Changes to rules about Pell Grants are likely to have a dramatically adverse effect on companies that operate for-profit colleges.

According to a piece by John Lauerman at Bloomberg News:

The budget deal reached last week includes the White House’s proposed $1.8 billion reduction to the program, which is widely used by students at for-profit colleges. The feature, called “year-round Pell,” permits applicants to get two grants in one year. The accord must be approved by Congress and signed by the president to fund the federal government through September.

For-profit colleges received $545 million in year-round Pell funds, or 32 percent of the total, last year, according to the Education Department. Public two-year community colleges, which enroll about 8 million students, or more than four times as many as for-profit colleges, got about $455 million in year- round Pell funding, or about 27 percent of the total.

The year-round provision allows students to take out more than one grant a year to pay for education. Last year about 800,000 students took out a second Pell, mostly in order to pay for summer courses.

The budget deal allows students to take out only one grant a year. Cutting students off from the second Pell would save about $8 billion over the next two years. This allows the government to close the $20 billion Pell shortfall without reducing grant amounts.

It would also, however, prevent students from paying for more of their education with Pell Grants. According to the article students at for-profit schools, who mostly take classes online, are much more likely to attempt to use more than one grant a year.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer