Obama's Budget Proposal Maintains Maximum Pell Grant

President Obama’s fiscal year 2012 budget proposes two changes to federal student aid programs that would sustain the Pell Grant program and maintain its $5,550 maximum award. According to Mike Rotundo (Financial Aid), about 3,700 NMU students rely on Pell Grants.

“For Northern, the most important piece of Obama’s proposal is keeping the maximum Pell award at $5,550 so that our neediest students don’t see their funding impacted,” said Rotundo. “It’s important to maintain that level for some students to have access to higher education.”

Rotundo received an overview of the major provisions of the president’s request from the National Association of Student Financial Aid Administrators (NASFAA). The Obama administration projects a $20 billion shortfall for the Pell Grant program for academic year 2012-13. The cost has gone up significantly in recent years because of increased enrollment, greater financial need, broadened eligibility standards, higher awards and the introduction of second Pell Grants in a single award year.

The NASFAA report said if the administration took no action to address the shortfall, the maximum grant could be reduced to $3,240. One change being proposed to sustain the program is to eliminate second Pell Grants in a single award year, ending what’s commonly known as the “year-round Pell.”

Rotundo said the Higher Education Opportunity Act previously established the year-round Pell and NMU was set to implement it this summer. But if the budget proposal goes through, a second grant will not be available to students this summer unless they have not yet reached their annual limit—perhaps because they attended part-time for a portion of the academic year or did not enroll until the winter semester.

A second change being proposed to maintain the maximum Pell award is to eliminate the Stafford loan subsidy for graduate students.  Rather than paying no interest on direct loans while in school, graduate students would pay the 6.8 percent interest traditionally incurred by borrowers. A proposal to restructure the Perkins Loan program, similar to last year’s, would also eliminate interest subsidies and increase the interest rate to 6.8 percent. Loan funds would increase from $1 billion to $8.5 billion a year to provide loans to an estimated 3 million students and the repayments would be used to fund Pell Grants.

Another provision intends to cut down on improper Pell awards through enhanced IRS data transfer and verification.

“They’re looking to simplify the FAFSA (Free Application for Federal Student Aid) by having a direct transfer of financial information from the IRS,” said Rotundo. “Sometimes people get confused and make mistakes in transferring data from their tax returns to the FAFSA. This would pull IRS information directly to the appropriate fields of the FAFSA. They’re working to simplify the process and have more accurate data so they’re paying the right people.

“Obviously the president’s proposal is the first stage of the budget process. We have a long way to go and some things could change.”