09.19.08

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.

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

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.

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.