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News from NASFAA

Issue 1:  Pell Grant Entitlement. [no comparable section of the HEA]

Recommendation: Create a Pell Grant Program "true" entitlement and assure that such an entitlement will extend for ten years into the future. The Pell Grant maximum should double in next five years, with an inflation adjustment after that. The maximum award under this entitlement proposal would be as follows: 

AY 2004-2005 $5,800 authorized
AY 2005-2006 $6,000 entitlement
AY 2006-2007 $6,500 entitlement
AY 2007-2008 $7,000 entitlement
AY 2008-2009 $7.500 entitlement
AY 2009-2010 $8,000 entitlement
AY 2010-2011 inflation adjustment
AY 2011-2012 inflation adjustment
AY 2012-2013 inflation adjustment
AY 2013-2014 inflation adjustment
AY 2014-2015 inflation adjustment

Rationale:  The Federal Pell Grant is the keystone of the financial aid partnership for needy students.  We appreciate that the Congress has generously increased the maximum award in recent years.  Still, the current appropriated maximum award of $4,000 is well below the authorized $5,800 maximum award in the Higher Education Act.  For years, many in the higher education community and Members of Congress have been alarmed over increasing student debt and have urged increases in grant funding to redress the "grant/loan imbalance."  Only twice since the founding of the Pell Grant Program in 1972 has the appropriated maximum award matched the authorized level.  If we are serious about reducing student loan debt; if we are serious about increasing grant assistance; if we are serious about providing increased educational opportunities; then, once again, NASFAA suggests that making the Pell Grant Program a true entitlement, divorced from the vagaries of the appropriations process, is the only way we can help reduce student debt levels, guarantee adequate grant assistance, and increase educational opportunities.   

We also recommend setting a new national goal. The Congress this year is poised to complete a five-year process increase the amount of federal spending on medical research by doubling the budget of the National Institutes of Health (NIH).  With the accomplishment of this admirable goal, we call on the Congress to start anew on an ambitious national goal that will benefit so many of our citizens and the nation itself and begin a five-year process to double the Pell Grant maximum award from $4,000 to $8,000.   

We also suggest the Pell Grant entitlement go outside the bounds of the conventional legislative process and extend for ten years.  Doing so accomplishes critical goals, most important, it provides an assurance of funding for current and near-term future students, as well as showing students in junior high schools that if they meet financial eligibility requirements and apply themselves academically, then the finances for affording a postsecondary education are in place.  Such a long-term entitlement will give those who may be on the margins academically the incentive to apply themselves to their studies, knowing the funding will be there. 

Issue 2:  Pell Grant Authorized Maximum; If Not an Entitlement. [Section 401(b)(2)(A)]

Recommendation:  Double the Pell Grant Maximum award. Should be Pell Grant not be made into a "true" entitlement, the authorized maximum should at least double in next five years.

Rationale:  The Federal Pell Grant is the keystone of the financial aid partnership for needy students.  We appreciate that the Congress has generously increased the maximum award in recent years.  Still, the current appropriated maximum award of $4,000 is well below the authorized $5,800 maximum award in the Higher Education Act.  For years, many in the higher education community and Members of Congress have been alarmed over increasing student debt and have urged increases in grant funding to redress the "grant/loan imbalance."  Only twice since the founding of the Pell Grant Program in 1972 has the appropriated maximum award matched the authorized level. 

We also recommend setting a new national goal. The Congress this year is poised to complete a five-year process increase the amount of federal spending on medical research by doubling the budget of the National Institutes of Health (NIH).  With the accomplishment of this admirable goal, we call on the Congress to start anew on an ambitious national goal that will benefit so many of our citizens and the nation itself and begin a five-year process to double the Pell Grant maximum award from $4,000 to $8,000.   

Issue 3:  Pell Grant Minimum Award. [Section 401(b)(5)]

Recommendation: Phase in an increase Pell Grant minimum award to $750.

Rationale:  Currently, if an individual evidences Pell Grant eligibility for an award of from $200 to $399, then the individual qualifies for a grant of $400. The Task Force recommends eliminating this bonus payment and phasing-in an increase in the minimum Pell Grant award to $750 so that the grant will be truly meaningful for recipients.  The minimum grant has not been changed in over a decade and goes primarily to students from more middle-income than poor families. Operationally, the phase-in mandates a minimum EFC of 3800.  As the Pell Grant maximum increases, eventually, use of a 3800 EFC results in achievement of the $750 minimum.  This shift will target Pell Grant funding on the neediest recipients which frees up funding that can be used to provide even greater increases in the Pell Grant maximum award.

Issue 4:  Insufficient Pell Grant Funding. [Section 401(g)]

Recommendation:  Reaffirm current congressional disclosure language and reject Administration's proposal that Secretary set level of Pell Grant maximum award if funding is insufficient.

Rationale:  Current law mandates the Secretary inform the Congress whenever funding for the Federal Pell Grant Program is insufficient to fully fund the congressionally mandated maximum award level.  We wish to reaffirm this approach in the current law and oppose a proposal made by the Administration in their February Budget submission.  The Administration proposed that whenever ED estimates that funding is insufficient to fully fund the congressionally mandated maximum award, then the Secretary has the authority to reduce the maximum award below the level set in the appropriations bill.  This gives the Secretary broad authority to set the maximum award that no prior ED Secretaries have had.  We believe the Congress has the responsibility to fund the program to fully pay for the maximum award that that body has set and only the Congress should have the authority to reduce a prior decision concerning the proper level of the maximum award. 

