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December 23, 2004

Students to Bear More of the Cost of College

By GREG WINTER

College students in virtually every state will be required to shoulder more of the cost of their education under new federal rules that govern most of the nation's financial aid.

Because of the changes, which take effect next fall and are expected to save the government $300 million in the 2005-6 academic year, at least 1.3 million students will receive smaller Pell Grants, the nation's primary scholarship for those of low income, according to two analyses of the new rules.

In addition, 89,000 students or so who would otherwise be getting some Pell Grant money will get none, the analyses found.

"Season's greetings from Uncle Sam," said Terry W. Hartle, senior vice president of the American Council on Education, which conducted one of the analyses and represents about 1,800 colleges and universities. "Your student aid stocking is going to be a little thinner next year."

Beyond the implications for Pell Grants, the new rules are expected to have a domino effect across almost every type of financial aid, tightening access to billions of dollars in state and institutional grants and, in turn, increasing the reliance on loans to pay for college. Taken together, many education experts say, the consequences for the nation's core financial aid programs are among the most substantial in a decade.

"This is the first time in at least 10 years where there's been a significant reduction for this magnitude of students," said Brian K. Fitzgerald, director of the Advisory Committee on Student Financial Assistance, which was created by Congress to advise the lawmakers on financial aid. It was this committee that performed the other analysis.

The changes are the denouement of a fight that has roiled Congress for more than 18 months. When the Bush administration first proposed altering financial aid rules last year, legislators stopped the revisions from taking hold, arguing that tough economic times meant students needed more help to attend college, not less.

But this year the administration found support from Congressional leaders seeking to constrain the cost of Pell Grants, an expense that has steadily increased as more low-income students go to college.

Even with the new rules, spending on Pell Grants, which could easily surpass $12 billion this fiscal year, may continue to increase, and the ranks of recipients will probably grow as well, because so many new students are applying for aid.

Without the changes, though, Pell Grant costs would be about $300 million higher than with them, according to figures from the White House Office of Management and Budget, since tens of thousands of additional students would be eligible for aid and hundreds of thousands more would receive larger awards.

Exactly how individual families will be affected depends greatly on their financial circumstances and on where they live. Parents who earn at least $15,000 will be negatively affected in every state except New Jersey and Connecticut. Those in states including New York, Massachusetts, Michigan, Delaware, Virginia, South Carolina and Wisconsin will be among the hardest hit.

Many may see their federal grants decline by only a few hundred dollars, or not at all, some financial aid experts estimate. Others can be expected to contribute significantly more.

Painful though it may be, supporters of the new rules say, trimming back on awards has its benefits, especially for future students.

Educators and lawmakers on all sides have long agreed that the maximum Pell Grant, currently set at $4,050 a year, is wholly inadequate given today's college costs. But, supporters of the changes say, unless there is a serious effort to scale back the program, whose costs have been exceeding lawmakers' appropriations for it, Congress may never be in a position to give larger awards to the poorest of students, who need them the most.

"There aren't any easy answers, and there are consequences for wrongly adding hundreds of millions of dollars to the current budget shortfall," said David Schnittger, spokesman for the Republican majority on the House Committee on Education and the Workforce.

The debate stems from a seemingly small alteration to the federal financial aid formula, a complicated equation that either directly governs or heavily influences distribution of federal, state and institutional aid. Its purpose is to determine how much of a family's income is truly discretionary and therefore fair game for covering college expenses.

Much as with the federal income tax, the formula allows families to deduct some of what they pay in state and local taxes. This year the administration gained enough Congressional backing to reduce that amount significantly, in some cases cutting it by half or more. On paper, at least, that leaves families with more money left over to pay for college, even though state and local taxes have gone up in the last few years, not down.

The Department of Education, which issues the financial aid formula, says it has no choice but to update the deductions periodically.

"We're required by law to do this, and we can't pick and choose which parts of the law to follow," said Susan Aspey, a department spokeswoman.

Ms. Aspey said by e-mail yesterday that about 80,000 additional students - not 89,000 as the two analyses determined - would be receiving grants if the changes had not been made. She also said that nearly half of the nation's 5.3 million Pell recipients would not be affected, though that would appear to leave the possibility that the number affected will be even higher than the 1.4 million estimated in the two analyses. Ms. Aspey could not be reached last night for elaboration.

In adjusting the formula, the department is relying on data from 2002, which may not fully reflect the economic difficulties that many families have faced since then. Department officials, however, say the new formula is a lot more accurate than the previous one, which was at least a decade old.

The enormous University of California, with campuses scattered across the state, estimates that at least half of its 46,000 Pell Grant recipients will face some sort of reduction as a result of the changes. At the other end of the spectrum, Knox College, a small liberal arts institution in Illinois, says the changes will most likely reach upward to affect the middle class as well.

"Of course we focus on the students who have the greatest need, but these families are needy, too," said Teresa Jackson, Knox's director of financial aid. "They can't just sit down and write a check for $30,000 a year. I can appreciate the difficulty with the budget, but my gosh, to cut back on financial aid given the times doesn't make a lot of sense."


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