Moscato: Economic woes won't affect University financial aid

Though there has been an increase in the number of students requesting financial aid this year, Moscato said, “the University has a remarkable commitment to meeting the full need of every student who applies for and needs financial aid ... we’re committed to meeting this additional demand.”

Moscato’s pledge comes on the heels of a warning by the Department of Education that the record number of college students seeking federal financial aid may lead to a $6 billion shortfall in the government’s Pell Grant program unless Congress appropriates more funds.

Pell Grants are scholarships given to students from low-income families, and awards currently range from $400 to $4,310, according to the Department of Education. Zach Goldberg, a spokesman for Rep. Rush Holt (D-N.J.), said in an e-mail that Holt, a member of the Education and Labor Committee, would not support reductions in Pell Grants.

Regardless of whether the program received further funding, “no Princeton student will be affected by a shortfall in Pell Grant funds,” Moscato said.

During the 2007-08 academic year, 54 percent of undergraduates received financial assistance from the University, and 10 percent of undergraduates received Pell Grants.

Moscato said students will not suffer from a lack of federal aid funds or the reduced availability of student loans.

“We’re very fortunate to be insulated from that national problem,” she said, referring to Princeton’s decision in 2001 to eliminate the requirement for students to borrow funds as part of their aid packages.

Giving aid in hard times

Last school year the University awarded $82 million in need-based scholarships, of which roughly $76 million came from University resources like the endowment and programs like Annual Giving. Federal and state programs contributed $2.8 million in scholarships, and $3.2 million came from outside groups. Students on financial aid also earned around $2.2 million from on-campus jobs during the school year.

Any cut in government aid would force the University to cover the shortfall with its own financial resources. But in remarks earlier this month at a roundtable discussion on Capitol Hill about endowment spending, President Tilghman said the University has also felt the effects of the economic downturn.

“This year, of course, we’re back almost where we started when I became president in the beginning,” she said, according to the Yale Daily News. During the first two years of her presidency in 2001 and 2002, the endowment posted only a 2 percent return, which is much smaller than the 24.7 percent return for the 2007 fiscal year. Though Annual Giving rates have not yet fallen as a result of the current economic downturn, it is unclear if this trend will continue.

Both the endowment return and Annual Giving contribute toward funding Princeton’s financial aid program, accounting for roughly 92 percent of all aid received by students.

Get the best of the ‘Prince’ delivered straight to your inbox. Subscribe now »

“The year is still young, so I don’t have the complete details about where the funding will come from,” Moscato said when asked how minimal endowment growth and the potential for fewer Annual Giving contributions would effect financial aid funding.

“Generally speaking, we use all of the restricted scholarship funds that are available from the endowment, and when need exceeds that, then we turn to unrestricted funds provided by our strong Annual Giving program,” she explained. “It remains to be seen how it will work out in the end for the year in progress.”

Pell shortfall hurts nationwide

A report from the Department of Education shared with officials on Capitol Hill stated that the Pell Grant program will need a total of $20.1 billion in the next fiscal year, compared with $14.2 billion this year.

The $6 billion would represent a 40 percent increase in the program’s budget in just one year. As of July 31, almost 800,000 more students had applied for grants than had applied on that date a year ago — a 9 percent increase.

“While it is hard to identify all the reasons for the increase in applicants, the trend includes both dependent students and older, independent students who tend to qualify for greater amounts of aid. The traditional college-age population has peaked, but there are more people who are 24 and older,” the report reads.

Nearly nine in 10 Pell Grant recipients come from families with incomes under $40,000. Nearly half are over the age of 23.

According to a 2006 report by the College Board, the maximum Pell Grant covered 84 percent of the tuition, room and board costs at a four-year public college in 1975. Today it covers less than a third of these costs.

Rethinking federal student aid

A panel of education policy experts is advocating an extensive overhaul of the federal aid system.

The independent Rethinking Student Aid study group, sponsored by the College Board and several education-focused foundations, has spent the last two years studying how the federal government distributes more than $86 billion in grants, loans, tax benefits and other aid each year.

Its proposal includes eliminating the Free Application for Federal Student Aid (FAFSA), redeveloping the Pell Grant and student loan programs, and restructuring how the government provides financial aid funding to colleges.

“It is urgent that we diminish the bureaucratic hurdles, the information barriers, and the financial restrictions facing young people and adults aspiring to improve their prospects through postsecondary education,” the report states.

One of the group’s proposals is to create block grants for colleges based on the proportion of Pell Grant-eligible students they enroll and retain to the second year. The change would significantly increase support to public colleges and universities. But private institutions, which currently receive 46 percent of campus-based grant funds, would receive about half that under the panel’s recommendation, according to Inside Higher Education. The panel also proposed that Pell Grants should be based on a family’s adjusted gross income and family size and tied to the Consumer Price Index. Currently, grants are awarded based on the 145-question FAFSA.

One of the biggest overhauls suggested was to end the government’s current practice of covering interest on student loans for some students while they are in college, replacing it with a program where former students would make greater payments as their incomes increase.

Moscato, a 25-year veteran of the University’s financial aid office, said in an e-mail that she is receptive to the panel’s goal and that it was too early to know how federal aid funds at Princeton would be affected.

“The study group has come up with an interesting set of recommendations,” Moscato said. “I am very supportive of the general focus on simplifying the federal aid process.”

Holt is currently reviewing the recommendations, Goldberg said.