President Trump Proposes Historic Cuts to Student Aid in 2018 Budget

By Stephen Payne, Policy and Federal Relations Staff

On the heels of an abbreviated budget outline released in March that alluded to damaging cuts to the federal student aid programs, President Donald Trump on Tuesday released his expanded budget proposal for fiscal year (FY) 2018, which would affect award year 2018-19 and provides a full glimpse into the Trump administration’s funding priorities for the federal student aid programs. Overall, the Trump budget proposal would cut about $150 billion from federal student aid programs over 10 years.

The budget proposal, “A New Foundation for American Greatness,” includes a number of harmful cuts across the spectrum of federal student aid, including to grant, loan, work-study, and repayment programs. Broadly, the budget was designed to balance in 10 years without cuts to Social Security or Medicare, all while increasing funding for defense and border security programs.

"The Trump administration's budget imposes devastating cuts on the federal financial aid programs that many college students rely on to pay for college,” said NASFAA President Justin Draeger. “By eliminating or significantly cutting these programs, the White House puts in jeopardy the education of the next wave of young workers, and the future economic security of the U.S. NASFAA remains committed to advocating on behalf of students who count on the federal student aid programs to pay for college, particularly students from the lowest income brackets. We encourage Congress to create a budget that will aid these students in their quest for the American Dream, and include adequate levels of support for all students pursuing a higher education."

Pell Grant Program

Trump’s budget proposal would cut $3.9 billion from the Pell Grant Program reserves. A cut of this magnitude, on top of the $1.56 million cut in the FY 2017 spending package passed into law earlier this month, moves the Pell Grant Program perilously closer to a funding shortfall in the coming years.

In the new budget, Trump acknowledged support for the reinstatement of access to two scheduled awards in an award year, also known as “year-round Pell,” which was included in the spending agreement passed earlier in the month.

Regardless of cuts to the program’s reserves, the 2018-19 Pell Grant maximum award will remain at $5,920, the 2017-18 maximum award level. Trump does not propose extending the inflation adjustment to the maximum award, meaning the Pell Grant maximum award will remain at $5,920 in each award year moving forward, absent congressional action.

Campus-Based Aid Programs

Federal Supplemental Educational Opportunity Grant (FSEOG) Program

Trump proposes eliminating the FSEOG program entirely. FSEOG was established by the 1972 Amendments to the Higher Education Act of 1965. The program provided $992,874,878 in grant aid to 1,530,180 students in award year 2015-16. Since FY 2014, FSEOG has been funded at $733 million annually. To defend elimination of FSEOG, the Department of Education’s budget summary notes FSEOG is “largely duplicative of the Pell Grant program and does not deliver need-based aid in the most targeted way.”

Federal Work-Study (FWS) Program

For Federal Work-Study (FWS), Trump’s proposed funding level of $500 million represents a 49.5 percent cut to the program. In FY 2017, FWS was funded at $989.7 million. The program provided $1,096,080,441 in aid to 634,931 students in the 2015-16 award year. If enacted, this cut would amount to the largest percentage cut and the largest dollar-for-dollar cut in the program’s history. Since 1965, FWS funding was cut by more than 10 percent twice: in FY 1973 and in FY 2010, a result of one-time funding increases in the 2009 American Recovery and Reinvestment Act.

Because of the current “base guarantee” component of the campus-based aid allocation formula, which guarantees funds to institutions at the level of their award year 1999-2000 allocation, a large cut to FWS could have dramatically different implications for different institutions. Based on a NASFAA analysis, FWS funding at a level less than approximately $660 million would mean institutions would receive—at most—their base guarantee as their total allocation in award year 2018-19, with no funding for the “fair share” portion. Because the Trump budget proposes funding for FWS at $500 million, if enacted, institutions would receive approximately 75 percent of their “base guarantee” and no “fair share” funds, a potentially devastating cut particularly for those institutions with low “base guarantee” allocations.

The budget also implies support for revising the FWS allocation formula, a NASFAA recommendation, by proposing to “reform the poorly targeted Work Study program to ensure funds go to undergraduate students who would benefit most.”

Federal Perkins Loan Program

Trump’s budget recommends allowing the Federal Perkins Loan Program to expire on September 30, 2017. A bipartisan bill to extend Perkins was released in the House last week, though an extension remains an uphill battle in Congress. In 2015-16, $1,045,313,129 in Perkins Loans were lent to 421,646 students.

