The Department of Education is brushing aside calls from congressional Democrats to reverse recent changes in the way student financial aid eligibility is calculated, saying that predictions that the adjustments will result in reduced aid for millions of families are overblown.
"The changes will have a minimal impact on a handful of students," said Sally L. Stroup, an assistant secretary of postsecondary education. The changes in the amount of money families will be expected to contribute to students' higher education costs beginning in the 2004-2005 school year are the result of legally mandated adjustments in the complex federal formula that determines students' financial aid eligibility.
As they can on tax returns, families are allowed to deduct certain costs as they calculate how much money they must spend on college and how much aid for which they are eligible. The calculations are used to determine eligibility for most federal financial aid programs, some state assistance programs and aid offered by many individual colleges and universities.
Consultants and financial aid officers said the recent adjustments will result in millions of families paying hundreds of dollars more in college costs.
The major change in the formula, adjusted by the Department of Education late last month, will decrease the amount of money families can deduct for state and local taxes, in some cases by more than half. Those reductions will increase the amount of money families are expected to contribute toward higher education costs.
Only one state, Connecticut, will see no decrease in the state tax deduction. Meanwhile, the deduction will decline by 25 percent in Maryland, 43 percent in Virginia and 33 percent in the District.
The impact of those changes will vary widely, depending on a family's particular circumstances. Other factors include parents' income, age, overall assets, the amount of equity they have in their homes, the number of children they have in college and, most important, the state in which they live.
The Department of Education said the adjustments -- made for the first time since 1994 -- will result in only minor aid changes for most students. Officials also said that increases in the amount of income and assets families can protect under the formula should help offset the tax deduction changes.
But some financial aid experts said the impact on families will be significant. One private financial aid consultant said the change could reduce the amount of grants, loans and work-study awards the federal government would otherwise pay out by hundreds of millions of dollars.
At least five members of Congress have spoken out against the adjustments since they were publicized last week by the New York Times. Sen. Jon S. Corzine (D-N.J.) has introduced legislation that would reverse them.
The Department of Education has not developed any estimates of the total impact of the changes. But Brian Zucker, president of Human Capital Research Corp., a consulting firm in Evanston, Ill., that helps colleges and universities develop financial aid policies, said the changes would affect at least $5 billion of the $90 billion in need-based financial aid provided to students each year.
At 2,300-student Stonehill College in Easton, Mass., a Massachusetts family of four that earns $69,000 a year and has one student in college would see its contribution rise by $734, said Eileen O'Leary, director of student aid and finance.
A Massachusetts student from a single-parent family earning $29,949 would lose eligibility for both a $200 federal Pell Grant and a $300 state grant.
"It is one of those really technical things that has a great effect," said Terry Jackson, director of financial aid at Knox College, a small liberal arts school in Illinois. "The impact will not be minimal."
The Department of Education, in contrast, said that in several states where the change in the state tax portion of the formula is the smallest, student aid will be unaffected or even increased because of the adjustments.
A working parent in her mid-forties earning $30,000 with three children and one child in college living in New Jersey, Texas or Nevada would see no change in her expected contribution, the department said. Meanwhile, it said, a family of four in Connecticut with parents in their late forties earning $63,000, with some savings and investments, would pay less toward college under the new formula.
