The Senate will take up a measure today that would prevent subsidized student loan interest rates from doubling this July.  While both parties agree that they want to stop the rate hike from going forward, Senate republican leadership indicated Monday that they will likely filibuster the democratic measure because it opposes the proposed offset.   Senate democrats need 60 votes to move forward with their bill.  Democrats, who control 53 votes in the Senate, would need at least seven republicans to vote with them to overcome a filibuster and begin debate on the bill.  House republicans have already passed a different version.   

The democratic legislation would cover the $6 billion cost of preventing the interest rate increase by eliminating a corporate tax loophole that allows the wealthy to pay less in Social Security and Medicare taxes.  Republicans prefer a measure similar to the House-passed bill, which would offset the cost of the interest rate cut by eliminating a fund in the 2010 health care overhaul that covers prevention and public health.

President Obama has made a campaign issue out of the bill because interest rates on Stafford loans will jump to 6.8 percent from 3.4 percent if Congress doesn’t act by July 1^st.

UPDATE:  The Senate just voted to blocked the bill to prevent doubling of the student loan rates.  Stay tuned…

Congress returns to work today after a week-long recess period.   The Senate convenes at 2:00pm and continues debate of the student loan interest rate bill.  The House is also in at 2:00pmwith votes expected around 6:30pm. 

This afternoon, the House Budget Committee will mark up two bills:  The Sequester Replacement Act of 2012 (HR 4966) and The Sequester Replacement Reconciliation Act of 2012.  Both measures aim to replace sequestration, the mandatory cuts scheduled to begin in January 2013.  The first bill would stop sequestration from happening, while the second would outline a series of cuts to entitlement programs such as health care and food stamps that would replace the cuts to discretionary spending expected through sequestration.  The full House is due to pass the package late in the week likely along partisan lines.  However, the safe bet is Congress won’t reach agreement on how to deal with spending priorities until after the elections. 

Meanwhile, on Tuesday the Senate is scheduled to debate a bill to keep interest rates on federally subsidized student loans at 3.4 percent for one more year, instead of increasing to the previous amount of 6.8 percent.  The House passed a similar bill a week ago, but the two chambers differ on how to pay for the extension.  In a sign of their desire to downplay the partisan tensions, Senate Republicans are expected to help Democrats reach the 60 votes needed to overcome a procedural hurdle to bringing the measure to the floor.  

Tuesday also marks the formal launch of a House-Senate conference to write a surface transportation reauthorization bill.  If conferees can’t come to an agreement on the bill before the November election, then chances are good the bill just won’t get done this year.  And that will mean starting over from scratch early in 2013.  The biggest hurdles include the length of reauthorization, policy riders approving the Keystone XL pipeline and blocking EPA’s authority to regulate coal ash, and how best to pay for the cost of highway and transit programs around the country.  This bill reauthorizes the University Transportation Centers; the UW operates one of these centers for USDOT Region 10.

Also this week, the full House is scheduled to debate the FY 2013 Commerce-Justice-Science spending bill, which includes funding for NOAA and the Office of Science and Technology Policy.  House Rules Committee meets at 5:00pm today to write the spending bill’s rule, and it will hit the floor sometime later in the week.  This will be the first FY 2013 appropriations bill to be approved in the House, but differences over spending levels make it likely that both chambers won’t agree on most or even all of its spending bills until after the elections.  But by sending the measures through committee and to the floor in each chamber, leaders are at least offering a starting place for those year-end negotiations.  Congress has missed the statutory September 30^th appropriations deadline for more than a decade, instead relying on continuing resolutions to keep the government from shutting down until the final bills are cleared and signed by the President.

President Obama used his weekly address to call on Congress to prevent student interest rates from doubling in July.  He believes that we should be doing everything we can to put higher education within reach for every American because “at a time when the unemployment rate for Americans with at least a college degree is about half the national average, it’s never been more important.”  Obama is calling on Congress to act before student loan interest rates double for more than 7.4 million students, adding an average of $1,000 to their debt.  Congress has a chance to take action on what should be an area of bipartisan agreement to prevent this unnecessary and damaging increase in interest rates.  Watch the President’s address here.

