Pell Grants to be eliminated for many low-income students

A new formula for calculating eligibility for college financial aid will eliminate federal Pell Grants for up to 80,000 to 90,000 low-income students and will affect funding levels for up to 1 million others.

The change, announced by the U.S. Department of Education (DOE) Dec. 23, will also force other types of state and federal assistance to scale back their financial aid programs.

Besides those who will lose their Pell Grants completely, "we estimate about 1.3 million students will see reductions of $100 to $300 per year," said Terry Hartle, senior vice president of the American Council on Education, a trade association representing 2,000 public and private colleges and universities.

The Bush administration supports the new formula and estimates the federal government’s savings at $300 million in the 2005-2006 academic year alone.

Although revisions to the financial aid calculation formula are supposed to be made regularly, the formula used by the DOE for the past 14 years was based on 1990 figures. The newly revised version will reference tax data from 2002.

This threatens to create a serious financial disconnect. In 1990, state and local taxes were higher on average than they are today. As a result, the new, recalibrated formula will make families appear to have more income available for this year’s college expenses than they did last year.

Sen. Jon S. Corzine, D-New Jersey, was "outraged that the Bush administration is going forward with these punitive cuts," adding that the change in the eligibility rules was "nothing more than a backdoor effort to cut student aid funding."

Proponents of the new plan claim that the neediest students – those who receive maximum Pell Grants of $4,050 – will be unaffected by the changes, and that only a fraction of the 5.3 million Pell recipients will lose their grants entirely.

"Our projections show that nearly half the Pell Grant recipients won’t see any change at all, and on average the losses [for those affected] will be less than $100," said Susan Aspey, DOE spokeswoman.

Nonetheless, those affected will feel the hit.

"I don’t think it means students won’t go to school," said Hartle. "But they will have to borrow more money on credit cards, work longer hours or take fewer classes."

Advocates of federal student aid point out that the present maximum grant of $4,050 covers only one-third of average college costs (tuition, fees, room and board) and is patently inadequate.

The Pell Grant is a federal entitlement program that gives money to students enrolled in eligible programs of study at approved postsecondary institutions in the United States and abroad. Created in 1972 by former Sen. Claiborne Pell, the program began in 1973 and was fully implemented in 1976.

Unlike local and federal loans, Pell Grants are not repaid, making them a highly desirable type of funding. Almost one-third of US college students receive Pell funds.

Application for Pell funds is made through the FAFSA (Free Application for Financial Student Aid), which is completed annually.

The Pell has four absolute requirements: applicants must be undergraduates, must be working on their first undergraduate degree, must be attending a federally approved school and must not be incarcerated in a state or federal prison.

To receive a Pell Grant, students must also demonstrate financial need. This is determined through the student’s Estimated Family Contribution, a figure calculated by the FAFSA. About 90 percent of the families with students receiving Pell Grants have an income of less than $35,000 a year.

Eligible students may receive anything from a few hundred dollars to the maximum Pell award of $4,050. The average award is about $2,400 a year. Currently there are some 5 million Pell recipients.

Because many states use federal formulas to calculate aid for students at state universities, the Pell changes will have a ripple effect, with students also finding themselves less qualified for state financial aid and even for scholarship assistance. Eligibility for subsidized federal student loans could also be affected.

Although the Pell Grant program has grown steadily since its inception, need threatens to outstrip availability. The program is driven by an escalating number of minority and low-income high school graduates, with projections forecasting the high school graduating class of 2008 as the largest in U.S. history.

Despite this, the last Pell increase ($50) occurred three years ago, and the average U.S. college student graduates with a $17,000 debt.

"The real thing that’s unfortunate is that the Pell Grant isn’t going up," said Sarah Flanagan, vice president for government relations of the National Association of Independent Colleges and Universities. "If the maximum were making even moderate increases, all these people on the margin wouldn’t fall out of the program."

Last year Congress approved $12.4 billion for Pell Grants for 2005. The total represented an increase of $400 million from 2004 but was half of what was requested.

President Bush has frozen the maximum Pell Grant at $4,050 for the fiscal year 2005 education budget. This is the third year in a row that Bush has frozen or cut the maximum Pell, an act that conflicts with his campaign promise to raise the maximum Pell award to $5,100.

The Pell program itself is in deficit, a casualty of the burst dotcom bubble, when many people returned to school in order to retool for a new career. To date, the government has borrowed more than $3.6 billion in order to provide Pell Grants to those eligible under the formula.