Senate Spending Bill Trims Undergrad Loan Subsidy to Fund Pell

The full Senate Appropriations Committee approved the Labor, Health and Human Services, and Education (Labor-H) Appropriations Subcommittee fiscal year (FY) 2012 spending bill during a mark-up yesterday.  

Meanwhile, the House of Representatives rejected a temporary, stop-gap spending bill that would have maintained funding for federal programs from the end of FY 2011 on Sept. 30 through Nov. 18. With just a week until the end of the fiscal year and Congress far from completing the FY 2012 budget, lawmakers need to pass a continuing resolution (CR) to fund the federal programs or face yet another possible government shutdown.

The Senate Appropriations Committee's FY 2012 Labor-H spending bill protects the maximum $5,550 Pell Grant for award year 2012-13 by eliminating the interest subsidy on undergraduate federal student loans during the six-month grace period and redirects those savings into the Pell program, according to reports. All other student aid programs, including the Supplemental Educational Opportunity Grant (SEOG), are reportedly funded at the same level as last year.

Eliminating the interest subsidy during the grace period is expected to provide $2.34 billion in savings over five years. These savings would be used to help fill the remaining $1.2 billion Pell Grant shortfall that currently exists for the 2012-13 award year.  The Senate Labor-H Appropriations Subcommittee first approved the bill earlier this week. According to Subcommittee Chairman Sen. Tom Harkin (D-IA), "One of the Committee’s highest priorities in the bill is maintaining the maximum Pell Grant award. Now more than ever, students need affordable, quality education opportunities to help make our economy strong and competitive."

The Labor-H Subcommittee’s overall FY 2012 allocation is over $300 million less than they had in FY 2011. The bill eliminates funding for 15 programs, but doesn't eliminate any student aid programs. Overall, the bill provides $68.43 billion for U.S. Department of Education programs, up from $68.34 billion last year.

The next step would normally be for the the full Senate to vote on the bill, but timing is an issue because the fiscal year ends Sept. 30. The House never completed a comparable spending bill and is expected to push for an omnibus spending bill, bundling all 12 appropriations bills into one.  Given the impending deadline, Congress needs to pass a short-term continuing resolution (CR) within the next week that will temporarily fund the federal government and give Congress additional time to complete the FY 2012 appropriations process.  

While the traditional appropriations process plays out, the congressionally appointed Super Committee will simultaneously be working toward developing a deficit reduction plan that would equal $1.5 trillion in cuts, as mandated by the Budget Control Act passed in August. If the committee's recommendations achieve at least $1.5 trillion in savings and are enacted by Congress, the debt ceiling will be raised $1.5 trillion. If the committee's bill is enacted and produces between $1.2 trillion and $1.5 trillion, the debt limit will be raised the same amount as the savings the bill creates. 

If the Super Committee cannot reach at least $1.2 trillion in cuts an enforcement mechanism, known as sequestration, will be imposed.  This process would mandate across-the-board spending cuts, with half coming from defense spending and the other half coming from non-defense spending.