Analysis: Obama’s Budget Increases Pell Awards, Freezes Campus-Based Program Funds

Quick Takeaways: 

  • President Obama’s fiscal year 2016 budget request would provide an overall investment of almost $148 billion for higher education programs
  • The total Pell Grant base award of $4,860 would see a $140 boost when taking mandatory add-on funds and statutory inflation adjustments in account, bringing the maximum grant for academic year 2016-17 to $5,915 
  • The budget would also freeze funding the Supplemental Educational Opportunity Grant (SEOG) and Federal Work-Study programs and revamp the Perkins Loan program

By Brittany Hackett, Communications Staff

President Obama’s fiscal year 2016 budget request would provide an overall investment of almost $148 billion in postsecondary grants, loans, and work-study to 13.2 million students, according to a recent analysis from the Committee for Education Funding.

The budget proposal, released in February, would “strengthen and improve” federal student aid programs and include Obama’s America’s College Promise program, which would provide two years of free community college to student who meet certain requirements. Funding increases are also included for the Pell Grant program and the campus-based Title IV programs, as well as proposed changes to the Pay As You Earn (PAYE) student loan repayment program.

Pell Grant Proposals

Regarding the Pell program, Obama’s budget proposal would provide enough funds to maintain the base award of $4,860. After including add-on funds and the statutory inflation adjustment, the total maximum award would see a $140 boost to $5,915 for academic year 2016-17.  The budget proposal would also continue the inflation adjustment beyond FY 2017 -- when it is set to expire – at a cost of $30 billion over 10 years. CEF notes that the ongoing indexing “would be offset by savings from a number of changes in mandatory spending in the education budget.”

Though the details remain vague, Obama’s budget also proposes changes to the Pell program that would:

  • Strengthen the academic progress requirement to encourage timely completion and graduation;
  • Restore in part the “ability to benefit” provision, which allow students without high school diplomas who are enrolled in eligible career pathway programs to receive the maximum Pell award;
  • Limit the receipt of Pell disbursement to students who repeatedly enroll in higher education programs but do not earn academic credit; and
  • Move the Iraq and Afghanistan Service Grant Program in to the Pell program, ensuring that eligible children of veterans receive the full Pell grant for which they qualify.

Campus-Based Program Changes

Obama’s budget includes a proposed change to the allocation process for campus-based programs that would direct funding to institutions that enroll and graduate higher numbers of Pell-eligible students and offer an affordable education with manageable levels of student debt upon completion.

The budget would also freeze funding for two key campus-based programs – the Supplemental Educational Opportunity Grant (SEOG) and Federal Work-Study (FWS) - and revamp the Perkins Loan program, which is set to expire on September 30, 2015.

For SEOG, Obama’s budget would freeze funds at $733 million. FWS funds would be frozen at the FY 2015 level of $989 million, which is an increase on the $925 million for FY 2013 when the original sequester cuts took place. Nearly $1.2 million would be available to participating institutions in the 2016-17 academic year when the institutional matching funds are taken into account, CEF notes. 

For the Perkins Loan program, Obama proposes the creation of a new $8.5 billion Unsubsidized Perkins Loan Program that would expand loan availability and allow more institutions to participate.  However, CEF notes that “many of the favorable benefits of the current Perkins Loan Program would be lost,” such as a set 5 percent interest rate, non-accrual of interest during the in-school and grace periods, and more helpful cancellation options for many public service jobs.

PAYE Proposals

The president’s budget calls for expanding the current PAYE repayment plan to all student borrowers and making it the only income-driven repayment option for borrower who originate their first loan on or after July 1, 2015.  The Department of Education this week hosted a negotiated rulemaking session on this topic.

In order to pay for the expansion of PAYE, the budget proposes the following offsets:

  • Eliminating the standard payment cap under the program to ensure high-income, high-balance borrowers pay an equitable share of their earnings as they increase;
  • Calculating payments for married borrowers filing separately on the combined household Adjusted Gross Income;
  • Capping Public Service Loan Forgiveness (PSLF) at the aggregate loan limit of $57,500 and establishing a 25-year forgiveness period for borrowers with balances above this limit; and 
  • Ensuring that PSLF is targeted at the students with the greatest need by preventing the application of payments made under non-income driven repayment place.

Other Changes

Obama’s budget proposal also includes provisions to:

  • Increase the level of Student Aid Administration funds by 13 percent for FY 2016, bringing the total level of funding to $1.6 billion;
  • Freeze funding for most institutional support programs designated to institutions serving traditionally underserved and underrepresented populations;
  • Freeze funding for programs that promote access to college and services for low-income and first-generation students, such as TRIO and GEAR UP;
  • Create new and expanded sources for funding teacher preparedness and investing in programs that offer evidence-based strategies to improve U.S. college access and success.

 

Publication Date: 5/1/2015


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