Cost-Savings in House Budget Plan Come at a Price

Stephen Payne, Policy & Federal Relations Staff

A week after the House Budget Committee released its fiscal year (FY) 2017 Budget Resolution, which called for $6.5 trillion in spending cuts over 10 years, a new committee report further details what would be on the chopping block, including some noteworthy changes to the financial aid programs.

On Wednesday, the committee released the accompanying FY 2017 Budget Resolution Report, which provides more specifics on where exactly these cuts would come from. On top of capping the Pell Grant maximum at the AY 2016-17 level for 10 years, the report recommends eliminating the in-school interest subsidy and the administrative cost allowance, phasing out the TEACH Grant Program, among other noteworthy reforms.

While none of the proposed changes in the resolution or in the report would become binding if passed by both chambers, the programmatic changes suggested in these documents do serve to illustrate some of the Republican priorities in higher education from a budgetary perspective.

The budget resolution and adjoining resolution report made the following recommendations:

Pell Grant Program

  • Cap the maximum award at the 2016-17 award year level, $5,815
  • Implement a “maximum income cap” for the Pell Grant Program
  • Eliminate eligibility for less-than-half-time students

Administrative Cost Allowance (ACA)

  • Eliminate both the Pell Grant ACA and the campus-based aid ACA. The plan justifies the elimination of the Pell Grant ACA by saying schools “already benefit significantly from the Pell program because the aid makes attendance at those schools more affordable.” In 2011, NASFAA conducted a survey of NASFAA members on this topic and found that the “elimination of the ACA would have a detrimental impact” on financial aid offices.

Student Loans

  • Switch to “fair value scoring” of the federal student loans to “ensure a true assessment of their cost to taxpayers.” A January Government Accountability Office (GAO) report disagreed and found that “the current...methodology is more appropriate [than fair value scoring] for this purpose as it represents the best estimate of the direct cost to the government and is consistent with current budgetary practices.”
  • Eliminate the in-school interest subsidy because “there is no evidence that in-school interest subsidies are critical to individual matriculation.”

TEACH Grant Program

  • Phase out eligibility for TEACH Grants. The report cites a February 2015 GAO report that highlighted the lack of performance metrics and the frequency of grant-to-loan conversions.

Need Analysis

  • Eliminate the need analysis provisions under the College Cost Reduction and Access Act in 2007, which include “the expansions of the level at which a student qualifies for an automatic zero Expected Family Contribution and the income-protection allowance.”

The resolution cleared the House Budget Committee last Wednesday, but its path to passing the full House of Representatives is unclear. The House is out of session until April 12, so it remains to be seen whether conservative Republicans, who support deeper spending cuts, will end up supporting the resolution.

As always, stay tuned to Today's News for updates on the budget process, and be sure check out our Federal Budget & Appropriations resource page for more information and a news archive.


Publication Date: 3/25/2016

David S | 3/25/2016 2:25:33 PM

Exactly, Gary. What incredibly short-sighted policy. There are quite a few reasons why college is more expensive here than elsewhere, but the main reason is that lawmakers would rather give tax breaks to Exxon and billionaires than invest in education. They weaken the programs, then claim they don't work and use that as a rationale to weaken them even further, and then eventually kill them off once and for all.

Gary S | 3/25/2016 10:14:17 AM

Where oh where to begin................
After visiting Republican House members' offices just one week ago, it is clear that our message fell on deaf and disinterested ears. They have never walked a day in our shoes and their blinders were never more apparent. Pell grant caps mean more debt. Eliminate the interest subsidies means more debt. Removal of Pell for less than half time means lost opportunities and/or increased credit card debt. Removal of automatic zero EFC means more debt and/or lost opportunities. Elimination of the Teach Grant program attacks a profession with few resources prior to graduation; low undervalued salaries at graduation; in a nation struggling to educate the less fortunate anywhere close to the level of the wealthy. The priorities of this Congress are as bad as the blustering of generally unqualified presidential candidates in this election. We are effectively removing the concept of equal opportunity.

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