Last week, Rep. Paul Ryan (WI), unveiled his FY2013 budget resolution calling for an overhaul to the tax code and deeper reductions in spending. Among Ryan’s proposals was limiting the growth of federal financial aid for college students, focusing it on low-income students. More specifically, Rep. Ryan proposes a budget that:

• Eliminates the in-school interest subsidies for undergraduate students
• Eliminates the student aid eligibility expansions enacted by the College Cost Reduction and Access Act (CCRAA), including auto-zero eligibility and Income Protection Allowance
• Proposes an undefined a maximum income cap for Pell Grant eligibility
• Eliminates Pell Grant eligibility for less-than-half-time students
• Eliminates the automatic increases in the maximum Pell award above $5,550
• Eliminates the mandatory funding for Pell Grants
• Eliminates Pell and Campus-Based Aid Administration Cost Allowances (ACA)
• Repeals the mandatory funding for College Access Challenge Grants ($150 million in FY 2013). Again, since there is no corresponding increase in the discretionary side, in effect this either cuts this program or will result in $150 million in additional cuts in FY 2013 to all other discretionary education programs.
• Allows interest rates on subsidized Stafford loans to double on July 1 from 3.4% to 6.8%

While this budget resolution is not expected to be adopted in full in the House or the Senate, some of these proposals may be used to shape the debate over the budget and deficit reduction in the coming months and will be a topic that we will be keeping a close eye on.

The Obama Administration’s FY13 budget, released on February 13, reflects a continuing commitment to increased federal investments in research and education.  The budget would increase funding for the National Science Foundation (NSF); the Department of Energy’s (DOE) Office of Science and ARPA-E; and the Agriculture and Food Research Initiative (AFRI) in the Department of Agriculture, which supports competitive research.  It also would provide a modest funding increase for the National Endowment for the Humanities (NEH).  Similarly, funding for basic research at the Department of Defense (DOD) is essentially level despite significant cuts elsewhere in the agency. 

Funding for the National Institutes of Health (NIH) would be essentially frozen at the FY12 level.  The science portfolio at NASA would be cut by more than three percent.  

For student aid, the Administration would fully fund the maximum Pell Grant level of $5,635 and extend the 3.4 percent interest rate on subsidized Stafford loans, which otherwise would rise to 6.8 percent on July 1, 2012.  Additionally, the Administration would shift campus-based aid programs, such as Perkins Loans, toward institutions that “keep their tuition and tuition increases low,” enroll relatively high numbers of Pell-eligible students, and provide “good value.”  No additional details are available on exactly how the Administration would implement this.

The FY13 budget also contains several tax proposals of interest to research universities.  These include making the American Opportunity Tax Credit permanent and limiting the value of certain tax expenditures, including the deduction for charitable contributions for individual taxpayers, to 28 percent.  The budget would also expand the Build America Bonds program by making the program permanent, expanding eligibility to both government entities and nonprofit institutions—including both public and private universities—and expanding the allowed uses of the bonds.

Details are beginning to emerge on Obama’s proposal to make college affordable.  He spoke to this during his State of the Union address on Tuesday, and again today at an event at the University of Michigan.  US Department of Education Secretary Arne Duncan has also been talking about this issue since late last year, and often refers to the challenge as looking “beyond the iron triangle” of cost, quality, and access.

Obama is proposing a financial aid overhaul that would – for the first time – tie colleges’ eligibility for campus-based aid programs (Perkins loans, work-study, and supplemental grants for low-income students) to the institutions’ success in improving affordability and value for students.  Under the proposed plan, the amount available for Perkins loans would grow to $8 billion, from the current $1 billion. Obama also wants to create a $1 billion grant competition, along the lines of the Race for the Top program for elementary and secondary education, to reward states that take action to keep college costs down.  Finally, he has also proposed a separate $55 million competition for individual colleges to increase their value and efficiency.

The administration also wants to give families clearer information about costs and quality, by requiring colleges and universities to offer a “shopping sheet” that would make it easier to compare financial aid packages and post-graduate earnings and employment information – all in an attempt to give students and families a better sense of what to expect from the college and after graduation. This would be in addition to the requirement imposed this year on the “college cost calculator.”

These proposed changes would all require Congressional approval, which is not likely to happen this year.  While some legislation may get introduced, most of the discussion around these ideas will take place out on the campaign trail.  Hang on for a bumpy ride!

Read more about the State of the Union address. 

Read more about the President’s speech at University of Michigan. 

Read more about Secretary Duncan’s “Beyond the Iron Triangle” speech.

President Obama announced today at a speech at the University of Colorado Denver, a new initiative called ‘Know Before You Owe’ designed to make college loans more affordable and reduce the financial burden on recent graduates – many of whom are struggling to find employment.

