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Pell Grant Peril: Budget Cuts Could Lead to Financial Aid Problems

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A possible government shutdown is looming as Congress continues to debate over the long-term budget plan for the 2011 federal budget.

Congress’s failure to pass the budget, which has been delayed several times since last October, has kept the Federal Pell Grant Program in limbo.

Pell Grants Assist Low-Income Students

A post-secondary educational grant sponsored by the U.S Department of Education, the Federal Pell Grant Program provides need-based grants to low-income students to promote access to higher education. Unlike student loans, Pell Grants do not have to be repaid. Students receiving Pell Grants (typically undergraduate students that have not yet earned a bachelor’s degree) can also receive financial aid from other federal and non-federal sources.

In the late 1970s, the maximum Pell Grant covered more than two-thirds of tuition and fees for a public four-year university. In the 1980s, it covered roughly half of such expenses. During the 2008-09 school year, it covered about one-third of a student’s tuition and fees, The Washington Post reported in October 2009, when President Obama was aiming for a $40 billion increase in Pell Grant funding over the next decade.

The cost of Pell Grants has doubled over the past three years due to increases in the number of recipients and growth in the amount of the maximum award. According to the Chronicle of Higher Education, about 9.4 million students are expected to receive Pell Grants this year.

Lawmakers Disagree Over Pell Grant Restructuring

Lawmakers acknowledge that restructuring is necessary to reform the Pell Grant program, but disagreements continue over the size and extent of the cuts. At present, the maximum Pell Grant award for the 2010-11 award year (July 1, 2010 to June 30, 2011) is $5,550 and students who take summer courses can collect two Pell Grants in one year.

The actual amount received depends on the student’s expected family contribution, or EFC; the cost of attendance as determined by the student’s college or university; whether the student is enrolled in school full- or part-time; and whether or not the student attends for a full academic year. The Obama administration is in favor of preserving the maximum grant amount of $5,550 but the program is facing a shortfall of more than $10 billion.

The Pell Grant Program was increased by about $17 billion over two years as part of the American Recovery and Reinvestment Act of 2009. The extra money was not enough to match the massive increase in students enrolling in college and qualifying for aid due to the recession.

Pell Grant Cuts This Late in the Year Will Cause Problems

Representative Paul Ryan (R-Wis.) launched a proposed federal budget for 2012 that would cut entitlement spending and slash spending on grants to low-income students, research, and job-training programs, reports Inside Higher Ed. Should the proposal pass, an estimated $5.8 trillion in federal spending would be cut over the next 10 years.

Money for scientific research and minority-serving institutions would also be cut to generate overall savings of over $100 billion, and the maximum allowable Pell Grant would be reduced by $845 per student. Additionally, about 1.7 million students who receive smaller Pell Grants would become ineligible for the program, points out U.S. News and World Report.

If Congress winds up cutting the Pell Grant budget, many colleges may have to withdraw a portion of the financial aid offers they made to students for the coming academic year, putting administrators in a difficult position and putting additional financial strain on students and their families.

As Daniel de Vise of The Washington Post explained in his April 5, 2011 College Inc. column, the vast majority of large state institutions have already told admitted students how much aid, including Pell Grants, they are likely to expect this fall.

How Drastically Will Pell Grant Cuts Affect College Students?

During a news conference held on April 5 by the U.S. Public Interest Research Group, a non-profit lobbying organization, Rick Shipman, Michigan State University’s financial aid director, said that Michigan State would have to reduce the financial aid packages offered to more than 9,000 students if Pell Grant cuts are enacted. Most of the students that would be affected are already receiving the university’s maximum aid award, the Chronicle of Higher Education reported.

On the other hand, Stanford University’s director of financial aid, Karen Cooper, does not believe the decision on Pell Grants will have a significant effect on the University’s financial aid policies one way or the other. “The Pell Grant program is very helpful to us and makes a difference in our overall budget,” Cooper told The Stanford Daily in March 2011. “If it’s a short-term change, we should be able to absorb that with institutional funds…in the long run we may need to expect a little bit more of all of our students before we take in Stanford scholarship funds.”

Budget Deadline is Looming

President Obama summoned congressional leaders back to the White House Wednesday evening, but the late-night session failed to break a stalemate over Republican demands for deep budget cuts. According to The Los Angeles Times, should Congress and the White House not reach a compromise on spending before the midnight deadline Friday, federal officials have prepared plans to furlough about 800,000 employees, freeze the processing of some income tax refunds and suspend pay for the military as part of the impending government shutdown.

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Melissa Rhone+

Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.


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