The winners of the 2012 election in Congress will have to tackle several outstanding student aid issues when they take office in January 2013, including a Pell Grant funding shortfall, student loan interest rates, and expiring tax benefits.
Results from the 2012 election show that Democrats will maintain their majority in the Senate, after picking up two seats on Tuesday. However they won't have the 60-seat "super-majority" that would enable them to overcome a filibuster. The Democrats will have 53 seats, plus Independents Sen. Bernie Sanders (VT) and newly-elected Sen. Angus King (ME) who caucus with the Democrats. Republicans will have 45 seats next term. Overall, there are 11 new senators in the 113th Congress and a record 20 female senators.
Republicans are also expected to hold on to their majority in the House and perhaps slightly strengthen it. The current results show the balance of power at 233-193, with 10 too-close-to-call races remaining. Overall, there will be an estimated 76 new House members. Chairman of the House Committee on Education and the Workforce John Kline (R-MN) was reelected for another term and is expected to retain his chairmanship. The ranking Democrat on the committee George Miller (CA) was also reelected.
The outcome of the election could lead to an even more polarized Congress, as many moderates lost seats and the number of swing districts has declined since the 2010 election. According to media reports, the loss of moderates in Congress mirrors the declining number of moderate voters. The Associated Press reports that in 2012 voters were “more ideologically polarized than in 2008 or 2004.”
Ten members of the current 112th Senate did not seek reelection, including six Democrats, three Republicans and Independent Sen. Joe Lieberman (CT) who generally caucused with Democrats on domestic issues. Of those 10, six have traditionally been considered moderates who are willing to cross party lines, including Sen. Jeff Bingaman (D-NM), a top member of the Senate Health Education Labor and Pensions (HELP) Committee. Lieberman’s successor will be Democratic Rep. Chris Murphy (CT) and Bingaman’s seat will go to Rep. Martin Heinrich (D-NM).
In addition, moderate Sen. Dick Lugar (D-IN) and 13 House incumbents were defeated in their primary battles, including Rep. Hansen Clarke (D-MI), author of the Student Loan Forgiveness Act, a bill that would forgive debt for individuals who have paid 10 percent of their discretionary income toward their loans for 10 years. Clarke’s loss leaves the fate of his legislation in question, as it is not likely to be passed during the lame-duck session of the 112th Congress and doesn’t appear to be championed by any member of the 113th Congress.
The current, 112th Congress will begin its “lame duck” session after the 2012 election and isn’t expected to act on several outstanding federal student aid issues. This means the 113th Congress will have to tackle these issues.
The recent, dramatic expansion of the Pell Grant Program has driven up costs and forced Congress to cobble together a combination of additional funding and eligibility restrictions to avoid a funding shortfall for the program. While the program is fully funded for fiscal year 2013, it is projected to face a roughly $7 billion shortfall in fiscal year 2014. To shore up this shortfall, Congress will need to increase funding for the program or reduce spending by trimming awards or tightening eligibility requirements.
Generally, Democrats have pushed for additional funding for Pell Grants while Republicans support finding ways to reduce the cost of the program by tightening eligibility standards and/or reducing awards. Addressing the Pell shortfall will likely be a point of contention for the more partisan 113th Congress
The good news is that the Pell Grant Program has a small surplus for 2013, so no changes are expected for the 2013-14 academic year. This also gives Congress some time to address the issue.
Last year, Congress passed a one-year extension of the 3.4 percent interest rate for Direct Subsidized Stafford Loans. Preventing the rate from increasing to 6.8 percent drew widespread support from both sides of the aisle. Post-election, Congress will need to address this issue again before July 1, 2013 to prevent the interest rate on these loans from increasing to 6.8 percent.
With the increasing scrutiny on student loan debt and default, this issue is likely to draw as much attention as it did in 2012. However, it is unclear if maintaining a lower interest rate will draw bipartisan support again, given it will no longer be an election year.
There are currently four education tax benefits that expire on Dec. 31, 2012 -- the American Opportunity Tax Credit, the Student Loan Interest Deduction, the Coverdell Education Savings Accounts, and the Employer-Provided Educational Assistance. Students and their families will be able to claim these benefits when they file their 2012 taxes in 2013, but they will not be available for the 2013 tax year that families file in 2014 unless Congress extends them by Dec. 31, 2013.
Ideally, the 112th Congress will extend the tax benefits before Dec. 31 to eliminate uncertainty for students and parents. The fact that Congress will be in a lame duck session could decrease their chances of extending the tax benefits, leaving the issue for the 113th to address next year.
Extending these benefits could be a challenge for a more partisan Congress because they will likely be tied to Bush Era tax cuts that Democrats generally want to eliminate and Republicans generally want to extend.
The renewal of the Higher Education Act is also due in 2014. The last reauthorization took almost a decade, and the hope is that this one will occur as close to the deadline as possible. However, a potential roadblock is the fact that there are several other education bills that are due to be reauthorized before the HEA and have not yet happened, including the Elementary and Secondary Education Act (ESEA).
Publication Date: 11/8/2012