WASHINGTON – The U.S. Department of Education on Thursday announced a new formula for calculating eligibility for college financial aid, a move that will eliminate federal Pell Grant scholarships for an estimated 80,000 to 90,000 low-income students and force a modest scaling back of other types of state and federal assistance to broader categories of undergraduates.
Bush administration officials said the new formula, which is used to measure a family’s ability to pay college costs, will save the government at least $300 million in the 2005-06 academic year. The neediest students, who receive the maximum federal scholarship of $4,050, will be unaffected and only a small fraction of the 5.3 million Pell recipients will lose their grants entirely, officials said.
The previous formula was a decade old and relied on 1990 data that is widely acknowledged to be out of date. The new formula uses tax data from 2002.
Congress, however, had resisted the change in a series of bills approved by both houses over the last 18 months, and education officials indicated Thursday that they were taken aback by the timing of the announcement, just two days before Christmas.
The Chronicle of Higher Education called the move the “December Surprise,” and Terry Hartle, senior vice president of the American Council on Education, representing 2,000 colleges and universities, said the timing was “unfortunate and probably deliberate.”
“This will have a modest but noticeable impact on a very large number of low and middle-income students,” he said. “I don’t think it means they won’t go to school. But they will borrow more money on credit cards, work longer hours or take fewer classes.”
The formula change, a seemingly small, technical one, involves replacing 1990 data with 2002 data on state and local taxes to recalculate a family’s expected disposable income available for college costs. In most states, those taxes were lower in 2002 than in 1990, suggesting grant applicants had more disposable income to put against tuition charges.
Because many states use the federal formula to calculate aid to students at state universities, the changes announced Thursday will have a ripple effect, education officials said. Eligibility for subsidized federal student loans could also be affected. But nonsubsidized loans, which are not tied to a family’s income, would not be affected.
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