Threats to Pell in House Budget Proposal are Ungrounded, Unfair and Misguided
Mar 27, 2012
On March 23, the House Budget Committee released additional details to Rep. Ryan's FY2013 budget proposal. This post updates a previous post with these new details.
The House FY 2013 Budget Resolution released by House Budget Committee Chairman Paul Ryan makes vague but undeniable threats to the Pell Grant program, proposing to limit funding and further tighten eligibility requirements. The premises for these threats--that Pell is on an unsustainable path and that it increases tuition--are wholly unsupported by the facts, and further cuts to this program are extremely misguided.
The House Budget Committee's report released on Friday provides more detail on proposed cuts to Pell and other student financial aid. These include:
- Rolling back to pre-2007 levels the amount of income students are able to protect in the student aid formula before their aid is reduced as well as the income level at which students would automatically be deemed unable to contribute financially to their education. These changes were made in 2007 on a bi-partisan vote specifically to better target aid to needy students; rolling them back violates that bi-partisan support and will directly harm these students.
- Eliminating eligibility for students when they have to reduce their course load to less than half time (less than 6 credit hours) due to unavailability of courses, heavier or inflexible work schedules or family obligations. This short-sighted cut risks losing these students altogether and reducing college persistence and success rates precisely when the nation needs to be increasing them.
- Flat funding the maximum Pell Grant at $5,550, eliminating an already agreed upon increase to $5,635.
- Eliminating administrative fees paid to colleges to help process Pell Grants and other student aid.
- Eliminating interest subsidies on student loans for undergraduate students while they are still enrolled, which will rack up the interest these students have to pay on their loans when they complete their studies.
- Changing the accounting rules on federal student loans to make it look like the savings from these loans is much smaller than originally estimated.
All of these cuts are short-sighted and unjustified. Analysis of Congressional Budget Office data shows that the Pell Grant program is on a stable and sustainable growth path: costs are projected to decline slightly in FY13 and remain stable over the next ten years. Pell Grant students already have suffered $56 billion in cuts that will take place over the next decade as a result of recent budget agreements. They lost the "year-round" Pell Grant in the FY11 budget agreement, which allowed them to receive a grant for summer study, and suffered eligibility cuts in the FY12 omnibus appropriations bill. Given that an estimated 40 percent of the recent growth in the program was due to a crumbling economy during the recession, it is unfair to punish Pell Grant students who are trying to regain their economic footing with harsh cuts to their financial aid grants.
The Pell Grant program is projected to be stable over the next ten years, but it does face a large funding gap in FY14 (October 2013-September 2014). This gap is due to a drop in savings from student loan changes last year to help fund prior years' growth. To keep Pell on a sustainable path, Congress should provide continuous funding through this gap without making harmful program changes affecting low-income students. A good place to find this funding would be the current overly complex and poorly targeted array of federal higher education tax credits and deductions.
The budget proposal also mistakenly asserts that the Pell Grant program is responsible for driving up tuition costs. Several well-respected higher education experts and the U.S. Department of Education have overwhelmingly debunked this myth. For example, Harvard economist Dr. Bridget Terry Long reviewed several studies and found that "most studies conclude that colleges are not responding to federal aid" in setting their tuition prices. There is no doubt that tuitions have increased at an alarming rate in the last few years and that policymakers should pass appropriate polices that responsibly address the problem. However, Pell is not part of the problem and cutting Pell will not solve the problem. It will only further punish low-income students in need of financial aid.
The Pell Grant program is evolving with the American economy. As more jobs require postsecondary credentials, more low-income students need access to this program to help them afford postsecondary credential attainment. "Old school" thinking about the Pell Grant program as simply providing grants to a limited number of traditional college kids is outdated. Today, Pell Grants fund certificates and associate degrees in advanced manufacturing, allied health, and other in-demand industries that undergird our economic recovery. Pell Grants are a lifeline. With the increasing cost of college, some students have to work their way through school, but Pell is important financial and psychological "seed money" for the investment in their futures. With Pell, older low-wage working students earn the credentials they need to succeed in the 21st century workplace and to support their families.
Every cut to the Pell Grant program reduces students' access to credentials, which results in America's workforce falling behind and our economic engine slowing. Before proceeding with the House budget proposal, federal policymakers first need to ensure that they have their Pell Grant facts straight, and then they need to carefully consider the long-term economic costs of reducing investments in the program and in our shared economic future.
For more information see the Save Pell factsheet Pell Grants Help Keep College Affordable for Millions of Americans >>