NAICU Washington Update

Congress Takes Next Step on the FY 2016 Budget

May 01, 2015

The House Budget Committee filed S. Con. Res. 11, the FY 2016 conferenced budget resolution, checking off the latest step in this year’s budget process.

Unfortunately, the conference report includes the following assumptions on spending cuts:

  • Maintain the Pell Grant maximum at the current level, but undercut the funding structure to support it. The budget proposes the elimination of all mandatory Pell Grant funding, which represents an $80 billion cut over 10 years, then makes up for the lost mandatory funding by expecting it be fully funded from appropriations. Finding an additional $8 billion per year puts impossible pressure on the appropriations committee.
  • The elimination of the in-school interest subsidy for undergraduate student loans. This represents a $34 billion cut over 10 years.
  • The elimination of the expansion of income-based repayment. This represents a $16 billion cut over 10 years.
  • Keeps the FY 2016 sequestration cap on appropriations for non-defense programs, and lowers it each year for 10 years.

Regarding the two procedural issues with which we have concerns, the conference committee includes the following positives about student aid:

  • Instead of requiring the use of “fair-value” accounting for student loan legislation, the Congressional Budget Office must provide it as “additional information” when such legislation is considered. Fair-value accounting makes student loans look more expensive to the government than they really are.
  • Reconciliation instructions are not included for changes to student loans. Reconciliation is a budget and legislative process that requires deficit reduction (i.e., program cuts), but which affords the Senate fast-track floor procedures and requires a simple majority for passage. Reconciliation has been used three times in the last 10 years to make changes to the student loan program.

Congress will need to pass legislation to make the proposed cuts in mandatory Pell and enact the in-school interest subsidy, but the lack of reconciliation instructions for students loans will make it very difficult to do so. Without reconciliation, the most likely place for these proposals to emerge is the reauthorization of the Higher Education Act. The tight caps on appropriations will continue to make funding the student aid programs difficult.

The House is expected to vote on the resolution Friday, May 1, while the Senate will consider it Monday, May 4.

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