By Elvina Nawaguna
WASHINGTON (Reuters) - College students dependent on work-study programs and federal grants will have a hard time making up for reduced funding in the new school year as federal budget cuts take hold.
The so-called sequester officially kicked in on Friday, stripping millions of dollars from several financial aid programs that colleges and universities rely on to entice students.
The biggest cuts - about $86 million - will be to the Federal Work-Study (FWS) and Supplemental Educational Opportunity Grant (FSEOG) programs, which help low-income students pay for undergraduate education, according to data from the Office of Management and Budget.
In addition, students will see a small increase in student loan origination fees, which will total $82 million. Other indirect effects could come from a $71 million cut to student aid administration funds.
Parents and students are apt to find themselves scrounging to make up for financial aid already granted but now slated to be reduced.
"Students and parents will start getting their award letters in the coming weeks, and presumably (the cuts are) just going to create more uncertainty for them," said Justin Draeger, president of the National Association of Student Financial Aid Administrators (NASFAA). Many schools, he said, had been notified of the association's tentative expectations before Congress failed to beat its March 1 deadline but may have already sent out award letters.
After the cuts are implemented, Draeger said, parents and students could be forced to take out more loans at a time when student loan debt is already a growing crisis.
A report from the New York Federal Reserve Bank last week found a sharp spike in delinquent student loans.
"Financial aid administrators are frustrated, and part of the frustration comes from the empathy they feel for parents and students. There just continues to be uncertainty year after year about the funding levels and benefits that students have available to them," said Draeger.
SMALL ENDOWMENTS, LITTLE RELIEF
The University of California, Davis, is expecting at least $180,000 in cuts to the FWS and FSEOG programs, unless Congress can reach a deal before the sequester starts to bite.
Translated into people, the school could offer about 38 fewer FWS jobs and about 18 fewer FSEOG scholarships. Those students would have gotten about $3,000 for each work-study award and about $4,000 for each FSEOG grant for the school year.
Katy Maloney, director of financial aid, says the school doesn't have the resources to make up for the cuts and will be sending students notices about the changes.
"If you were planning to get a work-study job and you can't get a regular job, we might see more students getting more student loans," Maloney said.
Other schools are optimistic that they may have more flexibility, including Syracuse University in New York, which is expecting to lose about $350,000 in FWS and FSEOG programs.
Although "it's going to obviously cause us to rethink how we do a couple of things on campus," said Ryan Williams, associate vice president for enrollment at Syracuse, the university plans to use internal funds to keep the same level of financial aid for students. "I know there are schools out there (that) don't have the endowments to make up the difference," he said.
The Federal Pell Grant Program, which provides billions of dollars in grants to low-income college students, will not be immediately affected. That's because the Balanced Budget and Emergency Deficit Control Act of 1985 protects it from sequestration through the 2013-2014 school year. That could change later if nothing is done.
Colleges and universities are also expecting cuts to some of their research programs.
"If Congress doesn't ultimately replace the sequester with something else, these are (research and aid) cuts for 10 years," said Draeger of the NASFAA.
(Reporting by Elvina Nawaguna; Editing by Karey Van Hall and Prudence Crowther)