Earlier this month, President Donald Trump signed a two-year, $2.7 trillion budget deal to suspend the debt ceiling until July 2021, and increase defense and non-defense discretionary spending caps for fiscal years (FY) 2020 and 2021, which would impact funding for Title IV programs for award years 2020-21 and 2021-22. The Bipartisan Budget Act of 2019, negotiated by party leadership in the weeks leading up to the August congressional recess, passed in the House on July 25 and in the Senate on August 1, before being signed into law by the President.
The bipartisan agreement increases defense and non-defense discretionary spending by $320 billion above the spending caps that would have otherwise been enacted due to sequestration under the Budget Control Act of 2011 (BCA). The bill’s passage ends the threat of discretionary sequestration by increasing spending limits through FY 2021, when the discretionary sequester is set to expire indefinitely.
While the budget deal brings an end to sequestration caps on discretionary spending, it extends the sequester on mandatory spending through FY 2029. With the mandatory sequester still in place, student loan origination fees, the Iraq-Afghanistan Service Grant (IASG), and TEACH Grants will continue to be impacted as in previous years. Loan origination fees will increase by the sequestration percentage determined annually by the Office of Management and Budget (OMB), resulting in origination fees of 1.059% for Direct Subsidized and Unsubsidized Loans, and 4.236% for Direct PLUS loans disbursed on or after Oct. 1, 2019.
Institutions will be required to apply a percentage reduction to awards from the Iraq-Afghanistan Service Grant (IASG) and Teacher Education Assistance for College and Higher Education (TEACH) Grant programs where the first disbursement occurs on or after Oct. 1, 2019. As in previous years, The Office of Federal Student Aid (FSA) is expected to issue guidance to help institutions determine the sequester-required dollar reduction and adjusted award amounts for IASG and TEACH Grant awards.
Although a major hurdle has been cleared with the passage of the overall budget deal, Congress still has its work cut out to appropriate funds to individual federal programs. After returning from the August recess, lawmakers will have just three weeks to pass all 12 appropriations bills before FY 2020 begins on October 1.
While the House has already marked up all of its appropriations bills for FY 2020 and passed 10 on the floor, Senate appropriators have not yet begun the process of passing their own spending bills. Senate leaders will divide the total budget into allocations for each of the 12 appropriations subcommittees, and are expected to begin full committee markup when Congress returns the week of September 9. There have been indications that the Defense, Labor, Health and Human Services, Education, and Energy-Water spending bills may be packaged together as the first group to be marked up in committee after the recess.
Lawmakers in the House will need to account for the differences between the spending level passed in the budget deal and the amounts used in their initial appropriations bills. House appropriators must adjust for $5 billion more in defense funding and roughly $15 billion less in non-defense spending.
Given that little time remains for the spending bills to be marked up, negotiated, and signed into law, there is a strong likelihood that Congress will use some type of stopgap legislation or continuing resolution that extends current funding levels and maintains government operations once FY2020 begins on Oct. 1, 2019, while any remaining appropriations bills are finalized.
For more information on the federal budget and appropriations process, check out NASFAA's Federal Budget and Appropriations page, which features recent news and a flowchart explaining the budget process.
Publication Date: 8/21/2019