News > September 25, 2003

By Alex Reyes

Assistant News Editor

A new formula for calculating need-based aid will cut the nation’s largest federal grant program by $270 million starting in 2004 and will directly affect the university’s financial aid package available to students.

The U.S. Department of Education has implemented a revision of the formulas used to determine eligibility for the Pell Grant. This revision has eliminated any chance of reward from this grant for 84,000 college students.

Milton King, associate director of the office of financial aid, said that fewer people will be eligible for Pell Grants because of the specific state tax tables that have been changed.

“The Pell Grant forms a critical part of the resources we have available for students,” King said. “We would certainly miss it if it disappeared. It would make the overall package we have available to students look less attractive. We would probably have to spread the loss through the packages of all students receiving need-based aid.”

Thirty-two percent of students at the university receive some type of federal aid. Other sources within the federal grant programs include the Supplemental Education Opportunity Grant, the Perkins Loan, the Stafford Loan and work study programs. In 2001-2002, the university gave almost $13 million in federal aid to students.

The Pell Grant was made possible under the Higher Education Act of 1997. Grants are aid that students do not have to repay. Need is determined by information submitted to the government on the Free Application for Federal Student Aid before enrolling at the university.

The purpose of the Pell Grant is to serve as the foundation of financial aid for students who demonstrate need. The purpose of all other federal-based aid is to supplement it, and other financial aid is not considered when awarding the grant.

The Pell Grant has been under much scrutiny and reevaluation since the expiration of the HEA in Dec. 2002. As a result, the Department of Education was required under federal law to revise the formula determining eligibility.

Families have usually been allowed to deduct some of what they spend on education from state and local taxes. However, most states have reduced the amount that families are allowed to deduct, in some places by over 50 percent, so families will appear to have a larger income and will therefore have a larger expected family contribution.

“We’ve been pleased with North Carolina not cutting state grant programs. Almost every other state has cut theirs,” King said.

The Department of Education said that despite the cutbacks of this particular grant program, government spending on education will probably continue to rise because of the proliferation in college-aid students and the increasing accessibility and popularity of higher education among low-income families.

Federal aid accounts for 27 percent of the aid provided by the university.

The university divided over $700,000 in the 2001-2002 school year to the 335 students eligible for the Pell Grant.

Nationally, the Pell Grant program provided over $12.5 billion to 5.1 million undergraduate students in 2002-2003.

Each year, the government establishes an authorized maximum amount of a Pell Grant; however the appropriated maximum outweighs this authorized amount. Only in three years of the program has the authorized maximum equaled the appropriated maximum. Only the neediest students, usually whose families are not able to pay any of their college tuition, will receive an appropriated maximum award that equals the authorized maximum.

The appropriated maximum grant covers 41 percent of the average tuition, fees, room and board at 4-year institutions, but only 16 percent at private 4-year institutions.

James Stedman of the Congressional Research Services released a report detailing the background and reevaluation of the Pell Grant program. The purpose of the report is to provide an analysis of the program and its role in the distribution of federal student aid for the consideration of the 108th Congress during the process of revising the HEA.

In the report, Stedman said that the Pell Grant program is the “single largest source of grant aid for postsecondary education attendance funded by the federal government.”

Although there is no cap as to who can receive a Pell Grant, recipients primarily come from low-income households. In 1999, 45 percent of dependent Pell Grant recipients had a total parental income of below $20,000. 90 percent of eligible dependent students had a household income of less than $40,000.

One thing that Stedman sees as a potential problem with the Pell Grant is its reduced role in federal aid packages. Many students who are eligible for the grant may choose instead to take a Federal Stafford Loan. Raising the minimum award might fix this problem, as would making the program into an entitlement program with higher maximum grants or concentrating the amount of assistance on needy undergraduates in the first years of their matriculation at a university.

Another issue is determining how much attention needs to be given to the universities’ tuition charges and if some academic merit component should be added to the formula for determining eligibility for the Pell Grant.

“There is a large formula that determines whether someone is eligible for the Pell Grant,” King said. “It includes family size, income and other children in college. More students attending Wake have been eligible for Pell Grants, so the amount of money that we receive from the federal government has increased,” he said.

This holds true for the rest of the nation as well. Due to the increase in eligible students, the estimated deficit for the Pell Grant program is over $2.5 billion. The Department of Education said that this deficit is due to the “unexpected growth” of valid applicants, especially the increase of independent students.