Issue 5: Loss of Pell Grant Eligibility Due to a School's Default Rate. [Section 401(j)]

Recommendation: Eliminate current law provision which mandates that schools losing eligibility to participate in the Federal Stafford Loan Program due to high default rates also lose their eligibility to participate in the Federal Pell Grant Program.

Rationale:  We understand that as a result of this provision in the last reauthorization that many schools whose primary missions are to provide educational opportunities for needy students have dropped their participation in the Stafford Loan Program so that they would not lose Pell Grant eligibility for their students. These schools should not be disadvantaged in their Pell Grant participation, since many such schools (especially community colleges) have few borrowers. Consequently, a few defaults could tilt them in a loss of loan eligibility and consequent loss of Pell eligibility. NASFAA opposed the inclusion of this provision in the last reauthorization.  

Issue 6:  Tuition Sensitivity. [Section 401(f)]

Recommendation: Eliminate current law "tuition sensitivity" provision that mandates a student eligible for a maximum Pell Grant have that award reduced in the following fashion:  For any academic year for which an appropriation Act provides a maximum basic grant in an amount in excess of $2,700, the amount of a student's basic grant shall equal $2,700 plus-one-half of the amount by which such maximum basic grant exceeds $2,700; plus the lesser of- (a) the remaining one-half of such excess; or (b) the sum of the student's tuition and, if the student has dependent care expenses (as described in section 472(8)) or disability-related expenses (as described in section 472(9)), an allowance determined by the institution for such expenses. 

Rationale:  The result of this provision is to reduce the award for the neediest Pell Grant recipient attending a lower cost college. Currently, only California community college students are affected by this provision, but as the Pell Grant maximum award increases, students at other lower cost schools across the nation will be impacted by this provision.  The provision developed as a compromise more than ten years ago and has outlived its usefulness. It perpetrates an injustice on poor students that will be extended to other postsecondary institutions that attempt to give postsecondary opportunities to students through a policy of low costs. 

Issue 7:  Front-Loading Demonstration Pilot Project. [(no comparable section of the HEA]

Recommendation: Establish a front-loading demonstration project.

Rationale:  This demonstration project would be modeled after the distance education demonstration project placed into the law by the reauthorization of the HEA in 1998 (Section 486).  It would be entirely voluntary; would be limited to a small number of volunteer schools; would sunset or end with the expiration of the Higher Education Act; would require periodic reports; would be flexible in its parameters; and would test front-loading grants in a way that would give concrete answers as to the benefits and negative consequences of front-load grants and back-loading loans.

When candidate George W. Bush was campaigning for president, one of the hallmarks of his education proposals was a front loaded Pell Grant for first-year students.  First-year students were to receive a $5,100 Pell Grant maximum award, rather than a $3,300 award (the maximum at that time). Early in his Administration, he dropped support for that proposal however it would not be surprising if the proposal or a variation of it surfaced in the Administration's reauthorization proposal.

Clearly, many NASFAA members would oppose such a proposal and the Reauthorization Task Force heard that from our early vetting of this proposal with our Reauthorization Advisory Group.  The Task Force concluded otherwise believing as professionals we have an obligation to explore new ways of delivering aid or, at a minimum, testing ideas in the real world. In that spirit, the Task Force believes a front-loading demonstration project is desirable to answer many of the practicable and theoretical issues surrounding front-loading. It is not enough to state that front-loading is "bait and switch" without testing the validity of that premise with a real world experiment. The proposed demonstration project needs to be given legislative parameters yet needs a certain flexibility to really test the premises both operational and values behind many who propose frontloading as a way to increase college participation and reduce loan debt. 

Issue 8: Negative EFC Needy Student Targeting Provision. [no comparable section of the HEA]

Recommendation: Add Pell Grant funding in the amount of any calculated negative Expected Family Contribution (EFC) to the student's Pell Grant award.

Rationale:  The Task Force believes that the poorest of the poor as evidenced by individuals with negative EFCs should qualify for a bonus Pell Grant award.  For example, a student with a negative EFC of 750 would have $750 added to the maximum award they qualify for. Consequently, a student with a negative $750 EFC, who otherwise qualifies now for a $4,000 maximum award, under this proposal would receive a Pell Grant award of $4,750. The Task Force recognizes that negative EFCs can be calculated beyond 750, but currently are not. We suggest not going beyond this level for reasons of cost to the government, but believe the extra cost of this recommendation is a reasonable solution to reducing student debt and increasing the amount of grant assistance in a fiscally responsible way. 

Issue 9: Reinstatement of Pell Grant Eligibility. [Several Sections]

Recommendation: Reinstatement eligibility should be consistent for all Title IV programs. 

Rationale:  Reinstatement eligibility should be consistent for all Title IV programs.  The student's eligibility should be reinstated for the payment period in which he/she becomes eligible. Once a student has defaulted on a federal student loan or is required to repay an over award, he/she is ineligible for any Title IV funds until that defaulted loan over award has been paid- in-full.  Once the default/over award has been paid the student may regain eligibility for a federal Pell Grant for the period of enrollment in which eligibility was regained.  

[Return to main article on NASFAA's Reauthorization Task Force Preliminary Recommendations]

Posted October 11, 2002 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
Copyright 2002.
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