Late in March, a task force of 17 NASFAA members forwarded an initial list of 61 recommendations for changes to the Higher Education Act in the upcoming Reauthorization to the NASFAA Board of Directors. The Board accepted most of those recommendations, although it was requested that some be further developed. This is the third in a series of articles that highlight those recommendations. NASFAA encourages members to suggest additional areas where legislative change is needed in the Pell Grant Program. To do so, you may comment publicly below or send your concerns privately to Reauth@nasfaa.org. For comprehensive coverage of all reauthorization topics, please refer to NASFAA’s HEA Reauthorization Web Center.
Make Federal Pell Grant Program a True Entitlement Program
NASFAA’s Reauthorization Task Force (RTF) proposes that the Federal Pell Grant become a true entitlement program with (1) 100% mandatory funding and (2) application of the inflation adjustment to the entire award.
Currently, the funding that makes up the greater part of a Pell Grant comes out of the discretionary side of the budget, which must be appropriated every year and is subject to politics and budgetary machinations. A small amount of Pell Grant awards is set in law as mandatory funding, that is, automatic spending that is not subject to annual appropriations fights. For 2013-14, the maximum award of $5,645 is made up of $4,860 from the annual appropriation; the balance of $785 is the mandatory funding portion. The increase of $95 from the 2012-13 maximum award is obtained by applying an inflation adjustment derived from the Consumer Price Index (CPI) to only the mandatory funding portion of the 2012-13 maximum award.
Due to the fact that the Federal Pell Grant program remains tied to a cyclical appropriations process, the amount of support that an otherwise eligible, high need student can expect from this program remains uncertain from year to year. When making plans to attend an institution of higher education a level of certainty in regard to the availability of financial aid resources is especially critical to low income students. Additionally, the uncertainty of Federal Pell Grant awards also impacts institutions in providing full cost/resource information to low income students in a timely fashion.
This recommendation has been made for quite a few years, including by the last Reauthorization Task Force. Listening sessions conducted by the RTF across the country reinforced the desire of NASFAA members to continue pursuing it.
Rescind Institutional Ineligibility for Pell Grants Due to Loan Default Rates
The RTF recommends elimination of the statutory language that bars participation in the Federal Pell Grant Program for schools that have been rendered ineligible to participate in the Direct Loan Program as a result of a final default rate determination.
High need students should have access to Federal Pell Grant funding irrespective of the inability of past borrowers to avoid default. The tie between a school’s Title IV cohort default rate and the Federal Pell Grant places institutions that attract high need students at a decided disadvantage compared to schools with a higher overall number of Title IV loan borrowers. Provided that a school meets all required counseling and administrative operational requirements associated with participation in Title IV loan programs, the law should not penalize high need students, meeting all eligibility requirements for a Federal Pell Grant, premised on the repayment behavior of Direct Loan borrowers at that same school.
The current law is also a disincentive for community colleges to participate in Federal loans, sending students to private lenders.
Allow Pell Grant Eligibility Beyond 6 Year LEU for Last Term Before Completion
The RTF believes that additional Federal Pell Grant eligibility, on a case-by-case basis, should be allowed beyond the 6-year LEU limit, if the student can complete his or her degree program within one additional period of enrollment. The amendment could include a sunset provision so that it is essentially a grandfather provision for students already enrolled when limits were imposed effective with the 2012-13 award year.
Still Under Consideration: Year Round Pell
The law briefly permitted a student to receive two scheduled awards within an award year if the student was accelerating his or her program of study. This provision became too expensive and was repealed before its effect on acceleration could be gauged.
The 6-year lifetime limit on Pell eligibility changes the game. The RTF would like to see year-round Pell reinstated for students but without the acceleration clause, thereby giving the student more control over timing the use of lifetime funds.
When the Department of Education implemented the short-lived provision, it took the opportunity also to dictate how a cross-over summer payment period should be assigned. The combination of this regulatory requirement and the statutory mandate for acceleration created a very difficult and burdensome set of rules. The NASFAA Board of Directors asked the RTF to further development this recommendation to ensure that such complexity and burden does not repeat. The Board will review the reformulated recommendation in June.
Publication Date: 5/24/2013