Pell Grant | Congress Proposes 15% Cut In Pell Grant Funding
The Republican leadership of the U.S. House of Representatives released a proposal on Friday that would cut the maximum Pell Grant to $4,015. This proposal is part of a larger package of budget cuts that seek to cut spending by $100 billion for the remainder of the current fiscal year. Congress has not yet passed the fiscal year 2011 budget and the federal government is currently operating under a continuing resolution that expires in early March.
The Pell Grant is awarded on an annual cycle that runs from July 1 to June 30, while the federal government is funded according to a fiscal year that runs from October 1 to September 30. Thus each Pell Grant spans part of two federal fiscal years. The proposed cuts to the fiscal year 2011 budget would affect the Pell Grant program during the 2011-12 academic year.
The maximum Pell Grant is based on the sum of discretionary and mandatory funding. Discretionary funding is subject to the annual budget appropriations process, while mandatory funding is already appropriated by permanent legislation. Thus discretionary funding is subject to an annual review and can be cut much more easily than mandatory funding. Entitlement programs, like Social Security, are based entirely on mandatory funding.
The current maximum Pell Grant of $5,550 is the sum of a $4,860 maximum Pell Grant under discretionary funding provided by the federal budget and $690 from mandatory funding provided by the College Cost Reduction and Access Act of 2007.
The proposal to cut the maximum Pell Grant appears to affect only the discretionary funding. If so, the $4,015 discretionary maximum would be added to the $690 in mandatory funding to yield an overall maximum Pell Grant of $4,705. This is less than what the overall maximum Pell Grant was during the 2008-09 award year ($4,731).
Despite the proposal’s lower overall maximum Pell Grant, there are some technical differences that yield roughly the same total cost. For example, the eligibility cutoff for the Pell Grant is currently based on the overall maximum Pell Grant. Previously it was based on just the maximum Pell Grant under discretionary funding. The minimum Pell Grant is also set at 10% of the maximum Pell Grant, higher than the previous $400 minimum grant.
This proposal would cut $845 (15.2%) from the current maximum Pell Grant of $5,550.
While the goal is to roll back government spending to 2008 levels, the legislative proposal hurts Pell Grant funding more severely than other budget items. The recent increases in the maximum Pell Grant compensated for four years of no or negligible increases during the Bush administration. The maximum Pell Grant was essentially flat from 2002-03 to 2006-07. The proposed cut in the maximum Pell Grant will be the largest cut in student aid funding in the history of the Pell Grant program.
This proposal will cause more than a million students to lose eligibility for the Pell Grant. Every $100 change in the maximum Pell Grant currently corresponds to about 200,000 recipients. The proposed cut in the maximum Pell Grant would mean that 1.7 million low-income students would no longer qualify for the Pell Grant, almost a fifth of current recipients. The remaining recipients would have their Pell Grants cut severely.
As the Advisory Committee on Student Financial Assistance (ACSFA) demonstrated in its June 2010 report, The Rising Price of Inequality , inadequate need-based grant funding causes declines in Bachelor’s degree attainment. The cut in Pell Grant funding will reduce the number of low income students receiving Bachelor’s degrees each year by about 61,000. Coupled with the likelihood of double-digit tuition inflation at many public colleges, college will become considerably less affordable. (Public college tuition tends to increase at double-digit rates at the end of a recession and for a few years afterward due to shortfalls in state income tax revenue. The stimulus bill delayed this by two
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