Pell Mell 

New tax guidelines will reduce federal grants -- and possibly state grants -- to students.

Jim Shannon handles student financial aid for Christian Brothers University. Lately, his responsibilities have included educating the school's 1,800 undergraduates on the latest changes in the Pell Grant program. And the news isn't particularly good.

About 550 CBU undergrads receive the federal grants each year. Under the Bush administration's proposals to change the allocation amounts and funding formulas, Shannon says some students will lose their money.

"I think what will happen is that those students on the lower end of amount of need will see their grants reduced, but the highest-need students won't be affected," Shannon says. "What will be interesting is to see the effect this could have on Tennessee students who also receive state grants, because the [contribution formulas] are taken from the Pell Grant formulas."

Late last year, President Bush outlined his plans to overhaul the allocation of federal funds to the nation's college students. In addition to proposing an increase in individual grant amounts, Bush also announced a review of the formulas used in calculating Pell Grant payments.

The federally funded program awards need-based grants from $400 to more than $4,000. To qualify for assistance, students must complete a form noting family income, savings, and other information. These numbers are used to compute a student's Expected Family Contribution (EFC), the amount a student's family can contribute to educational expenses. The formulas used in calculating the EFC have remained unchanged since 1988.

The new guidelines would save the government $300 million in 2005-2006, good news for a program that is $4 billion in the red. According to Department of Education administrators, the updated formulas will be based on new tax tables.

More than 86,000 Tennessee students received Pell Grant funds in the 2002-2003 school year, accounting for more than $208 million in Pell payouts. Approximately 90,000 students would be disqualified from Pell funds under the new formula, according to the Tennessee Student Assistance Corporation (TSAC), and 1.3 million students will see a decrease in fund amounts nationwide. According a TSAC statement, "The added pressure of [reducing Pell eligibility] may increase the number of students dropping out of college. [It] may also lead to increased numbers of students borrowing the additional funds needed.''

"The Pell Grant uses a graduated chart, while the Tennessee grant has a more exact cutoff in relating to income contribution," says Shannon. "If students' EFCs rise because of this, then more students are likely to be precluded [from the state grant]." At CBU, 275 students received state grants.

Shannon's concerns are confirmed by TSAC, which estimates that an increased EFC could cause a decrease in private-sector need-based scholarships as well.

Rhodes College financial aid administrator Forrest Stuart says the updated formula is long in coming: "We need to use updated data. The government is not doing this to kick people off the grant rolls. It's doing it because the law requires it.

"I'm sorry about the effects, but they need to keep the tax tables updated," Stuart adds. "It's not fair to everyone involved -- taxpayers and students -- when we use old data. The DOE should have done something about this a long time ago. It's not the Republicans jumping on these students."

At LeMoyne-Owen College, more than 80 percent of undergraduates receive Pell Grants. In other words, of the 800 undergraduate students attending the college, 650 received federal grant allocations. But college administrators say the new funding formulas won't greatly affect LeMoyne-Owen students.

"February is Financial Aid Awareness Month here at LeMoyne, and we are informing students about Pell changes," says chief financial officer Tijuana Hudson. "We may see some students affected, but not many."

Richard Ritzman, who handles financial aid at the University of Memphis, says the new funding formula would probably produce low-impact results. "If the maximum Pell Grant is raised by $100 for the next year (an increase proposed by President Bush for the next five years), it will probably, at best, offset the loss the student would have seen based on the new formula calculations. I have seen proposals come and go every year regarding the federal financial aid programs. In most cases, what is finally enacted, if anything, is quite different from what was originally proposed."

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