More than 80,000 college students will be ineligible for a federal Pell Grant next year under a new rule released by the U.S. Department of Education.

The policy change was published on Dec. 23, 2004 in the Federal Register, the public notice of rules and regulations from the government. The new rule affects the U.S. Department of Education’s state tax table. It reduces the amount of state taxes that can be excluded from the equation used to calculate the Expected Family Contribution, know as the EFC. The EFC is the amount a student is expected to contribute to his or her own education and is used to estimate how much financial aid they may receive.

While the state tax table is only a portion of a complicated equation used to decide financial aid, a report by the American Council on Education stated that 89,000 students would lose their Pell Grants under the new rule, although they would have received them under the old rule. The lobbying group, which represents 1,800 colleges nationwide, said another 1.3 million would see a reduction in their grant of $100 to $300, saving the federal government $300 million.

Jacqueline King, the director of policy analysis at the American Council of Education, said the number of grant recipients has gone up but the amount has remained the same. She said the new rule comes at an inopportune time when state governments are cutting funding for higher education, while tuition and fees are being increased.

“There's a lot of concern that the federal government is providing less federal aid at precisely the time it’s needed most,” King said. “There’s concern that this is hitting students at precisely the wrong time.”

Opponents say the problem with the new rule is that it is a long time coming. The tax table is supposed to be updated yearly under the Higher Education Act, but was last changed for the 1994-1995 school year. Department of Education officials said accurate data has not been available since then.

Marya Dennis, a management and program analyst for the department, explained that the new table reduces the allowance for California state taxes by only 1 percent.

“For different states the state tax allowance has decreased therefore making their EFC a little bit higher,” Dennis said. “And what everybody has noticed is it’s going to effect students with Pell Grants, at the very lowest of Pell Grants."

Department officials declined any further interviews with the [X]press, but as press secretary Susan Aspey said in a written statement the new table uses tax information from 2002, the most recent data available.

“We're required by law to do this and we can't pick and choose which parts of the law to follow,” Aspey stated. “Our projections show an increase in the number of students receiving Pell Grants next year and nearly half of Pell recipients are eligible for the maximum award and won't be affected.”
Barbara Hubler, the director of financial aid at SF State, said 7,838 students received a Pell Grant for the 2004-2005 school year. Of those, 106 received the minimum grant of $400 and 3,534 students qualified for the maximum grant of $4,050.

She said the new tax table would increase the EFC in California by $133. The amount means the new federal rule would affect students within a margin of $400. Some students who would receive $400, could lose the entire amount. Others may lose only $200 from their grant, Hubler said.

“You can say, oh, it’s going to be a $133 [EFC], but for students, that’s a lot of money,” Hubler said. “That's a textbook. Our students count their pennies.”

In its final report to Congress on the complexity of the financial aid process, the Advisory Committee on Student Financial Assistance stated that the state and local tax tables could cause disruption in financial aid when they are not updated annually. Instead, the committee suggested raising the Income Protection Allowance - the allowable amount of income for a student - by $1,000 to encourage students to work more and keep financial aid eligibility more consistent. The report stated that any changes that will disrupt financial aid eligibility should be phased in over time.