As students and families continue to financially recover from the lingering economic downturn, federal student aid remains key to providing access to higher education for low- and middle-income students. The combination of federal grant, loan, and work-study programs allows for aid to be packaged to meet individual student needs. This original structure and intent of federal student aid programs remain valid today.
While most parents of college-aged students are familiar with student loans and Pell Grants, the lesser-known SEOG (Supplemental Educational Opportunity Grant) is important as well -- especially to taxpayers -- because it requires institutions of higher learning to kick in matching funds.
Since colleges are required to match the federal investment in SEOG, taxpayers pay less to assist students through this program than through the Pell Grant program. Sounds like a great idea, right?
Not everyone thinks so.
Revisions currently being made to the Higher Education Act (a.k.a., the Financial Aid Simplification and Transparency Act of 2014) would eliminate SEOGs and could cause the federal government to short-change the neediest students by leaving those matching funds from universities on the table.
This is pennywise and pound foolish.
Students in Florida and throughout the country will be adversely affected by this change. For example, eliminating SEOG will take away more than $346,000 in federal funds, and more than $346,000 in matching institutional funds, from 355 students at Stetson University in DeLand, Fla., where I am president.
Unfortunately, some in Congress may mistakenly believe that SEOG duplicates Pell Grants. Rather, it supplements Pell Grant funding for the neediest students and requires institutional aid. In this sense, SEOG costs the federal government substantially less than the Pell Grant program, while at the same time leveraging hundreds of millions of dollars in student aid from colleges and universities.
So, if it costs taxpayers more, why make the change? To put it simply: simplicity.
Proposed changes to the act would eliminate critical and proven programs in the name of simplicity, erasing the original policy goals of creating institutional and state partnerships to provide supplemental need-based student aid, and allowing financial aid officers to provide an appropriate and beneficial mix of assistance to each needy student.
While simplification that reduces cost and redundancy is welcome, eliminating programs that provide significant amounts of funding from colleges for students is not. Simplification does not help taxpayers when it leads to increased pressure to raise Pell Grant funding because of cuts to state and institutional aid for low-income students.
Congressional education committees also are considering reducing federal loan limits particularly for independent undergraduates and graduate students. Graduate student borrowing would be limited to $30,000 per year, down from the current cost of attendance. The lowered limits for Stafford loans in combination with the elimination of the Perkins Loan program will lower the maximum borrowing levels for all students.
Reducing loan limits will make financing higher education more difficult and more expensive for many students:
•Lowering federal student loan borrowing limits is likely to result in increased borrowing through more expensive, private loans. •The biggest proposed cuts are made to independent undergraduates and graduate students, most of whom are adults and capable of managing their loans. •Graduate students, even those who have no undergraduate debt, may not have access to sufficient federal loan capital that they need.
An additional proposed step that is problematic for students is charging interest on the student loans taken by low-income students while they are still in school.
Since federal need-based loans were created in 1965, low-income students have not been charged interest while in school. The proposed elimination of this feature will add significantly to the total debt owed by these students. Students who persist in college will pay the highest amount of interest on their loans. These added costs are unlikely to be adequately offset through income-based repayment, an option for which many students will not even qualify.
Although the recent recession has hit many families very hard, as we continue to recover we need to be mindful of the opportunity that education provides, and that a well-educated work force benefits everyone.