February 15, 2011

Obama’s Budget Affects Federal Grant Recipients

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Correction appended

The Pell Grant Program faces a $100 million cut in President Barack Obama’s 2011-2012 budget, a reduction that will mostly reduce the amount of funding allocated to subsidize graduate and professional student loans, the White House annouced Monday.

Thomas Keane, director of financial aid for scholarships and policy analysis, said the impact of the reductions on undergraduates would be minor, but the cuts will probably affect 1,500 to 2,000 Cornell students who are pursing advanced degrees.

Government officials said Obama’s Pell Grant cuts will save the federal government $29 billion over the next decade, according to The New York Times.

The federal government is also currently paying interest for some graduate student loans. However, politicians have begun to question the efficacy of the program, which was intended to encourage more students to pursue graduate degrees, The Times reported.

Barbara Knuth, vice provost and dean of the graduate school, pointed out the negative impact that reduced federal support will have on graduate students — a group that is particularly vulnerable financially.

“Reducing or eliminating the in-school interest subsidy for qualifying graduate and professional students would increase the cost of loans to these students at a time when they have limited income, because they are focusing on their studies,” Knuth said.

Currently, there is an alternative proposal in the House of Representatives, mostly supported by Republicans, that includes a 15-percent reduction in all Pell Grant money for the 2011-2012 academic year, amounting a $845 loss per student, Keane said. The plan would also cut the Federal Supplemental Educational Opportunity Grant, which currently supplies Cornell with $1.6 million in federal money each year to support low-income students.

In total, the Republican proposal will result in a $4.3-million reduction in Pell Grant money and SEOG funds for Cornell undergraduates, which would have much greater consequences than the President’s proposal, Keane said.

The consequences of such losses would be substantial, Keane warned, noting that the University would be forced either to place an increased financial strain on students or to cut University programs and renovation projects to offset increased financial aid costs.

“We may have to ask students and their families to take on the burden, and I don’t want to do that,” Keane said.

In addition, Cornell currently has the highest number of undergraduate Pell Grant recipients in the Ivy League, with 2,200 students — about 16 percent of the undergraduate body — benefiting from the program, according to Keane. He added that Columbia and Princeton also have substantial percentages of Pell Grant-receiving college students.

For undergraduates, the new budget cuts apply only to year-round Pell Grants, also known as “summer Pell Grants,” because they allow students to collect two grants, one of which is used for summer study. Obama asserted that cuts to year-round grants will allow academic-year grants to remain at the maximum of $5,550 per student, according to the New York Times.

Keane said althhough he did not know exact figures, “not many” Cornell students receive summer Pell Grants, while a significant portion benefit from the academic year program. This summer will be the first time Cornell uses the year-round Pell program, and Keane did not yet know if and how diminishing grant money would be offset.

Though Obama’s budget will not have a significant impact on undergraduates, Keane said a potential threat is if the government stops raising Pell Grants with inflation over the next few years.

“This proposal won’t hurt undergraduates for 2011-12, but if the plan calls for no increase in the Pell Grants over 10 years, it will place a greater burden on Cornell to either make up the difference, or turn to students and families,” Keane said.

Roneal Desai ’13, a Pell Grant recipient and Student Assembly minority liaison at large, said he was interested to see how the University will deal with reduced funding. He also expressed concern that the increasingly dire need of the lowest-income students will lead the University to place unprecedented financial burden on students from middle-income families.

“The effect of these cuts on … the lower-income population of Cornell will largely depend on how the administration adjusts its financial aid policy accordingly,” Desai said. “However, in reality cuts will come from somewhere, and whether it be the lower or middle class that ultimately feels them, this will have a profound impact on one class or another of Cornellians’ ability to finance an Ivy League education.”

Correction: Due to an editing error, an earlier version of this article incorrectly stated that Pell Grants pay interest on some graduate student loans. In fact, separate federal funds are used for the interest-free loan program.

Original Author: Eliza LaJoie