PHEAA reluctant to tap reserves for grant money
The state’s student financial aid agency requested an extra $40 million to help sustain the maximum college tuition grant award at the current record-high $5,750 level for the 2023-24 academic year.
But Democratic Gov. Josh Shapiro in his budget proposal kept funding at the same level it is this year and recommended the Pennsylvania Higher Education Assistance Agency to dip into its earnings from its student loan business to pony up the additional money needed to maintain that maximum grant amount.
The proposal was among the topics covered during Tuesday’s House budget hearing with PHEAA officials.
Shapiro proposed $331.4 million to fund this state grant program that provides free aid to more than 331,000 students from low- and lowermiddle-income families. His budget proposal calls on PHEAA to kick in about $39.5 million of its earnings to supplement that amount.
House Republican Appropriations Committee Chairman Seth Grove of York County asked PHEAA’s president and CEO James Steeley if the agency will be able to meet that demand.
Steeley replied, “I’m hopeful through the legislative and budget process that we arrive at a point that PHEAA is able to put in a sustainable amount that will keep the state grants at that level.”
Steeley said that when PHEAA began providing supplemental funding, the idea was to use it to boost state grant funding and not replace what he said should be the commonwealth’s appropriation.
“So in essence, PHEAA’s supplemental funding would be like a bonus to the people or the students of Pennsylvania,” he said.
But when the state was facing a financial crunch coming out of the Great Recession, the agency dipped into its reserves to help fund the state grant program. Over time, PHEAA has invested more than $1 billion of its earnings to supplement the state appropriations.
This year, the agency supplemented the state appropriation for the grant program with $15 million, bringing available funding to more than $346 million.
It had requested the state provide $370.8 million for the state grant program, representing an 11.9% increase from this year’s $331.4 million allotment in the state budget.
Future outlook
Steeley said PHEAA hopes to be on a sustainable path to partner with the General Assembly and the governor’s office in funding the grant program.
He pointed out in addition to the money that the agency provides for the grants themselves, it also uses its earnings to pay for the administration of the state’s financial aid programs and public service outreach programs to educate students about financial aid.
“We’re almost up to $35 million that we’re committing and we can do that on a sustainable basis,” he said.
Its earnings for the first six months of this year is about $24 million, Steeley said. Annualizing that, the agency would be able to cover that $35 million out of the $48 million.
“Could we go above that in any given year? Yes, we could potentially go above it,” he said. “I guess where I sit I would hesitate to go above that when we’re not in a dire financial situation as a commonwealth like we were coming out of the Great Recession.”