Debt-ceiling negotiations could impact Pell Grant aid

As a result of the ongoing debt-ceiling negotiations in Washington, D.C., federally funded Pell Grant aid packages — which many University of California students rely on — may undergo serious cuts or gain new avenues of funding in the latest proposals to reduce the federal deficit.

Pell Grants — a staple of government assistance to cash-strapped households with college-bound students — offer up to $5,550 in aid that does not have to be repaid. Approximately 40 percent of all UC undergraduates — around 72,000 students — are eligible for Pell Grants and received a total of $321 million this past year.

As part of Speaker of the House John Boehner’s deficit reduction plan, the Secretary of Education would lose the authority to grant incentives for on-time payment of loans, and not all savings from the interest-rate hike on graduate students would be put back into the Pell Grant program.

According to a statement from the Committee for Education Funding, the Boehner plan would reduce student loan spending by $21.7 billion but would only put $17 billion of the savings back into the Pell Grant program — leaving the remaining $4.7 billion to be used to reduce the deficit.

Carolyn Henrich, legislative director for the UC’s Federal Government Relations office in Washington, D.C., said that this would effectively transfer the “burden of deficit reduction … onto the backs of students.”

According to the Congressional Budget Office’s score of Senate Majority Leader Harry Reid’s most recent budget proposal, in his plan, 100 percent of the savings from cutting subsidized Stafford loans would be used to fund Pell Grants. Still, members of the academic community are wary.

In a letter to the California Congressional Delegation, UC President Mark Yudof called for “continued funding for federal student financial aid programs.”

“I urge you to avoid disproportionate and harmful cuts to college students,” Yudof said in the letter. “Such reductions will decrease college completion rates and damage rather than improve the nation’s economy.”

The July 20 letter also discusses the proposed interest rate hike of the federal government’s Stafford graduate loan programs.

The Stafford graduate loan program — introduced in 1965 — subsidizes fixed-interest loans for graduate and professional students.

Yudof warns in the letter that “the impact of the additional interest costs for UC student borrowers would be approximately $30 million per year” and that “needy college students would assume very heavy new burdens in the name of federal debt reduction.”

Sara Goldrick-Rab, co-director of the Wisconsin Scholars Longitudinal Study — a study of the relationship between increasing Pell Grant aid and college credit accumulation — said she feels somewhat differently.

“If the set of options included cutting the maximum Pell Grant, changing the amount of credits required for a Pell Grant or getting money from an increase in the Stafford loan interest rate … then the Stafford hike is the best option,” Goldrick-Rab said. “However … I would love to see an extended set of options.”

Many feel that the discussed Department of Education budget cuts come at a time when the need for Pell Grants is increasing among the most disadvantaged students.

“Cuts to the Pell Grant program are not going to feel universal,” Goldrick-Rab said. “The grant … matters a lot more to students with lower test scores and parents who did not go to college. The effect will be disproportionate.”