The Department of Education yesterday announced a new formula for calculating eligibility for college financial aid, a move that will eliminate federal Pell Grant scholarships for an estimated 80,000 to 90,000 low-income students and force a modest scaling back of other types of state and federal assistance to broader categories of undergraduates.
Bush administration officials said the new formula -- which is used to measure a family's ability to pay college costs -- will save the government at least $300 million in the 2005-2006 academic year. The neediest students, who receive the maximum federal scholarship of $4,050, will be unaffected and only a small fraction of the 5.3 million Pell recipients will lose their grants entirely, officials said.
The previous formula was a decade old and relied on 1990 data that are widely acknowledged to be out of date. The new formula uses tax data from 2002.
Congress, however, had resisted the change in a series of bills approved by both houses over the past 18 months, and education officials indicated yesterday that they were taken aback by the timing of the announcement, just two days before Christmas.
Sen. Arlen Specter (R-Pa.) said he was "very unhappy" and promised to renew the battle for broader Pell Grant funding next year. Sen. Jon S. Corzine (D-N.J.) said he was "outraged that the Bush administration is going forward with these punitive cuts," adding that the change in the eligibility rules was "nothing more than a backdoor effort to cut student aid funding."
"For those working to get ahead, this is a scene from 'The Grinch who stole my education,' " he said.
The Chronicle of Higher Education called the move the "December Surprise," and Terry W. Hartle, senior vice president of the American Council on Education, representing 2,000 colleges and universities, said the timing was "unfortunate and probably deliberate."
"This will have a modest but noticeable impact on a very large number of low- and middle-income students," he said. "I don't think it means they won't go to school. But they will borrow more money on credit cards, work longer hours or take fewer classes."
Because many states use the federal formula to calculate aid to students at state universities, the changes announced yesterday will have a ripple effect, education officials said. Eligibility for subsidized federal student loans could also be affected. But non-subsidized loans, which are not tied to a family's income, would not be affected.
The most direct repercussions will be in the Pell Grant program, the federal scholarship aid program for the needy that has grown steadily over the past decade with strong bipartisan support in Congress.
An estimated 90 percent of the families receiving help through the program earn less than $35,000 a year. The average grant is about $2,400 a year. Most of those expected to lose eligibility next year are families at the upper margin of eligibility who receive only the minimum grant of $400, according to Susan Aspey, spokeswoman for the Department of Education.
"Our projections show that nearly half the Pell Grant recipients won't see any change at all, and on average the losses [for those affected] will be less than $100," she said. Although the changes will cause some to lose eligibility, the department still expects a 25,000 net increase in the number of Pell scholarships in 2005-2006.
Driving the program's rapid growth is the rising number of high school graduates from minority or low-income backgrounds. Congress approved $12.4 billion for Pell Grants for 2005, up $400 million from 2004 but less than the administration requested. The fiscal pressures will only intensify when high schools graduate the largest class in U.S. history in 2008.
With demand outpacing funds appropriated by Congress, the government has borrowed about $3.6 billion to provide grants to all those eligible under the formula. At the same time, advocates of federal student aid say the present maximum grant of $4,050 to the neediest covers only a third of average college costs and is plainly inadequate.
The outdated eligibility formula, said David Schnittger, spokesman for the House Committee on Education and the Workforce, was "a de facto cut on the poorest students" because it provided grants to some who should not have been eligible and hampered Congress's ability to increase the maximum grants -- a goal of key members in both parties.
The formula change, a seemingly small, technical one, involves replacing 1990 data with 2002 data on state and local taxes, to recalculate a family's expected disposable income available for college costs. In most states, those taxes were lower in 2002 than in 1990, suggesting grant applicants had more disposable income to put against tuition charges.
Hartle said it was "inevitable" that the formula would have to be updated.
But Brian K. Fitzgerald, director of the Advisory Committee on Student Financial Assistance, which was created by Congress, said the panel recommended last summer that changes in the formula be "phased in." Many states raised taxes after 2002, so "the updated data is still old data and doesn't give a true picture of the current tax burden facing students in many states, because those rates have risen."
Staff writer Helen Dewar contributed to this report.