University Business - April 2011 - (Page 27)

FINANCIAL AID Pell Grants and the FY2012 Budget Tackling the growing cost of federal financial aid By Haley Chitty HE COST OF THE FEDER al Pell Grant program has exploded in recent years, more than doubling from $14.7 billion in the 2007-08 academic year (AY) to $33.2 billion in AY2010-11. U.S. Department of Education data show that 8.1 million students received Pell Grants in AY2009-10 (32 percent more than the previous year) and it’s estimated that 8.75 million students will receive Pell Grants in AY2010-11 (an 8 percent increase). ese increases have been driven by several factors, including rapidly increasing enrollment, recent legislative changes that expand eligibility, and the economic downturn that limited families’ ability to pay for college. In its fiscal year (FY) 2012 budget request, the Obama administration estimates that the Pell Grant program would face a $20 billion shortfall in 2012 alone, if the program is not modified. ese rapidly growing numbers, combined with increased pressure to cut federal spending to address the growing federal deficit, prompted the Obama administration to change its policy position on the federal Pell Grant. In his previous two budget requests, President Obama recommended making the Pell Grant program a true entitlement program by fully funding it through mandatory spending. is year, the Obama administration abandoned the mandatory Pell proposal and now recommends some student aid cuts to prevent cuts to the maximum Pell Grant. In order to maintain the $5,550 maximum Pell Grant, the Obama administration’s FY2012 budget request proposes eliminating the recently enacted “yearround Pell” that provides two Pell Grant universitybusiness.com T If funding was cut for 2011-12 Pell Grants, families would need to be notified they are receiving smaller awards. awards in one award year to encourage students to attend summer school so they graduate sooner. e administration says that the overall cost of two Pell Grant awards in a single award year is more than 10 times the original estimate and asserts that there is no clear evidence it meaningfully accelerates students’ degree completion. e administration also proposes eliminating loan subsidies for graduate students to help cover the growing cost of Pell Grants. Higher education associations reacted with cautious support for Obama’s proposal, another indication that there is growing acceptance that the federal government may not be able to continue providing the same level of funding for Pell. “Eliminating subsidized Stafford loans for graduate students and two Pell Grants in an award year will undeniably have a negative impact on students, but maintaining funding for the Pell program, which could be facing a $20 billion shortfall in FY2012, is our highest priority,” said National Association of Student Financial Aid Administrators President Justin Draeger in a statement. e rising cost of the program also makes it a prime target for budget cuts by Congress, but Republicans in the U.S. House of Representatives take a more immediate approach to cutting Pell spending. A spending bill approved by House Republicans in February cuts students’ Pell Grant awards for the 2011-12 award year by more than 15 percent. is would reduce the maximum Pell Grant by $845, from $5,550 to $4,705. e average grant would be cut by $785. Cutting 2011-12 Pell Grant awards would create a significant disruption for campuses, students, and families because financial aid offices have already begun sending 2011-12 financial aid packages to students based on the $5,550 maximum Pell. If funding was cut for 2011-12 Pell Grants, these aid packages would have to be revised and students and families would need to be notified they are receiving smaller Pell awards. e cuts approved by House Republicans would also reduce awards after the 2011-12 award year. e cuts would trigger a provision in current law that requires Congress to maintain a maximum Pell Grant award of $4,860 in order to keep mandatory funds currently allocated to the Pell Grant program. If congress cuts below the $4,860 base, the mandatory funds currently being used to Haley Chitty is director of communications at the National Association of Student Financial Aid Administrators, www.nasfaa.org. April 2011 | 27 http://www.nasfaa.org http://www.universitybusiness.com

Table of Contents for the Digital Edition of University Business - April 2011

University Business - April 2011
Contents
Editor’s Note
College Index
Company Index
Advisory Board
Behind the News
Sense of Place
Viewpoint
Financial Aid
Models of Efficiency
Shrinking the Desktop
All Things Transfer
Sudden Impact
Internet Technology
What’s New
End Note

University Business - April 2011

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