Student Financial Aid: The Federal Picture

Vickie Choitz, Senior Policy AnalystOctober 2, 20128th Annual NALEO National Summit on the State of Latino Education

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Overview

• Federal student financial aid basics

• Status of Pell Grants

• How you can get involved

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Source: Trends in Student Aid 2011, The College Board

Undergraduate Student Aid by Source and Type (in Billions), 2010-11

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Who is eligible for federal student aid?

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Steps in federal financial aid process

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www.studentaid.ed.gov

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1. Use FAFSA4caster to estimate aid

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2. Research college costs -College net price calculators

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3. Complete the FAFSA – online or paper

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3.1 IRS Data Retrieval Tool is Handy

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4. Student Aid Report (SAR)• Summarizes information submitted on FAFSA; double

check it• Institutions and state higher education agencies receive

this information• Shows calculated Expected Family Contribution (EFC)

Defining important terms

EFC• Family size and # in

college/career school • Taxed and untaxed income• Assets• Benefits (such as

unemployment or Social Security)

• Auto-zero EFC and Simplified Needs Test

COA• Tuition and fees• Books, supplies, transportation,

personal, misc.• Room and board• Dependent care• Study abroad expenses• Disability expenses• Employment expenses for coop

study• Loan fees

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5. Compare colleges and aid packages – U.S. Dept. of ED “College Shopping Sheet”

More important terms

Federal need-based aid• Federal Pell Grant• Federal Supplemental Educati

onal Opportunity Grant (FSEOG)

• Direct Subsidized Loan• Federal Perkins Loan• Federal Work-Study

Federal non-need based aid

• Direct Unsubsidized Loan• Federal PLUS Loan• Teacher Education Access for

College and Higher Education (TEACH) Grant

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Unmet Need• Leftover student financial need after counting EFC and student

financial aid• COA – EFC = financial need• Two ways to look at it:

Financial need – grant aid = unmet need after grants Financial need – all student aid (i.e., loans) = unmet need

after student aid

Hispanic Unmet Need 1995-96 2007-08

Unmet need after grants $5,500 $9,900

Unmet need after student aid $4,500 $7,000

Source: Trends in Student Financing of Undergraduate Education: Selected Years, 1995-96 to 2007-08, U.S. Dept. of Education, Jan. 2011, NCES 2011-218

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Pell Grants and Fun Facts• Largest federal grant aid program; max grant = $5,550• 2012 = 40th anniversary; >60 million students served• 9.1 million students in 2010-2011• Next year’s maximum Pell Grant will cover the smallest share of

college costs in the history of the program• Pell Grant recipients are already more than twice as likely as

other students to have student loans • Nearly half of African-American undergraduates and about 40% of

Hispanic undergraduates rely on Pell Grants to attend school• Recent budget agreements reduced Pell Grant costs by $56

billion• Young adults of all backgrounds and party affiliations oppose

cuts to Pell Grant and believe college affordability should be a top priority for Congress and the economy

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Big Increase BUT New Equilibrium for Pell Grants

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Rollercoaster funding for Pell

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Update on Pell Grants in Federal Budget – Review of Recent Changes

• ELIMINATION of “summer/year-round” Pell (2011 Continuing Resolution on April 14, 2011)

• $17b INFUSION (Budget Control Act on Aug. 2, 2011); funding from elimination of in-school interest subsidy for graduate students and elimination of Direct Loan repayment incentives

• MORE CUTS (2012 Omnibus funding bill on Dec. 15, 2011) Decreased income limit for “auto zero EFC” from $32,000 to

$23,000 Reduced Pell lifetime eligibility limit from 18 to 12 semesters

(retroactive) Eliminated Ability to Benefit options

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President’s FY13 Budget Proposal (January 2012)

Fund Pell Grants and New Programs

• Fully fund Pell with no eligibility cuts (through FY 2014)• Initiatives to promote affordability, value, and completion:

Incentives in campus-based programs New Race to the Top – College program New First in the World Competition

• Make American Opportunity Tax Credit permanent• Double # of work study jobs• Freeze subsidized Stafford loan interest rate at 3.4%

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House FY13 Budget Proposal (March 2012)

Rollbacks and Cuts

• Roll back Income Protection Allowances to 2008 levels• Roll back auto-zero EFC from $23,000 t0 $20,000• Roll back definition of untaxed income• Eliminate eligibility when students are enrolled LTHT• Eliminate in-school administrative fees• Level fund maximum award at current $5,550 (no

scheduled increase to $5,635) and eliminate mandatory portion of grant (including scheduled increases)

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Senate Appropriations Committee “Labor-H” FY13 bill (June 2012)• Restore financial aid eligibility for students without a high school diploma or

its equivalent who are enrolled in eligible career pathway programs and can demonstrate their “ability to benefit” from postsecondary education.

• Increase maximum Pell Grant by $85 to $5,635 (this is a “scheduled” increase for the 2013-2014 school year).

• Make a down payment on the $6 billion funding gap that will result in FY14 • Support reforming the allocation formulas for the Federal Work Study and the

Supplemental Educational Opportunity Grant (SEOG) programs to redirect funds to lower-priced institutions that enroll and graduate higher numbers of Pell-eligible students; $150 million in new funds for enhanced work-study programs.

• Allocate $39 million for the First in the World initiative proposed by the Obama Administration in February (but does not fund the Administration’s proposed Race to the Top: College Affordability and Completion initiative).

• Provide level funding for TRIO programs and the Child Care Access Means Parents in Schools (CCAMPIS) programs.

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What’s the Bottom Line on Pell?• Demand for Pell Grants:

Program enrollments have grown by 50% in last four years: 6.1m in 2008 estimated 9.6m in 2012

Program costs have doubled: $16b in 2008 ~$34b in 2012

40% of growth is due to more eligible students as a result of the recession (and growing economic inequality)

• Supply of Funding for Pell Grants: Congress has not kept up with funding the program

through annual appropriations; stop-gap funding and rushed eligibility and funding cuts

Stop-gap funds from 2012 run out at end of FY 13

$6-7b funding gap in FY4

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Elimination of Ability to Benefit (ATB)• 2012 Omnibus funding bill (passed in December 2011)• Eliminates student aid eligibility for students without a high

school diploma or equivalent, even if they can prove “ability to benefit” from college by: Passing approved test Passing six college credit hours

• About 90,000 ATB students; disproportionately first generation, low-income, and minority

• An estimated 31% of AtB students are Hispanic and 19% are Black – compared to 14% of all undergraduates who are Hispanic or Black

• CLASP advocating for a reinstatement or exclusions• See CLASP fact sheets and guidance from Dept. of ED

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Pell Grants - Activities and Resources• 2012 = 40th anniversary• Save Pell coalition

For individuals: sign up at www.savepell.org For organizations: contact Vickie at CLASP

• Save Pell fact sheets (posted at www.clasp.org)• CLASP forthcoming paper on importance of Pell Grants

and other student aid to workforce and economy• Pellumni• The Pell Institute’s commemorative publication• Documentary: “Pell Grants: A Passion for Education”

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CLASP Save Pell webpage

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Thank You!

Vickie Choitz

Senior Policy Analyst

202-906-8048

vchoitz@clasp.org