Yesterday the U.S. House passed another short-term stop-gap spending bill .
With a vote of 271-158, the House passed a three-week continuing resolution containing $6 billion in cuts. The resolution (H.J. Res 38) will expire on April 8.
None of the cuts included in this latest resolution would impact student aid or funding for the U.S. Department of Education.
The Congressional Budget Office (CBO) has proposed cuts to three areas of financial aid spending in its annual report, “Reducing the Deficit: Spending and Revenue Options.”
To reduce spending on student aid, the CBO proposes the elimination of subsidized loans to graduate students, a change in the interest rate structure for student loans and tighter eligibility criteria for the Pell Grant program.
“Under current law, students with an expected family contribution (EFC) exceeding 95 percent of the total maximum Pell grant award ($5,273 for academic year 2010-2011) are ineligible for a grant,” the CBO report states. “This option would make students with an EFC exceeding $2,500 ineligible for a Pell grant.”
Restricting the Pell Grant to the neediest students, the CBO argues, would focus the grant program on students with the greatest need.
Assuming that the maximum discretionary award level remains at $4,860 in future years, the CBO estimates that this option would yield discretionary savings of $2 billion through 2016 and $7 billion through 2021, along with accompanying mandatory savings of about $1 billion through 2016 and $5 billion through 2021.
The CBO report argues that eliminating subsidized loans for graduate students would help focus federal financial aid priorities on what some people consider the federal government’s primary responsibility — making higher education accessible to high school graduates.
“This option would end, in 2012, the practice of making new subsidized loans to graduate students, on the presumption that those students would generally take out unsubsidized loans instead,” the CBO report states. “The option would reduce federal outlays by more than $8 billion from 2012 to 2016 and by about $18 billion from 2012 to 2021.”
Additionally, the report proposes changing the structure of interest rates on federal student and parent loans to resemble those on fixed-rate mortgage loans.
“In particular, the interest rate on new loans would depend on conditions in financial markets at the time of origination but remain fixed for the life of the loan,” according to the report. “Under this option, the interest rate on all new federal student and parent loans would be set to the interest rate on 10-year Treasury notes at the beginning of the academic year in which the loan is originated plus 3 percentage points.”
The CBO estimates this option would reduce federal outlays by $900 million from 2012 to 2016 and by $52 billion from 2012 to 2021.
“Currently, the interest rate on all new unsubsidized and subsidized loans to non-undergraduate students is 6.8 percent,” the report states. “On all new PLUS loans, the interest rate is 7.9 percent. For the 2011-2012 academic year, the interest rate on new subsidized loans to undergraduate students will be 3.4 percent, but for all subsequent years, that rate will be 6.8 percent because of the expiration of a provision in the College Cost Reduction and Access Act of 2007.”
Congress has yet to finalize a budget for the remainder of fiscal year (FY) 2011, which ends Sept. 30, and is beginning debates on the FY2012 budget.
This week Congress is expected to approve a three-week, stop-gap spending bill that reduces federal spending by $6 billion, but does not cut student aid or funding for the U.S. Department of Education.
The federal government is currently being funded by a two-week, stop-gap measure that is set to expire on March 18. The three-week CR would prevent a government shutdown after March 18 and give Republicans and Democrats time to negotiate a long-term CR for the remainder of fiscal year (FY) 2011, which ends on Sept. 30.
The bill faces opposition from some conservatives in the House who are concerned that the bill does not included enough cuts, but Republican leaders in the House and Democratic leaders in the Senate have expressed confidence that they will be able to pass the measure. The bill could be difficult for Democrats to oppose because the cuts are the same as those proposed by the Obama administration in its 2012 budget request.
Yesterday, the U.S. Senate voted 44 to 56 against H.R. 1, a seven-month fiscal year (FY) 2011 spending bill passed by the House on Feb. 19.
H.R. 1 would have cut 2011-12 Pell Grant awards by $845 — more than 15 percent — and would have eliminated funding for the Federal Supplemental Educational Opportunity Grant (FSEOG).
The Senate also voted 42 to 58 to defeat a Democratic alternative FY2011 spending bill that would have trimmed an additional $6.5 billion from current spending levels, but would not have cut funding for Pell or FSEOG. Sixty votes were needed to pass either measure.
The Senate’s inability to pass either spending bill means lawmakers will have to yet again restart negotiations to craft a FY2011 spending package that will garner sufficient support in the House and Senate.
The federal government is currently being funded by a two-week continuing resolution (CR) that will expire on March 18. Because it is unlikely that Republicans and Democrats will be able to agree on a spending package before the current CR expires, Republican leaders in the House began planning another short-term CR to give more time to debate a long-term CR. Early reports indicate that House Republicans will propose $2 billion in cuts for every week the short-term CR covers.
Yesterday President Obama signed a two-week continuing resolution that reduces current federal spending by $4 billion and effectively eliminates the Leveraging Educational Assistance Partnership (LEAP) program.
The bill does not impact the current maximum Pell Grant.
With this final hurdle for a short-term, stopgap bill completed, Congress now will begin to negotiate another continuing resolution to provide funding for the remainder of the c urrrent fiscal year.
Last week the U.S. House passed H.R. 1 which would reduce federal spending by $61 billion, including reductions to higher education. The U.S. Senate however has indicated that it will not pass a budget bill containing such deep reductions.
The Senate is currently drafting its own budget bill that is likely to include approximately $25 billion in reductions mosttly from President Obama’s FY12 budget request. It is unclear at this time whether or not the Senate version will include similar cuts to higher education, in particular reductions to the maximum Pell Grant and the elimination of funding for the Federal Supplemental Education Opportunity (FSEOG) program.
