Department of Education
The Federal Pell Grant Program provides need-based grants to low-income undergraduate and certain post-baccalaureate students to promote access to postsecondary education. Students may use their grants at any one of approximately 5,600 participating postsecondary institutions. Grant amounts are dependent on: the student's expected family contribution (EFC); the cost of attendance (as determined by the institution); the student's enrollment status (full-time or part-time); and whether the student attends for a full academic year or less. In FY 2015, the Department disbursed $29.9 billion in Pell Grants averaging approximately $3,679 to more than 7 million students. The maximum Pell Grant award was $5,730 for the 2014–15 award year and increased to $5,775 for the 2015–16 award year.
Agency Accountable Official: Thomas P. Skelly, Director, Budget Service and Acting Chief Financial Officer
Program Accountable Official: Jay Hurt, Chief Financial Officer, Office of Federal Student Aid
To calculate an annual improper payment estimate for the Pell Grant Program, the Department of Education obtained approval from OMB in FY 2014 to use an alternative methodology which replaces the previous methodology. This alternative methodology leverages data collected through Federal Student Aid Program Reviews, which include procedures such as verifying student-reported income levels, student academic performance, and eligibility on the disbursed funds for a sample of students in each review. In FY 2015, gross improper payments in the Pell Grant Program were estimated to be $562.29 million, or 1.88% of total program outlays. Estimated Pell Grant over-award improper payments were $457.59 million and the estimated under-award improper payments were $104.70 million.The major root causes of improper payments in the Pell Grant Program are incorrect self-reporting of an applicant’s income which leads to incorrect awards based on Expected Family Contribution (EFC); incorrect processing of student data by institutions during normal operations; student account data changes not applied or processed correctly; ineligibility for a Pell Grant (e.g., validity of high school attended, history of degrees obtained); satisfactory academic progress not achieved; and incorrectly calculated return records by institutions returning Title IV student aid funds. To prevent and reduce improper payments in the Pell Grant Program, the Department is pursuing several corrective actions. One of the most recent significant actions that the Department is pursuing is to encourage applicants to retrieve certain income information directly from the IRS with the use of the IRS Data Retrieval Tool. With just a few simple steps, applicants can view information from their IRS tax return and transfer that information directly into the FAFSA. For the 2014-15 cycle, approximately 5.6 million applicants and their parents opted to use this tool for providing the appropriate tax-related information. Additional improvements were made to the 2014-2015 application cycle to determine eligibility for the IRS Data Retrieval Tool and identify additional ways to encourage those applicants to utilize the tool. Of those who fill out the FAFSA each year, some applicants indicate that they intend to file a tax return, but have not done so yet. These applicants must later retrieve their IRS data once they file or face verification by the school. For the 2017-18 award year, applicants will be able to complete their FAFSA using “prior-prior year” tax data. This is in contrast with the current “prior year” process where many applicants submit their FAFSAs before tax returns have been completed resulting in the need to estimate income and tax information that subsequently needs to be corrected once the tax return is filed; or worse, waiting to complete their FAFSA until after the tax return has been filed. Also, applicants will be able to initiate their application earlier in the 2017-18 award year. The start of the FAFSA cycle for 2017-18 will move up from January 1 to October 1. Another key action in addressing the inaccuracies on the FAFSA, are the changes in verification regulations. Verification is the process required by the Department that schools conduct to confirm specific information reported on the FAFSA by the applicant. Previously, the Department required postsecondary educational institutions to verify key items on up to 30 percent of their students’ FAFSA forms, focusing on those individuals that qualify for Pell Grants. Beginning with the 2012–13 award year, schools are required to verify all applicants that are selected by the Department for verification. Annually, the Department analyzes grant recipients and the verification selection system, and informs the financial aid community of what FAFSA items are subject to verification for the upcoming award year. This annual analysis is performed to enhance verification methodology and to meet the goal of selecting the applicants who are most likely to have incorrect information on their FAFSA. In addition, Federal Student Aid’s Program Compliance office works to promote accountability in the administration of Title IV student financial aid through institutional oversight and enforcement. As part of its ongoing oversight and enforcement activities, Program Compliance conducts periodic recertification of all schools’ eligibility and issues loss of eligibility determinations to schools; assesses millions of dollars in final program review determinations and final audit determinations; and debars individuals from receiving assistance or benefits from any federal agency as a result of financial aid fraud or other criminal convictions. Additional information on the Department’s efforts to reduce and prevent improper payments in the Pell Grant Program can be found in its annual AFR (http://www2.ed.gov/about/reports/annual/index.html?src=ln).