Student Loan Blog : budget shortfall

Minnesota College Students May Miss Out on Pell Grant Increase

Student Loan Girl — Thu, 05 Mar 2009 20:48:00 GMT

In spite of an increase to the maximum federal Pell Grant award of more than $800 — mandated by President Obama’s stimulus plan — Minnesota college students may not receive a single percent increase in funds due to the way the state distributes its Pell Grant awards, the Minnesota Daily reports (“Students Aren’t Guaranteed Pell Grant Increase,” March 2, 2009).

In Minnesota, federal Pell Grants — which are awarded to low-income students based on need — are linked to state grants. Historically, when a larger amount of Pell Grant money comes into the state than was expected, the Minnesota legislature reduces state grant awards.

This exact scenario occurred a year after Minnesota received a Pell Grant fund increase of $55 million in 2003. That year, the local legislature reduced state grants by about $18 million, resulting in almost 3,000 fewer students receiving state aid, according to the Minnesota Office of Higher Education.

“If [students] are getting both the state [grant] and the Pell [Grant], they’ll keep getting what they’ve always gotten, but I’m not sure if they will see any significant increase,” said Republican Sen. Claire Robling, the Senate Higher Education Committee’s ranking minority member.

Although MOHE, which distributes state aid, assures students that they should receive at least a portion of the increase from the stimulus funds, the Minnesota Senate’s Higher Education Committee members are concerned that the state’s $5 billion budget shortfall will force the state to redistribute excess student aid funds to programs that show a greater need than higher education.

At the same time that many students are wondering if they’ll ever see a portion of the $800 Pell Grant increase, University of Minnesota president Bob Bruininks says he has earmarked those funds for a different purpose. Faced with a $151 million budget cut, Bruininks is hoping that his institution will be able to use the stimulus money to hold the university’s tuition increase to 10 percent.

Rodrigo Zamith, a journalism senior at the university who receives Pell Grants, is worried about his bottom line. He’s afraid that students may start resenting state legislators if they redistribute the excess Pell Grant funds, intended for college students, to other programs.

“$800 for students matters a lot,” Zamith said. “For me, that’s two months worth of rent.”

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Colleges Want Piece of Federal Government’s “Bailout Pie”

Student Loan Girl — Thu, 20 Nov 2008 23:17:00 GMT

With 39 states anticipating budget shortfalls next year totaling more than $100 billion, colleges are urging Congress to include them in a second economic stimulus bill currently being drafted, The Chronicle of Higher Education reports (“As the Economic Crisis Hits Home, Colleges Seek Help From Congress,” Nov. 13, 2008).

Hard hit by the deteriorating economy and financial markets, many schools are dealing with declining endowments, reduced support from the state, and higher numbers of financially needy students. To help schools overcome these challenges, college lobbyists are asking Congress to include funds for financial aid, research, and infrastructure as part of the new economic-stimulus bill.

The Association of American Universities and the American Association of Medical Colleges are specifically lobbying Congress for more money for research, emphasizing the ways colleges support the economy by creating new jobs, graduating work-ready students, and promoting business development.

In a recent letter from the AAMC quantifying its claims, the organization stated that medical colleges were responsible for about 3 million jobs, $20 billion in state tax revenue and injected $451 billion into the economy last year.

Billions Requested by College Associations

Many college associations representing a wide array of interests have petitioned Congress for several billion dollars, each for distinct purposes:

The AAMC is requesting $1.9 billion for the National Institutes of Health.
The American Association of State Colleges and Universities and the Student Aid Alliance are asking for more than $5 billion to make up for a projected shortfall in Pell Grant funding and for Congress to provide enough funding to meet a recently passed $500 increase to the maximum Pell Grant award.
The Association of American Universities wants bailout money set aside for campus construction projects that have halted across the nation.

In their pursuit of funds, schools are competing with state governments, as well as the ailing airline and auto industries. And with the transfer of power on January 20, 2009 from the current Bush administration to the Obama administration, schools may have to wait until February or later to see if they get the capital infusion they seek.

With so many urgent needs confronting Congress — including the possible collapse of Ford, Chrysler and GM, and the loss of millions of jobs if the automakers don’t receive $25 billion in emergency government loans — colleges realize that they aren’t likely a top priority to receive government aid, the Chronicle suggests.

Cynthia Littlefield, director of federal relations at the Association of Jesuit Colleges and Universities said, “There are so many people going to the trough who have legitimate needs that it’s going to be hard.”

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Two-Year Colleges Will Be Most Affected by State Budget Deficits

Student Loan Girl — Tue, 11 Nov 2008 23:12:00 GMT

The financial outlook for community colleges in nearly half of all states is “not good,” with many institutions anticipating midyear cuts in funding, according to a member survey by the National Council of State Directors of Community Colleges (“State Budgets Are Likely to Squeeze 2-Year Colleges,” The Chronicle of Higher Education, Nov. 7, 2008).

But this “not good” outlook may not even address the full extent of state budget problems for community colleges, being that respondents began completing their surveys prior to Wall Street’s huge drop in mid-September, the Chronicle reports.

More than half of the 22 surveys that came in after September 18 indicated that a midyear budget cut was likely. But the long-term state budget trends may have the most substantial impact on schools. The survey found that three in five respondents said chronic state budget deficits, due in large part to state spending on Medicaid, will hurt public schools, particularly community colleges, in the future.

“Medicaid, corrections, and K-12 impose incredible structural restraints on state budgets,” said James Palmer, director of the Grapevine Project, which conducts annual surveys on state-tax support for higher education. “We have been aware of these problems for some time, and over the last year, a growing number of folks in higher education have become more aware of how spending in these other areas causes pain for colleges.”

While many governors have petitioned Congress for another federal stimulus package that would, in part, help states overcome their budget shortfalls, Palmer says that the stimulus package would only help colleges rebound if it included a provision to alleviate state’s Medicaid costs.

Survey Findings Indicate States’ Widening Fiscal Crisis:

Eighteen of 28 states weren’t able to get the all the state funds they needed to operate at full capacity in 2007-08 academic year.

In the public education sectors, including secondary and elementary schools, community colleges experienced the biggest drop in state appropriations, 5.2 percent. State appropriations to flagship universities, in comparison, only declined 1.8 percent.

69 percent of survey respondents said that rural community colleges would suffer the most from tight state budgets, compared with 54 percent who said that suburban community colleges would face the most strain and 46 percent who believed that urban community colleges would fare the worst.

In 28 states, college tuition increases since 2000 had far outstripped state-based student aid. And in a full eleven states, need-based aid amounts designated in the most recently passed state budgets had not kept pace with tuition increases.

Only four states had need-based aid programs with enough funds to enable low-income students to complete college without going into debt. The percentage of students who graduate with "significant loan debt" had grown in the last few years in 21 states.

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