The New York Times

June 13, 2003

Change in Aid Formula Shifts More Costs to Students

By GREG WINTER

Millions of college students will have to shoulder more of the cost of their education under federal rules imposed late last month through a bureaucratic adjustment requiring neither Congressional approval nor public comment of any kind.

The changes, only a slight alteration in the formula governing financial aid, are expected to diminish the government's contribution to higher education by hundreds of millions of dollars, starting in the fall of 2004.

But they will also have a ripple effect across almost every level of financial aid, shrinking the pool of students who qualify for federal awards, tightening access to billions of dollars in state and institutional grants and, in turn, heightening the reliance on loans to pay for college.

How much more money this may require of students and their parents will vary widely, changing with every set of circumstances that make families unique. Some families may be expected to pay an extra $100 or less each year, while others may owe well over $1,000 more.

"The seemingly insignificant publishing of an obscure table in the Federal Register has serious consequences on the individual," said Joe Paul Case, dean of financial aid at Amherst College.

While many college administrators characterized the change as a backdoor way to cut education spending, without public discussion, the Department of Education says it was simply executing its responsibilities under federal law.

Whether furnished by colleges, states or the federal government, the vast majority of the nation's $90 billion in financial aid is dictated by a single, intricate equation known as the federal need analysis. Its purpose is to decipher how much of a family's income is truly discretionary and therefore fair game for covering college expenses.

Much like the federal income tax, the formula allows families to deduct some of what they pay in state and local taxes. But, this year, the department significantly reduced that amount, in some cases cutting it in half. 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 over the last year, not down.

"This is a classic mismatch between public policy and the world that the students and families are actually living in," said Patrick M. Callan, president of the National Center for Public Policy and Higher Education. "If somebody put in a bill about this, it would get a hell of a debate, wouldn't it?"

The Education Department acknowledges that there is a disconnect between the formula and the current trajectory of state and local taxes, but contends that there is little it can do to remedy the situation.

Federal law requires that it update the tax tables periodically, and the data from which it draws comes directly from the Internal Revenue Service. The problem is, the department says, the most recent data is at least three years old, reflecting a period when state taxes were considerably lower than what they are now.

"I don't know what to do about that," said Dan Madzelan, chief of forecasting and policy analysis for the department's office of postsecondary education. "There's always some kind of a look back in the federal system."

Because discretionary income is unique to each family entirely dependent on its size, income, the number of children it has in college and, for tax purposes, where it lives there is no set amount that educational expenses will change.

The department has yet to come up with its own figures, but an analysis was conducted by Human Capital Research, an Illinois-based consulting firm that helps universities set enrollment and aid. Its methodology was vetted by financial aid officers, and the Education Department described it as generally sound.

In the 2004-2005 academic year, when the changes first take effect, parents in places like New York, Pennsylvania, Massachusetts, Oregon, and Washington, D.C., who earn $50,000 a year may be expected to contribute $700 or so beyond what they are already paying, according to the analysis. Those earning about $25,000 may owe only an extra $165 or less, while families earning $80,000 could be expected to pay an additional $1,100 or more.

Families in Florida and California should experience a smaller increase, probably less than $500 for those earning $50,000 and about $750 for those earning $80,000. In other states like Michigan, Delaware, South Carolina or Wisconsin, the burden will likely be greater. Families earning around $25,000 may be expected to contribute an extra $220 or less, those earning $50,000 may owe $940 more, while their counterparts with $80,000 incomes may be obliged to part with an additional $1,500.

"In the scheme of things it may not always seem like a lot of money, but in aggregate there's no question that we're talking about a swing of billions of dollars," said Brian Zucker, president of Human Capital Research. "It brings a lot of uncertainty into play, and it's truly going to require a considerable effort on the part of institutions to work with families and be sensitive to this extra hit that they will face."

Though it believes that family contributions will rise, the department points out that the new formula includes some extra leeway for inflation and the protection of personal assets, making it difficult to predict how each individual's financial picture will change.

Still, the changes should shave off a few hundred million dollars in grants to low-income students, known as the Pell Grant. With the faltering economy and the swelling popularity of college, the program has surpassed $11 billion a year. The new formula should constrain some of that growth, the department says, though it maintains that was never the intent of recalibrating it.

Because the size of each Pell grant is tailored to a family's discretionary income, the formula changes will result in smaller awards for some of the 4.8 million recipients in the program. Other recipients will stop getting grants altogether, the department added, since their resources will be deemed that much higher, pushing them beyond the program's eligibility requirements.

"The way those students will make up the difference is that they'll work more, going to college half time and working part time," said Ken Redd, research director for the National Association of Student Financial Aid Administrators. "It's not that they won't go to college, it'll just take them an extra year or two to finish, if they finish at all."

The changes are expected to go far beyond federal grants, because billions of dollars in state, college and university grants are distributed every year with strict adherence to the federal formula. As long as students receive some federal assistance, even private institutions must follow the government's determination of how much a family should pay.

"There is a major accessibility crisis looming in higher education, said Janet L. Holmgren, president of Mills College in Oakland. "And this will only exacerbate it."


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