President Trump Again Proposes Massive Cuts to Student Aid

By Stephen Payne and Megan Walter, Policy & Federal Relations Staff

In his fiscal year (FY) 2020 budget proposal, which would impact award year 2020-21, President Donald Trump again reiterated his support for hard-hitting cuts to the federal student aid programs, similar to the cuts outlined in his previous budget proposals. Congress has soundly rejected the proposed cuts in the past.

Among other things, the proposal—"A Budget for a Better America: Promises Kept. Taxpayers First"—recommends cutting the Public Service Loan Forgiveness (PSLF) and Federal Supplemental Educational Opportunity Grant (FSEOG) programs, cutting funding for the Federal Work-Study (FWS) program in half, and rescinding $2 billion from the Pell Grant reserve funds.

“Once again the president’s proposed cuts to higher education miss the mark,” said NASFAA President Justin Draeger. “In fact, the only increase proposed by the president’s budget in higher education is money to upgrade systems within the Department of Education. While system upgrades may certainly be warranted, doing so while simultaneously enacting devastating cuts to programs that directly benefit students shows just how disconnected the president’s priorities are from student realities. We call on Congress to once again discard these short-sighted proposals and consider ways to increase the federal investment in education.”

Education Secretary Betsy DeVos said in a statement that the budget proposal reaffirms the administration’s “commitment to spending taxpayer dollars wisely and efficiently by consolidating or eliminating duplicative and ineffective federal programs.”

“This budget at its core is about education freedom—freedom for America’s students to pursue their life-long learning journeys in the ways and places that work best for them, freedom for teachers to develop their talents and pursue their passions and freedom from the top-down ‘Washington knows best’ approach that has proven ineffective and even harmful to students,” DeVos said. 

Other higher education associations and advocacy groups described the budget proposal as a net loss for students, due to deep cuts to student aid programs.

James Kvaal, president of the Institute for College Access and Success (TICAS), said in a statement that those cuts “overshadow otherwise worthwhile changes, such as automatically enrolling distressed borrowers in income-driven repayment, automating the annual income recertification process, and modernizing student loan servicing.”

“As college remains more crucial for economic opportunity than ever before and costs continue to rise, these proposals move in the exact opposite direction that students and our economy need,” he said.

Peter McPherson, president of the Association of Public and Land-Grant Universities, said the cuts were a “mistake.”

“The U.S. should be looking for ways to expand college access, not shrinking programs that enable such opportunities. A college education should be equally available to students from all backgrounds regardless of their family income,” he said in a statement. “Simply put, this budget proposal is misguided and turns its back on many programs and initiatives that are key to the future success of our nation.”

Below is a more detailed description of how Trump's budget proposal would affect specific student aid programs and benefits.

Maintaining Pell Grant Maximums, While Taking Pell Reserves
Trump proposed sufficient funding to support a FY 2020 Pell Grant maximum award of $6,195, the same maximum grant as FY 2019. Similar to last year, Trump proposed expanding Pell Grant eligibility to "include high-quality short-term programs that provide students with a credential, certification, or license in an in-demand field."

Trump also proposed rescinding $2 billion from the reserves in the Pell Grant program, which moves the program needlessly closer to shortfall. With the $2 billion rescission, the Department of Education (ED) estimates the program’s reserves will run dry in FY 2024.   

The proposed budget also would move the Iraq and Afghanistan Service Grant program into the Pell Grant program "to ensure the children of our fallen service members receive a full aid award" by exempting the program from annual sequestration adjustments required under the Budget Control Act of 2011.

Massive Cuts to Campus-Based Aid Programs

Federal Supplemental Educational Opportunity Grant (FSEOG) Program
Trump again proposed eliminating the FSEOG program entirely. FSEOG was established by the 1972 Amendments to the Higher Education Act of 1965. The program is estimated to provide $1.13 billion in grant aid with 1.6 million awards in award year 2018-19. In FY 2018 and 2019, FSEOG was funded at $840 million annually. To defend the elimination of FSEOG, the ED’s budget summary notes that FSEOG is "largely duplicative of the Pell Grant program and does not deliver need-based aid to the neediest students."

Congress chose to reject previous proposals to eliminate FSEOG in the last two years. Following the president’s proposed elimination of the program in FY 2018, Congress appropriated $840 million for the program, the largest increase in a single year in the program’s history, and the first boost to funding since FY 2014. In FY 2019, Congress maintained funding at $840 million.

