In the past 20 years, average tuition and fees at...

In the past 20 years, average tuition and fees at public four-year institutions have more than doubled, to $10,440, while maximum Pell awards have only grown 29%. Credit: Getty Images / iStockphoto / kzenon

Tuition bills are coming due, and while millions of students across the country are weighing the risks of going back to college in the middle of a pandemic, the most financially strapped students carry an added burden of dwindling aid.

For Americans living in the lowest income brackets, college represents a way up the socioeconomic ladder. But getting there and obtaining a degree is not easy, especially for students without financial means.

The Pell Grant is the largest source of postsecondary education grant aid, helping to fund higher education for at-need students since 1973. In its budget proposal for the 2020-21 school year, the U.S. Department of Education anticipated giving Pell Grants to 6.8 million at-need students, to the tune of $29.6 billion. But alongside the skyrocketing cost of higher education, the federal grant is having less and less of an impact.

How much each student qualifies for depends on their expected student and family contribution. Those with the most financial need could qualify for the maximum allowable grant amount: $6,345 in the 2020-21 academic year.

In the past 20 years, average tuition and fees at public four-year institutions have more than doubled, to $10,440, while maximum Pell awards have only grown 29%. And tuition isn’t everything — room and board, books and living expenses come at an additional cost.

As recently as 2002, the most at-need students would nearly be able to cover their entire tuition and fees at these lower-cost institutions by qualifying for the maximum Pell Grant. But now, those qualifying for maximum Pell awards would find it covers just 59%.

Loans likely filling the funding gap

According to data from the most recent National Postsecondary Student Aid Study, 90% of dependent full-time undergraduates from households in the lowest income quartile received a Pell Grant in 2016. Among independent undergraduates in that income bracket, 64% received the grant.

State and institutional need-based grants may be picking up some of the slack. State need-based grants went to 27% of all full-time students at public four-year institutions in 2016. Need-based grants from institutions went to 17%. But about 57% of students in this lowest income group took out student loans that year.

While the Pell Grant typically accounted for 34% of a low-income undergraduate's total aid in 2016, loans accounted for 44%.

Low-income parents also feeling the sting

When a dependent student has exhausted grants and federal loan limits themselves, they can tap their parents’ borrowing potential.

Parent PLUS loans, allow parents to borrow up to the difference between the entire cost of attendance and the aid directly awarded to their student. Borrowers must pass a credit check, but there are no income requirements.

Federal PLUS loans come with higher interest rates and fewer repayment options than federal student loans. In the 2020-21 school year, PLUS loans are being offered at 5.3% interest compared with 2.75% for federal undergraduate loans.

What students can do

Barring significant increases in need-based aid or significant decreases in college costs, lower-income students and their parents will often have to continue cobbling together their college funds from a variety of sources.

The following tips are applicable for anyone who doesn’t have their entire cost of college covered:

Maximize free money. Fill out the Free Application for Federal Student Aid, or FAFSA, on time — every year. It’s how you access federal, state and institutional financial aid. Apply for scholarships every year, and only turn to loans when free money is exhausted.

Be strategic about borrowing. Borrow only what’s needed and opt for federal student loans when possible. Weigh the risks of borrowing a parent PLUS loan versus a private student loan. 

Compare costs across institutions. Weigh all costs associated with attending various schools, and consider starting your college career at a lower-cost community college.

Earn while you learn. Look into the work-study program or a part-time job to earn money while in school.

Stay committed. Seek out resources on and off campus to stay engaged and enrolled.

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