CBO Releases Costs & Savings Estimates on House Student Aid Legislation

On Friday, the Congressional Budget Office (CBO) released costs and savings estimates on the Student Aid and Fiscal Responsibility Act of 2009 (H.R. 3221), which was reported out of the House Committee on Education and Labor on July 21. The CBO estimates that enacting H.R. 3221 would reduce direct spending by $7.8 billion over the 2009-2019 period. The proposed legislation would also increase discretionary spending by at least $13.5 billion over the same time period, although CBO has not completed a comprehensive estimate of all aspects of the bill that would be subject to appropriations.

H.R. 3221 calls for annual increases in mandatory funding of the Pell Grant in an amount equal to the Consumer Price Index (CPI) plus 1 percent, beginning with a mandatory base-level of $690. CBO estimates the mandatory award will grow from $690 in 2010 to $2,040 in 2019. If the appropriated amount remains level at $4,860 over that same time period, the total Pell Grant will be $6,900 by 2019, according to CBO estimates. Total mandatory spending on the Pell Grant would increase current spending on the Pell Grant by $39.4 billion over the next ten years.

Eliminating the Federal Family Education Loan Program (FFELP) - as called for under H.R. 3221 - would save an estimated $86.8 billion over ten years, according to CBO estimates. Shifting all federal Stafford and PLUS borrowing into the Direct Lending program would increase discretionary administrative costs by $7.2 billion over the next ten years. Phasing out the Perkins Loan Program and implementing the new Federal Direct Perkins Loan Program is estimated to cost $1.3 billion over the next ten years.

The bill has yet to be passed by the full House, although a vote could come as early as this week. With a full docket dedicated to judicial confirmation hearings and healthcare, it is unlikely the Senate will consider similar legislation until after the August recess.

By Justin Draeger
Vice President of Public Policy, Advocacy, and Research

Posted 07/27/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.