Students could see more Pell Grants

Paying for college could be easier for low-income students under the presidential budget proposal, but middle-class students might find it harder to take out loans.

About 1 million more students around the country would be awarded Pell Grants in 2011 under the proposal, which was released this week. The money comes from $68 billion in additional spending on the program throughout 10 years.

“It may increase the amount of lower-income students who apply for higher education and financial aid,” said Mark Kantrowitz, publisher of FinAid.org, a financial aid Web site for students.

Two types of federal financial aid

Pell grants: Provide need-based aid to
undergraduates from low-income families. Currently, money is allotted to the program at Congress’ discretion, but Obama’s proposal would make it a mandatory program. In the 2008-09 school year, 2,563 UNC students received Pell grants, with grants averaging $3,434.

Perkins loans: Provide loans to financially needy students. These loans are distributed by campus administrators, who have considerable flexibility on how they allot the money. Under the new plan, this program will operate at a federal level. This school year, UNC received $4 million in Perkins loans.

But the federalization of Perkins loans, another of President Barack Obama’s proposed reforms, has potential to cost UNC students, said Shirley Ort, director of the Office of Scholarships and Student Aid at UNC.

Perkins loans are mostly distributed by individual schools, but if federalized, adding them to financial aid packages could become harder.

In 2008-09, 2,563 UNC students received Pell grants, which averaged $3,434, Ort said.

Ort said the reform comes at a time when more college students might need financial aid because of the struggling economy.

Kantrowitz said about 7 million students nationwide benefit from Pell grants, which average $4,000.

The maximum grant for 2009-10 is set at $5,350. Obama proposed raising that to $5,710 by the 2011-12 school year, Ort said.

The proposal would also make Pell grant spending mandatory. Currently, Congress decides each year how much to spend on the program.

To pay for the increase in Pell grants, the Obama administration has proposed eliminating the Federal Family Education Loan program, which provides federal subsidies for private loans, said U.S. Secretary of Education Arne Duncan in a conference call Thursday.

The program is not looking to increase the national debt or burden taxpayers with the increase, he said.

Justin Hamilton, press secretary for the U.S. Department of Education, said federal direct loans will have the same eligibility and interest rates as the private loans that many students receive but will save the government millions of dollars in subsidies that can instead fund Pell grants and other reforms.

But Steve Brooks, whose agency works with College Foundation of North Carolina to provide loans to many N.C. college students, said the reforms to the system could hurt some students.

Brooks, executive director of the N.C. State Education Assistance Authority, said students could have to pay more for loans than in the past to compensate for a possible increase in interest rates.

He said that without competition, federal loan companies might get lazy and slack on service.

“Local service is very important,” Brooks said.

The Obama administration hopes the Pell grant increase will help improve national college graduation rates, Duncan said in the conference call.

“We have to educate our way to a better economy,” Duncan said.

Contact the State & National Editor at stntdesk@unc.edu.