Economy, Demographics Cited in Student-Aid Surplus

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In 1989, the federal Pell Grant program began compiling a deficit that reached $702 million in 1992. Today, the aid program for college students is running a $1.3 billion surplus, the second consecutive year money has been left over.

Department of Education officials say shifting student demographics and a healthier economy are responsible for the surplus, which Congress and President Clinton want to use to raise maximum Pell Grant awards.

But higher education officials say the surplus is largely a byproduct of changes made in 1992 to the Higher Education Act, which had the effect of disqualifying up to 1 million independent students for the need-based grants, to the benefit of students from middle-class families.

"It was such an obvious change, and it panned out as predicted," said Barmak Nassirian, a policy analyst at the American Association of State Colleges and Universities here.

The Pell Grant program is not an entitlement, but Congress has usually appropriated enough money to meet the needs of all the students who are expected to apply, an amount that has ranged from $3.6 billion in 1985 to $6 billion this year. Making the forecast is not an exact science, and demand for student aid is influenced by many social and economic factors.

When the national economy weakened in the late 1980's, for example, a wave of older students returned to college or enrolled in proprietary job-training schools after being forced out of work.

Most were independent of their parents and qualified for higher grants than students with family incomes to report. In addition, traditional students whose parents were hurt by the downturn were qualifying for more aid. As a result, the program's costs exceeded projections for several years.

Moving Target

"The economic outlook of the country has a large impact on Pell Grants, and that was the biggest single factor in the shortfall," said Becky Timmons, the director of congressional relations for the American Council on Education, an umbrella lobbying group for higher education associations here.

In an effort to improve its forecasting, the Education Department in 1992 created an internal, 15-person "program costing group," which makes monthly forecasts of grant volume and meets quarterly with congressional aides and higher education officials.

"We need to tell policymakers how much to spend on Pell Grants. It could have an impact on money for other programs," said Tom Skelly, the director of the budget-systems division at the Education Department. "They're always estimates, but we can keep everyone informed."

After years of shortfalls, federal officials welcomed an $18 million surplus in 1993. This allowed the department to begin erasing the accumulated deficit, which Congress also addressed with targeted appropriations over several years.

One factor in the ongoing shift is that more dependent students have been applying for grants, Education Department officials said. With a relatively healthy economy and low unemployment, those students are qualifying for smaller awards. At the same time, a surge in college enrollment began to slow in 1992 and fewer independent students have been entering college and proprietary schools.

While the maximum Pell Grant increased from $1,400 in 1975 to $2,340 this year, the average award dropped, for the first time in 14 years, from $1,543 in 1993 to $1,506 in 1994. And total recipients fell to 3.7 million in 1994 from 4 million the year before.

"The economy has improved to the point where family incomes are improving a little each year," said Sally H. Christensen, the director of the Education Department's budget service. "The rate of growth has slowed, and students are eligible for less."

Money in the Bank

That appears to be true at Murray State University in Kentucky, where 2,206 of the school's 8,100 students qualified for $3.4 million in Pell Grants in 1994. Six years ago, 2,207 students qualified for $3.1 million.

"Are more students qualifying for Pell Grants? We haven't seen that increase appreciably," said Johnny McDougal, the school's financial-aid director. "What we have seen is an alarming increase in loan dependence."

An official at the University of Texas at Austin, where about 6,000 of the university's 37,000 students got Pell Grants last year, said that grant volume has varied little over the past 10 years.

"But I can't imagine that over the next few years we'll have a downward trend in Pell Grants," said Don Davis, the university's assistant director for student financial services. He noted that a growing immigrant population in states that border Mexico is likely to keep financial need high.

While demographic factors strongly influence Pell Grant demand, the recent drop in program costs also reflects changes made in 1992 that required single, independent students to put more of their income toward college expenses. The change made about 1 million students ineligible for Pell Grants, Mr. Nassirian estimated.

"We told the Hill that it would be a problem, but it wasn't heeded," said David Baime, the director of government relations for the American Association of Community Colleges, based here.

Now that a surplus exists, the Clinton administration and the gop-controlled Congress are debating how to use it.

Republicans negotiating a fiscal 1996 spending bill want to increase the maximum Pell award to $2,470 for the 1996-97 school year and use the surplus to cut current appropriations without cutting the program.

President Clinton's fiscal 1997 budget would increase the maximum award to $2,700 for 1997-98 by using $500 million of the surplus--if the money is available.

Vol. 15, Issue 30

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