The administration is essentially speeding up by 2 years, a federal law that was set to go into effect in 2014. Announced today and beginning in January of 2012, students with federal loans who enroll in the Income Based Repayment Plan will experience a cap on their federal student loan repayments at 10% (currently 15%) of discretionary income and all remaining debt on these federal loans will be forgiven after 20 years (currently 25 years).

The second part of the initiative encourages students with one or more types of federal loans to consolidate them for a 0.5% interest rate reduction.

The administration estimates that this could affect up to 1.6 million borrowers and save some students hundreds of dollars a month.

The House Appropriations Committee released their draft Labor-HHS-Education spending bill today in which they executed several spending cuts and revoked all additional funding for “Obamacare”. Some highlights:

Health & Human Services

• The Health Resources and Services Administration (HRSA) is funded at $6.7 billion, a $1.5 billion increase over FY11 levels
• The National Institutes of Health (NIH) is funded at $31.76 billion, which is $1.4 billion above FY11 and designed to support at least 9,150 new and competing research projects
• Head Start would receive $8.09 billion, approximately $500 million above FY11
• The Center for Medicare/Medicaid Services takes a cut of $290 million from FY11 with an FY12 funding level of $3.2 billion

Education

• Investing in Innovation (i3) funding is eliminated by the House in their FY12 bill
• International Education & Foreign Language (Title VI) is cut by approximately $10 million to $66.7 million from already reduced FY11 levels
• Federal Work Study is level funded at $978.5 million
• TRIO is level funded at $826.5 million
• GEAR UP is level funded at $302.8 million
• the Fund for the Improvement of Post-secondary Education (FIPSE) is eliminated by the House for FY12
• The Pell Grant Program is maintained at a maximum award amount of $5,550 but in order to fill the shortfall in the program, the Committee suggests limiting lifetime eligibility to 6yrs (from 9yrs), rolling back recent changes to the qualification formula, and eliminating eligibility for students who attend school less than half time or students who do not have a diploma/GED

The Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies held a hearing yesterday on the Department of Education’s FY12 budget. Secretary Duncan was the witness.

In his opening remarks, Duncan expressed concern that America has gone from being a world leader in education to now being “middle of the pack”.  He also emphasized that demand on the Pell program has increased from 6 million to 9 million students in 2 years and that the Department is focused on closing the Pell shortfall – currently $11 billion – through increased efficiencies and more resources. The Pell program accounts for a third of the Department’s total $77 billion FY12 request. The Secretary cites the increasing number of lower income families and more families without jobs as the reason for the increased demand for the grants. Earlier this week, both Reid’s and Boehner’s debt ceiling deals contained an elimination of the in-school interest subsidy for graduate students, with the money saved by doing this going back into the Pell program to help shore up the shortfall for the next two years. Although this will have a negative effect on students, out of the many rumored changes to Pell that have been floating around during the past few weeks and the negotiation process, this is the best possible outcome for the university community. Pell and changes to the program will continue to be an issue as we head towards Fall and finishing up the FY12 process.

The Committee also brought up the concern that 89% of first-generation college students do not complete their degree. The Secretary stated that this was one of the Department’s FY12 priorities, and they are trying to solve this problem in three ways: 1) Fighting to maintain access to Pell. 2) Investing in community colleges and partnerships with the private sector to leverage funding. 3)  Investing in programs such as i3 and the proposed “First in the World Competition”. The First in the World Competition would provide “venture capital” to encourage innovation approaches to improving college completion (particularly low-income and minority students), research support to build the evidence of effectiveness needed to identify successful strategies, and resources to scale up and disseminate strategies we already know are successful.

The Labor-HHS-Ed Appropriations bills have not yet been drafted in the House or the Senate and we don’t expect to see them until after the August recess.

The Department of Education has released the following summary of the President’s FY12 budget request for the agency:

U.S. Department of Education

Information Release

2/14/11

Deep cuts and efficiencies in several key education programs will help fund new education investments to keep American students competitive in the global economy under the proposed 2012 Obama administration education budget. The President released the budget at a Baltimore public school on Monday, February 14.

“We are cutting where we can to invest where we must,” said Education Secretary Arne Duncan, who joined President Obama for the announcement. “These are challenging times, but we can’t delay investments that will secure our future. We must educate our way to a better economy by investing responsibly, advancing reform and demanding results.”

Areas for new investment run the spectrum from early learning to college completion, and include funding for formula and competitive K-12 programs, including a new district-level Race to the Top program with a rural set-aside and another round of Investing in Innovation grants. The budget also includes new and expanded programs that support teacher and principal effectiveness. Read more

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