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Congress struggles to reach compromise on financial aid

A debate over student financial aid has been playing itself out in Congress over the past few months, as some Congressmen struggle to keep a tax loophole from eliminating millions of dollars in student grants.

This summer, Congress rearranged the tables in the federal need-analysis formula, the system used to determine students’ eligibility for federal grants. The changes, the first made since the mid-1990s, will result in a $270-million funding cut for the federal Pell Grant, the primary source of aid for about 4.5 million college students.

Of these students, 84,000 will lose eligibility and one million more are slated to receive lower awards.

The federal need-analysis formula calculates student eligibility for aid by determining how much money families can contribute to their children’s education. There have been small adjustments to the formula in past years, but, because of new tax considerations, this year’s change is substantially more significant.

Brian Fitzgerald, director of the Advisory Committee on Student Financial Aid, said that the statistics used to recalculate aid are problematic.

He said that the new numbers are adjustments to the formula’s assumptions about the state taxes that applicants pay.

“They are required by law to be adjusted periodically, but had not been adjusted since the mid-1990s,” Fitzgerald said. “However, the tax data used reflects lower state tax rates from the late 1990s, while taxes have risen since the economic downturn in 2000. The real question is: why was the adjustment made when the administration knew that the data were lower than current tax liabilities?” Fitzgerald said.

Most experts agree on the centrality of this problem. The data used to rearrange the formula was collected before most states and local areas raised taxes. Thus, the tax data used in the new arrangement do not reflect the true, current state of families’ tax situations.

The change misrepresents many families’ contribution abilities, making their revenues appear considerably higher than in the past. This causes many college students to lose financial aid.

Fitzgerald added that critics of the Bush administration say that the changes were made to control cost in the Pell Grant program, whose expenditures have run one billion dollars over their appropriations for the past two years.

The Bush administration defends the action, saying they were required by law to do so.

With the rise in tuition costs and the drooping economy, concern over this issue has caused many politicians to jump into the fray.

Senator John Corzine of New Jersey introduced a bill to stop the updated formula from being implemented. The Corzine bill passed the Senate on September 10.

Congressmen Ric Keller of Florida is currently campaigning to have the House accept the amendment in conference process. Senator Ted Kennedy of Massachusetts, Rep. George Miller of California, and Senator Joseph Lieberman of Connecticut are all taking various steps to help fight the new formula as well.

Still, the Department of Education and the Bush Administration insist that the formula’s changes are nothing more than minor technicalities that only hurt a negligible handful of Pell recipients. The debate is intense, with pressure coming from the left as conservatives remain insistent about the legal requirement for formulaic readjustment.

Fitzgerald said that the change would affect students at both public and private institutions, including Chicago.

But though this means less money for the University of Chicago from the Pell program, it does not necessarily mean less money for needy students overall.

“There will be reductions in the students’ individual Pell Grant awards,” said Alicia Reyes, the director of college aid at the University. “The University remains committed to meeting the full need of the students so the loss would be met with additional institutional funds.”

The University received $1,252,869 for 514 students from the Pell Grant program for 2002-03.

A first-year at the University of Chicago, Luisa Flores, says she could have gone to Florida Atlantic University “basically for free.” Bright Futures, a scholarship program sponsored by the Florida lottery, offers to pay 75 percent to 100 percent of tuition for students who receive a 1270 or better on their SATs.

“I would have had 75 percent of my tuition paid for every year, plus a  $3,000 incentive every year,” Flores said.

Still, she insisted on coming to the University of Chicago. “It’s about getting a quality education, not about finding the cheapest deal for anything less than that.”

Corzine’s bill remains in conference in the House. Until it passes the House, the debate is expected to continue with increased efforts on both sides.