NAICU Washington Update

Trump Budget Cuts More Than $150 Billion from Student Aid Over 10 Years

June 02, 2017

In a proposal that many in education have criticized, President Trump’s budget for FY 2018 proposes more than $150 billion in cuts from federal student aid programs over the next 10 years.

Using optimistic economic assumptions of 3% growth, the budget, which contains $4 trillion in spending on entitlements and discretionary programs, drastically cuts entitlement programs like Medicaid and SNAP (food stamps). 

The budget, which projects to balance in 10 years, proposes to cut $54 billion from Non-Defense Discretionary programs and move it to Defense programs for a total Defense budget of $603 billion.  That transfer of funds contributes to a $9.2 billion cut to Department of Education discretionary spending.  These cuts came from trimming or eliminating 30 programs at the agency. Cuts on the entitlement side at the Department of Education are in the student loan programs, totaling $143 billion, bringing the total amount eliminated from student aid to more than $150 billion over 10 years.

The Department provided many reasons for the drastic cuts, including the need to make tough choices in a tight budget, one that is especially focused on defense and the proposed border wall, and that programs were deemed to be duplicative.  Specifically, the budget proposes the following for student aid programs:
  • Pell Grants: the budget maintains both the maximum award of $5,920 (no longer indexed to inflation, however) and year-round Pell; and $3.9 billion is rescinded from surplus funds to go towards deficit reduction.
  • Supplemental Educational Opportunity Grants: Labeling them as “roughly duplicative of Pell Grants,” the budget eliminates SEOG completely.  The poorest Pell Grant students who receive these funds will lose on average $600, and up to $4,000, in grant aid.
  • Federal Work Study: funding is cut in half, to $500 million, and the number of recipients is reduced by half. According to the budget, the program should be “better targeted to undergraduate students who would benefit most.” 
  • Perkins Loans: the budget eliminates the program for scoring purposes, as it is already set to expire on September 30, 2017.
  • In-school interest subsidy: subsidized loans are phased out, starting in 2018, meaning new loans will charge interest for all students while they are in in school. 
  • Public Service Loan Forgiveness: starting in 2018, this program, which is just about to provide its first group of beneficiaries forgiveness, is eliminated for new loans, except those to allow current borrowers to complete their course of study.  However, a new forgiveness program (the Income Driven Repayment Plan – details below) is available to all new borrowers, regardless of the type of work they perform after graduation.
  • TRIO and GEAR UP:  two of the six TRIO programs are eliminated – Ronald E. McNair Postbaccalaureate Achievement Program, and Educational Opportunity Centers – and funding is cut by $92 million, which will only allow for continuation awards.  The rationale for eliminating the two programs is that they are expensive to administer and have not been proven effective.  GEAR UP is cut by $103 million, to provide for continuation grants only.
  • Other higher education programs eliminated:  Teacher Quality Partnership Grants, International Education programs, Strengthening Institutions (Title III-Part A), Child Care Access Means Parents in School are proposed for elimination.  Graduate education programs are funded at $5 million to provide for final funding of existing awards only. 
Outlook towards HEA?

The student aid budget proposal from the administration indicates what its priorities would be in a Higher Education Act reauthorization.  The student aid cuts clearly reflect the “one grant-one loan” framework that has been discussed in the congressional education committees. 

In addition to the funding proposals, the budget also includes a proposal for a new Income Driven Repayment (IDR) plan to consolidate the existing mix of current loan forgiveness programs, as Trump discussed on the campaign trail.  The plan would provide expedited repayment for undergraduates over 15 years and for graduates over 30 years, with payment set at 12.5% of discretionary income.  Any remaining balance would then be forgiven.

And finally, the budget briefing materials from the Department reference “increased higher education accountability.”  According to the materials, “some colleges lack adequate incentives to support their students in graduating, finding a good job, and repaying their loans.  A better system would create shared responsibility for success among students, schools, and the federal government to ensure students do not take on debt that they cannot afford to repay.”  These references hint at possible higher education policy ideas that have been gaining bi-partisan traction during the on-going HEA reauthorization process for some sort of institutional risk-sharing.

During the budget briefing at the Department of Education, staff continuously referenced looking forward to working with Congress on HEA reauthorization ideas, and made clear in post-briefing conversations that there is no specific policy language behind the proposed cuts.

Next Steps

Because the schedule is off as usual following a newly elected president, the next steps for the budget process are condensed into a four-month schedule rather than a typical nine-month process.

Over the summer, House and Senate appropriators will write spending bills, some of which the House may be able to pass.  In September, legislation to make the proposed student loan changes could be considered, but that depends on summer action on health care legislation. 

Budget watchers already expect that spending bills will not be completed by the start of the fiscal year on October 1, and that a continuing resolution will be needed to keep the government running. Congress will also need to address the debt ceiling, making for the perfect budget battle storm this fall.

MORE News from NAICU