How the FY2011 Spending Bill Impacts Student Aid Programs
Congress passed a continuing resolution (CR) on April 14 to fund the Federal government for the remainder of fiscal year (FY) 2011. This long-term FY2011 CR cuts a total of $38.5 billion from non-defense FY2010 spending levels, but maintains the $5,550 maximum Pell Grant for the 2011-12 award year and gives campuses the ability to offer eligible students a second Pell Grant award this summer. However, the cuts do impact many large student aid programs for the 2011-12 academic year, including the Pell Grant, the Federal Supplemental Educational Opportunity Grant (FSEOG), and Federal Work Study (FWS).
Maintaining Maximum Pell Grants
In a major victory for students and families, the CR maintains the maximum $5,550 Pell Grant for the 2011-12 academic year. The original long-term spending bill (H.R. 1) that was passed by the House in February called for an $845 cut to the maximum grant, reducing it to $4,705. NASFAA advocated heavily against H.R. 1 by informing key lawmakers that 2011-12 Pell Grant Payment and Disbursement schedules, as well as many award packages, had already been released. H.R. 1 ultimately failed to pass in the Senate
Eliminating Year-Round Pell
The long-term CR eliminates the second scheduled awards within an award year (also known as year-round Pell Grant) -- a proposal originally proposed in President Obama's FY 2012 budget request. The proposal was fast-tracked to be included in the FY 2011 spending bill, which permanently eliminates year-round Pell, beginning with the second scheduled award for the 2011-2012 academic year (eligible students can get a second award this summer if it is the second payment for the 2010-11 academic year). This cut is projected to save $8 billion over the next two years and will help lower the projected $20 billion Pell Grant shortfall that would have occurred for academic year 2012-13 if the program was unchanged.
Suspending Crossover Regulations
Related to the year-round Pell elimination, the CR also suspends existing Pell Grant crossover regulations for the summer of 2011. Institutions are no longer required to assign a student in a 2011 crossover period to the award year which yields the higher Pell payment for the crossover period. If year-round Pell would have been eliminated without addressing the crossover regulation, a student in a crossover period with a higher payment for the crossover period from the 2011-12 award year would have been forced to receive funds from that year, potentially leaving them short of Pell funds in the spring. With the suspension of those regulations, schools can pay a student's remaining 2010-11 funds, including second scheduled awards, for the crossover payment period.
While elimination of second Pells is permanent beginning with the 2011-12 award year, further action by the Department of Education (ED) is necessary to revert crossover rules permanently. ED will likely release its plans with regard to crossover Pells shortly after enactment of the CR. NASFAA had engaged ED as well as Congress in discussions on the implications of eliminating second Pells without corresponding action on the crossover rules and we believe that ED will provide agreeable guidance on this issue.
New FSEOG Allocations
The spending bill also cuts FSEOG by $20 million, an amount that will be reduced from its FY 2010 appropriation of $757 million. H.R. 1 would have eliminated FSEOG funding completely, so the reduced funding can be seen as a partial victory. However, the change in FY2011 FSEOG appropriated funds at this point in the year will require the Department to release new allocations. Due to allocation formulas, reductions will not likely be an equal amount or percentage. Schools that were scheduled to receive the base guarantee only, for example, should not see any reduction, while schools that were to receive a "fair share" amount may see reductions.
Additional Cuts
Changes to other aid programs include:
- the elimination of LEAP and Byrd Scholarships
- a $25 million dollar cut to TRIO
- a $20 million cut to GEAR UP, and
- a $1.6 million cut to Javits Fellowships.
In addition, the bill calls for a 0.2 percent cut to all Education programs across-the-board. This impacts most student aid programs -- and is cut in addition to the $20 million already reduced from FSEOG. The Pell Grant is -- in all practical terms -- shielded from this provision. In addition, Direct Loan will probably be unaffected because it is an entitlement program. We expect that the Perkins Loan program is also unaffected.