NAICU Washington Update

Senate Appropriators Cut In-School Interest to Keep $5,550 Pell

September 23, 2011

The Senate Appropriations Committee approved its FY 2012 Labor-HHS-Education spending bill on Sept. 21, maintaining the SEOG and Federal Work-Study student aid programs at last year's levels. The committee also funded a maximum Pell Grant of $5,500.

The Pell Grant program needed an additional $1.3 billion (on top of the $23 billion baseline and the $9 billion from the Budget Control Act this summer) to maintain the $5,550 maximum grant this year. To pay for that increase, the committee decided to start charging low-income undergraduate students interest on their subsidized student loans as soon as they leave school, for the first time since the student loan program was enacted in 1965. The change is effective July 1, 2012.

Currently, low-income students are given a six-month interest-free grace period after they graduate. The committee's cut comes less than two months after the in-school interest subsidy for graduate student borrowers was eliminated in the Budget Control Act.

With a subcommittee allocation of $157 billion ($308 million below last year), the committee faced difficult decisions to maintain as much education, health, and research funding as possible. Subcommittee Chairman Tom Harkin (D-Iowa) likened the process to "cutting beyond the fat and muscle to the bone marrow," and noted that they had to eliminate 15 programs, which was "painful and unpopular." Ranking Member Richard Shelby (R-Ala.) opposed the bill because of the spending for the Affordable Health Care Act, and for continuing Pell Grant funding on an unsustainable path.

The committee considered tightening eligibility rules for Pell Grants instead, but did not want to kick any students out of the program.

While it is a relief that Pell is maintained at $5,550, and that SEOG, Federal Work-Study, TRIO, and GEAR UP are protected and level-funded, it is of great concern that important federal loan benefits for low-income students are being eliminated.

Next Steps

The House Appropriations Committee has twice cancelled mark-ups because subcommittee members have not agreed on the draft bill. As NAICU understands it, the dispute is related to the increased spending for the bill provided in this summer's Budget Control Act. NAICU is not aware of student aid provisions in the House bill, but knows committee members face the same difficult choices as Senate appropriators. It is expected the education bill will not see further action until the House and Senate leadership begin working on an omnibus bill.

Meanwhile, after a first failed attempt, the House early this morning passed a continuing resolution (CR) to keep the government running until Nov. 18. The original sticking points were that conservatives opposed the spending level, and Democrats opposed the offsets for disaster aid. At press time, the Senate is considering its version of the CR.

The plan is to have both chambers pass the CR before next week's recess, avoiding the shutdown battles of earlier this year, and giving appropriators time to complete a final omnibus appropriations bill for passage before Thanksgiving. Completing the FY 2012 appropriations process by then would give Congress all of December to debate the Super Committee recommendations, which are also due before Thanksgiving.

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