10 Things You Need to Know About Potential Pell Grant Cuts

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By Donna Reish

President Obama's announcement that he intends to cut the nation's deep budget deficit by $1.1 trillion over the next decade was met with the usual support and opposition from the left and right, respectively, who complained that it either wasn't enough or too much. Of course, politicians are probably more concerned with the political implications than how it'll affect the average American citizen, particularly college students, whom Obama has vowed to support. His new budget plan calls for major reductions in the funding of Pell Grants and other higher education programs over the next 10 years. The federal grant largely benefits students from low-income families who struggle with the financial burden of college. Haggling in Congress will ultimately affect how much the program is impacted, but for now, here are few things you should know about the currently proposed cuts:

  1. Obama has proposed a $100 billion reduction in the funding of Pell Grants and other higher education programs: With both parties promising to reduce the national budget deficit, it has become a foregone conclusion that financial aid programs will see cuts in funding. Now that both sides have put their offers on the table, we have a better idea of what to expect in the near future. Programs such as and the Leveraging Educational Assistance Partnership Program and Byrd Honors Scholarships would be eliminated in Obama's proposal, while funding for the Perkins loan program would expand by $8.5 billion per year beginning in 2012-13. Overall, the Education Department's budget would grow by 4.3 percent.
  2. During Obama's time in office, the maximum Pell Grant has increased from $4,731 to $5,550: Additionally, the average Pell Grant awarded increased from $2,970 to $4,115 in order to make up for four years of weak funding during the Bush administration. In 2008, Obama campaigned promising to increase financial aid and make college more affordable for students from lower and middle income families. But now that Republicans have regained the majority in the House, changes that were established when the Democrats were in control could be rolled back.
  3. The amount of Pell Grant recipients increased from 6.1 million in 2008 to 8.9 million in 2010: Due to the weak economy, expanding enrollments and the increase in qualifying applicants, many more students have been applying for aid in the last three years using the Free Application for Federal Student Aid (FAFSA). The White House states that more than nine million students are currently receiving aid from Pell Grants.
  4. A $20 billion shortfall is expected in the Pell Grant program in 2012: The shortfall is a result of the increases in the maximum amount awarded and number of recipients, which have caused the Pell Grant program's expenditures to double in the last three years. Obama has pledged to provide $41 billion — $28 billion from discretionary spending and $13 million from mandatory spending — to fund the program in 2012.
  5. If the shortfall is unaddressed, then the maximum Pell Grant award will drop from $5,550 to $3,240 in 2011-12: The decrease of $2,310 would greatly affect college students all over the nation. In order to avoid such as a drastic change, Obama will need to cut spending for other higher education programs. In doing so, he'll need to select areas that aren't heavily depended upon by students who normally have trouble finding other ways to fund their educations.
  6. Obama intends to keep the maximum Pell Grant award at $5,550: Despite the massive cuts, Obama wants to leave the maximum award untouched, which would be achieved by taking the next two actions on this list — the elimination of year-round Pell Grants and the reduction of loan subsidies for graduate and professional students. As a result, much fewer students would be impacted, especially low-income students who can't afford to spare the money when paying for college.
  7. The elimination of year-round Pell Grants would save about $60 billion over the next decade: In the year-round program, students in accelerated programs are able to receive two Pell Grants per year, the second of which is used for summer school. This option became available in the 2009-10 academic year after the Higher Education Opportunity Act of 2008 was passed, which, as it turns out, did little to improve students' academic progress and cost much more than anticipated.
  8. The reduction of loan subsidies for graduate and professional students would save $29 billion over the next decade : It would result in $2 billion in savings next year, providing a short-term enticement and saving bundles long-term. Although some professional and graduate students currently benefit from the payment of their student loan interest by the government, experts claim that it hasn't encouraged more students to attend in graduate school.
  9. In the House bill, the maximum Pell Grant award would be reduced from $5,550 to $4,705: The Republicans' plan entails the largest reduction of student-aid funds in the history of the Pell Grant program. It's a part of their spending bill for the remainder of 2011 that intends to shed an additional $100 billion from Obama's budget plan. During last fall's midterm elections, Republicans pledged to drastically cut national spending.
  10. The House Bill could result in the removal of 1.7 million students from the Pell Grant program: The estimate was made by Mark Kantrowitz, publisher of FinAid.org, a trusted website devoted to providing comprehensive information about financial aid. For every $100 change in the maximum Pell Grant amount, 200,000 recipients are affected, meaning that even a minor reduction can disrupt the college careers of tens of thousands low-income students. According to Kantrowitz, 97 percent of Pell Grant recipients earn fewer than $50,000 per year.

Information courtesy of Yahoo, Inside Higher Ed, The New York Times and Fastweb.

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