the Education Department.

[Minorities and poor college students are shouldering the most student debt]

"We have growing inequality that we know exists in terms of wages and salaries," said Margaret Cahalan, director of the Pell Institute for the Study of Opportunity in Higher Education. "When you have a society where half of students are eligible for free and reduced lunch, it should be no surprise that students have no resources when they get to college."

Goldrick-Rab said Pell recipients may be a lot worse off than the data shows because of the way the government calculates financial aid. The FAFSA form, which is used to determine aid, does not ask questions about debt. It also judges the expected contribution of a family living below the poverty line the same as one teetering on the edge, masking the full extent of aid a student might need.

Nine out of 10 Pell recipients who graduate from four-year colleges have student loans and owe on average $4,750 more than their peers, according to the Institute for the College Access and Success (TICAS). These students have few choices but to borrow as states are cutting need-based aid and Congress is threatening to do the same.

[House Republicans want to cut back grants for poor college students]

Twelve states and the District now spend more on scholarships and grants that are based on academic achievement instead of financial need, according to the National Association of State Student Grant and Aid Programs. Middle- and upper-income students who can afford college prep classes and tutors disproportionately benefit from merit-based aid, meaning students with the means to pay for college are getting more money than those without.

Meanwhile, congressional Republicans are supporting a budget plan that would eliminate guaranteed funding for Pell, which advocacy group the Committee for Education Funding said could result in the maximum award declining by 15 percent. Even at its current level, with maximum awards topping $5,775 per school year, Pell covers barely a third of the cost of college, according to TICAS.

"We're going to see college completion rates go down if these policies continue," Goldrick-Rab said. "Folks are trying college and quickly finding out they can't afford it."

Want to read more about paying for college? Check out these articles:

How your family finances factor into financial aid calculations

There’s a way to dramatically lower student debt payments, but hardly anyone uses it 

States are spending slightly more on higher education. But so are families.
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