What's In, What's Out of the White House's Narrowed Spending Framework

By Hugh T. Ferguson, NASFAA Staff Reporter 

President Joe Biden and congressional Democrats formally unveiled updated bill text for his administration's "Build Back Better" agenda, which in recent iterations has begun to narrow in scope as key members of Congress have pressured the White House to lower top-line spending from the previous $3.5 trillion budget plan. As a result, top priorities within the higher education sector have seen a significant scaling down, or in some cases have been eliminated from the drafted package entirely.

The proposal, subject to the reconciliation process that requires nearly all congressional Democrats to pass, has been subject to breakneck negotiations in recent weeks and is getting closer to its final form. Currently the White House is touting $40 billion in higher education investments, down from the $111 billion previously slated for the sector. Even at this lower amount, $40 billion would be a historic one-time investment in higher education that would expand Pell Grants for students attending public and nonprofit schools, make students enrolled in the Deferred Action for Childhood Arrivals (DACA) program Title IV eligible, and make several other changes to the student aid programs.

NASFAA President Justin Draeger issued the following statement after the framework's release: 

"We applaud Congress and the Biden administration for proposing these historic investments in higher education that will help millions of students pay for their educational expenses, complete their postsecondary programs, and contribute to our country's economic recovery." 

"Granting federal student aid eligibility to students with DACA status is a significant step forward for students who were brought to this country by no choice of their own, have been educated in the same K-12 educational system as other Americans, and wish to continue their education at the postsecondary level. This makes good economic and moral sense." 

"While a $550 increase to the maximum Pell Grant is a welcome upfront investment toward making college more affordable for low-income students, we are concerned to see these funds parceled out by institutional sector, which will add new complexity to a financial aid system on the verge of much-needed simplification. The best place to address concerns about institutional quality at some proprietary institutions should be in the institutional eligibility and accountability provisions in the Higher Education Act, not by making programmatic changes that add complexities to students."

"We welcome these proposed investments and will continue to work with the administration and Congress to make these proposals a reality." 

Programmatic Changes in Scaled Down Spending Bill

Pell gets an increase: The bill includes funding to increase the maximum Pell Grant by $550 for students enrolled at public and non-profit institutions from 2022-23 through 2025-26. This is a slightly larger increase than the $500 boost included in the text first introduced in September, though much less than the increase of up to $1,400 initially pledged by the White House. The exclusion of proprietary institutions from the $550 increase means that students would have a different Pell Grant award at a proprietary institution than at a public or nonprofit institution.

Title IV eligibility extended to DACA students: Individuals enrolled in DACA would be eligible for Title IV aid.

Taxability of Pell eliminated: Pell Grants would be excluded from gross income in the Internal Revenue Code, and therefore would no longer be taxable.

Means-tested benefits recipients and automatic -$1,500 Student Aid Index: When the FAFSA simplification changes included in the Consolidated Appropriations Act of 2021 are fully implemented in 2024-25, and through the 2029-30 year, means-tested benefits recipients will automatically receive a -$1,500 Student Aid Index (SAI).

Phase-out of excise tax on investment income of private institutions: The amount of excise tax would be reduced for private institutions by a percentage that accounts for the amount of qualified financial aid awarded by the institutions compared to tuition and fee charges. To qualify, an institution must provide a publicly available report to the Department of Education (ED) detailing the average amount of federal student loans borrowed by its students, disaggregated by student categories.

Completion grants scaled down: In the White House's initial proposal there was a large new grant program to strengthen student retention and college completion efforts. Although the college completion grants remain in the legislation introduced Thursday, the proposal allocates just $500 million in funding for the program, significantly less than the $9 billion included in House Democrats' initial reconciliation proposal.

