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Higher Education is a Top Priority in President Obama’s FY 2015 Budget

Mar 11, 2014

by Katherine Saunders and Marcie Foster

Last Tuesday, President Obama released a FY 2015 budget proposal that prioritizes education and reaffirms a commitment to making college affordable and improving college completion rates.

This year’s budget request builds on previous actions by the Administration to make college affordable and increase the proportion of Americans with a postsecondary credential. The budget makes key investments in existing programs and proposes new programs that would give states and institutions bigger, more defined roles in supporting access and success for low-income and moderate-income students.  

The President maintains his commitment to existing programs that serve as the bedrock of student financial aid. The budget calls for an increase in the maximum Pell Grant to $5,830 for the 2015-2016 academic year and takes steps to shore up the program’s funding gap in future years by reforming the Perkins Loan program. These funds would ensure Pell grants remain available to nearly 9 million low- and moderate-income students.

Additionally, the budget calls on Congress to pass legislation that would make federal financial aid available to students without a high school diploma or equivalency who are enrolled in eligible career pathways programs. This critical provision, which CLASP strongly supports, would strengthen adult career pathway bridge programs and co-enrollment approaches that help low-income, low-skilled adults and out-of-school youth. Right now, students enrolled in these programs are not eligible to receive a single dollar of federal financial assistance (including student loans) for their college coursework.

The Budget also seeks to reform campus-based aid programs, such as federal work-study. The request would revise current allocation formulas, disbursing funds to institutions based on the enrollment and graduation of Pell-eligible students rather than historical funding levels. Two new investments in the President’s budget request include the College Opportunity and Graduation Bonus and the State Higher Education Performance Fund. The College Opportunity and Graduation Bonus would include $7 billion in mandatory funding over 10 years to reward colleges that successfully enroll and graduate a significant number of low- and moderate-income students “on time” (not defined in the budget request). Under this new program, annual grants would be given to eligible institutions based on their number of on-time Pell graduates multiplied by a tiered bonus amount per student ($1,000 for each Pell graduate at a four-year institution, $700 at two-year institutions, and $350 at less-than-2-year institutions).

Bonus funds would be used by institutions to improve college access and success for low-income students through such activities as awarding need-based aid, enhancing supportive services, and pursuing acceleration strategies.  The State Higher Education Performance Fund proposes $4 billion in four-year competitive grants to encourage and support systemic efforts to improve college attainment and affordability, especially for low-income students. Grantees would implement performance-based policy and funding reforms that encourage degree attainment and affordability. States would be required to match their federal grants dollar for dollar, for a total investment of $8 billion over four years. 

Finally, the budget requests the permanent extension of the American Opportunity Tax Credit (AOTC), which provides financial assistance to students or to taxpayers whose children are attending college (see CLASP proposal to make the AOTC work better for low- and moderate-income students). The request also ends the taxation of Pell grants.

Overall, the budget reflects a continued commitment to low-income students and takes steps to strengthen the role of institutions and states in supporting student success. Collectively, the proposed reforms seek to increase access to college and employment opportunities by making postsecondary education more affordable and better targeting resources to institutions that demonstrate success in access, affordability, and completion.  As Congress prepares its budget and higher education funding levels for the upcoming fiscal year, it should consider these reforms a strong foundation for improving college affordability and improving the skills of America’s workforce.

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