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Budget Deal’s Impacts on Student Aid Servicers

The agreement reached on Wednesday by Senator Patty Murray and Congressman Paul Ryan reverses some sequestration cuts without raising taxes or making changes to entitlement programs. If approved, Congressional appropriators would have at their discretion $492 billion for non-military spending. That is about $23 billion more than would be available if Congress were to allow a second round of automatic sequester cuts to take effect in January. And yet, it is still about $14 billion below the original level of non-defense funding before the cuts first took place in March.

Within the confines of those top-level limits, lawmakers would have the discretion to restore and theoretically increase funding to campus-based financial aid programs and federal research agencies such as the National Institutes of Health and National Science Foundation, which would otherwise suffer more cuts if a second round of mandated “sequestration” reductions take place in January.

However, in order to pay for the $63 billion worth of increases to federal discretionary spending over the next two years, the negotiators identified various sources of revenue, such as hiking airline security fees and requiring federal workers to kick in more money for their pension plan.

Two of the cost saving provisions in the the agreement impact student aid servicers, but are not expected to have any immediate impacts on students. The first calls for Congress to cut payments to guarantee agencies in the now-defunct Federal Family Educational Loan Program, and changes how certain federal student loan servicers are paid. Not-for-profit and state loan agencies won a special provision in the 2010 Student Loan Bill that ended federal bank-based lending that guaranteed the entities loan-servicing contracts with the Education Department without having to go through a competitive bidding process. These payments will now be made with discretionary, not mandatory, funds. This change would save approximately $3 billion.

The second provision reduces the compensation that guaranty agencies receive for rehabilitating a loan from the Federal Family Education Loan (FFEL) program, beginning July 1, 2014. It will save more than $2 billion over ten years

Budget Deal Announced

Earlier this evening, Budget Conference Chairs Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) announced a two-year budget agreement that would replace $63 billion of sequester cuts over FY2014 and FY2015. For FY2014, the discretionary top line budget would be set at $1.012 trillion, offering an additional $45 billion over FY2013 numbers, and will be evenly split between non-defense and defense spending. The numbers agreed to for FY2014 and FY2015 are below the levels established by the Budget Control Act and the sequester remains in place for FY2016 and beyond.

The sequester relief is fully offset by savings elsewhere in the budget. The agreement includes dozens of specific deficit-reduction provisions, with mandatory savings and non-tax revenue totaling approximately $85 billion. The agreement would reduce the deficit by between $20 and $23 billion. The House is expected to take up a bill on Friday, followed by the Senate next week. If this bill is signed into law, the appropriations committees will then be able to work on spending bills at an agreed-upon level in advance of the January 15th deadline (when the current CR expires).

While House Appropriations Chair Hal Rogers (R-KY) praised the deal, there is expected to be some opposition from both sides of the aisle. The White House has indicated support for the proposal.

Budget Update

The Budget Conference Committee is quickly approaching its December 13th deadline for coming to an agreement on an overall budget framework that will shape the remainder of FY2014, and possibly FY2015, as well as provide some sequester relief. There are rumors swirling that the two lead negotiators – House Budget Chairman Paul Ryan (R-WI) and Senate Budget Chairwoman Patty Murray (D-WA) – may be close to producing a compromise that could set top-line spending levels for FY2014-2015.

House GOP leaders have already set aside time to move a budget conference deal this week in the event the budget negotiators do produce a compromise. The emerging framework would increase spending a modest amount over the rest of this fiscal year in exchange for an array of deficit reduction steps in other areas. One possible scenario would involve rewriting part of the Budget Control Act enacting the sequester cuts and raising the $967 billion overall discretionary spending level by $34 billion to $1.001 trillion in the fiscal year that began October 1st.

Budget Conference Negotiations Continue

The House is in session this week and is scheduled to work on a bill that would renew a 25-year-old ban on the production of plastic guns that expires on December 9th and to possibly overhaul patent litigation. The House also wants to advance a pediatric medical research bill before the Christmas recess but is facing resistance from conservative members who want to use the money for deficit reduction. The Senate is on recess until December 9th.

Conference committees will continue negotiations on the farm bill and water resources legislation in the hopes of reaching deals before the end of the year. No public meetings are currently scheduled for the budget conference committee this week, but informal talks continue as the panel seeks to come up with an accord on FY2014 spending by December 13th.

House Budget Chairman Paul Ryan (R-WI) and Senate Budget Chairwoman Patty Murray (D-WA) continue to talk about the FY2014 budget. Because of their differences, they may ultimately agree to put forward a limited fiscal agreement that would meet the most minimal of goals but would most likely be the only deal that could clear a divided Congress. The deal would provide appropriators with top-line figures for discretionary spending for the current fiscal year and the next, and partially alleviate the spending sequester that threatens automatic cuts if budget caps under the Budget Control Act aren’t met. It would utilize a combination of non-tax revenue such as user fees and modest cuts to mandatory spending programs to produce savings to offset any reduction in the sequester, among other proposals.  This type of deal would likely prevent another government shutdown when the current continuing resolution expires on January 15th.

Budget Negotiations on Hold for Thanksgiving

Congress is on break starting today through the Thanksgiving holiday. The House returns to work December 2nd for two weeks and the Senate returns the following week of December 9th. Unfortunately, budget negotiations did not result in top-line numbers for FY2014 spending before lawmakers left town, leaving appropriators very little time to draft an omnibus spending bill before the current continuing resolution (CR) runs out on January 15th. Appropriators and their staff say they need at least 30 days to put together an omnibus bill to keep the government running when the current stopgap spending measure (PL 113-46) expires on January 15th.

House leaders have stated that they will try to advance a new CR at the sequester level of $967 billion for discretionary spending set under the 2011 Budget Control Act (PL 112-25) if budget negotiators can’t produce a deal.

But appropriators are concerned not only about the current year but that the appropriations cycle for FY2015 will face the same challenges that the FY2014 process has faced. The House and Senate Budget Committees traditionally pass concurrent budget resolutions in April each year that provide the framework for appropriators to proceed on the 12 annual spending bills. Work on FY2014 bills fell apart in August after the House and Senate appropriations committees spent months working under different top lines, known as 302(a) allocations, and no compromise was forged to bridge the $91 billion gap between the House and Senate plans. Appropriators believe now is the best chance to create a top line number for FY2015, several months ahead of schedule, which could help restore regular order to the appropriations process.

But now nothing will happen for at least a week or two while everyone enjoys their Thanksgiving break. The game clock, however, keeps ticking toward the January 15th deadline of the existing CR.