The U.S. Congressional Budget Office’s recent projection of a surplus in the federal Pell Grant program for 2013 is a credit positive for colleges and universities, according to a recent report from Moody’s Investors Service.
The CBO released its report on the Pell program, which provides government grants to low-income students to encourage higher college attendance rates, on Wednesday last week.
Moody’s analyst Eva Bogaty said the surplus is particularly positive for colleges that enroll a large number of low-income students.
The most prominent colleges, such as the Ivy League, elite liberal arts colleges and flagship public universities, however, are relatively unaffected by changes in the program. These are typically highly rated and enroll fewer low-income students.
“The Pell surplus makes it likely that the program will be able to maintain current eligibility levels and fund maximum grant awards for another year,” Bogaty wrote.
Bogaty explained that special mandatory funding put in place by President Barack Obama in 2010 has offset the shortfalls the program had over the past few years. However, the funding will run out by the end of 2013.
Without a surplus, the program would have faced cuts that would likely have resulted in a reduction in the current maximum annual grant award or further changes to student eligibility.
“The new surplus in the Pell program is likely to lead to a short reprieve for Pell-reliant colleges and universities where the percentage of net revenue from Pell grants has grown significantly over the past 10 years,” Bogaty said.
She said that, according to The College Board, the number of low-income students receiving Pell Grants has more than doubled over the past decade to 9.4 million in academic year 2011-12 and the U.S. Department of Education reported that these grants provided a total of $36.5 billion to all of higher education in fiscal 2011.