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DAVID GREENE, HOST:

This is MORNING EDITION, from NPR News. I'm David Greene. We're going to spend some time talking about paying for college. In a moment, we'll hear some advice for parents and students. First, every year the federal government gives needy college students billions of dollars of assistance they don't have to pay back - $34.5 billion worth, to be exact. It's known as the Pell Grant program; 9 and a half million students rely on it. But now, a new study says much of the money is going to people who never graduate. NPR's Claudio Sanchez reports.

CLAUDIO SANCHEZ, BYLINE: Sandy Baum, an expert on student financial aid, has been leading a group in a study of the 48-year-old Pell Grant program. Their report, commissioned by the nonprofit College Board, confirms what many have known for years about grant recipients.

SANDY BAUM: We have always known that the completion rates are lower than what we'd like them to be. But what we really learned was that there are so many students who are not the traditional Pell Grant student, who are not young people from low-income families but rather, are adults seeking to improve their labor force opportunities. And so understanding how important Pell Grants are to these students, and how poorly designed they are to actually serve these students, was something of an awakening.

SANCHEZ: Baum says these are people 25 years and older who were hit hard by the recession; lost their jobs, went back for more training and education, but have struggled to complete their schooling. Baum says they get little or no guidance about what to study, or even what school to choose.

BAUM: If you're an adult, you're much more likely to see a sign on the bus, or hear that your neighbor went to school someplace. You really don't have many options.

SANCHEZ: Older, non-traditional students, says Baum, now make up nearly half of all Pell Grant recipients. But only 3 percent ever graduate. And without a degree, they're back to square one, struggling to find work. High dropout rates, though, are not limited to older students. Among 18- to 25-year-olds in the program, only a fraction earn a bachelor's degree within six years, often because they're just not ready for college-level work.

But Sophia Zaman, a recent graduate from the University of Massachusetts at Amherst, says Pell Grant recipients like her don't drop out because they can't handle the work. Higher tuition and fees push them out.

SOPHIA SAMAN: I have numerous friends who were unable to afford taking on a fourth year of college because - and my university was not unique - we faced a 16 percent tuition increase.

SANCHEZ: Zaman now lobbies Congress on behalf of the U.S. Student Association. She says the $8,600 she received in Pell Grants over four years wasn't enough. She still had to work three part-time jobs to make ends meet. Researchers agree, Pell Grants today cover only a fraction of what they once covered. But their key finding is this: The Pell Grant program must now serve two equally needy but very different populations - young and old.

Claudio Sanchez, NPR News.

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