Pell Grants Face a Potential $6 Billion Budget Shortfall


September 18, 2008
by Scholarships.com Staff
According to a Department of Education memo cited by the New York Times, the Federal Pell Grant program could face a budget shortfall of up to $6 billion in 2009 due to increases in grant amounts and numbers of applicants.  The cap on Pell awards has risen from $4050 to $4731 between 2006 and now, and will increase to $6000 for the 2009-2010 academic year (if funding is available) according to the recently reauthorized Higher Education Act.  Meanwhile, the number of FAFSA applications has risen by nearly 17 percent in the last year alone, driven by a worsening economic situation.

According to a Department of Education memo cited by the New York Times, the Federal Pell Grant program could face a budget shortfall of up to $6 billion in 2009 due to increases in grant amounts and numbers of applicants.  The cap on Pell awards has risen from $4050 to $4731 between 2006 and now, and will increase to $6000 for the 2009-2010 academic year (if funding is available) according to the recently reauthorized Higher Education Act.  Meanwhile, the number of FAFSA applications has risen by nearly 17 percent in the last year alone, driven by a worsening economic situation.

While data has not yet been released on whether more students are qualifying for Pell Grants or other need-based federal student financial aid this year, increasing college enrollment and unemployment rates, coupled with an overall economic downturn and increased cost of living for Americans, certainly suggest the possibility exists.  According to the Department of Education memo to Congress, tough choices or an unpopular announcement regarding Pell Grant funding may have to be made shortly after the next President's inauguration.  While it's speculated that Congress will ultimately find the money to fully fund the popular grant program, the federal government is by no means exempt from economic strain.

This announcement comes at the same time as the release of the results of an audit of 14 student loan guaranty agencies, which suggests the government may have lost over $1 billion to FFELP student loan companies taking advantage of a now-closed federal funding loophole.  Lenders had been recycling new student loans through a loan program that guaranteed a 9.5 percent return from the government on student loans made before 1993.  Lenders had been taking advantage of this loophole as late as 2006, claiming in some cases hundreds of millions of federal dollars for which they should have been ineligible.

When these loan recycling programs came to light, the Department of Education settled with lenders, allowing them to keep the money they had gained up to that point in the 9.5 percent program, but requiring them to immediately cease using the program or submit to an audit in order to continue receiving the subsidies on loans actually eligible.  So far, 14 lenders have agreed to these audits.  Based on the results, if the loan agencies audited are representative of all lenders that participated in the 9.5 percent program, federal losses could total $1.2 billion.  Several of the lenders involved in this settlement, including Nelnet, a company that also recently settled with New York Attorney General Andrew Cuomo over other questionable business practices, have also announced that they are unable to completely fund their student loan programs for the 2008-2009 school year.

Just because there are millions of college scholarships out there doesn’t mean you have time to go searching, and many won’t even match your profile. We’ve done the work and Scholarships.com is totally free. We have the search algorithms and scholarships database, saving you time in searching, finding and applying to thousands of dollars in college scholarships. Get instantly matched to scholarships that meet your unique talents, skillset and strengths, only those you qualify for. Access a complete list of college scholarships now by conducting a free college scholarship search at Scholarships.com.

Discuss

Share your thoughts and perhaps thousands of students will benefit from your unique insight on the subject!



If you can read this, don't touch the following fields


 
The U.S. Department of Education will offer a contract to a single loan servicer to manage its $1.2 trillion student loan portfolio, which contains over 43 million borrowers. Instead of keeping its current contract with four different services, the ED will award Navient, GreatNet or the Pennsylvania Higher Education Assistance Agency (PHEAA) the contract. What exactly does this mean for borrowers?

Department of Education Seeking Single Loan Servicer

May 23, 2017 10:23 AM
by Susan Dutca
The U.S. Department of Education will offer a contract to a single loan servicer to manage its $1.2 trillion student loan portfolio, which contains over 43 million borrowers. Instead of keeping its
Roughly half of foster youth graduate high school or receive a high school equivalency diploma by age 19, and less than four percent of foster children earn a bachelor's degree. Getting into college and paying for it is already difficult, so how do foster youth in higher education overcome seemingly impossible obstacles?

Finding Foster Youth College Scholarships on the Web

May 8, 2017 4:27 PM
by Susan Dutca
Roughly half of foster youth graduate high school or receive a high school equivalency diploma by age 19, and less than four percent of foster children earn a bachelor's degree. Getting into college

    May 1st is National College Decision Day! There are so many colleges from which to choose and a lot of students are applying to several schools, some even more than a dozen. Naturally, the cost of college will be a major deciding factor for many of you and continuing to find outside scholarships could be very helpful to most. Students are wary of taking out too many student loans and possibly even forego a more prestigious school in favor for a less expensive college if they fear they won't able to afford the tuition without taking on enormous student debt. One way to avoid doing this and help make college affordable is by applying to free college scholarships. There's no reason you shouldn’t be able to attend your dream college - you still have time to pocket some free college scholarship money before heading off to college!

National Decision Day 2017 College Scholarships

May 1, 2017 4:13 PM
by Susan Dutca
May 1st is National College Decision Day! There are so many colleges from which to choose and a lot of students are applying to several schools, some even more than a dozen. Naturally, the cost

    Being a college student can be daunting, period. With the surplus in coursework, responsibilities and stressing over college debt and expenses, college students are high-anxiety all year round...not just around finals time. On top of that, some student-parents must manage going to, and paying for college while raising and paying for their children. Fortunately, there are great financial aid resources and college scholarships reserved for students who have families; including students with dependent children, single mom scholarships, and single dad scholarships! With Mother's Day right around the corner, indulge in these exclusive free college scholarships- for your accomplishments as a student and mom.

College Scholarships for Moms

April 21, 2017 4:06 PM
by Susan Dutca
Being a college student can be daunting, period. With the surplus in coursework, responsibilities and stressing over college debt and expenses, college students are high-anxiety all year
New York's free college scholarship program is being met with heavy criticism as more details have emerged and it is set to start in fall of 2017. Though lauded for being the first of its kind to offer free college tuition at public colleges and universities, many European countries already offer free college, regardless of family income level...and at the tax payers' expense.

New York Free College Scholarship Program Not So "Free"?

April 18, 2017 11:23 AM
by Susan Dutca
New York's free college scholarship program is being met with heavy criticism as more details have emerged and it is set to start in fall of 2017. Though lauded for being the first of its kind to