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Pell Grant use
Joe May, president of the Louisiana Community and Technical College System, has a solution for students taking Pell Grants and then dropping out.

The government pays out billions in Pell Grants each year. But critics say there are cases of fraud where students don’t use the money for education.

Tess Vigeland: The House returned to the debt ceiling debate today with Republicans lining up to vote against their own bill to raise the debt limit. Meantime, Vice President Joe Biden continues meeting with top lawmakers on how to cut $1 trillion in spending.

Some in Congress are targeting federal Pell Grants, financial aid for low-income college students that doesn’t have to be repaid. Some of the program’s critics are pointing to cases of fraud, where students don’t use the money for education.

Marketplace’s Nancy Marshall Genzer reports.

Nancy Marshall Genzer: Pell Grants are a godsend for students like 21-year-old Nichole Harris. She can’t imagine spending any of the $3,000 she got in Pell Grants this year on anything but her education.

Nichole Harris: I would never do something like that.

Harris just finished her second year at Montgomery College. It’s in the Maryland suburbs of Washington. Harris’ mom is in the military, and raised her daughter with a strict sense of right and wrong. So Harris was shocked when she heard other students talk about using their Pell money to play Santa.

Harris: Christmas, you know, gotta shop. So if you don’t have money for people, then it’s kind of hard. So I guess they just feel like, oh let me use the Pell Grant money, which is not good.

The maximum Pell Grant is about $5,500. The government pays the money directly to the school. The school takes out tuition and fees. Then it gives anything left over to the student — usually a few weeks into the semester. Some students like Harris, at more expensive schools, don’t get anything back. Those who do are supposed to spend the money on books or living expenses. But there’s no way to enforce that. Some students drop out after getting their checks. Teachers on some campuses say they know when the checks come in because it’s a lot easier to find a parking space.

Laurie Wolf: Teachers tell us that. I mean, I can go out and I can actually witness that when I arrive in the morning.

Laurie Wolf is executive dean of student services for Des Moines Area Community College in Iowa. She says some students are just enrolling for a check. They drop out, enroll again the next semester, and apply for another grant.

Wolf: They see that they get this lump sum amount of money and it’s like, ooh, pennies from heaven. Except it’s dollars. Quite frankly I think some of them look at it as, ooh, it’s easier to do this than it is to find a job.

Pell grant facts

Number of grants: 8,094,024

Total amount of grants: $29.9 billion

Average grant: $3,706

Numbers all for 2009-2010 award year

Pell Grant fraud is more of a problem at low-cost community and technical colleges. They’re cheaper. So students get a refund check. In some cases, people shop around for the cheapest schools. Some of the best bargains are in Louisiana.

Joe May is president of the Louisiana Community and Technical College System. At the technical colleges, only a fifth of the Pell Grant goes toward tuition. Students get the rest back, up to $4,300 per year. May says he has a solution: raise tuition.

Joe May: We have what is, in effect, the second lowest tuition at these colleges in the country. We’re proud of that on one hand. On the other hand, if our price is so low that people are abusing the system, we’re very concerned about that.

But student advocates say higher tuition would price honest students out of school.

Mark Kantrowitz is publisher of the website He says colleges should track the biggest abusers. Students who flunk out of one school repeatedly lose their eligibility for Pell Grants at that school. Then enroll in another school, with a fresh grant. In financial aid circles, they’re known as Pell runners.

Mark Kantrowitz: If you see a student transferring from one college to another to another within a small geographic area, that may be a sign that they’re a Pell runner.

The school could report that student to the Department of Education, which has already been cracking down on fraud. Kantrowitz tracks Pell Grant money and says most does go toward tuition and fees. Students don’t submit receipts showing how they spend the money. So it’s hard to say how much is lost to fraud. Still, Kantrowitz says most students are honest. And they need the Pell grants to get an education.

Back in Maryland, student Nichole Harris says she wouldn’t be in college right now without the grant.

Harris: I would hate to not be able to afford school because somebody else is like oh, let me use government money, basically and go buy myself something.

Harris is afraid the Pell Grant’s critics will use fraud by a few as an excuse to cut the grants.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

Vigeland: This story was reported with the help of Liz Willen and Joanne Jacobs at The Hechinger Report.

Copyright (c) 2011 American Public Media’s Marketplace®. Reprinted by permission. All rights reserved.

This story originally aired on Marketplace on June 1, 2011.

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  1. Wow. I know someone who is unemployed, married with a toddler, and attends school full time. He uses his gi bill along with his Pell grant to build their big dream house.

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