Pell Grant Reform and Future Via SAFRA

Written by Michael Bennet

The Pell Grant is continuing to evolve on a yearly basis, with recent changes being handed down as a part of the Student Aid and Fiscal Responsibility Act (HR 3221), or SAFRA. This new legislation was included in the Health Care and Education Reconciliation Act of 2010, and was passed on March 30, 2010 by President Obama.

SAFRA will invest over 36 billion dollars into the Pell Grant program over a ten year period, and it will raise the maximum Pell Grant amount for the 2010-2011 school year.

Changes to the Maximum Pell Grant Amount

SAFRA has increased the maximum Pell Grant amount for 2010-11 to 5,550 dollars, where it will remain static for 2011-2012, and 2012-2013.

It will then increase beginning in 2013-2014 according to a specific consumer price index that is supposed to adjust the final award amount with the annual cost of inflation. SAFRA will therefore link the maximum Pell Grant amount over the next ten years or so to the yearly rise in inflation via the Consumer Price Index.

Starting in 2013-14, the Pell Grant amount will increase by the CPI plus 1.0%, thus combating the inflation rate of about 1.6 + 1.0 %. This will project the maximum amount for 2019-20 at roughly 5,975 dollars, a 425 dollar increase from where it stands now in 2010.

This is a 1,000 dollar shortfall of where President Obama had initially hoped the bill would take the maximum Pell Grant amount, and has raised eyebrows from many critics who have exclaimed that this isn’t nearly enough.

Original Changes That Were Not Included in the Final Bill

The original SAFRA Bill had included changes to the FAFSA that would make assets for dependent, and certain independent students no longer a factor in determining their eligibility for federal aid. It would have also implemented an asset cap of 150,000 dollars in asset value for students to become eligible for all types of federal need-based aid.

These provisions however were not included in the final bill, and because they were originally included in the initial form of the bill, they will perhaps be instituted in a similar bill in the future.

The SAFRA Changes, EFC, and How It Affects You

The EFC for the 2010-2011 Pell Grant has also changed due to the SAFRA Bill, and has increased from 4,761, to 5,273, a rise of 512 points from 2009-10. How this new EFC value will affect your Pell Grant eligibility will also have to be viewed in relation to your cost of attendance, or CoA.

The following is a quick briefing of the changes that will have an effect starting in 2010-11 as a result of the new SAFRA Bill. If you have an EFC between 0 and 4,617, and a CoA above 5,550, you will not be affected by the recent changes. If your EFC is between 4,618 and 5,273 for 2010, and you have a CoA that is above 5,500, you will now become eligible to receive a Pell Grant. If your EFC is between 4,618 and 5,273, and you have a CoA between 4,900, and 5,549, you will not be able to become eligible for an award.

All of the changes that have been handed down via this new bill have not all been positive for students though, and if your EFC is lower than 4,618, and your CoA is below 5,550 for 2010-11, you can expect to receive a lower award than you may have originally hoped for. The actual difference in the award amount you are able to receive will typically be around a few hundred dollars less than where it may have originally stood, although it may not have this dramatic of an effect depending on your situation, and overall financial need.

Pell Grant Future

SAFRA was supposed to make it so that beginning in 2013-14 the maximum Pell Grant amount will begin to increase via the CPI index + 1% ratio, thus projecting the full amount to be set at roughly 5,975 dollars for the 2019-20 school year.

This however does not seem to be something that is going to happen as of right now due to a recent Congressional vote that has significantly cutback funding to the Pell Grant program. While full amounts have not been altered, it now remains unknown whether or not the scheduled increases originally established by SAFRA will be implemented.

Stay tuned, as it remains to be seen how this recent vote will affect the Pell Grant program going forward in 2011-2012, and beyond.

Update. Please view this post about the 2011-2012 Pell Grant cuts to learn more about the impact this Congressional vote has had on the Pell Grant program.