House-Passed GOP Budget Plan Will Meet Resistance in Senate

The House of Representatives passed the Republican's fiscal year (FY) 2013 budget plan, The Path to Prosperity, yesterday afternoon by a vote of 228-191. Votes fell primarily along party lines, with no Democrats voting for the bill and only 10 Republicans voting against it.  

Drafted by House Budget Committee Chairman Paul Ryan (R-WI), the budget resolution outlines spending caps and would cut mandatory and discretionary funding for U.S. Department of Education programs by $9.5 billion in FY 2013. The GOP plan, which differs greatly from President Obama’s FY 2013 budget request, will not move forward as it stands no chance of passage in the Democratically-controlled Senate.

Specifically, the budget resolution proposes the following provisions for student aid programs:

  • 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%

The budget proposal is largely symbolic because the Senate Democratic leadership has stated that they will not debate a budget resolution this year and will instead stick to the debt-deal reached last August to set spending caps for FY 2013. Senate Budget Chairman Kent Conrad (D-ND) and Appropriations Chairman Dan Inouye (D-HI) have written to House Speaker John Boehner (R-OH) to anything proposal with spending levels below the debt-deal would amount to a "breach of faith" that "would risk a government shutdown." 

Generally, the GOP budget resolution maintains that recent increases in federal funding for student aid have exacerbated a crisis in tuition inflation. A report about the budget proposal issued by House Budget Committee Chairman Ryan argues that federal funding for student aid has actually made college less affordable because increases in federal financial aid funding are being absorbed by tuition increases.

"[S]chools are … blaming the rising cost of health care and employee benefits, the need to compete for students by offering nicer facilities, and reductions in state subsidies and endowments as a result of the recession," the report states. "While these do represent contributing factors, they are merely accelerating a long-standing problem. College costs have risen at twice the rate of inflation for about thirty years, but this year fees soared 8.3 percent -- more than double the inflation rate -- as federal subsidies have increased at a historic pace."

The report maintains that "the decisions of colleges and universities to raise their prices would have been constrained if the federal government had not stepped in so often to subsidize rising tuitions."

To address this issue the GOP budget would limit the growth of financial aid and focus it on low-income students to "force schools to reform and adapt."

The budget outline also calls for a revision of how Congress tracks the cost of the federal student loan program to use fair-value accounting principles to account for market risk associated with the program. According to a 2010 Congressional Budget Office (CBO) issue brief on the Costs and Policy Options for Federal Student Loan Programs, "FCRA estimates are not comprehensive measures of the costs of the federal student loan programs, for two main reasons: They do not take into account the cost of some of the risks that student loans impose on taxpayers, and they omit most administrative costs (which are recorded elsewhere in the budget)." Under fair-value estimates, the federal student loan programs cost taxpayers money.

"[A]ccording to outdated current scoring rules, these extremely risky loans appear as profit-making investments in the federal government’s books, thus encouraging more loan expansion, even though there is evidence that subsidized lending contributes to tuition inflation," states the House Budget Committee’s report on the budget outline.

 

2 Comments

  • And the beat goes on:

    "Two U.S. Democratic Senators introduced a bill that would require colleges to counsel students before they sign on to private loans and inform them if they are eligible for federal loans," Bloomberg reports. "The 'Know Before You Owe Act of 2012' would also require the borrower’s school to confirm the student’s enrollment status, cost of attendance and estimated federal financial aid assistance before the private student loan is approved, according to a statement today released by Senator Richard Durbin, a Democrat from Illinois. Private loans don’t have the same kinds of protection as federal loans, which include income-based repayment and deferment options. U.S. educational debt has reached $1 trillion, according to the Consumer Financial Protection Bureau."

  • I know it would be difficult to quantify, but most debate about the price increases imposed by institutions ignores the costs of complying with "unfunded mandates" imposed by federal and state statutes and regulations for reporting and comprehensive disclosure, i.e. comsumer information, net price calculator, gainful employment, etal. That is not to say that these are inappropriate requirements in and of themselves, but they do have a cost to the institutions. There is a constant "harping" about administrative staff "bloat" without any acknowledgment that institutions have little choice about incurring thse costs. Can NASFAA or NACUBO put any facts behind the cost of these "unfundated mandates"?

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