Yesterday U.S. Education Secretary Arne Duncan presented President Obama’s FY 12 budget to members of the U.S. Senate Budget Committee.
The president’s budget would boost FY2012 discretionary spending for Pell Grants by $5.4 billion above spending levels in the FY2011 continuing resolution (CR) that is set to expire on March 4. The increased funding would bring the total FY2012 discretionary funding for Pell to $28.6 billion.
The administration proposes reining in the cost of the Pell Grant program in FY2012 by eliminating the newly enacted “year-round” Pell Grant program that is designed to accelerate a student’s time to completion. The president’s budget would also eliminate interest subsidies for graduate student loans and direct those savings to the Pell grant program. The administration projects that its proposal — known as the Pell Grant Protection Act — would reduce the discretionary need for the Pell Grant program by $100 billion over the next 10 years. Legislative text for the Pell Grant Protection Act has yet to be released.
Senate Budget Committee Chairman Kent Conrad (D-ND) highlighted the challenge that growth of the Pell Grant program presents to Congress.
“The rising cost of college has outpaced the increases in the Pell award,” he said. “At the same time, due to the recession and increased demand for Pell grants, as well as changes that we made as to who qualifies, the cost of the program has increased. So, we’re paying a smaller share of the cost of college, but the overall cost of the Pell program has increased.”
Republicans argued that the administration’s proposal does not go far enough to rein in Pell spending.
“In 2008, we provided Pell Grants for 6 million, now we’re providing Pell Grants, under your proposal, for 9.6 million, doubling the entire budget and we don’t have the money,” said the committee’s Ranking Republican Sen. Jeff Sessions (R-AL). “You haven’t cut Pell Grants. Pell Grants are increasing dramatically.”
This morning the Senate voted – 91 to 9 – to keep the federal government operating another two weeks through March 18 and cut $4 billion from the federal budget.
The U.S. House of Representatives passed the two-week continuing resolution (CR) yesterday.
Education programs received a disproportionate 22 percent of the cuts, but the maximum Pell Grant would remain at $5,550 under the bill.
The only student aid cut in the bill was the elimination of funding for the Leveraging Educational Assistance Partnership (LEAP) program. This cut would provide $64 million in savings. The bill would also make cuts several cuts to unfunded earmarks proposed by President Obama in his FY 2012 budget.
The measure now goes to President Obama, who is expected to sign it.
Today the U.S. House of Representatives passed emergency short-term legislation to reduce federal spending by $4 billion.
The bill that cleared the House on a bipartisan vote of 335-91 eliminates the threat of a shutdown on March 4, when existing funding authority expires. At the same time, it creates a compressed two-week timeframe for the White House and lawmakers to engage in negotiations on a follow-up bill to set spending levels through the end of the fiscal year.
The Senate is set to vote on the short-term measure tomorrow morning, the final step before it goes to President Barack Obama for his signature.
The White House, which earlier in the day called publicly for an interim measure of up to five weeks, stopped short of saying the president would sign the legislation.
On Tuesday the U.S. House education committee held the first in what is expected to be a series of hearings on the regulatory burden on colleges and schools.
In an opening statement, Rep. John Kline of Minnesota, the panel’s chairman, promised to root out rules that “hinder job creation and economic growth.”
Much of the hearing focused on education mandates imposed on elementary and secondary schools under the No Child Left Behind Act.
But lawmakers also heard from Christopher B. Nelson, president of St. John’s College, in Maryland, about the “massive” federal regulation of higher education. He urged Congress to apply its “pay as you go” budget rules to regulation, eliminating old requirements as new ones are added. “There are things we are measuring because they can be measured, not because they are good, and those are the most dangerous,” he said.
Mr. Nelson drew sympathy from Mr. Kline, who said he knew regulations were “a real burden” on colleges. “We want to get at that,” he added.
Over the past month Congress has taken a series of steps that would impact federal funding for higher education.
On February 19 the U.S. House passed a seven-month long continuing resolution (H.R. 1) to fund federal programs for the remainder of FY2011. H.R. 1 reduced spending by almost $60 billion compared to FY10 spending levels. Among the reductions included in H.R. 1 are several that would reduce funding for higher education.
An unintended consequence of the reduction to the Pell Grant included in H.R. 1 is the potential for the bill to trigger a provision in last year’s student-loan-overhaul law that conditions additional support for the Pell on Congress’ maintaining a “base” maximum award of $4,860. Under the overhaul, if lawmakers reduced the base below $4,860 the Pell Grant would become ineligile for mandatory “add ons” to the maximum starting in 2014.
According to an analysis by the Center on Budget and Policy Priorities, reducing the base by $845 to $4,105 as H.R. 1 proposes would result in the loss of $870 in mandatory money in 2014. Taken together, those reductions would cut the maximum award from the current $5,550 to $4,025.
The Senate has indicated that the reductions in H.R. 1 are too deep and are expected to release their version of a spending bill this week. It is expected that the Senate version will include nearly $25 billion in reductions, most of which were proposed by the Obama administration’s FY12 budget request.
Despite all of this Congress has only five days to agree on a FY11 spending bill before the current continuing resolution bill expires on March 4 (this Friday).
In a move that could temporarily prevent a government shutdown, if no agreement is reached by March 4, the House Republicans have proposed a short-term extension of federal funding that would continue to fund most federal programs at current levels for an additional two weeks (until March 18). In addition the extension would trim $4 billion from the budget.
The reductions in the short-term Republican funding bill include earmarks that Congress had already agreed not to continue and programs that the President targeted for elimination in his FY12 budget, including LEAP.
Senate Democrats have signaled some acceptance to the short-term proposal to allow more time to negotiate out a FY10 bill.