University students have begun to file financial aid forms to receive some compensation for next year’s rise in tuition and fees. But despite a previous trend of increased financial aid dollars, possible cuts to federal programs could decrease the amount of aid available to students each year.

At the end of 2012, Congress dodged the fiscal cliff with a last-minute agreement. This agreement temporarily delayed sequestration, or across-the-board spending cuts to federal agencies and programs, said Jonathan Lackland, deputy director for external relations at the Illinois Board of Higher Education. Congress will have to decide where these cuts will be made by March 1. In the area of higher education, financial aid is one element that could see significant damage, Lackland said.

The federal government is the largest source of financial aid for undergraduate students, according to a summary report from the IBHE. For fiscal year 2012, the government provided more than $205 million in aid to undergraduate students at the University, which amounts to 54 percent of all undergraduate financial aid.

But in the case of sequestration, federal financial aid programs could see about an 8.2 percent decrease in funding, said Daniel Mann, director of student financial aid at the University. These include the Federal Work Study Program and the Federal Supplemental Education Opportunity Grant. 

Although Pell Grants would not be impacted by a sequester for the 2013 fiscal year, the grants could be cut or significantly reduced in upcoming years in the case of more cuts to federal programs, Mann said. Pell Grants currently give out $27.8 million to 6,800 University students annually, according to the University’s 2012 Student Financial Aid Survey.

“In terms of financial aid, the sequester could not only affect fiscal year 2013, but it could affect future years as well,” Mann said.

Federal loans will also be affected if sequestration calls for cuts in higher education next year, he said. Students and families could see a 7.6 percent increase in loan origination fees, a cost associated with establishing a loan. This would reduce the amount of money the University can distribute to students, he added.

Annually, more than 18,000 University students borrow about $168 million from the Federal Direct Loan Program. But with an increase in origination fees, an additional $1.2 million would potentially be removed from that pool, according to the survey.

Maddy Thomas, sophomore in AHS, said she relies heavily on the monetary support of financial aid and receives about $22,000 each year, most of which comes from federal loans. 

She said a cut in federal funding toward financial aid would negatively impact many students’ educational opportunities.

“You have to educate the people who are going to become the leaders of the future,” Thomas said. “A lot of people do rely on financial aid in order to go to college, and if they don’t have that money, they’re not going to be able to get a good education. That could turn into a vicious cycle.”

In addition to a decrease in federal funds for financial aid, the University could also see more of a cut in state aid, said John Samuels, chief communications officer for Illinois Student Assistance Commission. He said the availability of funding for the Illinois Monetary Award Program, for example, decreased statewide from $420 million in 2011 to $371 million in 2012, and he expects that amount to decline even more in 2013.

“We basically are telling students that they’re eligible for a grant up to a point where we believe there is no longer funding available,” Samuels said.

Even so, Mann said the University has seen a steady increase in the amount of financial aid allotted to students in recent years, citing a “strong and proportional relationship” between a rise in both tuition and financial aid. 

He said the University is always looking to increase the amount of institutional funds students receive, especially as tuition costs continue to rise.

At its January meeting, the University board of trustees approved a 1.7 percent tuition hike, along with a 1 percent increase in student fees and a 3 percent increase in housing costs. 

Trustees are set to approve student health insurance fees at the board’s next meeting in March.

Mann said financial aid eligibility is based on a student’s total cost of attendance, including tuition, room-and-board, fees, books and other expenses. 

Once the health insurance fee is approved, the financial aid office will be able to get a clearer picture of next year’s financial aid packages, he said.

“It’s going to be a little more in total cost of attendance next year,” Mann said. “So, the campus is putting additional institutional funds into financial aid that will help meet some of this increased cost that students will be facing.”

However, he said the financial aid office is still waiting on next year’s federal and state budgets to be finalized, in addition to the possibility of sequestration. Therefore, he said anything decided now regarding financial aid packaging for next year could be subject to change.

Samuels said students should start filing their FAFSA forms as soon as possible, as some funds are only available on a first-come-first-serve basis. He added that the availability of state and federal aid changes quickly.

“It’s really important for students to be paying attention to the financial aid situation because we’re at a time where the budget can change quickly,” Samuels said. “For students with need who are looking for better state funding or federal funding, this is probably the most complex and uncertain time, that I can recall, in decades.”

Lauren can be reached at [email protected].