Potential Cuts to Pell Grant Could Affect Students in 2011

More than 9 million students may receive less federal funding this fall.

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Antoine Hamilton, a 27-year-old Wisconsin resident, makes his financial ends meet—just barely. A student at the Art Institute of Wisconsin, Hamilton works two jobs as a stylist and a resident care technician and claims he lives paycheck to paycheck while paying tuition bills. He also receives the maximum federal Pell Grant, $5,550 an academic year, to help finance the bachelor's degree he hopes to complete by the time he's 30.

"I feel like our economy right now is not good, so a lot of people are actually getting their minds right and trying to go back to school and go into those fields that will help them have a better life," says Hamilton, who took several years off between high school and college.

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Now, Hamilton is one of millions of financially needy college students across the country who may see a decrease in one component of their financial aid packages in 2011, if a bill passed by the U.S. House of Representatives makes it through Senate deliberation and is approved by President Obama—a notion that Hamilton says makes him "feel devastated."

"Because I would not be able to pay for my education, I won't meet the graduation requirements in three years," Hamilton explains. "I believe I would just lose interest in school and go back to work, and then where would I be? I would just be working, or I would probably be poor. I wouldn't be able to meet the expectation I have for my goal to be successful in my career."

The Pell Grant Program, widely considered to be the backbone of financial aid to the country's most needy students, was subject to a decrease in funding as part of a Continuing Resolution (H.R. 1), which cleared the House last month and cut about $60 billion from the federal budget. Lawmakers levied a $5.7 billion cut to the Pell Grant Program, which grants aid to low- and moderate-income students based on a formula that considers annual income and school cost, among other factors. The changes would take effect for the 2011-12 school year, decreasing the maximum amount of aid for the most needy students from $5,550 to $4,705, a difference of $845. Plus, about 1.7 million students who receive smaller Pell Grants would become ineligible for the program. 

Approval of the cuts is far from guaranteed, since the Pell Grant Program has long received bipartisan support in the Senate. But the House's cut represents a struggling economy's fix to a program that was "absolutely" unsustainable, according to Rep. Virginia Foxx, a Republican from North Carolina who chairs the Congressional Subcommittee on Higher Education and Workforce Training. "It's hardly a devastating cut when you are cutting such a small amount," she says, citing a sharp rise in the program's cost over the last few years. "We're cutting entire programs in lots of cases."

The Pell Grant Program was injected with about $17 billion over two years as part of the American Recovery and Reinvestment Act of 2009, but the extra money did not match the needs of the skyrocketing numbers of students enrolling in college and qualifying for aid through the recession. (About 27 percent of U.S. college students currently receive some amount of Pell funding.) This confluence of events has put pressure on the long-term sustainability of the program, says Justin Draeger, president of the National Association of Student Financial Aid Administrators. The program, which was fully funded for 2011-12 before H.R. 1 was passed in the House, will face a budget shortfall of about $20 billion in 2012 if no long-term changes are made. 

[Read more about a potential shortage of college grants in 2011 and 2012.] 

President Obama has proposed several cuts that would take effect in 2012, including an end to the year-round grant that allows students who take summer courses to collect two Pells in one year. In his proposal, the maximum grant would remain at $5,550, a contrast to the House bill that lowered the maximum grant award. H.R. 1 would also provide Pell funding to fewer students, which may address what Rep. Foxx says was the intent of the original Pell Grant legislation.