House Education Committee Debates FY 2013 Education Budget

Education Secretary Arne Duncan defended President Obama's fiscal year (FY) 2013 education budget request and criticized House Republican's FY 2013 budget proposal at a hearing held yesterday by the House Education and the Workforce Committee.


Duncan asserted that Obama's budget request would "help protect the significant taxpayer investment in Federal postsecondary student aid programs by creating incentives for States and public and private postsecondary institutions to provide good value to students at an affordable price."

Committee Chairman John Kline (R-MN) expressed concern that Obama's FY 2013 Budget Request represents another expansion of federal authority that will lead to more headaches for students, parents, and institutions.

"We must be extremely cautious about polices that manipulate student loan interest rates and use need-based student aid subsidies such as the Perkins Loan and Work Study programs as bargaining chips to impose federal price controls," Kline said.

Duncan was equally critical of the House Republican FY 2013 Budget Resolution, which the full House is expected to vote on this week. He argued that the GOP budget balances the federal budget on the backs of America's students. Regarding student aid programs, Duncan argued that this budget would:

  • cut $3 billion from Pell aid to students in 2013, eliminating almost 400,000 recipients, and reducing the awards of 9.3 million
  • hurt borrowers by allowing the interest rate on subsidized loans to double and eliminating the undergraduate in-school interest rate subsidy
  • cut Federal Work Study (FWS) funding by $185 million, potentially denying work-study for 129,000 students

Duncan also urged Congress to prevent the sequestration process that is scheduled to occur in January 2013 and would result in a 7.8% across-the-board cut to non-security discretionary funding. Congress needs to avoid sequestration by passing a balanced deficit reduction measure including targeted savings that total at least as much as the $1.2 trillion that was required by the Budget Control Act, Duncan said.

Direct Loans

Rep. Tim Bishop (D-NY) asked Duncan for an update on the transition to 100% Direct Loans two years after the transition. He also asked if the federal government has realized estimated savings from this transition.

Duncan said the transition has gone extraordinarily smoothly and that the savings created by the transition is the only reason that the government has been able to fund the Pell Grant program at historic levels.

However, Subcommittee on Higher Education and Workforce Training Chair Virginia Foxx (R-NC) asked Duncan about recent reports of some borrowers complaining about the loan rehabilitation process. Foxx has joined other Republicans in the House and Senate in asking borrowers to report any issues or problems they have encountered when repaying their Direct Loans. She asked Duncan to submit an explanation to the committee of why this was happening and when the Department would resolve the issue.

Duncan said that the Department was committed to helping any borrowers that could be more efficiently moved through the process. 

Interest Rates

Duncan faced some tough questions about the scheduled interest rate increase on subsidized student loans on July 1.

Rep. David Roe (R-TN) noted that if student loans had variable interest rate, the current rate would be below 3.4% and Congressional action wouldn't be required to keep the rate low. He asked why the Obama administration is only asking for a one-year extension of the 3.4% interest rate instead of moving to a variable rate.

Duncan answered that it is vital to address the immediate interest rate increase, but he agreed that a long-term solution is also needed.

Foxx noted that Senate Democrats blocked the variable interest rate in 2005. She questioned why Democrats did not address this issue years ago when they controlled Congress.

Rising College Costs

Several Republicans on the committee argued that it was illogical to provide additional funding for student aid because these increases can't keep up with increases in college costs.

Rep. Scott DesJarlais (R-TN) argued that increasing college costs need to be addressed before more money is dumped into Pell.

However, Duncan and Rep. Tim Bishop (D-NY) said there is no evidence that increases in student aid drive up college costs. Duncan noted that increases in the need for remedial education and declines in state funding for higher education were driving up the cost of college. He also said that institutions need to innovate education delivery to keep costs down. 

Elimination of ATB

Rep. John Tierney (D-MA) expressed concern about the elimination of the Ability to Benefit provision. In response, Duncan recognized that it was regrettable, but noted that tough decisions had to be made last year in order to preserve the maximum Pell Grant.


Publication Date: 3/29/2012

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