Pell Grants safe until 2015, report suggests

While government agencies tighten their budgets as the U.S. economy recovers from recession, the Federal Pell Grant’s foreseen shortfall in 2014 is now unlikely, and students will still receive government-subsidized financial aid, according to a report by the Congressional Budget Office Wednesday.

Officials had anticipated $5.7 billion dollars in Pell Grant shortfalls by 2014, but with $9.3 billion in extra money not used in 2013, the organization should be safe until 2015, said Libby Nelson of Inside Higher Ed, who analyzed the discrepancy between shortfall and surplus.

“This was based on projection on how many students will be on the program receiving grants,” she said. “CBO’s latest analysis turns out this event significantly overestimated in the past and now there is money left over from this year’s appropriation.”

The surplus may be a result of fewer students receiving Pell Grants than originally expected, Nelson said.

“We found out in September that fewer people are receiving grants than the government expected, so that may be a part of the explanation [for the surplus],” Nelson said. “There have been quite a few eligibility changes that kick students out and create a drop-off in students applying.”

However, despite the continuation of Pell Grants, it will be more difficult for students to meet the requirements needed to receive a grant in coming years due to changes put into effect in July 2012, she said.

Restrictions on eligibility for applicants for Pell Grants have become more rigid, Nelson said. Students without a high school diploma or a GED were previously eligible for a grant, but that policy no longer stands.

“Prospective students used to be able to take a test to prove they can benefit from college education, but people cant do that any more,” Nelson said. “Other policy changes are that the total semesters you could receive a grant was reduced from 18 to 12.”

Prospective students and those enrolled in college can only receive a Pell Grant once per academic year instead of obtaining multiple to accelerate graduation, Nelson said.

Daniele Paserman, a BU economics professor, said decreasing funding for student aid programs lowers chances for students to receive a grant.

“That we are not going over the fiscal cliff opens good news to current students and prospective students worried about how to finance their higher education prospects,” Paserman said. “Much of the research on how financial scholarships affects attendance and enrollment shows that there is an effect if you decrease financial aid and how it affects probability to enroll.”

Paserman said with a surplus, there is a chance more students can receive Pell Grants, but higher education costs have been rising at a pace faster than that of inflation during the past thirty years.

“For the last couple of years the actual amount granted to students has been upgraded because there is an automatic index for inflation,” he said.

A number of students said they believe the surplus should be put to use for the benefit of students.

Amy Yun, a School of Management senior, said while a significant part of the surplus might be saved in case the economy begins to decline again, some should be used for student aid.

“I understand there is a surplus and the [U.S. government is] keeping a reserve of enough money in case things get worse in later years,” Yun said. “They should provide enough money for their current pool of candidates right now and dip into the surplus.”

Max Lim, a College of Arts and Sciences freshman, said he thinks as another recession or fiscal cliff is not immediately pressing, the U.S. government should allot the entire surplus to students.

“Having too big of a surplus is not good because, although it is good to have as a backup plan, there is no real point keeping the extra money for something that may not happen,” Lim said.

Thiagu Meyyappan, a College of Engineering senior, said the surplus will protect future Pell Grants from another recession, but the amount saved in 2013 should also be used for students.

“If we do have a surplus, then they should weaken the restrictions so more people apply for a Pell Grant and go to college,” Meyyappan said. “When you are just coming out of an economic crisis, it’s necessary to tighten restrictions to save the whole program. But if they start to flourish, the Pell Grant should be available to more people again.”