Several potential cuts to federal loan programs could be included in upcoming budget decisions. Eliminating subsidized interest for undergraduate students would save the country $4 billion per year.
Eliminating the Federal Supplemental Educational Opportunity Grant program, which awards money to undergraduates with exceptional financial need with no need to repay, would save $1 billion per year. And eliminating the Federal Work-Study Program, which provides money that is earned through part-time employment to assist students in financing the costs of postsecondary education, would save $1 billion per year.
"We may lose all federal student aid programs except for the Pell Grant, but it's likely that we'll see some tightening of eligibility standards for the Pell Grant," Kantrowitz says.
The Budget Control Act required the installment of a bipartisan committee to develop legislation to achieve at least $1.5 trillion in future deficit reduction by Thanksgiving. If the committee doesn't come to an agreement on spending cuts or if Congress doesn't approve the agreement, uniform cuts will be made across all federal programs. If that happens, the student aid programs would still exist but would offer less financial aid.
"There's a significant possibility (the committee) won't reach (an) agreement," Kantrowitz says. "In 2008, the maximum Pell Grant had a $69 cut due to an across-the-board funding cut. It happened then. It could happen now."
As students and parents watch for additional cuts to federal student aid programs, it's important to look for additional financial sources including savings, grants and scholarships.
"College tuition continues to grow at a rate of 9 percent or more per year in many states, with no prospects of slowing down," Franklin says. "Families should begin planning and saving for this expense as early as possible."