Budget deal protects Pell Grants for low-income learners

Financial aid for college

During his weekly address April 8th, President Barack Obama told the nation that the administration, in negotiations with Republican and Democratic leaders in the US Congress, reached an agreement on the US budget that will avoid a government shutdown. He also noted that the deal would allow the government to continue to fund the Federal Pell Grant program--which provides financial aid to low-income students to help them pay for college--at its current level.

"We protected funding for critical programs that invest in science programs, our kids' education, and critical health programs," White House Communications Director Dan Pfeiffer said following the President's address. "We are maintaining current levels of Head Start enrollment, funding Race to the Top, including an early learning element, and have sufficient savings available to maintain the Pell Grant maximum award and the broad education reform agenda, including K-12 education."

The Federal Pell Grant program has been under intense scrutiny since the US House of Representatives approved a bill in March that would slash funding for the program by $60 million, reducing the maximum yearly award from $5,550 to $4,705 and making about 1.7 million students who currently receive the grant ineligible for the program.

If the agreement brokered earlier this month remains intact, the Pell Grant program will continue to offer a maximum yearly award of $5,550 and won't have to change current eligibility guidelines, which administration officials say is especially important in the current economic environment to help unemployed workers train for new jobs.

"Students pursuing postsecondary education today face a different national landscape than the one they would have seen just a few decades ago," Martha Kanter, under secretary for the US Department of Education, testified in March before the House Appropriations Subcommittee on Labor, Health and Human Services, Education and Related Agencies. "College, or other postsecondary training, has never been more important to finding meaningful and substantial employment. Over the past decade, individuals with only a high school diploma have been twice as likely to be unemployed as individuals with college degrees. In the current economy, individuals who may be having trouble finding a job, or see their income stagnating, may be returning to school for new or additional training. The demand for more education is a welcome development, but it has resulted in exceptional challenges to postsecondary education in general, and to the Federal Pell Grant program in particular. Today, almost half of Pell Grant recipients are over the age of 23 and, among older students, 84 percent have an annual income under $30,000."

Peter Backus is an adult learner currently using the Pell Grant to help pay for an Associate's Degree at Eastern Maine Community College (EMCC).

"I want a business degree," Backus, 38, said. "The main point of going to EMCC is that everyone has to take their core curriculum first. Knocking it out there is quite a bit cheaper than going somewhere else."

Backus, who served four years in the Navy after high school, explained that Pell Grants can be especially important to adult learners because adults have fewer options when it comes to financial aid than students right out of high school do.

"In entering school again, the only financial aid that I could get was grants or loans," he said. "I couldn't get anything that was merit-based because I hadn't been in school for forever."

"For adults that are looking to go to school it's different." he added. "For younger people whose parents are paying for it, it's kind of imaginary money. As an adult, you're paying for it out of your own bank account."

Backus noted that his Pell Grant award, about $1,700, covered his entire first semester of tuition.

Ann Murtagh Gitto, director of financial aid at Bard College at Simon's Rock, a small private liberal arts college, explained that Pell Grants are an important element in enhancing any financial aid package she is able to provide for students. She noted that about 30 percent of students at her institution receive Pell Grants.

"Simon's Rock isn't able to meet the full need of students, which we would love to do, so the Pell Grant is a way of enhancing what we're able to do for them," Gitto said.

Pell Grant basics

Originally known as the Basic Educational Opportunity Grant, the Federal Pell Grant was created in 1972 as an amendment to the Higher Education Act. It was renamed the Pell Grant in 1980 in honor of Senator Claiborne Pell, the Democratic Senator from Rhode Island from 1961 to 1997, who was instrumental in the creation of the Basic Educational Opportunity Grant.

The grant program is intended to provide need-based grants that do not need to be repaid to low-income undergraduate students and students in certain postbaccalaureate programs that lead to certification of licensing as a teacher. Grant amounts are determined based on several factors, including:

  • The student's expected family contribution (EFC)
  • The cost of attendance (as determined by the institution)
  • The student's enrollment status (full-time or part-time)
  • Whether the student attends for a full academic year or less

To apply, students must fill out the Free Application for Federal Student Aid (FAFSA). The US Department of Education uses the FAFSA and EFC to determine financial need based on a standard formula established by Congress. The elements of the formula include the following:

  • The student's income (and assets if the student is independent)
  • The parent's income and assets (if the student is dependent)
  • The family's household size
  • The number of family members (excluding parents) attending postsecondary institutions

The EFC is determined through the sum of the percentage of net income (remaining income after subtracting allowances for basic living expenses and taxes) and a percentage of net assets (assets remaining after subtracting an asset protection allowance). The program uses different assessment rates and allowances for dependent students, independent students without dependents and independent students with dependents.

Once students file the FAFSA, they receive a Student Aid Report (SAR), or the institution they plan to attend receives an Institutional Student Information Record (ISIR), which notifies students of eligibility for a Federal Pell Grant and explains the student's EFC.

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