Pell Grants as Performance-Based Aid? An Examination of Satisfactory Academic Progress Requirements in the Nation’s Largest Need-Based Aid Program

By: Lauren Schudde & Judith Scott-Clayton | December 2014

The Federal Pell Grant Program is the nation’s largest need-based grant program. While students’ initial eligibility for the Pell is based on financial need, renewal of the award is contingent on their making satisfactory academic progress (SAP)—meeting minimum academic standards similar to those proposed in models of performance-based scholarships. It is not clear how many students are affected by failure to meet SAP standards, or how the policies shape student outcomes.

In this study, the authors draw from literature on performance-based funding and academic probation to consider the potential implications of SAP standards. They describe federal guidelines and illustrate how SAP is evaluated in a statewide community college system. Using administrative data with term-by-term measures of Pell receipt, student grades, attempted and earned credits, persistence, degree attainment, and transfer, they employ regression discontinuity and difference-in-differences approaches to examine the magnitude of SAP failure and its effects.

The results suggest that a substantial portion of Pell recipients at community colleges are at risk for Pell ineligibility due to their failure to meet SAP grade point average (GPA) or credit completion requirements. Approximately a quarter fail to meet the GPA standard alone. When the credit completion requirement is taken into consideration, the first-year SAP failure rate approaches 40 percent. The preferred difference-in-differences estimates show mixed effects of SAP standards: Failing to meet the GPA requirement has a negative impact on persistence into the second year, but it may improve associate degree attainment and transfer among students who are not discouraged from reenrolling.

A version of this paper is published in Research in Higher Education.