Link Between Financial Aid And College Access And SuccessFederal Pell Grants help more than eight million low- and moderate-income Americans attend and complete college and are the cornerstone of our nation's student aid system. The vast majority of Pell recipients have family incomes under $40,000, and they already have to borrow more than others to complete college. For more information about Pell Grants, visit the U.S. Department of Education's website. Pell Grant Provisions Prevent Student Abuse July 18, 2011 - Despite recent discussion of studentabuse of federal Pell Grants, there is actually no evidence widespread abuse exists. Any concernsabout fraud or abuse should be addressed directly and carefully to avoid harming the millions of needy students who play by the rules. When institutions raise their tuition prices, they are likely to spend more on needbased financial aid because of the larger gap created between ability to pay and sticker price. They may also spend more on non-needbased aid, designed to encourage students with particular characteristicsto enroll. Institutional grant aid creates a gap between the sticker price and the net price students actually pay to institutions, as well as a gap between gross tuition revenue (tuition times number of students) and the net tuition revenue the institution actually receives. Increases in institutional grant aid may reduce net revenues by simply lowering the prices students pay, or it may increase net revenues by bringing in more students. This is a pricing pattern that economists call â€œprice discrimination.â€• Price discrimination is not a bad thing. Some students can easily afford the sticker price, and would be able and willing to pay even more. Some institutions have long waiting lists of students willing to pay their sticker prices. Most of these are highly selective, nationally known, private institutions or flagship public universities. These institutions discount their prices to attract different students than those who would enroll without financial aid. They want the best students they can get, and many of those students simply cannot pay on their own. They may also want students with particular capabilities who will be drawn in by financial aid. For those institutions, financial aid is an expenditure made to shape the student body. Many other institutions would have empty seats if they did not discount so generously. If they lowered the sticker price enough to fill the class, their total revenues would be too low to operate. But if they can draw in some full-pay students, while charging others a lower priceâ€”something close to the maximum each student is willing and able to payâ€”they can fill their classes while taking in adequate net revenues.