NAICU Washington Update

House and Senate Budgets Nod Toward Obama's Student Aid Plan

March 26, 2009

Both the House and Senate Budget Committees wrote their draft FY 2010 budget resolutions this week -- each with a different nod toward President Obama's plan for restructuring student aid.

Neither plan goes as far as assuming a full mandatory Pell Grant program, a complete switch to Direct Lending, a totally new Perkins Loan program, or a five-year state fund for access and persistence.  But both plans provide mechanisms congressional committees need to work toward these proposals.

The House budget resolution goes the farthest in providing the framework for considering this massive restructuring of student aid.  It includes reconciliation instructions for the Education and Labor Committee to find $1 billion in savings over five years through legislation written by September 30, 2009; and includes a deficit-neutral reserve fund for "College Access, Affordability and Completion." 

The Senate budget resolution goes part of the way by providing a deficit-neutral reserve fund, but does not include a reconciliation instruction for the Health, Education, Labor and Pensions Committee to find savings by a specific date.

Procedurally, the reconciliation instruction is the key element as to whether or not Congress moves forward with the administration's student aid proposal.  The reconciliation process limits debate, and requires only a 51-vote majority for passage in the Senate.  It's a process that was originally intended to be used only for deficit reduction purposes.  Right or wrong, though, the Senate protection of a simple majority through reconciliation is the only way congressional leadership and the education committees will attempt making Pell Grants an entitlement, broadening the Perkins Loan program, or giving states an incentive to improve completion rates.

Since 2001, reconciliation has been used in four major efforts to pass tax-cut legislation and to cut the federal payments to student loan lenders.  Thus, the precedent for using this procedure has already been set.  In 2007, for example, $750 million went toward deficit reduction while $20 billion was shifted from lenders to need-based student aid through the Pell Grant mandatory add-on.

House Budget Committee Chairman John Spratt (D-S.C.) clearly supports Obama's budget proposal, and included the reconciliation instructions needed for education, energy and health care reform that the administration wants.  The House version also includes a Sense of the House on College Affordability, indicating that "nothing in the resolution should be construed to reduce any assistance that makes college more affordable and accessible for students, including but not limited to student aid programs and services provided by non-profit state agencies."

Senate Budget Committee Chairman Kent Conrad (D-N.D.), however, is strongly opposed to using the reconciliation process for anything other than deficit reduction.  During the opening session in the Senate committee, it was expected that Republican senators would complain that the House plan forced their hand on their own procedure.  Some Democratic senators, though, publicly urged the chairman to take the House reconciliation instructions for all of the president's priorities because, they argued, those reforms would create deficit reduction.

Where the House and Senate plans go from this point will be determined over the next couple of weeks.  Both chambers expect to have votes on the floor the week of March 30, and then to work on a conference agreement after the April 6-17 spring break.  Reconciliation for education, energy, and health care looms as the biggest issue budget committee and leadership negotiators will face in agreeing on a conference report for the FY 2010 budget.

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