The Education Department has proposed requiring college dropouts to repay federal grant money regardless of how much they spend before quitting school, an across-the-board plan that critics argue would hit poor students hardest.
Under current federal rules, most students who drop out don't have to return federal need-based grants unless they leave on or before the first few days of classes. Financial aid officers take into account how much grant money a student received and how much was spent on books, parking stickers, supplies and the like. Repayment is required only if the student received more grant money than the expenses justify.
The proposal calls for one grant repayment formula to cover every school and every student, based on how long a student stays on campus before withdrawing. The new rules are expected to take effect after a public comment period ends Sept. 15.
"Every student would owe a repayment regardless of whether the financial aid received was enough to cover the expenses they incurred," said Linda B. Michalowski, director of federal relations for the California Community Colleges system. "They no longer look at how much [the students] got. It's just 'bam,' you owe a percentage. And our students will pay the highest price."
Community college students, unlike those who attend more expensive state schools or private universities, rarely have loans and other money to help with tuition, books, fees and housing, Michalowski said. Loans, unlike grants, always require repayment, regardless of student status.
The Education Department, which based its proposal on a federal law enacted last year to ensure that federal grants are used wisely, maintains the new approach is fair.
"Aid is awarded to a student with the expectation that the student will complete the period of time for which the aid has been awarded," said Dan Madzelan, the Education Department's chief policy analyst for higher education. "If the student doesn't complete the term, then there is a return that is required."
An estimated 1.1 million Pell Grant recipients each can get a maximum $3,125 per year. The $6.3 billion program was responsible for 10 percent of federal student aid last year. College trade groups say colleges with nontraditional students--who may be older or working full time or have lower incomes--report higher percentages of Pell Grant students dropping out.
The Education Department says it doesn't know how many Pell Grant recipients nationwide drop out in an average year.
The department's proposed rules would throw out the old individual repayment calculations that could be based on a college's tuition rather than the grant amount, and instead would require the return of "unearned" financial aid if a student dropped out before completing 60 percent of an academic term. Both the college and the student would be responsible for what's left. The proposal would apply only to federal grant aid specified in the Higher Education Act as it was renewed last year. Veterans' grants and other programs would not be covered.
The proposed rules account for student startup costs by drawing the repayment line at the 60 percent enrollment period, Madzelan said.
"If a student completes 60 percent of the enrollment, the assumption is that they've earned 100 percent of the aid," he said.
The new rules also would help colleges, which must repay any grant money they receive from students, Madzelan said. That's because they would have more trouble filling a seat three-quarters of the way into a school term than on the first or second day, he said.
Some college aid officers fear that the enrollment-based formula could be cumbersome because not every student marches into a registrar's office to announce a withdrawal as soon as he or she stops going to class, said Terry Hartle, senior vice president of the American Council on Education, a Washington-based college trade group.
"If you give money to somebody for a purpose and they don't make use of the full service, you have no idea how to figure what was spent," he said. "It's a difficult computation that is tilted against students and incomprehensible. We're not exactly sure what will happen to students who don't have the money to repay."