Late Sunday congressional leaders appeared to have reached a deal to increase the nation’s debt ceiling. Though the impacts to higher education may not be the worst-case scenarios feared among advocates, as details come clear it is apparent that the plan leaves much long-term uncertainty for higher education.

Impacts to Financial Aid

In a fact sheet provided by the White House, funding for Pell Grants was protected. The plan “provides specific protection in the discretionary budget to ensure that there will be sufficient funding for the President’s historic investment in Pell Grants without undermining other critical investments.” Prior plans from both the Senate and the House would have directly appropriated funding for the Pell Grants in FY 12 and 13.

Despite the preservation of the Pell Grant, the deal does reduce some higher education benefits. Among the changes is the elimination of the interest subsidy for graduate student loans and the elimination of repayment incentives for federal student loans.

The Plan- Impact to Higher Education

The plan gives President Obama the authority to increase the debt limit by at least $2.1 trillion. The plan immediately enacts discretionary spending caps for 10-years for nearly $1 trillion in deficit reduction to be balanced between defense and non-defense spending. 

In addition a bipartisan committee is established to identify an additional $1.5 trillion in deficit reduction. The Committee is required to put their recommendations into legislation by November 23, 2011 and Congress is required to vote on the recommendations by December 23, 2011.  If the Committee fails an enforcement mechanism will trigger spending reductions beginning in 2013  to be a fifty-fifty split between domestic (i.e. discretionary spending and some entitlement programs) and defense spending. Social security, medicare beneficiaries, and low-income programs are protected from further reductions.

It still remains unclear exactly what discretionary spending would fall under the reductions if the enforcement mechanism is used.  Further discretionary reductions could impact several key higher education programs, including Perkins Loans, the Supplemental Educational Opportunity Grant and TRIO programs. As the details come to light, what is known is that higher education will be competing for a slice of an increasingly smaller federal pie.