New federal rules could force college drop-outs to repay grants
Students who drop out of school may have to repay part of their financial aid under new rules proposed by the U.S. Department of Education.
The new rules were released by the department in August to help carry out the amendments made with the reauthorization of the Higher Education Act in 1998.
"Any student who receives federal financial aid in the form of a grant or loan who drops out of school is going to have to pay some money back," said Susan Lipsmeyer, director of financial aid at Grossmont College, El Cajon, Calif.
Lipsmeyer has been a key figure recently in reforming the new set of financial aid rules.
"We had the refund policy in the past, but the changes are much more punitive," she said.
The new law mandates that students earn their financial aid by the length of time they stay in school.
"The statute requires that if a recipient of Title IV grant or loan funds withdraws from an institution after beginning attendance, the amount of...program assistance earned by the student must be determined. If the amount the student was disbursed is greater than the amount the student earned, unearned funds have to be returned," the law states.
If a student drops out before completing 60 percent of the semester, any unearned loan and grant money must be repaid.
Under the current law, students completing only 25 to 50 percent of the enrollment period would have to repay 25 percent of financial assistance.
"It depends when you drop out," said John Nametz, the UA's director of financial aid. "We have to calculate how much a student earned and how much a student didn't earn."
Nametz added that students with only loans would see more benefits under the new rules than students who receive grants.
"If you've only got loans it helps," he said. "They benefit in that they pay back more of the loan, lowering the loan principle."
Because the proposal could hurt low-income Pell Grant recipients, higher education associations lobbied to have the grant exempt from the repayment calculations.
After negotiating with the Department of Education, they agreed that 50 percent of the grant should be exempt.
If a student received a $2,000 Pell Grant, only a maximum of $1,000 would have to be returned if he or she dropped out.
Critics said the written law was ambiguously worded though, leaving the exempted amount prey to calculations that could force Pell recipients to repay the grant.
Nametz said that while the proposed rules make refund calculations easier, the old rules were a better deal.
"I prefer that the Department of Education allow the university to calculate it's own refunds," he said. "I think our policies were fair and reasonable and compassionate. I like to be a student advocate in these programs."
The UA is only one of many schools to oppose the rules.
Lipsmeyer, with the support of the California Community Colleges and the American Association of Community Colleges, has been pushing for a revision of the proposed policy.
"The provisions we were operating under in the 1998 amendments to the Higher Education Act were more than adequate," she said. "Generally students did not owe money back to the government."