CHICAGO — One education publication dubbed it the "December surprise": Two days before Christmas, the Bush administration announced it was revising the formulas for its Pell Grants - the federal government's primary aid vehicle for America's neediest college students - in a way that may leave 1.3 million students receiving a smaller amount, and 90,000 off the rolls altogether.
The reality, of course, is a bit more complicated. The change was mandated by law, and updates the formula to rely on 2002 tax rolls instead of 1988 ones. The neediest students should remain unaffected, and the money saved opens up at least the possibility that the maximum amount of the grant could eventually be raised from $4,050, long considered inadequate by many education advocates.
But the fact that, at a time of economic hardship, the country is tightening one of the few extensive grant programs available to low-income students raises broader questions about college affordability - and whose responsibility it is to make higher education a possibility. A vast majority of students relies on some combination of grants and loans to finance their education, and as the loan burden increases some are choosing to take fewer classes, forgo a four-year education, or skip college completely. The Pell Grant news is only one piece of a maze that's becoming increasingly tricky for many students to navigate.
"One thing that seems evident is that since the 1980s there's been a general shift in the public's and in policymakers' attitudes toward higher education, where they now believe it's an individual benefit instead of a societal benefit," says Ross Hodel, director of the Center for the Study of Educational Policy at Illinois State University. "That results in less government effort to help with higher education, and the feeling that the individual ought to contribute more. The old contract, where a student was paying roughly a third of the higher-ed costs, is now pretty much gone. Now the tuition-payer pays over half."
Since 1973, the Pell Grant has been the cornerstone of the federal government's student aid. Each year, millions of low-income Americans apply for assistance through the program. In 2006, according to the American Council on Education (ACE), it will provide $12.4 billion in grants - ranging from $400 to $4,050 - to more than 5 million undergraduates.
The changes will take effect next fall. Even with the revisions, the government estimates there will be about 25,000 more Pell Grant recipients than this year, simply because so many more students are applying. But some 90,000 students who would qualify under the current formula - mostly from families earning between $25,000 and $40,000 a year, according to ACE - may no longer get any money, and many more students will see their grants reduced by $100 or $300.
"It's what most of us would agree is a relatively inconsequential amount of money," says Brian Fitzgerald, staff director of the Advisory Committee on Student Financial Assistance. "But it's on top of an existing gap, and the effect in cumulative terms is much greater."
He and others worry about the "trickle-down" effect. Because many state-grant programs rely on the same tax formulas, the net change for some students can quickly become $1,000, instead of just $200 or $300. And even a few hundred dollars can mean a lot to some students, requiring them to work more hours, cut their number of classes, or enroll in a different type of college.
"Think about the student who is going somewhere like Aims Community College in Greeley Colo., where tuition is very minimal - $400 can be a lot to them," says Chris Simmons, assistant director of government relations at ACE. "I wish there had been more discussion or public debate about this, but in the end, the Department of Education was following the law. You can't blame them for that."
Mr. Fitzgerald, too, acknowledges the need for updating the Pell formulas, but preferred other solutions to the one chosen. His committee suggested phasing in the change over two years, which would have cost $150 million, or doing a more sweeping, one-time adjustment to eliminate some of the inequities in the way the grant program weighs state taxes.
Currently, it takes into account the amount of income tax and property taxes families pay in each state, but not other burdens, like sales tax or fees. Congress, Fitzgerald says, decided both options were too expensive.
In defense of the Pell decision, the House Education and Workforce Committee issued a statement underlining the fact that Pell grant funding is at an all-time high, and noting that without the changes, it would be impossible to increase the maximum grant to the neediest students, since the Pell budget shortfall has continued to grow.
The bigger question for students goes beyond just one grant. College affordability has hit what some call a "perfect storm" involving rising tuition, decreasing state funding, fewer student-aid options, and changing demographics.
"This decade, we'll see the largest generation in the history of the nation enrolling in college," says Fitzgerald. By 2010, some 32 million will attend college, and increasing numbers are minority students, often with more financial needs. His committee found that the average low-income student faces a $4,000 gap between their student aid and the cost of college. As they struggle to work more - occasionally seeing aid reduced as they report job earnings - "it turns into a death spiral for a lot of students," he says.
With so many sources of grants and loans either frozen or diminished, many are turning to private loan companies, which often charge higher interest rates and are exploding with business.
Last week, Sallie Mae - the largest student-loan company, created by Congress in 1972 - completed its privatization four years ahead of schedule. The company manages more than $98 billion in loans, and recently made an offer to buy Pennsylvania's state-run loan business for $1 billion, but was turned down.
Some experts worry, though, about students' growing reliance on loans and the repayment burden they shoulder when they graduate.
"There seems to be an effort to make the loan program the program to provide access to college, but that's not going to work for some low-income students, who have difficulty taking out a loan, or where it's anathema to families to borrow," says Sheila Pruden, an independent student financial-aid policy consultant in Illinois. "Education is the great equalizer, the way people get into the middle class. It's in the federal interest."