Policymakers and the media use the Pell Grant program to measure the share of low-income students enrolled at specific colleges and universities, but the reliability of this measure is rarely scrutinized. This paper discusses several key limitations of the “Pell proxy” that could affect its reliability, especially when used to draw conclusions about admissions and recruiting practices at particular universities or categories of schools.

Generally, the proxy undercounts low-income students enrolled in institutions of higher education while counting middle-income students as low-income. Using the Pell proxy to compare trends is even more problematic because Pell Grant take-up rates and eligibility rules have changed markedly over time. These trends may have affected the makeup of Pell Grant students differently by institution, reducing the reliability of the Pell proxy further.

This analysis also illustrates that when Congress increases the maximum Pell Grant faster than the rate of inflation—which it tends to do over long periods of time—more middle-income families qualify for the program. This eligibility design increases the cost of the program more than would be necessary to increase grant size for only the lowest income students. Policymakers could adopt a number of changes to the program to address this issue and better target aid.