Sequestration complicates college aid notices

• Pell Grants remain untouched by sequester cuts
• Federal Work-Study program facing cuts
• Borrowers next year may face higher fees

Colleges play a guessing game every spring when they tell prospective students how much financial aid is available to them. So the federal spending cuts that began with last Friday's sequestration are complicating an already complicated process even more. For some schools, the timing couldn't be worse.

"We're hoping to send out awards this week, and before we hit the switch, we're going to have to make a decision," says Pamela Fowler, executive director of the office of financial aid at the University of Michigan-Ann Arbor. "You can make fewer awards or you can cut the amount of the award. Which do you do?"

The Pell Grant, the signature federal program that provides billions of dollars to low-income students, will remain untouched until at least the 2014-15 academic year. Facing cuts of about 5% in the coming year are a handful of smaller programs. Education Secretary Arne Duncan said last week that the Federal Work-Study Program would be cut by $49 million while a campus-based aid program for needy students faces a $37 million cut. Borrowers for next year face higher student loan fees.

Schools typically send financial aid information to prospective students this time of year to help them decide whether they can afford to enroll in the fall. Justin Draeger, president of the National Association of Student Financial Aid Administrators, is advising colleges to include caveats about the sequestration.

Many schools already include disclaimers because final numbers often change, so the additional uncertainty is not likely to help budget-conscious families as they compare offers from different schools, says John Boshoven, chair of the guidance counseling department for Michigan's Ann Arbor Public Schools. "I'm imagining a whole bunch of asterisks on every letter that's sent out."

Because dollar amounts are relatively small, students affected should be able to make up the difference through loans or by finding a job off campus, Draeger says.

The University of Michigan could lose $255,000 to $1 million in federal work-study funds across its law school and Dearborn, Flint and Ann Arbor campuses, Fowler says.

In the end, Fowler decided to be optimistic. When letters go out Thursday, financial aid awards will be based on the same criteria she has used in the past, and will be adjusted later if necessary.

Work-study cuts vary by school, depending partly on how long they have participated in the federal program. The University of Mississippi anticipates a $68,000 cut, affecting about 34 of 450 students earning work-study funds, says financial aid director Laura Diven-Brown.

"This isn't cause for alarm," she says, noting that Pell Grant cuts would affect nearly a third of undergraduates, or about 4,800. Even so, the first round of cuts "do represent real individuals who will not have a financial aid award that they could have qualified for in the past."

Contributing: Jacob Hawkins