The Chairmen of the House and Senate Appropriations Subcommittees on Labor, Health and Human Services and Education both expressed concerns yesterday about the Obama administration's proposal to make Pell Grants a mandatory spending program during separate hearings with Education Secretary Arne Duncan.

House Subcommittee Chairman David Obey (D-WI), who is also chairman of the House Appropriations Committee, said that he had some misgivings about making Pell mandatory because he thought it would not be fiscally responsible.

Senate Subcommittee Chairman Tom Harkin (D-IA) told Duncan that he supported the administration's proposal to administer all loans through the Direct Loan program, but would need to discuss the administration's proposal to make Pell mandatory because committee members and other Senators had some concerns.

"I don't have a close mind on it," Harkin said. "I think there are good reasons on both sides."

In his opening remarks, Duncan said he appreciated all that the appropriations committee had done to fund Pell increases, but even with appropriators dedication the maximum Pell Grant has not kept up with the rising cost of higher education.

"We are ensuring that students will know that their Pell Grant will increase at the same rate as tuition," Duncan said. "This will give them assurances that they will have the assistance they need to complete college."

Duncan said that he was concerned that students would dismiss college as an option because their families lacked the financial resources to pay for it. He argued that the federal government should do whatever it can to assure these students that sufficient financial aid would be available for them to pursue their higher education goals.

Harkin said that he shared this goal, but countered that there are many other ways that the federal government let students know at an early age that there will be sufficient financial support for them to access college.

While the two chairmen have concerns about a mandatory Pell program, legislation to enact Obama's proposal will not come from their committee. The Pell change will likely be made through the reconciliation process and the House and Senate Education Committees are responsible for drafting the reconciliation legislation.

During the question and answer portion of the Senate hearing, Sen. Arlen Specter (D-PA) raised some concerns that the Pennsylvania Higher Education Assistance Agency (PHEAA) - his state's nonprofit financial aid organization - had about the proposal to make all loans through the Direct Loan program. Specter questioned if the administration's proposed $2.5 billion college access and completion fund would provide enough funding to pay for services currently provided by Federal Family Education Loan Program (FFELP) participants. He noted that PHEAA currently provides students in his state with financial literacy, default prevention, early awareness, counseling, and more.

Duncan replied that the administration's proposal to provide $500 million a year for the college access and completion fund "actually significantly increases the amount of resources that goes out to nonprofits."

Specter also asked Duncan what will happen to the substantial number of employees at nonprofit agencies like PHEAA if the FFELP is eliminated.

Duncan replied that the college access and completion fund would create a greater need for people to perform the services provided by agencies like PHEAA. He also noted that the Department had no intention of servicing all the loans made through the Direct loan program so there would be a great demand for companies to service loans.

"We have to have dramatic private sector involvement in servicing those loans," Duncan said. "There is a great opportunity for the private sector to get involved and we'll reward those that do a good job."

An archived Web cast of the Senate Appropriations Committee hearing is available online.

Media Coverage

Appropriators Question Duncan About Proposals on Pell Grants and Loans The Chronicle of Higher Education

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