NAICU Washington Update

President’s Budget Proposes Deep Cuts to Student Aid

March 22, 2019

President Trump’s FY2020 budget proposes drastic cuts to the federal student aid programs, including: $207 billion  from the student loan programs over 10 years and $1.8 billion in FY2020 appropriated funding for student aid.  It also includes a $2 billion rescission from the Pell Grant surplus. The FY2020 budget, submitted to Congress on March 11, mirrors the Trump Administration budgets from the last two years, which have been rejected by Congress, in favor of bipartisan support for funding student aid.
Student Aid Details
Specifically, the budget proposes to maintain the Pell Grant maximum award for FY 2020 at the current level of $6,195, while at the same time proposing to expand the program to include high-quality short-term programs.  Along with the elimination of the Supplemental Educational Opportunity Grant (SEOG), this reflects the Administration’s “one-grant” simplified approach to student aid, and the interest in ensuring federal student aid is available to short-term, non-degree programs, which the Administration argues helps people quickly retrain for jobs.
With jobs in mind, the budget also proposes to reform the Federal Work Study Program to target workforce and career-training educational choices rather than campus jobs to pay for college.  The budget proposes to cut funding by $630 million, leaving $500 million for the more narrowly targeted program. 
The budget includes proposals to eliminate subsidized loans and Public Service Loan Forgiveness, and reform and consolidate income-driven repayment plans. Together, these proposals cut $207 billion over 10 years from student benefits, even though they are touted as addressing the astronomical student loan burden of today’s borrowers.  In addition to student loan program changes, the budget also includes a general call for institutional risk-sharing for federal student loans. 
The Administration’s budget proposal shrinks the federal role in higher education by dramatically reducing funding for student support services provided through TRIO and GEAR UP.  GEAR UP funding is eliminated while TRIO funding is cut $110 million, leaving $950 million to cover state formula grants that combine the activities of both programs.
Funding for need-based graduate education in the humanities is also eliminated.
The Administration would need to work with Congress to enact legislation through the HEA reauthorization process to achieve its programmatic changes. On March 18, the White House issued additional principles on HEA, which reflect the budget proposals.
Outlook for the FY 2020 Process
President Trump’s last two budgets were similar in their inclusion of cuts, and were decidedly rejected by the Republican Congress.  Instead, Congress enacted bipartisan budget deals to increase the spending caps, and provided funding increases for the student aid programs in FY2018 and FY2019, which the President signed into law. NAICU expects Congress again to reject the President’s budget cuts, but how the FY2020 process unfolds will be different this year, with lower caps back in place, and a divided Congress.
The obstacles for FY2020 appropriations amount to a very steep fiscal cliff for Congress and the President to climb. The statutory spending cap is reinstated for FY2020 and FY20201, which lowers non-defense discretionary spending by $55 billion below FY2019. Without another negotiated budget deal, Congress will need to cut spending, otherwise sequestration kicks in with an automatic across-the-board cut in spending equal to the amount necessary to stay under the cap.   
House Democrats are emboldened by their new majority and have publicly declared their budget proposals will be the high water mark on spending in FY2020.  While Senate Republicans have not laid down such a marker, they have indicated their desire to increase the spending caps at least by inflation, and want to avoid another government shutdown over budget disputes.
House and Senate bipartisan leadership agrees with the need for a new budget deal, but have not reached the point of deciding how much the caps should be increased. Congress can start working on budget plans, and even writing appropriations bills, without a completed deal on those caps. However, they will need to enact legislation, which is signed by the President, before the beginning of the fiscal year (October 1) to avoid triggering sequestration.  There are two wild cards in play by the time the process reaches the fall: no one knows how President Trump will respond to another budget deal to increase spending; and Congress will need to raise the debt ceiling or risk defaulting on the nation’s publicly held debt.

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