US students to get bigger grants

Universities with highest fee increases are to be named and shamed, writes Jon Marcus

August 14, 2008

The US Government has overhauled its policy regulating higher education to increase financial aid for students and to deter universities from increasing fees dramatically.

The 1,158-page Higher Education Act, whose reauthorisation by Congress was more than five years overdue, raises the maximum student financial aid award, the Pell Grant, by 55 per cent, from $5,800 (£3,000) to $9,000 a year.

It also orders the Education Department to publish an annual list of institutions with the highest percentage increases in tuition fees. Those with the biggest rises will be required to explain the need for them, although there is no provision for penalties.

The policy was passed only hours before Congress adjourned for its summer recess and just in time to allow legislators to say they had taken action to hold down tuition fees, a major concern of voters in this election year.

But critics say that, other than embarrassing schools whose prices jump, the plan does little to force cost controls. In fact, they say, increasing financial aid might make universities feel free to raise tuition fees even further.

"Congress could be considered part of the problem," said Senator Charles Grassley, a Republican member of the Senate Finance Committee.

"When we increase Pell Grants, it gives higher education the chance to take the safety valve off and allows them to be less concerned about the cost. If there is a marketplace in higher education, (government policy) is circumventing the marketplace."

For their part, universities complained that the Act will vastly increase the paperwork they are required to submit. That, they said, would actually increase costs.

"The greatest threat to higher education isn't underfunding, it's over-regulation," said Senator Lamar Alexander, a former Secretary of Education, who demonstrated on the Senate floor how existing higher education regulations already filled five file boxes.

The Act will simplify the forms students and their families need to fill in to demonstrate their need for financial aid. It also requires private lenders that make tuition loans to students to disclose clearly late fees, finance charges and other penalties. Students will now be entitled to cancel a loan at no cost up to 30 days after it is approved.

The top Pell Grant will continue to increase to more than $11,000 by 2014.

That will represent more than double the current maximum, which has risen 140 per cent in the past 20 years. Fees have risen 70 per cent over the same period when adjusted for inflation, to more than $50,000 for tuition, room, board and mandatory fees at some private universities.

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