Some low-income students receiving Pell Grants may also need student loans to afford the cost of attendance, since Pell Grants are administered semester by semester. If students fail to finish school, they remain burdened with the student loan debt and lack a college degree.

Policymakers should replace Pell Grants with a college savings account funded at the full amount of the Pell Grants they will be eligible for for the duration of their program (e.g., four years for a bachelor’s degree). Full funding from the start might discourage low-income students from taking out student loans that might be burdensome if they drop out. Students who do drop out would forfeit the remainder of the account balance.