Federal Work-Study (FWS) Program
For FWS, Trump's proposed funding level of $500 million represents a 56 percent cut to the program.

By comparison, in FY 2019, FWS was funded at $1.13 billion. The program is estimated to provide $1.24 billion in aid to fund 704,400 awards in the 2018-19 award year. If the president’s budget proposal was enacted, the cut would decrease the number of student awards by 382,000. This cut would amount to the largest percentage cut and the largest dollar-for-dollar cut in the program's history, if enacted.

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 2020-21, with no funding for the "fair share" portion. Because the Trump budget proposed 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 expressed support for revising the FWS allocation based "in part on enrollment of Pell recipients" and for targeting FWS to "career or academically relevant" placements. The budget would also eliminate graduate student eligibility for FWS.

Congress chose to reject prior proposed cuts to FWS in FY 2018 and FY 2019, appropriating $1.131 billion in each year, the first time since FY 2009 the program’s funding surpassed $1 billion.

No Lifeline for Federal Perkins Loans
Trump again did not propose an extension of the Perkins Loan program in his FY 2020 budget.

Direct Loans
Trump again proposed eliminating the subsidy for Federal Direct Loans for undergraduate students, without any proposal to redirect those funds towards other student aid programs. Students would be ineligible for subsidized loans for any first loan originated after July 1, 2020, or until they have completed their "current course 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), 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
With the same components as last year's budget, Trump proposed consolidating the income-driven repayment (IDR) plans into a single plan: one 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 standard repayment cap would be eliminated. The new plan would be the only income-driven repayment option for borrowers who originate their first loan on or after July 1, 2020, "with an exception for students who borrowed their first loans prior to July 1, 2020 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, the new IDR plan would calculate payments for married borrowers filing separately on the combined household Adjusted Gross Income.

Further, Trump proposed automatically enrolling "severely delinquent borrowers" in IDR and facilitating for multi-year consent for data-sharing between the IRS and ED.

In addition, Trump proposed eliminating the PSLF program altogether. The same grandfathering provisions for the elimination of subsidized loans and the new IDR plan would apply to PSLF: any borrower who originated his or her first loan before July 1, 2020, would be eligible for PSLF.

Risk-Sharing
The budget also included language calling for "shared accountability" between the federal government and colleges and universities for repayment of federal student loans. The administration did not spell out its risk-sharing priorities, but noted an interest in "working with the Congress to address these issues."

Other Provisions
The budget requested funding at $1.8 billion—a $133 million increase—for student aid administration to support the Office of Federal Student Aid's (FSA) Next Generation Services Environment “to provide an innovative, world-class financial services experience for its customers.” The new student aid ecosystem is expected to feature a single access portal for students and borrowers.

What's Next?
Congress will now begin consideration of FY 2020 funding levels. However, Congress will need to raise the budget caps set under the Budget Control Act of 2011 to avoid a dramatic $55 billion cut to domestic programs.

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. In addition, NASFAA’s Federal Budget FAQ page answers some of your most pressing budget questions.

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.

 

Publication Date: 3/12/2019


Joe B | 3/12/2019 2:19:37 PM

"Great. An extra $133M for NextGen services so students can see how much less federal aid they're getting."

My thought, also. What "world-class experience" are we trying to promote, exactly? How much of an experience do you need when your award package is always just $X in unsubsidized loans? Devoid of FWS and FSEOG? And in 5 years, suffering Pell Grants? And in 10 years, no PSLF for those who opted for low-paying fields in an effort to change the world?

What amazes me is ED openly and incorrectly categorized one of its only remaining grant funds, FSEOG, as duplicative and ineffective? Are they TRYING to close their own doors? I would have thought that the "Sponsor of the American Mind" would have more dedication to funding it than this, even under this Mickey Mouse regime.

Amanda G | 3/12/2019 10:59:22 AM

.

David S | 3/12/2019 9:13:23 AM

Great. An extra $133M for NextGen services so students can see how much less federal aid they're getting.


The silver lining is that there's no way a budget that resembles this gets through Congress, where members seeking re-election have to face constituents who this would severely impact...not to mention their staff members, many of whom still have years of loan repayment to go, and if they continue working in federal jobs, would qualify for PSLF...not to mention that a report today in Roll Call shows that 13% of Congress members have student loan debt themselves, or a family member with student loan debt. But in my x number of years in financial aid, I don't think I've ever seen a budget or an administration this hostile to access to higher ed.

#Fight4FinAid more than ever, folks.

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