New Pell Formula Means Less Money For Students.

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Author: Pekow, Charles

Students who are getting a reduced Pell Grant this upcoming academic year as a result of the Department of Education's updated formula will lose an average of $131 -- or so the Government Accountability Office estimates, based on the department's formula announced last fall.

GAO predicts that the annual expected family contribution to the cost of college, generally called the EFC, will rise about $443 for most applicants. GAO figures that, as a result of the new formula, about 81,000 people (1.5 percent) will lose their eligibility for Pell Grants. GAO believes the updated formula will save the government over $250 million.

Less money from Pell Grants means students and their families will be expected to provide a larger percentage of higher-education fees. GAO estimates that about 61 percent of students will see their EFC increase, although it acknowledges its estimates could be off as much as five percent. Only about 36 percent of recipients figure to see reduced grants, and the amounts vary fairly widely by state. Grant awards in Alaska may drop as little as $65. Students in New Jersey will see only a small percentage change as well. Meanwhile, residents in Iowa and Minnesota may see their grant monies slashed as much as 55 percent. Hawaiian students could face a $210 drop in funds.

As intended, the biggest impact comes on those with higher earnings -- 88 percent of those with more than $50,000 in household income will see a drop. Among those in the $25,001-$50,000 bracket, 71 percent of dependents and 78 percent of independents will see a drop. Only 9 percent of dependents and 14 percent of independents from families making less than $25,000 will see their Pell funding diminish.

Looking at the percentages, those in the higher-income range stand to lose an average of 20 percent of their grant. Students from the middle range face a six or seven percent drop, and those in the lower range will lose three percent.

The changes in tables also mean that many families with incomes above $25,000 will see their Stafford loans reduced.

Again, a higher percentage of those in higher-income brackets will lose funding. Among those in the $100,000 and up range, 41 percent of dependents and 32

percent of independents will get a smaller loan, as will 42 percent of dependents and 34 percent of independents in the $50,001-$100,000 range. But only 31 percent in the $25,001-$50,000 range will see lower Stafford loans. In the lowest range, only 5 percent of dependents and 11 percent of independents will get a smaller loan.

You can view GAO's state-by-state estimates and related figures at <http://www.gao.gov/new.items/d05408r.pdf>.

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By Charles Pekow