Pell Grant Increase On the Way

Bush's decision not to veto compromise budget bill means students will see more aid and interest rate reduction, and lenders will suffer large cuts in federal payments.
September 7, 2007

You could just see the 2008 campaign ad: "Congressional Democrats tried to take billions in excess profits away from student loan companies and use the money to make college more affordable for students and families. President Bush nixed the plan, siding with fat-cat lenders over you and your children."

It's an ad you won't see now. On Thursday, the U.S. Education Department said that President Bush would sign, not veto, compromise budget reconciliation legislation that will squeeze $22 billion out of federal subsidies for student loan providers and direct the proceeds to increase the maximum Pell Grant to $5,400 and cut the interest rate in half over five years.

Bush had threatened to veto the version of the budget legislation that the House of Representatives passed in July, and the White House had harshly criticized many aspects of the Senate's version, too. And several key provisions that the administration found objectionable made it into the compromise version of the legislation that Democratic leaders in Congress -- without significant Republican input -- crafted this week, notably the interest rate cut (which had been in the House bill), the creation of several new mandatory spending programs for colleges, and the Senate legislation's complicated and hazily conceived plan to require lenders to compete at auction for the right to provide portions of the federal student loan portfolio.

An Education Department spokeswoman said that Education Secretary Margaret Spellings remained concerned that the compromise bill would spend about $1 billion on new entitlement programs, and that the interest rate cut would end after four years, "pushing tough fiscal decisions into the future ... an irresponsible way to make policy." But the spokeswoman, Samara Yudof, said that the secretary had recommended that Bush sign the bill because Congress had "answered the President's call to significantly increase funding for Pell Grants."

Republican Congressional aides went further, saying they believed that the budget legislation was, as one put it, "pretty damn close to what Bush asked for" in his 2008 budget plan, which proposed hefty cuts in lender subsidies and a major infusion of money into the Pell Grant. The president "can and should take credit for" influencing the bill's overall direction, the Republican Senate staff member said. "I would if I were him."

Democratic Congressional aides and some college lobbyists scoffed at the idea that President Bush deserved kudos, instead crediting the legislation's chief sponsors, Sen. Edward M. Kennedy (D-Mass.) and Rep. George Miller (D-Calif.), for what the Democratic leaders have heralded as the biggest infusion of federal student aid since the G.I. Bill.

"This is not a bill that would have taken place if it was left up to the administration," said Maureen Hoyler, executive vice president of the Council for Opportunity in Education, which lobbies on behalf of low-income students and especially the TRIO programs, which would gain in the budget legislation. "The people who deserve credit for this are Senator Kennedy and Congressman Miller."

Kennedy and Miller, for their part, were gracious, as they could afford to be with their legislative victory. “I am delighted that the President will join us in helping make this historic bill a reality for millions of students and their families," Miller said Thursday. "Today’s news is proof that elections can make a difference. Last November, Democrats promised to make college more affordable for every qualified student, and with this bill we are making good on that promise.... The new Congress, under the leadership of Speaker [Nancy] Pelosi, is proving that -- despite our differences -- we can work in a bipartisan way with the President to put the needs of America’s families first and strengthen the nation’s middle class.”

Both houses of Congress are expected to consider, and pass, the compromise budget legislation (H.R. 2669) as soon as today.

Some Congressional Republicans have signaled that they will vote against the measure: Rep. Howard P. (Buck) McKeon (D-Calif.), the senior Republican on the House Education and Labor Committee that Miller chairs, issued a prepared statement Thursday that blasted the legislation for putting billions that could have gone to further increasing the Pell Grant into an interest rate cut that won't help borrowers until they are out of college and to create several new mandatory spending programs. McKeon, who plans to oppose the measure, also criticized the Bush administration for "proposing misguided policies that threaten the stability of our nation's financial aid system," presumably a reference to the president's own call to slash federal subsidies for lenders.

McKeon also criticized Democrats for stripping out of the budget legislation provisions that would have required colleges to make public significantly more information about how they spend their money, with the underlying goal of giving students and families more clarity about why college tuition is rising so rapidly.

While college officials have objected to some of the new reporting requirements about college costs and prices, higher education lobbyists said it would be a mistake to read the stripping of those provisions from the budget bill as a sign that Congress no longer cares about holding colleges accountable for their rising costs. In crafting the compromise budget measure in recent days, Democratic lawmakers removed several provisions from the legislation that could have made the bill susceptible to objections under Congress's "Byrd rule," which prohibits lawmakers from considering "extraneous matter" -- roughly, provisions that don't have a significant cost or other budgetary impact -- as part of budget reconciliation bills.

So the fact that the cost-containment sections disappeared from the budget bill does not mean that colleges have dodged that particular bullet; those provisions are likely to reemerge, in some form, in the Higher Education Act legislation that Senate Republicans, led particularly by Sen. Michael B. Enzi (R-Wyo.), are pressing Congress to enact before the year ends. (The Senate has already passed its version of the Higher Ed Act extension, and Miller has vowed to have his House committee take up its version of the legislation in the coming weeks.)


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