Is Free College Money Still Possible?

debt dealIf you are struggling to find money for college, there are large sources of interest-free money available to you in the forms of federal and state grants. Typically, scholarships comprise only 2% of all student financial aid, while grants make up roughly 40%. Student loans round out the rest of the financial aid package. If you need money to pay for college, apply for grants, rather than loans, because you do not have to pay grant-awarded money back.

With a debt deal up in the air, many college students and their families are left wondering how their financial futures will be affected. The current debt deal will cut the nation’s spending by more than $2 trillion, but it will increase federal spending limits on higher education. Free money is still possible through this deal, available in the form of the Pell Grant program.

Pell Grants

The Pell Grant program is by far the largest grant program available for college students. The amounts range from just a few hundred dollars to over several thousand dollars. Pell Grants are based strictly on need, the college the student will attend, and that school’s federally approved guidelines. These colleges are given only a certain amount of Pell money for each school year, so once the funds are awarded, the money is gone.

The Debt Deal’s Effect

While the debt deal will drastically decrease subsidized student loans for graduate and professional students, there will be more money funneled into Pell Grants for undergrads. The changes currently being made to government-provided student aid are likely to increase the nation’s spending by at least $7.4 billion over the next three to four years; however spending will decrease in the long run by roughly $4.6 billion over the next decade.

The Pell Grant program, originally expected to shoulder drastic cuts in finances, will actually see an increase of $17 billion that will span three years, thanks to the debt deal. Previously, the highest amount that could be awarded from a Pell Grant was $819, but the new budget will increase the amount to $5,550. The increase is mainly due to the recession and greater numbers of eligible students. The size of the increase has caused the overall cost of the program to double in the past two years, reaching $32 billion for the 2010 to 2011 school year.

Even though the hike is drastic and is aimed to help students receive interest-free money for school after the deal is voted on, some people feel students will still need to apply for student loans and acquire debt before they graduate. The increase will cover less than one third of the average cost of a traditional, public college for four years, so students still need to find other sources of money to afford the cost of school.

Changes Ahead

Most graduate and professional students will unfortunately see an elimination of their federally subsidized student loans. These loans, unlike privately awarded loans, do not accumulate interest while the students attend college. Rebates will not be issued to students who pay their loans on time, yet borrowers who pay with bank-issued electronic debit cards will receive deductions. These changes will eventually allow the government to save $21 billion for the next 10 years.

(Jessica Bosari is a prolific writer who specializes in personal finance. She writes about topics such as government grants and finding free money.)

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