Pell Grant Increase: Where Is It All Coming From?
Last week I speculated on how President Bush intended to pay for the increase in awards for Pell Grants. Now it is official, with the details recently being released. The president’s proposal is summarized in an article by Kelly Field titled “How President Would Pay for Increase in Pell Grants” that appears in the Feb. 16, 2007 issue of The Chronicle of Higher Education: “The good news for colleges and loan companies turned bad last week as President Bush revealed that he would pay for a much-heralded increase in the maximum Pell Grant by cutting lender subsidies and eliminating the Supplemental Educational Opportunity Grant program.”
Unfortunately, as I also mentioned last week, if the president’s proposal is passed by Congress, low-income students likely will be negatively affected. “But the increases would come at a cost to some low-income students and to lenders in the federal government’s guaranteed-loan program. Many SEOG recipients would receive less need-based aid in 2008 than in 2007. And lenders would see their federal subsidies slashed for a third time in a year, this time by $18.8-billion,” the article stated.
Deep Cuts Cover Increase
According to the article, “Additional dollars for the increases in the Pell Grant program and the competitiveness grants would come from the elimination of the $880-million Supplemental Educational Opportunity Grants Program.”
Cuts would not be limited to the SEOG Program. As the article reported, “The cuts would not stop with SEOG, however. To achieve additional savings, the budget would also abolish the $64.5-million Leveraging Educational Assistance Partnership program, which matches each dollar that states commit to need-based aid, and the $40.6-million Robert C. Byrd Honors Scholarship Program.
“It would also end the Perkins Loan Program and require colleges to return the federal share of the money they use to make new Perkins Loans.”
After carefully considering the facts, it appears that the increases may be a mixed blessing, one that has both its proponents and opponents. Our Pell Grants will be increased more than ever, but at what cost? Does it make sense to entirely eliminate the Perkins Loan Program to receive the much-needed Pell increases?
There are a few other points from the article highlighting what President Bush’s proposed budget would accomplish that are of interest to college students and their parents as outlined below.
Notable Provisions of Proposed Budget
“Among other things, the president’s budget also would:
· Increase annual subsidized-loan limits for juniors and seniors by $2,000, to $7,500, while raising the aggregate undergraduate borrowing limit by $7,500, to $30,500. Congress raised the loan limits for freshmen, sophomores, and graduate students last year, but did not increase them for juniors and seniors.
· Provide $24-million in grants of $1-million each to colleges and school districts that work together to educate students in languages critical to national security, such as Arabic, Chinese, Japanese, Korean, and Russian.
· Raise the interest rate on PLUS loans from 7.9 percent to 8.3 percent for borrowers in the Direct Loan program, while reducing it by 0.2 percent, to 8.3 percent, for borrowers in the guaranteed loan program. Congress raised the rate on PLUS loans to 8.5 percent for borrowers in the guaranteed-loan program last year, but because of a drafting error in the bill, direct-loan borrowers were spared the increase.
· Make Pell Grants available year-round, while limiting Pell eligibility to the equivalent of 16 semesters.
· Eliminate a rule that enables students at costlier institutions to receive larger Pell Grants.
· Allow students and parents to exclude money held in Section 529 college-savings accounts when calculating their financial need. Contributions to such savings accounts are taxed, but the interest that accumulates is tax free.”
Talk to the education financial advisors at NextStudent. They have all the information and advice you need on student loans. Check out www.nextstudent.com.
Be sure to tune in next Tuesday for my next blog about this week in student loans.
Student Loan Girl