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Panel: Overhaul student aid system

A national panel called Thursday for a massive overhaul and simplification of the college student aid system, but the more immediate need is simply a lot more money.

Applications for all federal financial aid and loans have gone up by 8.9 million, or 16 percent, in the first half of 2008.

As a result, the U.S. Department of Education has warned Congress that up to 6 billion additional dollars might be necessary next year to ensure that all students qualified to receive a Pell Grant, the basic form of federal aid based on financial need.

Thomas P. Skelly, director of budget service for the education department, told Congress in a memo that "more people are applying for student aid, more people are going to college, more people who qualify for aid are showing up at school."

Around the country job layoffs, declining real estate values and higher prices for gasoline and food have triggered more requests for financial aid.

A rule of thumb is that if the economy is bad, college enrollments go up, and vice versa. Most early reports in Kentucky and around the nation are that the campuses have more students this fall, in some cases record numbers.

Federal lawmakers appropriated $14 billion for Pell Grants in fiscal 2008. But the education department says that with increased demand, Congress will have to come up with an extra $6 billion for fiscal 2009 or cut the amount of the grants.

"It's the mother of all shortfalls," said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. "There's more unmet need than anyone predicted."

In the current fiscal year, Pell Grants will be awarded to more than 6 million low-income students in amounts from $431 to $4,731, according to federal officials.

About 90 percent of the Pell Grant recipients come from families who make $40,000 a year or less. For Pell Grants alone, applications were up by more than 800,000 as of July 31, one of the biggest increases since the grant began in 1972.

To a great extent, this news has overshadowed the release Thursday of proposals by a study group commissioned by the College Board, which administers the SAT entrance exam.

The report contained four major recommendations.

Of them, the one most likely to garner widespread support is the call to simplify the application process for financial aid, which was called "complex snarl" for that confuses students and parents.

However, David Cecil director of financial aid at Transylvania University, said there's nothing new about the cry for "simplification."

Cecil serves on the federal issue committee of the National Association of Student Financial Aid Administrators, which is developing its own proposal to present to the next presidential administration in its first 100 days in office.

Cecil said there is no doubt that reform is occurring and educators want to find a simpler way of administering financial aid, but consensus isn't easily achieved.

"Simplification, believe it or not, is very complicated," Cecil said. "However, I believe there will be some small steps in the future" to simplify the process.

He added, though, that most dissatisfaction is not with the process but with the outcome, or whether a family gets the aid it thinks it deserves.

The other proposals are:

■ Redirect subsidies for federal loans "to diminish the burden of repayment." The study group wants no student to pay back more than 15 percent a year of discretionary income, on a graduated scale.

■ In what may be the most controversial recommendation, the study group urged the creation of special savings programs for low-income families, basically those eligible for Pell Grants, to build up a nest egg and increase the likelihood that their children will go to college. The savings could be used only for college.

■ Create incentives for colleges and universities to support students so they complete their degrees.

"The point is not to get to the starting line but to cross the finish line," said Michael McPherson, president of the Spencer Foundation and a study group member.