The Impact of Pell Grant Eligibility on Community College Students’ Financial Aid Packages, Labor Supply, and Academic Outcomes

Oct 15, 2026

Examines how receiving a modest Pell Grant affects community college students’ financial aid packages, labor supply while enrolled, and academic outcomes. Using administrative data from one state, the study compares students just above versus below the expected family contribution cutoff tied to Pell eligibility. Findings show other aid responds differently by institution, with some schools increasing borrowing when Pell eligibility is missed and others offsetting with higher state grants. For loan-offering schools, modest Pell reduces labor supply and increases enrollment intensity, and shapes initial enrollment choices versus loans.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages29

Reading Time1 h 13 min

AccessFree to download

Introduction

Background on Pell Grant and federal financial aid

Prior research on Pell eligibility effects

Explanations for mixed evidence

Educational Evaluation and Policy Analysis December 2018, Vol. 40, No. 4, pp. 557–585 DOI: 10.3102/0162373718783868 Article reuse guidelines: [sagepub.com/journals-permissions](sagepub.com/journals-permissions)[ ](sagepub.com/journals-permissions)© 2018 AERA. [http://eepa.aera.net](http://eepa.aera.net) The Impact of Pell Grant Eligibility on Community College Students’ Financial Aid Packages, Labor Supply, and Academic Outcomes Rina Seung Eun Park Community College Research Center Columbia University Judith Scott-Clayton Community College Research Center Columbia University National Bureau of Economic Research In this article, we examine the effects of receiving a modest Pell Grant on financial aid packages, labor supply while in school, and academic outcomes for community college students. Using administrative data from one state, we compare students just above and below the expected family contribution cutoff for receiving a Pell Grant. We find that other financial aid adjusts in ways that vary by institution: Students at schools that offer federal loans borrowed more if they just missed the Pell eligibility threshold, but at other schools, students were instead compensated with higher state grants. Focusing on the loan-offering schools, we find suggestive evidence that receiving a modest Pell Grant leads students to reduce labor supply and increase enrollment intensity. We also provide indirect evidence that students’ initial enrollment choices are influenced by an offer of Pell Grants versus loans. Keywords: Pell Grant, financial aid, labor supply, regression-discontinuity Introduction IN 1965, President Lyndon Johnson signed into law the Higher Education Act of 1965, which initiated the precursors to today’s Pell Grant and Stafford Loan programs and solidified the federal government’s role in higher education finance. Since then, the importance of federal financial aid policy has only increased. In 2014– 2015, the federal government provided over US$120 billion in student loans, grants, and other forms of financial aid for undergraduates—more than 4 times the level of support provided in 1990–1991. The federal Pell Grant program is the largest single source of grant aid, providing US$30 .3 billion in grants to over 9 million students annually in 2014–2015, up to US$5,775 each per year. Students can use the grant at any eligible institution and receive the same amount regardless of where they go. Although the eligibility formula is complex, family income is the main component: Those with family income below US$30,000 typically receive the maximum award, while only about 5% of those with family incomes above US$70,000 receive any award. If the award exceeds tuition and fees, students can use Park and Scott-Clayton the extra amount for books, food, or other living expenses. Although a large body of research convincingly demonstrates that financial aid programs can influence student enrollments and completion (e.g., Deming & Dynarski, 2009; Long, 2008; Page & Scott-Clayton, 2016), evidence on the effects of Pell Grants specifically is more mixed. Two early studies of the introduction of Pell Grants find no evidence that college enrollments increased any faster for Pell-eligible students relative to ineligible students (Hansen, 1983; Kane, 1995) . More recently, a regressiondiscontinuity (RD) analysis of urban community college students just above and below the eligibility cutoff for Pell finds no impact on college choice, course credits, or degree completion (Marx & Turner, 2015) . A similar study using data on high school graduates in Tennessee generally finds no effect of minimum Pell eligibility on college sector, quality, and enrollment, though finds some small differences by gender (Carruthers & Welch, 2017) . On the contrary, Pell Grants appear to positively influence enrollment rates for adult students (Seftor & Turner, 2002) and may increase persistence, graduation, and even postcoll

FAQs

What outcome areas does the article study regarding Pell eligibility?

It studies effects on students’ financial aid packages, labor supply while in school, and academic outcomes for community college students.

How does the study estimate the causal impact of Pell eligibility?

It compares students just above and below the Pell eligibility cutoff based on expected family contribution, using administrative data from one state.

What do the results suggest about modest Pell Grants for loan-offering schools?

The article finds suggestive evidence that receiving modest Pell Grants reduces labor supply and increases enrollment intensity, and that enrollment choices are influenced by Pell offers versus loans.

Oct 15, 2026

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