University Business - February 2012 - (Page 14)

financial aid FY2012 and $7 billion for FY2013. To generate budget savings, the Budget Control Act eliminated the in-school interest subsidy for graduate and professional students beginning July 1, 2012. It’s estimated to save $18.1 billion from FY2012-21, according to the Congressional Budget Office (CBO). The bill also eliminated some student loan repayment incentives for borrowers with loans disbursed on or after July 1, 2012. Together, the elimination of the graduate and professional in-school interest subsidy and direct loan repayment incentives yielded a savings of $21.6 billion with $17 billion redirected to the Pell Grant program and $4.6 billion going to deficit reduction. Even though the elimination of the Year-Round Pell Grant in the FY2011 budget reduced the shortfall to $11 billion and the additional funding provided in the Budget Control Act helped close the 2011-12 academic year Pell shortfall further, Pell still faced a $1.3 billion dollar shortfall for FY2012. 2012 Budget Like with the 2011 budget, Congress failed to pass the 2012 budget before the beginning of FY2012 on Oct. 1, 2011. After a series of continuing resolutions, Congress passed a 2012 budget in December that maintains a $5,550 maximum Pell Grant for the 2012-13 award year by reducing spending on other student aid programs and restricting eligibility for Pell and other federal student aid. To create sufficient savings to cover the outstanding $1.3 billion shortfall, the 2012 budget reduced the number of semesters a student can receive a Pell Grant to 12 full-time semesters, down from 18. The reduction will affect all students beginning with the 2012-13 award year, not just those who received a Pell for the first time on or after July 1, 2008. The budget also made some students who qualified for the minimum Pell award ineligible. The Ability-to-Benefit testing option, an option for non-high school graduates to become eligible for Title IV, was eliminated in the 2012 budget, meaning students who weren’t home-schooled and/or don’t have a high school diploma or GED are no longer eligible for federal student aid after July 1, 2012. In addition, the minimum income to qualify for an automatic-zero Expected Family Contribution was lowered to $23,000, down from $31,000 used for the 2011-12 award year. The 2012 budget also temporarily eliminates the no-interest six-month grace period on Stafford student loans made between July 1, 2012 and July 1, 2014. The repayment period still begins six months after the student is no longer enrolled at least half-time, but interest that accrues during those six months will be payable by the student rather than be subsidized by the federal government. Together, elimination of the temporary Stafford loan interest subsidy during the grace period and eligibility changes are expected to save $11 billion over 10 years—enough to immediately plug the 2012-13 award-year Pell shortfall. Future threats While Congressional support for maintaining the maximum Pell Grant remains strong, budget pressures will continue to threaten Pell funding. The most immediate threat stems from the Budget Control Act, which directed Congress to develop legislation to create $1.5 trillion in savings by December 2011. Congress failed to meet this mandate triggering $1.2 trillion in automatic, across-theboard spending cuts for FY2013. These automatic cuts would impact most federal spending programs (including student aid programs), but Pell Grants are exempt. However, Congress still has time to act to prevent the automatic cuts before they go into effect in January 2013. If Congress is able to pass legislation that reduces the deficit by at least $1.2 trillion, it could preempt the automatic cuts. This gives Congress another opportunity to tweak the Pell Grant program and other student aid programs to create budget savings. Something in this desert will change your institution… See page 23. 14 February 2012 universitybusiness.com http://www.universitybusiness.com

Table of Contents for the Digital Edition of University Business - February 2012

University Business - February 2012
Contents
Editor's Note
College Index
Ad Index
Behind the News
Financial Aid
Campus CFO
Education Gateways
5 Things Administrators Must Know About E-commerce Now
There’s an App for That
Internet Technology
End Note

University Business - February 2012