A new federal spending bill passed by Congress earlier this month could cut funding to thousands of low-income students receiving financial aid from Pell Grants.
The bill, approved by Congress on Nov. 20, increases Pell Grant funding by $458 million to $12.4 billion, but also tightens the eligibility requirements to receive the funds. Ron Andrade, UCSB’s financial aid director, said the change in requirements eliminates financial aid to about 84,000 students who were eligible under previous guidelines. The Pell Grant is a federal grant program that serves over 5 million students from low-income families.
Over 4,000 UCSB students who currently receive support from the grants and over one million students nationwide may face reductions in their federal aid as a result of the bill, Andrade said.
The eligibility criteria for the grant are based on the Expected Family Contribution (EFC) equation. This equation consists of the sum of the expected parent contribution and the expected student contribution to college expenses, Andrade said.
“There are going to be a number of students who will have a change in eligibility,” Andrade said. “Eighty-four thousand students can’t receive grants next year and 1.2 million will see their Pell Grants reduced.”
Most of the impact will be felt by students whose families earning between $35,000 and $40,000 a year, according to the Associated Press. Also hit hard will be students who contribute $3,850 to college expenses, the maximum amount to be considered for the grant. These students will receive the minimum Pell Grant of $400, Andrade said, with the maximum for the 2005-06 academic year being $4,300. The maximum grant amount has stayed constant even with increasing tuition fees.
The formula that determines the EFC deducts uncontrollable expenses such as federal and state income taxes from the wage numbers that determine eligibility, Andrade said. The tax table was scheduled for an update last year, but due to an uproar over state tax rates, Congress had to reschedule the adjustments.
The old tables made families appear more in need of the grant because out-of-date figures showed them paying more taxes than they actually paid, Andrade said. The consideration of newer tax rates will change the status of many of those currently receiving grant payments.
“The tables for the formulas are designed to be periodically adjusted to better represent the current tax rate that is out there,” Andrade said. “Last year state tax rates actually went down and the reduction of state taxes caused a larger amount of money to go into the formula. This eventually materialized into a slightly higher EFC simply because of a small shift in tax base. The higher the EFC goes, the lower the Pell Grant goes.”
Andrade said while the cuts will affect students, the tax rate considerations and new bill are necessary parts of the federal funding process.
“There is an acknowledgement that things are getting more expensive, but [the formula] is not an exact science,” Andrade said. “It all revolves around the current federal budget situation and this just happens to be a mandatory adjustment made to the tables.”
— The Associated Press contributed to this report.