NAICU Washington Update

Student Aid Funding - Where It Stands, Where It's Headed

May 03, 2011

In mid-April Congress passed a final FY 2011 budget deal, resolving student aid funding for the 2011-12 academic year. Now the budget action on the Hill moves to the much tougher lift of reaching agreement on a FY 2012 budget in the face of intense debt-reduction pressures and federal spending constraints. How student aid will fare in those political negotiations should become clear over the summer.

First, to what we know.

Student Aid for the 2011-12 Academic Year

The budget deal passed on April 14 maintains the Pell Grant maximum at $5,550 for the coming academic year.  Other student aid programs, however, did get targeted for cuts over and above the 0.2 percent across-the-board cut to all federal, non-defense accounts:

  • Year-Round Pell is eliminated as of July 1, 2011
  • SEOG is cut by $20 million
  • The previous decision to eliminate LEAP state grants was sustained.
  • TRIO is cut by $25 million
  • GEAR UP is cut by $20 million

While all of this is painful, student aid programs would likely have been hit far harder without heavy advocacy efforts by NAICU and the rest of the higher education community in Washington.  Many other education programs suffered a far worse fate.

Student Aid for the 2012-13 Academic Year

The House Budget Committee began work on the FY 2012 budget in April, but those efforts mark just the start of the funding deliberations. At the same time, Congress wants to move quickly to avoid repeating the prolonged process for the FY 2011 budget. While lacking in specifics, the House FY 2012 budget proposal is expected to:

  • Continue to trim Pell Grants, including a cut to the maximum grant of at least $550
  • Eliminate the graduate and undergraduate student loan in-school interest subsidy
  • Repeal the 2007 expansion of Income-Based Repayment for student loans
  • Make major cuts to the overall pool of money available for Education, Labor and Health and Human Services 

Meanwhile, the Senate Budget Committee is expected to produce a budget proposal in May.  Senate conversations have now broadened beyond the committee to the "Gang of Six" senators, who for months have been working on a bipartisan debt reduction plan. 

Controlling Pell Spending

Dramatic cuts to the student aid programs, such as those proposed in the House budget, are not supported by NAICU and other student aid advocates.  Still there is recognition that the trajectory of Pell Grant Program cost simply can't be sustained.  Given this fact, NAICU has been holding informal conversations with congressional decision makers from both parties, as well as those in the administration, on how best to get Pell funding in check. 

At its April meeting, the NAICU board's Student Aid Committee identified areas and approaches for consideration that would best protect needy students, while ensuring that the Pell program is on sound financial footing in the years ahead.

The Federal Budget Environment

All of these deliberations on the federal student aid programs are part of the larger debates on increasing the debt ceiling and reducing the deficit.  These overarching issues are expected be the center of attention in Congress over May and June, and the outcomes of those discussions will shape the decisions on student aid funding.

The biggest threats to student aid in this environment are likely to be "broad brush" approaches to dramatically limit federal spending.  Concepts under consideration include spending caps that would limit total government spending to 20 per cent of GDP (instead of the current 24 per cent),   and the president's "fail-safe" procedure which would automatically cut a percentage of spending if deficit reduction targets aren't met.

Maybe the only certainty is that a long, hot summer of deliberation in Congress will offer many twists and turns before a final FY 2012 budget is enacted - and the ultimate effect of that budget on federal student aid programs is known.


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