The average MSU graduate with student loans leaves campus $21,000 in debt. And with over 20,000 students taking out loans, recent news surrounding Pell Grant funding might have an effect on half of all MSU students.

President Bush touched on the escalating cost of higher education in his State of the Union address last week, saying he will increase the size of the Pell Grant, a need-based federal grant.

But as Bush vows to increase the Pell Grant maximum by $100 over the next five years, he doesn't have plans to add more money into the total financial aid pot. Instead, he will trim funding from other higher education financial aid sources, reports said, and it could result in higher costs for student loans.

MSU officials also warn that Bush's changes might reduce aid for nearly 2,100 of MSU's 6,700 Pell Grant recipients.

With the Pell Grant's $4 billion federal deficit, Bush is expected to propose taking funding from other higher education sources, such as student loans - the very thing MSU students might look for after losing Pell Grant funding.

Grants and loans

As Bush proposes to increase the Pell Grant's maximum from $4,050 to $4,550 over the next five years, almost 200 MSU undergraduates might lose their grants completely, and more than 2,100 will be affected by any changes, MSU Financial Aid Director Rick Shipman said.

He said the Bush administration is changing how financial aid is calculated, resulting in a tighter pool of recipients for the popular federal gift aid. The old calculations made it appear that some students were needier than they actually were.

"We're hoping our numbers will be high," Shipman said about the estimate of MSU students who might be affected by a change with Pell Grants.

Almost $650,000 could be lost in aid, which he said translates into students taking out more student loans, or having to find other sources of income. A record 47.2 percent of college freshman said there was a "very good chance" they would have to work during the academic year in a recent national survey.

Clinton vs. Bush

With proposed Pell Grant increases and changes to student loans, Bush is following through on his original campaign promises to increase Pell Grant funding.

Shipman said under the Bush administration financial aid for higher education has actually expanded. Bush has increased the amount of students receiving financial aid, but the dollar amount hasn't changed. The resources have been spread out across more students, he said.

Former President Bill Clinton created the federal student loans program and tax credits for families to help pay college tuition costs. Under the Clinton administration, more money was given to a smaller, needier group of students.

Nationally, over half of college students are enrolled in community colleges with lower costs, Shipman said. An increase in Pell Grants essentially helps community college students because they typically pay much less per credit than peers attending four-year universities.

More students receiving a Pell Grant widens the gap between the cost to attend and gift aid at schools like MSU, Shipman said.

"For students at four-year universities, having more students get more money increases the gap between the cost to attend and gift aid," he said. "It's not a good thing."

Rising costs

The change in Pell Grant funding may cause some students to lose the grants and be forced to take out loans without fixed interest rates - the loans would cost more under this plan.

Bush doesn't plan to increase funding for higher education, but instead take from the students who use loans or the loans' lenders.

"This is one way to come up with money that's needed to expand the Pell Grant," Shipman said.

Bush's proposed changes would eliminate a "locked-in" interest rate for loans. Instead of students consolidating various student loans and settling on a fixed interest rate, Shipman said the rates would vary with the markets.

If the federal loaners "lock-in" with a fixed rate, they have to pay the lenders who hold the consolidated loans the difference between the student's rate and the current interest rate, Shipman said.

"Bush has proposed to say that consolidated loans can still have a monthly payment, but if you do that, your interest rates will vary each time," he said.

Traditionally, federal student loan interest rates have been among the lowest.

MSU Economics Professor Charles Ballard said Bush could increase spending to settle the Pell Grant's increases and its $4 billion federal debt instead of turning to student loans.

"There are choices to be made and certainly the economy had a recession in 2001, but in that time, we've managed to increase spending on all sorts of things, most notably the war effort," he said. "In an $11 trillion economy there are a lot of things you could do more of. The president wants to be perceived as being pro-education, but his commitment to keeping taxes low is stronger than education."

Michael Boulus, executive director of the Presidents Council of State Universities of Michigan, said President Bush is trying to overcome the shortfall in higher education funding by supporting the Pell Grant. But he said it shouldn't come at the expense of student loans.

"It's not a good option," he said. "He's trying to bolster Pell Grants, but it shouldn't be done by offsetting with student loans."

Not enough

Even with proposed changes to increase the maximum Pell Grant, MSU officials said financial aid for higher education still woefully lags behind tuition costs.

Ballard agreed that more changes need to be made at the federal level to increase the size of student loans and the Pell Grant to keep up with inflation and rising costs for higher education.

There haven't been changes to the $2,625 student loan maximum since 1986.

"When the $2,625 number arrived, that paid for 150 percent of tuition at most four-year public schools," Shipman said. "Today that pays less than 50 percent of tuition."

He said that financial aid for higher education is behind college costs and inflation rates.

And with public-college tuition increasing by 10.5 percent this year alone, more students are borrowing money nationwide.

Shipman said today if the Pell Grant covered what it originally had intended when it was created, the award would be about $9,000.

In state funding for higher education most funds match federal dollars, said Rachel Birch, a legislative aide for Rep. John Stewart, R-Plymouth. Stewart chairs a state committee on higher education.

She said if Michigan's economy kept pace with national figures, higher education funding with state dollars would increase. She could not say if legislators have plans to increase higher education funding in the next year.

History senior Nick Carlton is one of the students following news surrounding Pell Grants.

Carlton receives the full Pell Grant, $4,050 a year, after returning from Army service in Texas and Europe.

Carlton also pays for school through the Army College Fund and the Montgomery GI Bill, which provide about $1,500 a month for college costs, he said.

"Those things helped out tremendously," he said. "I'm not going to come out with debt."

The 26 year old was deemed independent from his parents after returning from the Army, which changed how his financial need was calculated.

Although MSU students with the maximum award are less likely to have their grant changed or revoked, Shipman said, the concern is now shifted to question how Bush will propose paying for the award's increases.

"It's not a bad thing, if they take that money saved from (student loans) and put it into the Pell Grant," he said. "But if you're not in that really needy group, there's not a lot to do, except loans and jobs to help pay for school."