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Obama's FY 2011 Budget Treats Student Aid Kindly

NAICU Washington Update

February 10, 2010

President Obama sent his FY 2011 budget to Congress on February 1, and made education funding a top priority in a tight budget, providing a 7.5 percent increase in discretionary funds. That's in contrast to an overall three-year freeze on non-security discretionary programs, which would hold spending at $447 billion for programs outside of Homeland Security, Defense, Veteran's, and Intelligence.

For education, the budget includes a $4 billion increase in discretionary funds, which the administration is touting as the biggest increase since 2003. The big budget news is an additional $3 billion for K-12 programs, but also a proposal to consolidate 38 programs through reauthorization of the Elementary and Secondary Education Act (ESEA, aka NCLB).  Among the ESEA consolidations, we are particularly concerned that funding for Teacher Quality Enhancement Grants (HEA Title II) is eliminated and consolidated into a broader block grant for teacher preparation activities.  NAICU's stance is that there is a critical role for institutions of higher education as the lead grantee in teacher preparation partnerships.

For student aid, the budget advocates passage of the Student Aid Fiscal Responsibility Act (SAFRA), providing a mandatory Pell Grant maximum of $5,710, full conversion of all student loans to direct lending, direct Perkins Loans, and investments in community college and early childhood reform.  A new proposal paid for by SAFRA is included in the budget:  $1.2 billion over three years for Graduation Promise grants, to help strengthen high schools.

All other student aid programs would be level-funded, except for the LEAP state grant program, which is proposed for elimination, along with five other education programs.  NAICU is extremely concerned that the elimination of LEAP would result in a net loss of grant aid for low-income students in this tough economic time.  LEAP funding provisions ensure that states maintain their student aid programs, help students persist and graduate, and treat students at private colleges and universities the same as students at public institutions.

Beyond student aid, the budget proposes to expand the income-based repayment plan (IBR) for student loans, and to make permanent the American Opportunity Tax Credit, which provides a $10,000 tax credit for four years of college.  The IBR proposal would lower the discretionary income threshold from 15 percent to 10 percent; lower the loan forgiveness timeline to 20 years of payment, down from 25 years; and maintain loan forgiveness for 10 years of public service.

The Strengthening Institutions programs (Title III, HBCUs and HSIs) received a five percent increase overall. International Education programs are level funded in the budget.

The next steps for the budget process are for the House and Senate budget committees to hold hearings with administration officials, then write their version of a budget resolution, which typically occurs in March.