Duncan Defends Cost of Obama’s College Affordability Plan at House Hearing
Education Secretary Arne Duncan defended the spending required for the Obama administration’s proposed college affordability initiatives (outlined in Obama’s fiscal year (FY) 2013 budget request) at a hearing before the House Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies on Thursday.
Some representatives expressed concern about the cost of the President's new college affordability initiatives and the proposal to tie campus-based aid to college affordability metrics that remain undefined. Obama’s budget requests a 2.5 percent spending increase for the U.S. Department of Education over the FY 2012 budget.
Committee Chairman Rep. Denny Rehberg (R-MT) argued that the President’s budget maintains level funding for programs with proven success, such as early education and college preparation programs, and requests additional funding for unproven college affordability initiatives at a time when the government needs to cut spending.
Some lawmakers also expressed concern about Obama’s proposal to decrease Perkins Loan benefits to make it available to more schools and more students.
"I’m concerned that this proposal preserves the existing Perkins program in name only,” Rep. Lucille Roybal-Allard (D-CA) said. "As I understand it, the new program will reach more students but is a costlier alternative because interest will accrue while students are enrolled, students will be subject to a 1 percent loan origination fee, the current public service cancellation benefits will be lost, the nine-month grace period will be reduced to six months and the interest rate will increase to 6.8 percent, in other words the program bears little resemblance to the Perkins program that currently benefits low-income students."
The Department’s Chief Financial Officer Thomas Skelly said the idea is to expand the number of schools and students that participate in the Perkins program and provide incentives for postsecondary institutions to aggressively pursue innovative college affordability initiatives.
"Right now there are only about 1,600 schools that get Perkins loans. We’d like to expand it to about 4,400 schools," Skelly said. "Right now we make about $1 billion in loans each year. We could make about $9 billion a year."
Rep. Norm Dicks (D-WA) cautioned Duncan that this effort may penalize postsecondary institutions for budget decisions that have to be made because of declines in state support for higher education.
"I think you’ve got to be very careful not to criticize the universities unfairly here for what the states are doing to them, especially the public universities," Dicks said. "In my state, it is the legislature that has dramatically cut back on the funding, and they don’t have any choice."
Duncan responded that the Department understands the predicament states and universities are in, but said the federal government has to incentivize innovation toward a more affordable higher education system.
"This is about shared responsibilities," Duncan said. "Where we are challenged as a country is that college is becoming unaffordable, not just for low-income folks, but for middle-class folks. Some are being very creative here, most are not."
Still, Republican members of the committee argued that in the current economic climate, the federal government needs to rein in spending and reduce the burden of the deficit on future generations.
'What I find ironic is somehow we expect our local governments to balance their budgets and universities to balance theirs and states are doing the same and the federal government is the endless pit of money," Chairman Rehberg said. "We cannot continue to expect the federal government to make up for the shortfalls at the local level."
Pell Grants
Rep. Dicks asked Duncan how the Department plans to put the Pell Grant program on stable footing as it nears a $6 billion shortfall in FY 2014.
Duncan noted that the President’s proposed FY 2013 budget would provide $22.8 billion in discretionary funding for Pell. The total amount available would exceed program costs in the 2013-14 award year by $1.5 billion, which Duncan believes is the first step in addressing the 2014 shortfall.
The Department is also proposing a “down payment on preserving the Pell” that includes short-term solutions to close the anticipated FY 2014 funding gap:
- Expand and reform the Perkins Loan program
- Reduce the amount guaranty agencies receive when they rehabilitate student loans
- Reduce the in-school interest subsidy for subsidized Stafford Loans to 150 percent of the normal program length
Duncan cautioned members against future changes to the program that could hurt students.
"We also want to work with you to ensure that any changes made to keep the Pell Grant program on solid footing aren’t done in such a way that suddenly ends benefits for student that are already in the program," Duncan said. "We are concerned that such retroactive changes move the goal posts on students and could make them more likely to drop out."