A new Congress is taking over in January that has college students worrying over a possible 15% cut to their Pell Grant awards. The amount a student receives from the Pell Grant Program is determined by their status as a full- or part-time student, their financial needs, and the costs to attend their school. Grants make it possible for low-income or unemployed students to earn a degree when they otherwise could not financially commit.
So why would Congress want to take money away from a program that gives low-income students the opportunity to earn a college degree? Because there are too many qualifying people returning to school. The Obama administration has been trying to increase Pell Grant awards for students, but as the recession hits more jobs and more people return to school there just isnâ€™t enough money to go around to support both increased college populations and increased demand for grants.
However, students can start becoming more financially secure now so they arenâ€™t broadsided by changes made to their funding in 2011. A student who receives the full Pell Grant award of $5,550 might see a reduction of at least $845 next year. The following are some ways to help students start saving so politics wonâ€™t stand in the way of them going to college:
1.Â Make a budget: â€œFail to plan, plan to failâ€ goes the adage. Creating a plan forces you to see the reality of the amount of money coming in and the amount going money out.
First: assess your income. Include all sources, such as, student loans, scholarships, grants,Â job money, and allowance.
Second: assess whatâ€™s outgoing. Consider food, rent, cell phone, car insurance, gasÂ money, entertainment, etc.
Third: assess the gap. Compare the two ending amounts. Do you have enough to coverÂ your expenses?Â What are your options for more income? What are your options forÂ cutting outgoing expenses? To use a comprehensive expense calculator, go toÂ www.suzeorman.com
2.Â Spend only what you have – and not all of it: Most people live paycheck to paycheck and this puts most people at a disadvantage should some unexpected expense arise, like a broken-down car or Congress cutting financial aid awards. Having a long-term savings account might be out of the question right now. But can you set aside 10% of your income a month? Stop dining out for most meals and put the money in an accessible savings account for your education?
3.Â Confusing wants and needs: Do you get a latte every morning? Go shopping for new clothes once a week? If losing a 15% cut from your Pell Grant award will make or break your chances of attending college and youâ€™ve identified some unnecessary spending adding up after making your budget – itâ€™s time to reassess. When you do spend money, be creative and frugal. Shop at secondhand stores, share clothes with friends for special ocassions, make dinner at home for friends instead of going out, and rent movies.
- Financial literacy tips were adapted from Majoring in the Rest of Your Life. To learn more, visit us at lifebound.com or click HERE to read an excerpt.