The Obama Administration yesterday released its 2011 fiscal year budget request that seeks to increase discretionary education spending by $4.5 billion to $50.7 billion and implement many of the student aid changes proposed in his 2010 budget request. In addition to the discretionary funding, the budget proposal again seeks to make Pell Grants an entitlement program by funding it entirely with mandatory funds. It also seeks to increase the maximum award by $160 to $5,710 in 2011. After 2011, the maximum award would increase annually by the rate of inflation plus 1 percent, increasing it to an estimated $6,900 by 2019.

The president has set a goal that America once again will lead the world in college completion," Education Secretary Arne Duncan said at the Department's annual budget briefing. "This budget puts us on a path to success and meeting that goal."

The budget proposal estimates that funding the existing Pell Grant maximum would cost $56 billion from 2011-15 and $118 billion from 2011-20. Making the Pell Grant funding mandatory and indexing maximum awards would cost $181 Billion from 2011-20 and $686 billion from 2011-20. The budget proposal seeks to provide a record $34.8 billion in Pell Grant awards to nearly 9 million students during the 2011-12 award year -- roughly 1 million more than in 2009.

"NASFAA offers its full support to the president in increasing the government's flagship student aid program, the Pell Grant, by making program appropriations mandatory," NASFAA Interim President Joan Crissman said in a statement. "Currently, the Pell Grant is subject to the annual appropriations process, which at times leaves the program on shaky ground. The time has long come for us to make this program a mandatory investment in students."

Like Obama's 2010 budget proposal, the 2011 budget proposal would help pay for the expanded Pell grant and a host of other higher education initiatives using estimated savings from eliminating the Federal Family Education Loan Program (FFELP) and originating all federal student loans through the Direct Loan program. The budget proposal estimates that eliminating FFELP on July 1, 2010 would save an estimated $45.6 billion through fiscal year 2020. The budget proposal notes that the 2011 budget request is consistent with the Student Aid and Fiscal Responsibility Act (SAFRA), which has passed the House of Representatives and is pending in the Senate. The budget request notes that loan purchase programs authorized by the Ensuring Continued Access to Student Loans Act (ECASLA) will provide an estimated $112 billion in funding to purchase FFEL program loans, supporting approximately 57 percent of overall new program loans over academic years 2008-09 and 2009-10.

In addition, the budget request seeks:

• $1.1 billion to expand and redesign the Perkins Loan program to provide $6 billion a year in funding -- six times the current Perkins volume -- for up to 2.4 million students at roughly 2,700 additional postsecondary education institutions. The Department would service Perkins Loans along with other Federal loans, with estimated overall savings totaling $5.5 billion over 10 years. Loan cancellation costs on existing loans would be funded from the Federal share of loan collections; the institutional share of collections would be returned to schools. The loans would have the same low 5 percent interest rate and allowed loan amounts (both undergraduate and graduate) as in the current Perkins program. To make loans available to more students, interest on the loans would accrue while students are in school. The budget request does not mention anything about an institutional match for Perkins funds, but notes that the Administration supports provisions in the pending SAFRA legislation.

• $3.5 billion over 7 years for a College Access and Completion Fund, which would make grants to states, institutions of higher education, and other organizations to support innovative strategies to increase the number and percentage of students entering and completing college.

• $10.6 billion over 10 years for the American Graduation Initiative to invest in promising reforms to raise graduation rates, tie courses to business needs, and improve remedial education at community colleges.

• $7.5 billion over 10 years to expand income-based repayment (IBR) by decreasing the amount borrowers pay from 15 percent to 10 percent of their discretionary income and offering loan forgiveness after 20 years.

• $29.2 billion over 10 years to make the American Opportunity Tax Credit permanent. The credit provides up to $2,500 for tuition and fees and course materials during the first 4 years of postsecondary education.

• Provide level funding ($980 million) for Federal Work-Study so 768,000 students would receive a total of nearly $1.2 billion in award year 2011-12. The Recovery Act appropriated $200 million for Work-Study, which was used to increase the number of recipients for the 2009-10 award year.

• Provide level funding ($757 million) for Supplemental Educational Opportunity Grants (SEOG) to leverage $202 million in institutional matching funds to make available a total of $959 million in grants to an estimated 1.3 million recipients.

• Provide level funding ($853 million) for the Federal TRIO Programs to provide funding for approximately 2,700 projects serving middle school, high school, and college students and adults. An additional $57 million in mandatory funding will provide support for another 178 Upward Bound projects. The request also includes funding for Staff Training grants, evaluation, and administrative support for the TRIO programs.

• Provide level funding ($323 million) for the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) to serve approximately 748,000 middle and high school students in fiscal year 2011.

The budget request proposes eliminating three federal student aid programs. Nearly $64 million in funding for Leveraging Educational Assistance Partnerships (LEAP) would be eliminated because this program has accomplished its objective of stimulating all States to establish need-based postsecondary student grant programs, and Federal incentives for such aid are no longer required, according to the Obama administration. State grant levels have expanded greatly over the years, the Administration argues, and most States significantly exceed the statutory matching requirements.

The Administration also proposes eliminating $42 million in Byrd Honors Scholarship funding because it believes that the program duplicates other programs that provide assistance to students to increase college access. Funding for the $5 million Legal Assistance Loan Repayment Program would also be eliminated because the Public Service Loan Forgiveness program makes it redundant, according to the Administration.

The budget request would also allow the Academic Competitiveness Grant (ACG) and the National SMART Grant to expire at the end of the 2010-11 academic year. Participation trends during the first four years indicate funding already provided in prior years and in fiscal year 2010 will substantially exceed the amounts needed to support anticipated grant awards. As a result, the 2010 appropriation postponed the availability of $561 million in unneeded balances until 2011. As current estimates indicate these funds will not be needed, the Administration proposes to rescind the remaining available funds in the amount of $597 million in FY 2011.

For budget and financial management purposes, the TEACH Grant program is operated as a loan program with 100 percent forgiveness of outstanding principal and interest upon completion of a student's service requirement. The Administration currently estimates approximately 80 percent of participating students will not complete the required service and thus will have their grants converted to Direct Unsubsidized Stafford Loans.

Resources

Department of Education Summary of 2011 Budget Request

House Education Committee Chairman Miller's Statement on the 2011 Budget Request

House Education Committee Ranking Republican Kline's Statement on the 2011 Budget Request

Media Coverage

The Education Exception Inside Higher Ed

Big Raise for Pell Grants The Chronicle of Higher Education (A paid subscription may be required)

Education 2011 budget increased over 2010 UPI

Obama Proposes 7.6% Budget Increase for Department of Education Bloomberg

Education Department would see 9.7 percent rise in discretionary spending The Washington Post

Obama Plan Calls for Education-Funding Increase The Wall Street Journal (A paid subscription may be required)

Posted 02/02/10 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.