2018 Education Assistance Program Outlook
A college education is expensive, and few students have the means to pay for their post-secondary education outright. Many college students rely on loans, but that often leaves them carrying a heavy and sometimes unmanageable debt burden by the time they graduate. This problem is particularly severe for students who borrowed money from private lenders. Most government student loan programs are subsidized to some degree, which means they carry relatively low-interest rates and can be forgiven under some circumstances. Private loans, on the other hand, carry market-level interest rates and can become extremely expensive, especially if it takes you longer than four years to graduate.
If you need help paying for college and you want to avoid debt, grants and scholarships are a viable option. Not everyone will qualify, but there's a surprising range of assistance available to needy students who are willing to look for it.
Scholarships & Grants vs. Student Loans
Grants and scholarships are known as "gift aid" because unlike student loans, you don't usually need to repay them. Some scholarships do require repayment if you withdraw from school before finishing the requisite enrollment period, such as a semester, so be sure to read the fine print!
Grants and scholarship awards are based on different criteria. While grants are typically awarded based on a person's financial need (with greater emphasis placed on a student's income), scholarships can be awarded based on financial need, academic/athletic merit, community service, leadership or whatever other criteria are defined by the donor. Government sources typically cannot provide funding specifically for any gender or racial group due to anti-discrimination laws, but private sources can and do fund such scholarships.
Grants and scholarships can come from several different sources, including the federal government, state government, your college/school itself, alumni organizations, non-profit organizations, and even private donors. Grants and scholarships are designed to make education more accessible to deserving students who wouldn't be able to afford it otherwise.
The Budget Factor: Uncertainty For 2018
The US government is by far the largest provider of education grants and subsidized loans. Thousands of non-Government scholarships and grants are available, but the government programs receive by far the highest funding levels and are the first choice for most low-income students. This dependence means that any change in funding levels for these programs has a direct and immediate impact on the futures of America's aspiring low-income students.
In today's uncertain environment, it is difficult to say whether programs will be cut, and by how much. The White House has proposed a budget that has significant cuts to many education programs. The House and the Senate have proposed their versions, which remove some of the cuts. Little work has been done to resolve these differences and come up with a final budget, but serious cuts are under discussion, and anyone who is or might be dependent on government assistance to get to and through college should be paying close attention to the debate.
Let's look at some major programs and how the budget proposals may affect them.
Federal Pell Grant
The Federal Pell Grant helps more students in America than any other funding program. 7.5 million students received Pell Grants in the 2016/17 school year, 32 percent of all students, and the Pell Grant was the single biggest expense of the Dept. of Education.
Named after U.S. Senator Claiborne Pell of Rhode Island, Pell Grants help low-income undergraduate students still earning their first bachelor's degree, as well as certain post-baccalaureate students.
To apply for a Pell Grant, students must complete the Free Application for Federal Student Aid (FAFSA). This requirement isn't "one and done": students must complete and submit a new FAFSA each year to remain eligible for the Pell Grant.
The amount of money a Pell Grant recipient receives may vary in amount from year to year. For the current 2018-2019 award year until June 30, 2019, the maximum amount is $6,095. What a student receives depends on their financial need, the cost of their course, their status (i.e., full or part-time), and their intended length of study (i.e., a full academic year or less). Students who receive a Pell Grant do not usually receive the funds directly. Instead, the grant money is used to pay tuition fees and board fees first (for students living on campus). Any surplus funds are then distributed to the student to help cover their other costs.
To maintain a Federal Pell Grant, a student must remain enrolled in a suitable undergraduate course. Students can only retain their Federal Pell Grant for a maximum of 12 semesters (equivalent to six years). Once they have achieved a baccalaureate degree or first professional degree or used up all 12 semesters worth of their Pell Grant eligibility, students cease to be eligible for a Pell Grant.
Pell Grants and The Federal Budget
Because so many students receive Pell Grants, any change to the program has an immediate impact. Several changes are under discussion. Both the White House and House of Representatives budgets propose freezing the maximum Pell Grant award at its current level ($6,095/year) for up to six years. If tuition and other costs rise, this could leave students scrambling for other funds to fill the gap. The purchasing power of Pell Grants is already at its lowest level ever, making this a serious threat.
The White House budget proposes removing almost $4 billion from the Pell Grant reserve, which would have no immediate impact on the program but could weaken funding if there's a recession or if college enrollment rises. On a more positive note, there's a broad consensus behind making Pell Grants available year-round, which would make grants available to fund summer session classes, not just the spring and fall semesters.