Look Out for These Federal Aid Changes in 2012

Congress passed its 2012 appropriations legislation around Christmas, so the news may not have spread widely yet, financial aid experts say. But if you'll be a college student receiving federal financial aid in 2012-2013, several changes passed in December 2011 might affect you.

New financial aid rules and restrictions in the legislation will affect how much federal aid some students will receive, how long they'll be able to receive it, and how soon they'll start to rack up interest on student loans after college.

[Find out how to avoid college loans.]

The Pell grant program is the longtime backbone of federal aid for about 10 million students, and, as a darling of bipartisan Congressional support, has largely been sustained for the 2012-2013 school year. Still, some notable eligibility changes were made that could particularly affect students ages 24 and older.

In years past, eligible students could receive a Pell grant for nine years of schooling—a lifeline for needy students, including adults attending school part time or those who completed some college off and on over a span of years. Effective immediately and retroactively, students are only eligible for six full-time years of the grant. The decision affects any student who has been or will be in college, so if you've been receiving a Pell grant for eight years, for example, you are immediately excluded and ineligible for a grant next school year.

"When you think about it, nine years seems like a while, but the national average is getting close to six years," notes Rich Williams, higher education associate at the U.S. Public Interest Research Group. "The people who are pushing more toward the nine years are folks who transferred ... or say, a parent with children who is also working and going part time, so they have pushed closer to the nine years."

[Find out how online education helped this parent go back to school.]

Officials at Eckerd College in St. Petersburg, Fla., have already started to reach out to adult students that may be affected, says Director of Financial Aid Pat Watkins. The school is examining which students have exceeded 600 percent (six full-time years) of their Pell eligibility. Watkins has been alerting those whose eligibility has expired and asking them to think about a backup plan to pay for college next year—with varying degrees of success. 

"I don't think it sinks in for a lot of these students," Watkins says. "They're so used to receiving a federal Pell grant that it's like, 'What do you mean I'm not going to get it?' Next year when we send them an award letter and there's no federal Pell grant, they're going to say, 'How am I going to pay for school?'"

[Find out more about Pell funding in the 2012 omnibus.] 

Other students who may need a contingency plan are those who have been receiving a very small amount of a Pell grant—several hundred dollars rather than several thousand. The family income and expected family contribution scales have shifted slightly, knocking some students out of eligibility. In addition, students who have only passed an Ability to Benefit test (those who don't have a GED or high school diploma, or who weren't homeschooled) will no longer be eligible for federal aid. 

While the new eligibility rules will likely affect only a small portion of students at Susquehanna University, a private liberal arts college, Director of Financial Aid Helen Nunn says those who are excluded will have to turn to other funds to fill the deficit. "It's probably going to fall back to the families to manage that," she says.