Pell Grant Changes Proposed

A panel of education experts and researchers on Thursday proposed a broad reconfiguration of federal policies on financial aid for college, including a simpler application process, Pell grant maximums linked to the consumer price index and, most radically, federally financed college savings accounts for children in low-income families.

The panel recommended scrapping the current federal financial aid application, a dauntingly complicated form known as the Fafsa, and having the government get all needed financial information from the Internal Revenue Service.

“More tinkering with a system built piecemeal in the last century is no longer an option,” said Sandy Baum, a Skidmore College economics professor who served as co-chairwoman of the panel, the Rethinking Student Aid study group, which was organized by the College Board.

Students’ eligibility for Pell Grants, the most important federal aid to needy students, would be based on their family size and adjusted gross income.

“It is just imperative for our economic future and our civic future that we invest effectively in more students achieving success in college,” said Michael McPherson, president of the Spencer Foundation and co-chairman of the panel. “One of the challenges is the growing gap between the price of college and families’ ability to pay.

Although the report is certain to get intense scrutiny from Congress and education groups, it is unclear whether the recommendations will win enough support to have much chance of being adopted.

The group called for linking the maximum a student can borrow through the Stafford Loan program to the federal poverty level, allowing that maximum to rise with inflation; it also recommended that the standard 10-year mortgage-style repayment plan be replaced with a graduated repayment plan, so payments would rise along with borrowers’ income.

It also called for making the interest rates of federal loan programs to parents low enough to discourage families from turning to private student loans. With tuition rising faster than inflation, college affordability has become a growing concern for both voters and Congressional leaders.

“We will take a look at these and other recommendations that explore innovative ways to deliver student aid and help make college more affordable,” said Rachel Racusen, a spokeswoman for Representative George Miller, the California Democrat who is chairman of the House education committee.

“It is a welcome report,” said Molly Corbett Broad, president of the American Council on Education. “The big question is what we have the political will and the financial commitment to do. So the notion of beginning to save for college at a much younger age is a great idea, and we know that would make a huge difference, but there are significant cost implications.”

Perhaps the most unusual aspect of the plan involves the federal government opening — and financing — college savings accounts for low-income children.

Unlike children in affluent families, many low-income children do not grow up with parents who expect them to get a college education, or have any plan for paying the tuition.

So the panel proposed that the government create accounts for children in low-income families, long before they reached college age. The government would add money each year until they turned 18, but the accounts could only be drawn against for college expenses.

“Imagine the impact on the single mother of a 7-year-old who receives a letter informing her that the federal government has just put aside $250 toward the college education of that child and that this money will earn interest until the child is ready to enroll,” the report said.

If the program began at age 12, and the yearly deposit was 10 percent of the Pell Grant that the child would be eligible for, it would cost “less than $3 billion” a year, Ms. Baum said Thursday. She said 12 was probably the latest it would make sense to begin such a program, and added that the group had also estimated costs of starting it at age 5.