President Bush on February 7 sent Congress a $2.57 trillion fiscal year 2006 budget request, which would take the first steps toward retiring the $4.3 billion Pell Grant shortfall and increasing the maximum Pell award from $4,050 to $4,550 over five years (with $4,150 proposed for FY2006). The 2006 budget also proposes that the federal government recall the revolving loan funds used by institutions to fund the Perkins loan program, thereby effectively terminating the program. Several other long-standing higher education programs have also been targeted for elimination. The complete 2006 budget is available on the White House Office of Management and Budget's Web site.
Overall, discretionary spending for areas other than defense and homeland security would fall by nearly 1%, the first such decrease in years. In a speech last month at the Florida Community College at Jacksonville, President Bush foreshadowed the contents of his budget request when he announced that he would seek to raise the Pell maximum. In the same speech, Bush said he planned to pay for the increase by making the student loan programs more "effective and efficient."
In the budget overview, policymakers noted that the budget was guided by three major criteria, namely: (1) Does the program meet the nation's priorities? (2) Does the program meet the President's principles for appropriate use of taxpayer resources? and (3) Does the program produce the intended results?
These themes were reiterated in the February 7 budget briefing. At the event, new Education Secretary Margaret Spellings said the focus of the Administration's priorities is "doing a few things and doing them well." The President, she said, is concerned with setting priorities and "allotting resources along with those priorities, and in particular, fostering things that work."
"The President has offered the policy of gaining some resources from the mandatory side of the budget and putting them on the discretionary side to enhance the Pell Grant," Spellings said. "We all are concerned about [college] affordability clearly, and raising the award has been thwarted by the ever-growing Pell deficit that we've had, so this will once-and-for-all cure that."
A Department of Education news release called the budget "a common-sense approach that would improve the effectiveness of the student aid programs while reducing program costs and subsidies to private lenders," adding that "the savings generated from the student aid reforms would result in a $19 billion investment in the Pell Grant program over the next 10 years."
Numbers detailing exactly how student aid reforms would generate adequate funds to increase Pell are still unavailable. However, the new budget has suggested that funds could be found through implementing the aforementioned federal recall on Perkins Loans revolving funds, as well as reducing the amount that guaranty agencies may collect on defaulted loans, making permanent the moratorium on the 9.5% special allowance subsidies for lenders, and reducing the percentage of federal loan principal guaranteed against default, among other changes. These reforms will presumably be included in the forthcoming Higher Education Act reauthorization.
"While we're pleased that the president's budget has proposed increased funding to needy students through the Pell Grant program, we are very concerned about the implications of some of the other proposals, such as the elimination of Perkins federal capital and the recapture of the revolving fund," said NASFAA Director for Governmental Affairs Marty Guthrie.
In addition to suggesting funding levels, the FY06 budget also makes numerous policy recommendations. For instance, the budget would make interest rates on consolidation loans variable rather than fixed, and allow for loan reconsolidation by borrowers in repayment. The administration has also proposed that borrowers be allowed to choose their consolidation lender, and that those who opt to reconsolidate be charged a 1% origination fee to do so.
In terms of funding, the President's FY06 budget would:
- Retire the $4.3 billion Pell shortfall, increase the Pell maximum by $500 over a five-year period, and add $299 million for Historically Black Colleges and Universities and $96 million for Hispanic Serving Institutions.
- Make permanent an increase in loan forgiveness for highly qualified math, science, and special education teachers from $5,000 to $17,500.
- Create a Presidential Math and Science Scholars program ($50 million to encourage students to enter math and science fields), an enhanced Pell Grants for State Scholars program ($33 million in additional Pell to students who complete the high school State Scholars program), and a Community College Access Grants program ($125 million to foster dual enrollment programs for low-income and minority high schoolers to take college courses).
- Provide funding at the FY05 levels for: FSEOG, Federal Work-Study, GAANN and Javits Fellowships.
- Terminate funding for the Federal Perkins Loans Capital Contributions and cancellations, the Byrd Honors Scholarships, LEAP, GEAR UP, the Upward Bound and Talent Search portions of TRIO, and the Thurgood Marshall Legal Education Opportunity Fund.
Exact figures for FY05 and FY06 are available on the NASFAA Web site.
The Administration proposes to "replace the 7 percent community service requirements in the Work Study program with a separate set-aside equal to 20 percent of the Work-Study appropriation. Institutions would apply for these community service funds separate from their regular allocation." The budget document notes that "Program-wide, institutions place 15 percent of their students in community service jobs [but that] many individual institutions fail to meet the 7 percent requirement. Under the proposed approach, institutions that do not wish to participate in community service activities will no longer be required to do so and those that do wish to participate will be awarded additional funds." The Administration says that this approach would double the amount FWS funds used for community service activities.
The Administration also is proposing to phase in revised allocation formulae for the FSEOG and Work-Study programs under which funding distributions are based more directly on institutional need than historical precedent.
In his budget message to Congress, President Bush said "This budget takes a hard look at programs that have not succeeded or shown progress despite multiple opportunities to do so. My administration is pressing for reforms so that every program will achieve its intended results."
Bush added that "where circumstances warrant, the 2006 Budget recommends significant spending reductions or outright elimination of programs that are falling short."
House Democrats were quick to criticize the new budget. In a news release coinciding with the budget briefing, Rep. George Miller (D-Calif.), ranking member of the House Education and the Workforce Committee, said, "The president promised the American people he would strengthen college scholarships, but yet again he's broken his promise to increase Pell scholarships to $5,100. Instead, his meager increases barely keep pace with inflation, let alone skyrocketing tuition costs. That's the fifth straight year of double-talk on college assistance. The result: students will shoulder huge new debts as college expenses continue to rise."
By Elizabeth B. Guerard
NASFAA Assistant Director for Communications
Posted February 8, 2005 on www.NASFAA.org, the Web Site of the
National Association of Student Financial Aid Administrators (NASFAA).
Copyright 2005. Redistribution to non-NASFAA institutions is prohibited
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