Financial aid formula under debate in House

Erin Ghere

Amid the billions of dollars flowing out of the Capitol this session, the House of Representatives will debate this week how to finance individual students’ educations.
House legislators became divided on the issue of financial aid for students last week while writing the higher education finance bill, which will be debated on the House floor this week and voted on Friday.
“(The financial aid issue) is one of the few times a major decision will be made on the House floor,” said Rep. Peggy Leppik, R-Golden Valley, chairwoman of the House higher education committee.
The state deals with two forms of financial aid: federal Pell Grants and state grants.
The state grant system is set up so that each student’s share of the state grant money decreases as the amount available in federal Pell Grants goes up, said Rep. Lyn Carlson, DFL-Crystal, member and former chairman of the House higher education committee.
“Low to moderate income families don’t benefit proportionally or even at all with the (Pell Grant) increase,” he said.
This difference lies at the heart of the disagreement between Democrats, who want to change the distribution formula, and many Republicans, who don’t want to rejigger it.
Pell Grants are federally funded, and each state is given a certain amount. But the states get to decide for themselves how to distribute the money. This year, the Pell Grants will increase by $125 per student.
But Minnesota’s elected officials use a distribution formula that subtracts the increase in federal money from the amount of money given out in state grants.
“So (students) really didn’t get an increase,” Carlson said.
The extra money is added into the financial aid distribution formula, which factors in family income and tuition costs. The boost of federal money ends up decreasing the percentage of the tuition students are expected to cover out-of-pocket.
Democrats contend that the process is flawed, because students who go to more costly schools are compensated for higher percentages of tuition.
For example, three students — one from the University, another from a state college and a third from private school — each have a stake in $900 of grant money. The formula that legislators use would distribute about $290 to the University student, $210 to the state college student and $400 to the student at the private school.
But the formula should be changed, Democrats argue, so that financial aid grants are more in line with need, relative to income and tuition. “It doesn’t treat public college students as fairly as it should,” Carlson said.
Through this formula, students who attend more expensive colleges are eligible for state and federal grants; many state college students are only eligible for federal grants. Leppik said Democrats want to change this as well.
“By all students getting to keep their Pell Grants without losing their state grant, (the formula) is fair to all students,” Carlson said.