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 2012, the Department disbursed $33.3 billion in Pell Grants averaging approximately $3,653 to more than 9 million students. The maximum Pell Grant award was $5,550 for the 2011–12 award year and remained at $5,550 for the 2012–13 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
Note: The final Pell Grant error rate for FY 2011 was 2.7%, and at the time of reporting for FY 2012 the preliminary error rate was 2.5%. When establishing reduction targets for FY 2013 – 2015, the Department used the preliminary error rate from FY 2012, 2.5% for each year.
To calculate an annual improper payment estimate for the Pell Grant Program, the Department of Education conducts studies with the Internal Revenue Service (IRS) using data submitted by applicants in the Free Application for Federal Student Aid (FAFSA). The Department provides information from the FAFSA to the IRS for a sample of Pell aid recipients. The IRS compares this FAFSA data to its own tax data for these recipients to identify variances in the aid recipient’s self-reported income data used to determine aid eligibility that may result in improper payments. In FY 2012, gross improper payments in the Pell Grant Program were estimated to be $829 million, or 2.5% of total program outlays. For the statistical study of 2011-2012 award year data that was the basis of the FY 2012 improper payment estimate reported in the Agency Financial Report (AFR), the estimated Pell Grant over-award improper payment rate was 1.8% and the under-award rate was 0.7%, with a total (absolute) estimated improper payment rate of 2.5%.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 2012-13 cycle, approximately 4.8 million applicants and their parents have opted to use this tool for providing the appropriate tax-related information. Additional improvements were made to the 2012-2013 application cycle to determine eligibility for the IRS Data Retrieval Tool and identify additional ways to encourage those applicants to utilize the tool. 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 will be 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/2012report/agency-financial-report.pdf). .