Pell grants could face $6 billion shortfall

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September 30, 2008

1:20 AM

Students already facing rising tuition costs may soon have less financial aid to depend upon.

The White House has warned Congress that the federal Pell Grant program, one of the most helpful aid options available to low-income students, could face a financial shortfall of nearly $6 billion next year.

At the College of William and Mary, 562 students received over $1.5 million in Pell grants during the 2007-2008 academic year, according to Director of Financial Aid Edward Irish.

The current shortfall is due in part to increased applications for aid and the accumulation of deficits from previous years, leading to the program exceeding its $14 billion budget.

Pell grants use a formula that determines a family’s “expected contribution,” an amount based on income, assets and other financial factors. The grant covers the difference between this assessment and the cost of tuition.

Consequences of the shortfall could range from an increase in Pell funding to developing a new formula that qualifies fewer students for Pell grants.

Economics professor Robert Archibald does not see the government cutting Pell grant funding as a likely solution.

“It would be the first time they’ve ever [cut] it to my knowledge,” Archibald said. “Every year up to this point, if the amount of money that students qualify for exceeds the amount of money they budgeted for Pell grants, they find the money somewhere.”

If the College were faced with students losing Pell grant money, Archibald believes the most likely solution would be to use the College’s funds to cover student deficits.

“Since we have such a small percentage of students with Pell grants, it would probably not be difficult to cover that difference,” Archibald said.

The College tied last year with Harvard University for the fifth-lowest percentage of Pell grant recipients — 9 percent. Washington University in St. Louis, Princeton University, the University of Virginia and Wake Forest University all have fewer per capita recipients.

Although a cut in the program’s funding is unlikely, the College is preparing for that possibility.
Associate Provost for Enrollment Earl Granger said the admissions department would not be hurt by Pell grant cuts.

“I honestly don’t see [possible cuts] having an impact [on admissions],” he said. “If [cuts in financial aid] did cause the College to be less attractive to prospective students, we would accentuate other excellent aspects of the College, like its academic quality.”

Irish, however, is preparing for the worst.

“The problem, if there will be one, is not for the current school year, but the 2009-2010 year one [because current grants have already been awarded],” he said. “I believe there is a strong Congressional commitment to fund the Pell program. If there is a reduction, we will have to consider options at that time.”

Irish is more concerned with the availability of loans to students at the College.

“The obvious immediate problem relates to the availability of credit,” he said. “For student loans, we have experienced some lenders dropping out of the federal program.”

Last year, more students applied for federal financial aid than ever before. The Department of Education reported an increase of 800,000 applications from last year.

The recent downturn in the economy and the record numbers of students both attending college and qualifying for federal aid under current guidelines are the driving force behind the increase in aid applications.

“Just as there is financial turmoil in the country, it impacts colleges too,” Granger said. “We have to look at fees, tuition, the endowment, how much we set aside for aid. We have to assess the financial picture, and from there we make as much available for aid as we can.”

Although concerned about the shortfall the Pell grant programs faces, Irish said it is a small part of the College’s total financial aid program.

“It is certainly a significant concern, but we need to keep it in perspective with all grant money,” Irish said. “Pell funding, as important as it is, is only about 10 percent of the need-based grant funds awarded by the College.”

Archibald said smaller colleges, especially community colleges, are less capable of handling a cut in Pell grants.

“Typically, the average Pell grant is enough for a student to go to community college,” Archibald said. “[The percentage] is much higher at community college and other schools than at William and Mary. They’re the ones that are going to be in trouble.”

Even with the uncertainty facing federal student aid programs, Archibald sees the Pell grant program as a great benefit to college students.

“The Pell grant is absolutely the most cleverly engineered financial aid program there is because it’s essentially an entitlement,” Archibald said. “If your income is below a certain amount, it brings you up.”

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