Debt Deal Shores Up Pell Grant Program
The budget deal approved by Congress earlier this month that raised the federal debt ceiling had a mixed impact on student aid. According to FinAid, the deal devotes $17 billion to reduce a funding shortfall in the Pell Grant program and preserves the $5,550 annual maximum Pell Grant amount.
“Pell Grant funding has been one of the discussion pieces in Congress in terms of whether it should be funded at the same level or cut back,” said Mike Rotundo (Financial Aid). “The fact they’ve shored up the funding and solidified the program for the next two years is a big plus for Northern’s 3,700 Pell Grant recipients. About 50 percent of NMU students who file the Free Application for Federal Student Aid (FAFSA) rely on the grants, which last year totaled $14.1 million. Every time a bill is up for discussion, we’re holding our breath and trying to keep pace with what’s going on.”
FinAid reports that the Pell Grant program will still be left with a $1.3 billion shortfall in FY2012 and will probably suffer additional shortfalls in subsequent years. Congress must address it by appropriating additional money for the Pell Grant program or making further cuts in student aid spending.
Rotundo said the Budget Control Act of 2011 also eliminates subsidized loan availability for graduate students. Previously, they could borrow up to $8,500 annually in need-based direct subsidized loans that the government pays interest on while the student is in school and through an authorized deferment period after they leave. Though the annual limits will remain the same, graduate students would only be eligible for direct unsubsidized loans with a 6.8 percent interest rate. This change goes into effect for any new loans beginning July 1, 2012. Direct subsidized loans in place before that date will not be impacted.
“Compared with the Pell Grant program, it may be a smaller number of students affected, but we don’t want to minimize that," said Rotundo. "Student loans are one of the primary sources of financial aid for our grad students.”
Last year, 237 NMU graduate students borrowed an average of $6,047 each in subsidized loans.