HBCU, TCU, & MSI Investment Increased: House Democrats' initial proposal included approximately $1.5 billion in institutional aid and $2 billion for research and development infrastructure at historically Black colleges and universities (HBCUs), tribal colleges and universities (TCUs), and minority-serving institutions (MSIs), in addition to a program that would have provided tuition assistance to low-income students attending public and four-year nonprofit HBCUs, TCUs, and MSIs with undergraduate student bodies consisting of at least 35% low-income students. The new proposal instead includes $6 billion for HBCUs, TCUs, and MSIs to award need-based financial aid to low-income students (including emergency financial aid grants), as well as an additional $3 billion to improve research and development infrastructure at these institutions.

Free community college funding eliminated: Due to disagreements, the initial free community college language was eliminated from the bill. Though Biden has pledged that he will still advocate for such a policy, inclusion of such a proposal in legislation that is subject to the Senate filibuster would prove challenging, especially since support couldn't be mustered through reconciliation's simple majority vote threshold. 

Biden Officials Tout New Framework

Following the bill text's unveiling, ED Under Secretary James Kvaal gave remarks at an event hosted by New America and spoke about the latest iteration of the bill. He also used his time to reiterate what Biden considers to be ED's most pressing challenges ahead for higher education: the impact of the pandemic on student enrollment, the growing student loan crisis, and equity in higher education outcomes.

On the Build Back Better proposal, Kvaal praised the inclusion of an increase to the maximum Pell Grant, which he said serves as an upfront investment to make college more affordable for students.

"We think this increase in maximum Pell Grant is particularly important because it'll help students cover much more of their living expenses," Kvaal said of the $550 increase. "We also want to make sure that we're connecting students with other services that will help them complete their education like broadband and nutrition assistance."

The wide-ranging discussion focused on potential federal  investments to higher education and how they could benefit low- and moderate-income students.

In the conversation, Kvaal indicated that ED would be unveiling more details concerning its consumer protection agenda and also highlighted the pathway forward on its regulatory agenda that will focus on loan affordability and ensuring that available benefits reach borrowers in need.

Moderators at the New America event also focused on the newly unveiled legislative text for Build Back Better. With the legislative text being only an hour old at the point of conversation, Kvaal stressed that there was more work to do when it comes to the legislation at hand.

"We look forward to Congress getting a bill to the president's desk so we can start on bringing all this work to bear," Kvaal said. "I know this is not the end of the road. The president will keep working very hard for the rest of his term to build on this progress."

While it is unlikely for more policies to be tacked onto the current reconciliation package, Kvaal indicated that the administration will look toward other opportunities to implement higher education campaign promises, especially the free community college proposal.

"The president is around for at least three more years, hopefully longer, and so we're going to have other opportunities to push our agenda on Capitol Hill," Kvaal said. "I know how important community college — free community college — is to him personally, and I know he's going to keep fighting about it."

As the reconciliation bill begins to take its final form, congressional Democrats will continue to spar over a host of policy riders aiming to get ushered to enactment through this fast-tracked legislative process. However, any single member of the Democratic caucus in the Senate could block enactment of finalized legislation.

Stay tuned to Today's News for the latest developments concerning this spending package.


Publication Date: 10/28/2021

David S | 10/29/2021 9:47:55 AM

I know that we're not supposed to look a gift horse in the mouth, but I feel as though this was an opportunity to do so much community college and #DoublePell would have been transformative for millions of students. Some level of loan cancellation and the elimination of negative amortization in loan repayment, along with implementing a maximum age at which no more payments need to be made...would have helped so many get back on their feet.

Instead we get some nice but imperfect things, much of it still tweaking the margins. And all because Joe Manchin - who did not get 81 million votes last November - is afraid he won't be re-elected if his constituents see him too closely aligned with the Progressive Caucus. The fight continues...and while I'm glad to fight, it shouldn't be a fight. An investment in college affordability helps every single American.

Parker C | 10/29/2021 8:58:47 AM

Very glad to see Justin push congress to keep the Pell Grant funding equal among all types of institutions. The current proposal adds unnecessary complexity to financial aid awards.

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