Pell Grants:

How the Department of Education Estimates Program Costs

HRD-90-73BR: Published: Feb 21, 1990. Publicly Released: Feb 21, 1990.

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Pursuant to a congressional request, GAO assessed: (1) the Department of Education's process for estimating Pell grant program costs and the factors which contributed to its revision of its fiscal year 1990 budget request; and (2) whether Education had the authority to borrow funds from subsequent years' appropriations to pay for Pell grant funding shortfalls from previous years.

GAO found that Education used a three-step process to develop its Pell grant budget estimate, which included: (1) data from a sample of students who had previously applied for loans and a model which included 30 economic indicators; (2) manual data adjustments to reflect recent program changes; and (3) adjustments of the possible program funding shortages and surpluses. GAO also noted that the second budget request was attributable to: (1) an increased cost model estimate based on revised economic indicators and an unexpected increase in grant recipients; (2) an additional budget shortage; and (3) a decrease in program adjustments due to a lower estimated cost for financial aid administrators' discretion.

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