NAICU Washington Update

Little Good News in President's Student Aid Budget

President Bush submitted his last budget to Congress on February 4, with little good news for student aid funding in the final figures.

The budget proposes an increase in the Pell Grant maximum of $69, for a total maximum of $4,800 from discretionary and mandatory funds ($4,310 appropriated, plus $490 mandatory). To help pay for this, the budget eliminates funding for Supplemental Educational Opportunity Grants, Perkins Loans and LEAP state grants. It also level-funds work study, TRIO and GEAR UP. The result is a net loss of grant and low-interest loans for low-income students.

While the $69 increase brings the Pell Grant maximum back to its FY 2007 appropriated level, the discretionary funding would increase by $2.6 billion. This jump in funding covers both the current Pell shortfall of $732 million, and the costs associated with the increased number of students eligible for Pell Grants.

The number of students eligible for Pell Grants has grown as a result of need-analysis changes in the College Cost Reduction and Access Act, the first phase of HEA reauthorization, passed last October. When the appropriations committees write their bills this spring, they will have to start the bidding on Pell Grant funding with the $2.6 billion increase to pay for these new students. Given that a $100 increase in the Pell Grant maximum costs about $450 million, it has become more and more difficult to increase the maximum grant. NAICU and the Student Aid Alliance, however, will continue to advocate for the bipartisan target of $5,100.

Overall, the FY 2009 budget includes $3.1 trillion in total spending. Of that amount, $987 billion is slated for discretionary spending, or appropriations. For domestic spending - also known as "non-security" - the budget proposes $393 billion, a 0.3 percent increase over last year. Out of that domestic spending total, the Department of Education would receive $59 billion, a 3.5 percent increase. Student aid, which totals $17.8 billion, is 30 percent of the education budget.

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