The Government Accountability Office (GAO) last week released a report, Federal Student Aid Formula: Cost-of-Living Adjustment Could Increase Aid to a Small Percentage of Students in High-Cost Areas but Could Also Further Complicate Aid Process.

The report, for which NASFAA staff were interviewed, was required by the Higher Education Opportunity Act. It provides information on options for adjusting the federal student aid formula for geographic cost-of-living differences. Specifically, the report addresses the following questions:

• How does the current federal financial aid formula affect students in different geographic areas?
• What options exist for modifying this formula to reflect geographic cost-of-living differences?
• How would adding a cost-of-living adjustment (COLA) to the formula affect the federal financial aid system, including the distribution of Pell Grants?

The GAO found that while data suggest that the cost of living is higher in some areas than in others, the current aid formula accounts for these differences in only a limited way. How these differences affect a family’s ability to pay for college is unclear, in part because no official measure of geographic cost-of-living differences exists. The GAO identified three possible COLA options that could be used in the federal aid formula. These COLAs could increase Pell Grants and other financial aid for a small percentage of students from high-cost areas but could also further complicate the process for calculating and administering federal student aid.

Media Coverage

Cost-of-Living Adjustment Could Increase Aid to Students From Pricey Metro Areas The Chronicle of Higher Education

Student Aid, From California to Cheyenne Inside Higher Ed

Posted 08/17/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.