Congress made a number of changes to the federal student aid programs at the end of 2011. This legislation passed without much substantive debate because it was part of the budget process. President Obama signed the legislaton on December 23, 2011 (Public Law 112-74).
The Department of Education has posted a summary of key provisions, including:
1. Elimination of “Ability to Benefit” (ATB) eligibility for federal aid. Students who do not have a high school diploma or a recognized equivalent (GED) or do not meet the home school requirements and who first enroll in a program on or after July 1, 2012, will not be eligible to receive federal student aid.
Although there are many reasons to be concerned about ATB eligibility, including significantly higher default rates for ATB students, it is troubling that Congress eliminated this long-standing policy without much debate. A school’s failure to comply with ATB criteria is also the primary way for borrowers to qualify for false certification discharges/cancellations. NCLC urged the Department to add this issue to the current negotiated rulemaking agenda and broaden the scope of relief under the false certification regulations. The Department rejected this recommendation.
2. Changes in Pell eligibility. Congress reduced the income level under which a student will automatically be eligible to receive the maximum Pell grant from $30,000 to 23,000 for both dependent and independent students.
3. Maximum Pell Award Preserved. As a result of the legislation and automatic funding increases, the maximum Pell Grant for 2012-13 will be $5,550. Preserving this maximum award was a top priority for the Obama Administration. However, it came at the expense of eligibility changes that will affect many borrowers with the greatest financial need.
4. Reduction in Pell-Eligible Semesters. The time limit for Pell eligiblity is reduced from 18 semesters (or “semester equivalents) to 12 semesters (or “semester equivalents”). This applies to all Pell Grants, beginning with the 2012-13 award year.
This press release from the Project on Student Debt describes the impact of this retroactive and prospective elimination of eligiblity–More than 100,000 Pell Grant recipients, including those nearing completion, will lose eligibility.
5. Temporary Elimination of Interest Subsidy. The legislation temporarily eliminates the grace period interest subsidy for Direct Subsidized Loans. This change is effective for new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012 and before July 1, 2014.