A living stipend for students with financial need

“Nontuition expenses—including housing, food, transportation, and miscellaneous expenses, in addition to books and supplies—constitute a significant financial burden for many students pursuing higher education, even if they receive grant aid to help them pay tuition and fees. Well-designed policy interventions at both the federal and state levels could effectively address the hardships some students face.

A large increase in the maximum Pell grant to provide students additional funds for living expenses may seem like a straightforward solution, but that approach is not optimal. Doubling the maximum Pell grant would increase the aid most current full-time recipients receive by the same dollar amount, regardless of the size of their current Pell grant. In other words, it would double the grant for the lowest-income students, who currently receive the maximum, but would increase it by much larger proportions for those whose somewhat higher incomes qualify them for smaller grants. The program’s cost would more than double.

In this report, we propose alternative design options for a need-based basic living stipend. Awarding two Pell grants, with the second grant explicitly for nontuition expenses, would be less expensive and more targeted to the lowest-income students than doubling the maximum. Our preferred option would be a distinct need-based living stipend supplementing an increased Pell grant. The stipend would be standard, not based on individual cost of attendance, which is an inconsistent metric. The maximum stipend could be lower than the maximum Pell grant. The stipend would decline at a chosen rate as incomes increase. This approach would be most flexible and would be less expensive and better targeted than an increase in the maximum Pell grant that would give the same amount of funding to the lowest-income students.

A federal matching program providing incentives to states to provide need-based living stipends would be a useful complement to this federal program and could tailor aid to local circumstances.”

Read Full Report →