Federal Relations

By Cynthia A. Littlefield, Vice President for Federal Relations, AJCU

Update: The FY16 budgets have passed both chambers of Congress and moved to conference since this article was written. For more information, please write to Cyndy Littlefield, AJCU’s Vice President for Federal Relations: CyndyLit@aol.com.

Republican-Controlled Congress Proposes Devastating Student Aid Cuts

In a carefully orchestrated effort, both the U.S. House and Senate Budget Committees have released their FY16 budgets, passed their bills in Committee, and are going to the Floor the week of March 23rd. The House proposed balancing the federal budget in eight years by cutting $5.5 trillion in spending, while the Senate proposed a balance in ten years by cutting $4.4 trillion to the budget. Higher education would take a huge hit by losing a total of $150 billion in federal student aid over ten years. At stake is the heart and soul of federal student aid: the Federal Pell Grant program.

The House budget calls for the total elimination of all mandatory Pell Grant funding: $89 billion over ten years. The current Pell Grant maximum award is $5,775, of which $915 is obtained from mandatory funding. Appropriators would be hard pressed to replace Pell Grant mandatory funding from the discretionary budget, thus resulting in substantial cuts. Fewer students would be ineligible for Pell Grants, thus squeezing the program further. 

Student loans would also be hit by the elimination of the in-school interest subsidy program, which would cost students an additional $3,800. The government would get back an additional $38 billion for eliminating these subsidies. Public service loan forgiveness programs, which have provided opportunities for students to pursue such careers as police officers, firefighters, nurses, teachers or service members, would be eliminated because the student loans would no longer be forgiven over a period of time. An additional $26.8 billion would pay down the deficit with this loan forgiveness elimination. Public service loan forgiveness programs benefit the country greatly by helping more public servants afford to pursue their desired career paths.

The Senate bill is similar (though one degree less draconian), but still calls for the elimination of the mandatory Pell Grant and in-school interest subsidies. We are concerned by the call for reconciliation instructions from both bills to at least realize an additional $1 billion from the Senate HELP Committee and House Education and Workforce Committee, which will probably cut higher education mandatory funding again. According to House Ranking Budget Member Rep. Chris Van Hollen (D-MD), reconciliation instructions could go beyond the $1 billion request.

The U.S. Department of Education is currently in the process of reauthorizing the Higher Education Act (HEA). The purpose of the budget is to allocate funding levels for consideration in appropriations and to establish goals and priorities. But, when such items (e.g. in-school student loan interest subsidies and public service loan forgiveness programs) require authorization, setting the budget becomes more precarious.

A new budget cost estimate by the Congressional Budget Office, called “fair-value accounting,” will now make student loans more comparable to the risk that the private market might bear if making the same loans. This will make the cost of supplying loans more expensive, thus adding even more burden to students.

For FY16, sequestration cuts remain, reflecting the same cap as FY15. Starting in FY17, a total cut of $759 billion, or 13.8%, cut below sequester caps for non-defense discretionary caps will begin. And of course, both budgets call for totally eliminating the Affordable Care Act. Clearly, this Congress wants more funding for defense and less for students and children, or the elderly and infirmed.