CONGRESS MAKES MINIMAL CHANGES TO PELL GRANT

ON A PERSONAL NOTE: THANK GOD! As active college students, my wife and I are both Pell Grant recipients. As parents to an 8-month old baby girl and most of our funding tied up in the launch of Grant Pros, the money is much needed! As 4.0 GPA Dean’s List students, the money is also well deserved!

Recent federal budget debates routinely include threats about slashing higher education freebies. But in the latest round of congressional compromising, the rhetoric produced only a few nibbles around the edges of financial aid.

On campuses across the nation, there were fears of a wholesale reduction in the Pell Grant program that is the single largest source of free money for low-income college students. More than one in four students receives one of these grants, worth up to $5,550 a year.

While Congress left the maximum award intact for the 2012-13 school year, it did tinker with some of the rules governing eligibility. And it is suspending a program that eliminated some of the interest charged on federal student loans. Those relatively minor changes, along with a few others, have left financial aid experts relieved as they enter the new year.

“I’m usually a person that’s very skeptical, but this is not as bad as it could have been,” said Faith Sandler, executive director of the Scholarship Foundation of St. Louis. “I think they’re fairly reasonable.”

Congress needed to plug a $1.3 billion gap in the Pell program, which has been growing for more than a decade as college enrollments have soared. There were 19.4 million applicants for the grants this year, compared with 9.5 million a decade earlier. Its annual price tag has risen from $10 billion in 2001 to an estimated $34.9 billion this year, according to the U.S. Department of Education.

 

Starting in July

Congress avoided an overall reduction by making a few changes expected to affect a smaller number of students — though some of them severely.

Among the changes that start in July:

• Pell Grant eligibility was reduced from 18 semesters to 12 semesters, meaning that once students use a Pell Grant for six years, they are cut off from additional funding. The measure is expected to affect 100,000 students nationally.

• A six-month grace period on interest charged on federal student loans has been suspended, meaning that interest will begin accumulating immediately after a student graduates. This will affect loans made between July 1, 2012, and June 30, 2014.

• There’s a change in how aid is calculated for some low-income families.

• Only those students with a high school diploma or GED certificate will be eligible for Pell Grants.

Few are complaining about the change in Pell eligibility. The general consensus among financial aid experts is that students who don’t earn a degree in six years are unlikely to do so in nine years. The change also may eliminate some of the fraud attributed to so-called Pell runners, students who collect grant money with no intention of getting a degree.

Still, some experts are concerned about the timing of the change and the fact that there is no grace period or warning. Essentially, students who already have used six years worth of Pell Grants — double that number if the student is half-time or less — will be cut off in the 2012-13 school year.

“It’s as if you are on a train and someone starts tearing up the track before you can get to the station,” said Lauren Asher, president of the Institute for College Access and Success.

The group says African-American students will be disproportionately affected. They make up 24 percent of Pell Grant recipients, but 41 percent of those who have received grants for more than six years, according to the institute’s analysis of financial aid data.

Asher also worries about the lack of exceptions for students who need considerable remedial course work. The Pell Grant clock will start ticking for those students while they are taking classes that will never count toward a college degree. Nor is there a provision to help students who change majors, or who have difficulty transferring credits from a community college to a four-year school.

“This is a very abrupt shift that changes the rules,” Asher said.

 

Calculating need

Mark Kantrowitz, publisher of FinAid.org, questions the change in the way the government calculates need for students from low-income families. Under current rules, a family with an adjusted gross income of $30,000 or less is not expected to contribute to a student’s education costs. The new rule will reduce that figure to $23,000, creating the potential for greater financial demands on families with income in the $23,000 to $30,000 range, he said.

The net result, Kantrowitz says, is that students from that bracket — representing about 11 percent of Pell Grant recipients — could see their Pell Grants drop by $1,100 to $1,500 a year.

“These are students who are poor. They need the money,” Kantrowitz said. “That’s the one change that may have a serious impact on completion and graduation.”

It’s not known, at this moment, how many students will be affected by the new rule.

Rick Taphorn, financial aid director for Missouri Baptist University, said the school estimates that 125 students could lose up to $1,500 from their Pell awards next year. For students already struggling to pay for school, it’s the sort of hit that could force them to drop out or switch to a community college, he said.

And while Taphorn and others are happy to see the Pell Grant escape this year relatively unscathed, they wonder how much longer that can go on.

Along with these changes, the government already has decided to end this summer a program that offered subsidized loans to graduate students with need. They were able to defer interest on a portion of their loans until after graduation.

The problem, Taphorn said, is that the government is running out of things to trim in its effort to save the Pell.

“How long before you finally have to start cutting it?” Taphorn said.

For more information on grants, please visit the Grant Pros website.

For more information on grant writing, please visit the Grant Writing 101 blog.

 

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