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Congress Reduces Pell Grants

By Marcella Bombardieri


Nearly a quarter of low and moderate-income college students who currently qualify for federal Pell Grants will see their awards reduced or even eliminated under a change in federal rules that Congress allowed in its new spending bill passed over the weekend, according to an estimate from higher education analysts.

About 85,000 of the 5.2 million students currently eligible to receive Pell grants will become ineligible. Another 1.2 million will get a smaller award under a new formula the government will use to determine how much families can afford to pay for college, according to estimates from the American Council on Higher Education. The change will take effect for students starting or returning to classes next summer or fall.

Higher education officials worry that the change, estimated to save the government about $300 million in next year’s budget, will hurt students already struggling to pay for college.

“Nobody knows if the change will actually lead anybody to abandon their plans for post-secondary education,” said Terry Hartle, senior vice president at ACE. “The best-case scenario is that families will have to dig deeper to pay for college, perhaps by working more hours or taking out more loans.”

The effects could be much more widespread than the council’s estimates suggest. The same federal formulas are used to calculate federal subsidized loans, state aid, and grants colleges make to their own students, said Brian K. Fitzgerald, staff director of the Advisory Committee on Student Financial Assistance.

The change was first proposed last year by the U.S Department of Education. It was blocked at the time by Congressional legislation, but this year Republican leaders left a new amendment to block it out of the compromise bill approved Saturday by the House and Senate.

The new Department of Education aid formula was intended to reflect a reduction in income taxes in many states, but some analysts say the tax burden is measured in a flawed way that doesn’t reflect real increases in taxes in the last several years. The formula is supposed to be updated every year, but it hadn’t happened in many years.

Some Republicans say that the formula needed to be updated to help deal with the Pell Grant program’s $4 billion deficit and to ultimately increase the maximum award.

Pell Grants, the main federal program to help low and moderate income families pay for college, will cost will cost $12.5 billion next year, according to American Council on Education estimates. Even though the maximum grant of $4,050 has been virtually frozen for four years, about 1.2 million more students have become eligible for the Pell Grants in that time, leading to the budget squeeze.

It is not clear yet which students will lose their Pell Grants, but Fitzgerald said it will most likely be those with family incomes at the higher levels of Pell eligibility, perhaps $35,000 to $40,000, Fitzgerald said. These students are already receiving far less than the maximum grant. Many other students with lower family incomes will see their grants reduced by up to a few hundred dollars, Fitzgerald estimated.

Families will find out if they are losing grant money when they get their aid packages for next year.

Meanwhile, the Pell Grant is covering less of the cost of a college education each year. The average Pell Grant covered one-third of the cost of the average four-year public college in the 1980-81 school year. Last year, the average Pell grant -- $2,466 -- covered only one-quarter of the cost, according to the College Board.