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Category: Higher Education

Ryan Budget Proposes Deeper Cuts to Student Financial Aid

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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.

FY13 Budget Supports Research, Student Aid

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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.

White House Unveils Draft ‘College Scorecard’

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The White House is seeking input from colleges and consumers about a draft “College Scorecard” that would provide prospective students with information about a college’s cost, graduation rate, average debt burden, loan-repayment rate, and job-placement rate. The scorecard, which President Obama announced in a speech at the University of Michigan last week, is designed to make it easier for students and their parents to comparison-shop for college.  Read more here.

Sequestration: What it means for Federal Research Funding

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Automatic spending cuts, or sequestration, was established through the Budget Control Act passed by Congress last August and is set to go into effect January 2013.  The sequestration process has great implications for all federal discretionary programs, including most – if not all – of federally funded research programs. Below is a link to a detailed explanation of this process and the impacts to federal spending in both the short- and long-term.

Sequestration_Details

Obama proposes Race to the Top for College Affordability

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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.