U.S. Department of Education Secretary Arne Duncan defended President Obama's 2010 fiscal year budget blueprint at a House Budget Committee hearing yesterday.

Duncan faced some difficult questions from Republican members of the committee who expressed concern that the President's FY 2010 budget proposes to dramatically increase spending. There was specific concern that the administration would create an additional mandatory spending program by moving the Pell Grant program from discretionary spending to mandatory spending. In addition, Republicans voiced some skepticism that the Department would be able to effectively administer the entire student loan program if the Federal Family Education Loan Program (FFELP) was eliminated.

Student Loans

The Budget Committee Chairman John Spratt (D-SC) noted that President Obama had made a "far-reaching" proposal to increase Direct Loan program volume from 35 percent of all student loans to 100 percent.

"Are you satisfied that you have the infrastructure, personnel, and capacity to handle this additional burden?" Spratt asked.

Without hesitation, Duncan responded that the Department was ready and that it would partner with existing private companies to ensure a smooth transition.

"I'm absolutely convinced that we have the staff to do this," Duncan said. "We don't need to increase staff significantly at all. Many of the borrowers are serviced by the private side and we're going to continue to do this."

Later, Duncan noted that there were huge opportunities for private providers to help servicing borrowers' loans and the Department wants to keep them engaged so students, parents and schools can benefit from the competition. He made it clear that the administration aimed to spend money on students instead of subsidizing banks.

Republicans remained skeptical. Rep. Paul Ryan (R-WI), the ranking Republican on the committee noted that he was concerned with the proposal. Ryan said he wanted to know how the Department has prepared to take on the additional loan volume and wanted a serious discussion about the risks all the extra borrowing and spending will present to "our already strained Treasury."

Pell Grant

Ryan also said he was "disappointed" by the proposal to move the Pell Grant program to mandatory spending.

He said it would effectively make Pell another "auto-pilot entitlement, immune from Congressional oversight at precisely the time when we should be reforming existing entitlements, not adding new ones to the mix."

Duncan responded that the program needed to be placed on solid ground so that students and parents could depend on the funding.

"Pell Grants will not be subject to the politics of the moment or the whims of the market - they will be a commitment that Congress is required to uphold each and every year," Duncan said.

Access and Completion Fund

Ryan also expressed concern about the proposed Access and Completion Fund because it was another mandatory spending program, it duplicated other current programs, and the budget only funded it for five years. Ryan argued that such a program should be funded through discretionary funds so Congress could have more oversight of the program.

Perkins Loans

Thomas Skelly, director of the Department of Education Budget Service, provided some details about the administrations plans to expand and reorganize the Perkins Loan program during the hearing.

Skelly said the administration plans to recall the federal portion of Perkins funding as the loans are repaid and the program would be administered from Washington.

"The federal government would make the loans, taking the burden off schools," Skelly said.

Skelly and Duncan also made it clear that many more schools would be able to take advantage of the program under the administration's proposal. They noted that the amount of available loan funds would increase from $1 billion to $6 billion, the number of participating schools would increase from 1,800 to 4,400, and the number of students with access to Perkins would increase from 500,000 to 2.2 million.

Resources

Transcript of Duncan's prepared testimony

Archived video of the hearing

Media Coverage

Duncan Grilled About Obama's Student Loan Proposals Congressional Quarterly

Obama Ed Budget Passes First Test Inside Higher Ed

Duncan Defends Proposed Education Overhauls Congressional Quarterly

Education Secretary Defends Obama's Budget at Congressional Hearing The Chronicle of Higher Education

Posted 03/13/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.