Pell Grant Change Could Limit Student Financial Assistance

About 1.2 million college students receiving federal aid could be forced to cover a greater share of their tuition costs under new guidelines tucked into this year’s omnibus spending bill, now awaiting President Bush’s signature.

The proposed change came as Congress decided to freeze the maximum Pell Grant -- the largest federal grant program in the nation -- at $4,050 for the third consecutive year.

The new guidelines allow the Department of Education to revise the calculation for federal college aid in a way that would reduce the average allocation for the need-based grants by about $300 for about 1 million students, said Brian Fitzgerald, staff director for the Advisory Committee on Student Financial Assistance, which advises Congress.

In addition, he said, nearly 90,000 students now receiving Pell Grants would be cut off.

Although the change would have varying effects depending on a student’s family income and size, it would probably have the greatest effect on families earning $30,000 to $40,000, Fitzgerald said.

Students from higher-income families usually do not qualify for Pell Grants.

A change in the federal aid calculation could have a ripple effect because many colleges and state programs base financial aid on the federal formula.

Even a small change could spiral into a loss of $1,000 or more for a student, Fitzgerald said.

The proposed change in the federal formula goes back to a proposal by the Department of Education last year to revise the table used to calculate the amount of state tax a family pays.

The federal formula for Pell Grant eligibility includes family income, size and tax burden.

The table that determines a family’s tax level uses 1988 state tax data compiled by the Internal Revenue Service.

It is supposed to be updated annually.

Congress blocked the department’s plans to revise the tax level last year because the proposed table -- based on data from 2001 -- put many families in lower tax brackets.

Because their taxes were lower, they theoretically could contribute more to the cost of a college education -- thus reducing the amount of money their student could receive from the federal government.

Many Democrats expected that Congress would make the same decision this year.

Although the Department of Education would not confirm Tuesday whether it would go ahead with the revision, congressional officials said it was likely that the department would start using the revised formula, as required by law.

At a time when students are facing rising tuition costs, the proposed reduction in aid angered congressional Democrats and higher education officials, who said the changes hurt those who need the money most.

“The Republican Congress just threw students who need Pell Grants to afford a college education out into the cold,” Sen. Jon Corzine (D-N.J.) said in a statement.

By allowing a change in the formula, the revisions will save $300 million for the $12.4-billion program, which has a $4-billion cumulative shortfall, Republican supporters said.

Such a move could allow Congress to raise the maximum grant sooner, they said.

“Continuing to use this outdated information could mean shortchanging eligible students and deepening the Pell Grant budget shortfall,” Rep. John A. Boehner (R-Ohio), chairman of the House Committee on Education and the Workforce, said in a statement.

Even with the reduction, total federal allocations for Pell Grants will increase by $458 million to maintain soaring demand. In the last two years, Pell Grant recipients have gone up 19% to about 5 million students, Fitzgerald said.

Barmak Nassirian, associate executive director of the American Assn. of Collegiate Registrars and Admissions Officers, said the problem with the proposed change was not that it was trying to balance the budget, but that revising the tax measure was only a partial solution.

“To suddenly grab the one piece of it that happens to be working for needy families and leave everything else the way it was in 1988 is partially problematic,” he said.