Here's Your Grant Money, College Students. Don't Spend It All in One Place.

House Republicans propose giving eligible students the flexibility to access all of their Pell Grant money at once. Would that reform raise graduation rates?

Imagine a would-be college student filling out just one financial-aid form and then being given her allotted Pell Grant money automatically each semester until graduation. That, in principle, is what House Republicans would like to see happen as they update the current federal higher-education law. It is the most far-reaching proposal on their wish list of ideas to simplify and streamline the all-too-vexing college financing system.

These Republicans, members of the House Education and the Workforce Committee, say that college goers should be receive just one loan, one grant, and one work-study program if they are eligible. Right now, most students juggle a confusing mix of different loans and grants. "Students and parents, they look at all this stuff and go, 'I don't even know what I should do here,' " says committee Chairman John Kline, R-Minn.

The challenge of navigating that maze is daunting enough that some prospective college goers give up entirely. Others make mistakes and wind up signing up for financing they don't understand or passing up available money. They might confuse loans with grants and be shocked on graduation day when they are presented with an IOU for tens of thousands of dollars.

When it comes to Pell Grants, Republicans say the process is too complicated. Their solution would require students to apply one time only for grants that could span six years and allow students to use those grants whenever they want until the money runs out or they finish their degrees. "The idea is that here's the amount of Pell Grant that you're going to be eligible for. You would be able to draw down on it as you needed it," says Kline.

There are a lot of questions about the proposal, which is deliberately vague because committee members are still negotiating details. Michelle Asha Cooper, president of the Institute for Higher Education Policy, worries that if all the Pell money — roughly $35,000, in today's dollars — were to become available at once, students would use it on high-priced tuition in the first year and then be unable to finish their studies.

Currently, students must fill out an application each year for a fall and spring semester allotment. The maximum Pell Grant for the 2014-15 school year is $5,730, which can cover full tuition costs at some, but not all, public universities and community colleges. Often, grantees are left short and must take out loans to cover the cost of books and fees. The Republican proposal is intended to let them be more flexible so they might not have to take out loans until later.

The proposal also could give incentives to students to finish college studies early. They could use the flexible Pell Grant to pay for summer courses, which they cannot do now.

There are ways to do that without exhausting all the grant money in one year. Last year, the National Association of Student Financial Aid Administrators proposed a "Pell Well" where students could "draw" funds as needed, with some limits like prorated payments if they didn't take a full slate of classes. Those payments would be available until they graduate or their six-year entitlements ran out.

Rick Hess, an education scholar at the right-leaning American Enterprise Institute, says the flexible Pell Grant is a good way for conservatives to think about higher-education benefits. "I like the idea that if you decide you want to give grants to people to go to college, you give them what you're going to give them and it's their responsibility to do it."

The problem, Hess says, is that if the student blows all the money before actually getting a degree, he's out of luck. As a country, "we tend to be not very good at the 'out of luck' part," he says. (Besides, giving someone money not to get a degree is just bad policy.)

Politicians like Kline are looking at reforming Pell Grants as a response to the public's sticker shock about $1 trillion in student debt and ever-rising tuitions. The issue has captured the attention of unabashed liberals like Sens. Elizabeth Warren, D-Mass., and Tom Harkin, D-Iowa, and tea-party darlings like Sen. Marco Rubio, R-Fla. Senate colleagues Michael Bennet, D-Colo., and Lamar Alexander, R-Tenn., even teamed up on legislation to shrink the daunting Free Application for Federal Student Aid to just two questions.

Advocates are hopeful that the attention can translate into a real overhaul of the financial aid process, even in a highly divisive Congress. The public conversation alone could result in a college-going student body that is savvier about its choices. "People will at least know what kinds of questions they need to be thinking about," says IHEP President Cooper. And if the government-aid system actually becomes simpler through a new law, so much the better.

Almost two-thirds of high school students who didn't go to college said that the price of tuition was major factor in their decision, according to IHEP. Anecdotally, students told survey researchers things like "I'm broke" or "I can't afford it." The survey was conducted in 2006, well before the financial meltdown of 2008 and the subsequent squeeze on state budgets that caused an escalation in public-university tuitions. House Republicans cited the IHEP study in their policy primer, saying they want to make the financial-aid application process a lot simpler. Why do we need three types of federal loans when one will suffice? Why must a student reapply for a Pell Grant every year and wait until the fall to get their money when they could be taking summer classes?

These questions are music to the ears of college-access advocates, who have sought some of these changes for years. "I think it's great that they laid that out there as a marker," says Megan McClean, federal relations and policy director for NASFAA.

Of course, there is a "but."

"We support the spirit of simplification. Like all policy things, there are some things that we need to think through. There is so much right now that goes into the formula. There is a possibility of things becoming too simple," McClean says. "How do we make sure the money's really going to the people it should be going to?"

Advocates are wary of Republican calls to streamline the system for fear that overall funding will be cut. For example, advocates cite one worrisome part in the GOP paper that comes under the heading "Ensuring the Long-Term Stability of the Pell Grant Program." Republicans say award increases and expansions have been "recklessly expanded" under President Obama's administration, and the program must be put back on "stable footing." That's code for cutbacks in one form or another.

Kline is prepared for such criticisms, but he is also determined to move forward on the items that most parties can agree on. "Simplification and flexibility are things that we would like to see and I think there is bipartisan agreement on that so that's the direction we're moving."

That may mean the big idea of the six-year Pell Grant will fall by the wayside, but it also means other smaller Republican ideas will likely pepper higher-education law. Hess views that as the best outcome. "Higher education is a place where Republicans have been completely out of the game for a while. I think it's great to see conservatives actually into the game."