Direct Loans

Trump proposes eliminating the subsidy for Federal Direct Loans for undergraduate students. Students would be ineligible for subsidized loans for any first loan originated after July 1, 2018, or until they have completed their program of study. Already eliminated for graduate and professional students in 2011, eliminating the in-school interest subsidy will result in an increase to the cost of college by thousands of dollars for undergraduate students with financial need. According to an analysis by the Institute for College Access and Success (TICAS) released yesterday, a student starting school in 2018-19 who borrows the maximum aggregate subsidized loan amount ($23,000) and graduates in five years would enter repayment with $3,400 in additional student loan debt without the in-school interest subsidy.

Repayment

As part of fulfilling a proposal from his presidential campaign, Trump proposes consolidating the income-driven repayment (IDR) plans into a single plan: an IDR plan with a discretionary income cap of 12.5 percent and a 15-year repayment term for undergraduates, but a 30-year repayment term for graduate students. The new plan would be the only income-driven repayment option for borrowers who originate their first loan on or after July 1, 2018, “with an exception for students who borrowed their first loans prior to July 1, 2018 and who are borrowing to complete their current course of study.” Those borrowers would retain access to the current slate of income-driven repayment options.

In addition, Trump proposes to eliminate the Public Service Loan Forgiveness (PSLF) Program altogether to “generate savings that help put the Nation on a more sustainable fiscal path.” The same grandfathering provisions for the elimination of subsidized loans and the new income-driven repayment plan would apply to PSLF: any borrower who originated their first loan before July 1, 2018, would be eligible for PSLF.

Other Provisions

Trump’s budget eliminates the Child Care Access Means Parents in School (CCAMPIS) Program, which provides grants to support campus child care centers. Trump also proposes eliminating two TRIO Programs, the Ronald E. McNair Postbaccalaureate Achievement Program, which has a stated goal to “increase graduate degree awards for students from underrepresented segments of society,” and Educational Opportunity Centers (EOC), which has a goal “to increase the number of adult participants who enroll in postsecondary education institutions.”

What’s Next?

With a full budget proposal in hand, Congress will begin work on funding levels for FY 2018 in the coming weeks; however, plans to use the FY 2017 budget resolution to pass a repeal of the Affordable Care Act may delay progress on settling FY 2018, setting up a potential showdown at the end of the federal fiscal year on September 30, 2017, either to fund the government with a continuing resolution (CR) or to shut down the federal government. Both Republicans and Democrats have expressed concern with certain portions of President Trump’s budget, so at this point, it’s unlikely Congress would accept these dramatic cuts as written.

For more information on the federal budget and appropriations process, check out NASFAA's Federal Budget and Appropriations page, which features a flowchart that explains the budget process and also includes recent news. Stay tuned to NASFAA’s Today’s News for continued updates as Congress now takes the lead on funding for FY 2018.

NASFAA encourages all members to join the “Fight for Financial Aid” by liking the campaign’s Facebook page, tweeting with #Fight4FinAid, and by sharing campaign links with friends, colleagues, and students. NASFAA also encourages members to contact their congressional representation to express their views on President Trump’s budget proposal. You can find contact information for your member of Congress here: Find Your Representative in the U.S. House of Representatives and Contact Information for U.S. Senators.

NASFAA will hold a campaign kick-off event for the “Fight for Financial Aid” campaign at NASFAA’s National Conference in San Diego, California, in June.

 

Publication Date: 5/23/2017


Patrick G | 5/24/2017 4:59:30 PM

" In 2014-15, $1,160,352 in Perkins Loans were lent to 528,008 students."
The total you report as Perkins loaned in 2014-15 appears to be understated; otherwise the average Perkins loan in 14-15 would be just over two dollars.

Any chance you could provide a brief summary of the budget proposal's funding levels for HHS/HRSA (Title VII and other) financial aid and health professions workforce development programs?

Barbara B | 5/24/2017 10:55:11 AM

This guy is a real jerk. His favorite saying of MAKE AMERICA GREAT AGAIN is a bunch of bull if you are going to make it impossible for our young people to get a good education. Without an educated public there will be no MAKE AMERICA GREAT AGAIN. These rich people always want to put the screws to the lower and middle income families.

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