Maximum Pell, at All Costs

Obama administration's 2012 budget plan would keep the top grant at $5,550 -- but would pay for it by ending year-round Pell Grant and a loan subsidy for graduate students.
February 15, 2011

WASHINGTON -- In a 2012 budget blueprint that administration officials portrayed as austere and Republicans derided as profligate, President Obama kept his promise to privilege spending on education and research -- though not without some potential pain for programs important to colleges and students.

In many of its priorities and emphases, the president's proposed budget for 2012 stood in stark contrast to legislation put forward by House Republicans on Friday to fund the remainder of the 2011 fiscal year, which ends in September. While the GOP measure would slash the maximum Pell Grant by $845, end funding for several other student aid programs (as well as the AmeriCorps national service program), and slice billions of dollars from agencies that support academic research, the Obama budget for 2012 keeps those and other programs largely intact. (See related article on science funding.)

That doesn't mean, however, that the Obama budget would be pain-free for colleges and students. Given the enormous growth of the Pell Grant Program in the last two years, for instance, the program now faces a $20 billion deficit by the end of 2012, and the administration had to make "tough choices" to sustain the maximum grant at $5,550, Education Secretary Arne Duncan said in a call with reporters Monday.

The department's 2012 budget calls for ending a three-year experiment that allows students to qualify for two Pell Grants in a calendar year, to allow them to attend college year-round, and for eliminating the subsidy in which the government pays the interest on student loans for graduate students while they are in school. (The subsidy for undergraduate students would remain in place.)

"These are painful cuts, make no mistake about it," Duncan said.

Higher education leaders and advocates for students typically howl in protest when political leaders of any party or political persuasion threaten programs dear to them, and they did not hide their disappointment with the president's proposed cuts Monday. "It is regrettable that the administration is proposing to maintain Pell by making cuts to other student aid programs that provide much needed funds to students," said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

But recognizing the context in which the 2012 budget appears, with Republicans having emerged from the 2010 elections emboldened to shave the deficit and pushing much deeper cuts, Draeger and other college officials wrapped their disappointment in words of understanding for the choices the administration would make. "[M]aintaining funding for the Pell program, which could be facing a $20 billion shortfall in FY 2012, is our highest priority," Draeger said. (Note: This paragraph has been updated to clarify some information.)

"It is clear the administration has put a lot of effort and care into producing a budget that strives to protect and preserve student financial aid," Molly Corbett Broad, president of the American Council on Education, said in a prepared statement. "While the higher education community does not agree with all the choices made, we support the overall objective of ensuring a viable array of student aid programs anchored by the indispensable Pell Grant Program."

Protecting Education

Unlike House Republican leaders, who in their first crack at a Tea Party-friendly federal budget plan cut disproportionately from health, education and labor programs, President Obama's 2012 budget blueprint generally shields what he calls "investments" in education, research and a few other key areas in an overall budget that begins a five-year drive to freeze most federal spending and reduce the deficit. The Education Department's overall budget would grow by 4.3 percent in 2012 under the president's budget.

"Education is an investment that we need to win the future -- just like innovation is an investment that we need to win the future; just like infrastructure is an investment that we need to win the future," the president said in unveiling the budget at a Baltimore math and science school. "And to make sure that we can afford these investments, we’re going to have to get serious about cutting back on those things that would be nice to have but we can do without."

Those things the country "can do without" appear to include relatively few of the many programs that matter most to colleges. The administration's 2012 budget would eliminate a handful of programs that have long been targeted by presidents of both parties, including the Leveraging Educational Assistance Partnership Program (which provides matching funds to states to encourage them to award need-based financial aid) and the Byrd Honors Scholarships.

But it would sustain some programs that have been vulnerable in recent years, such as the Perkins Loan and Supplemental Educational Opportunity Grant Programs. (The Perkins program would get a facelift much like the one the administration proposed in 2009, when a restructuring of the loan program for needy students got dropped during the endgame for the Student Aid and Fiscal Responsibility Act of 2010.)

The administration's proposal would sustain the vast majority of other Education Department programs for students and colleges at their 2010 levels, as seen in the table below.

Some other priorities for higher education would take a meaningful hit. Funds for career and technical education in the Education Department, some of which flow to community colleges, would drop by about $250 million. Duncan said that the programs under the Carl D. Perkins Career and Technical Education Act "haven't lived up to their promise" and that the administration wants to "strengthen them before we invest in them further." Among the casualties would be a separate, $103 million stream of funds for the Tech-Prep Program, which provides funds to states for partnerships between school districts and (mostly two-year) postsecondary institutions.

The Obama budget would also create a new competitive grant program (modeled on the Race to the Top Program for elementary and secondary education) that would reward states that align high school graduation requirements with colleges' entry and placement standards, strengthen transfer and articulation between colleges, and institute performance-based funding for colleges. (If you guessed that it had the phrase "college completion" in its title, you were right: it's called "the College Completion Incentive Grants Program.")

It's All About Pell

But virtually all of the attention in the days and weeks going forward is likely to be about the Pell Grant -- the administration's efforts to sustain it at its current levels, and attempts by Congressional Republicans to cut it back.

Spending on the grants, which have long been the bedrock of the American student financial aid system, has exploded since 2008, due to several factors: significantly increasing college enrollments (with much of the growth among for-profit institutions), the economic downturn that changed many students' financial situations for the worse, and 2008 changes that expanded the number of students eligible for the grants.

The program has long had bipartisan support, and Republicans insist that it retains that support, even as House Republicans, in the legislation they put forward Friday to fund the rest of the government's 2011 operations, propose cutting the maximum grant to $4,705. "Nobody should be comfortable with huge cuts like these," Representative John Kline, the Minnesota Republican who heads the House Committee on Education and the Workforce, said Monday in response to a reporter's question about whether he would be "comfortable" with the $800 cut in students' grants. But given the enormous expansion in the program's costs, Kline said, Republican leaders "thought it was important" to include Pell in their overall efforts to rein in federal spending.

Administration officials made a different set of choices in recognizing that the Pell program cannot continue to grow at any cost -- "responsible decisions that are necessary so that students can continue to pay for college," Duncan said.

Duncan said that administration officials had seen "no evidence" yet that the 2008 change in the Higher Education Act that allowed students to effectively get "two Pells" in a year to study in the summer was "accelerating students' college completion time." And the program had proven to be 10 times costlier than anticipated, to a tune of "numbers ... in the multiple billions" of dollars, Duncan said, calling the initiative "unsustainable."

Officials at the California Community Colleges said their data showed that about 23,000 students at the system's 112 colleges had received a second Pell Grant in the 2009-10 academic year, and that the students -- more than half of whom are Hispanic, black, or Asian -- had higher average grade point averages and number of earned credits than did other full-time students who did not receive Pell Grants.

Duncan said that while the year-round Pell program certainly helped some students, "in tough budget times, we saw it as a bigger priority to maintain the maximum Pell Grant of $5,550, rather than having a smaller number of students get $11,000."

The other people who might see themselves as having been thrown overboard by the administration to sustain Pell are the nation's graduate and professional students with student loans, who would lose the benefit they now enjoy of having the federal government pay the interest on those loans while they are in graduate school. Administration budget documents said that the subsidy "has no effect on encouraging students to pursue graduate education."

The in-school interest subsidy has been a target of deficit-cutting Congressional Republicans and of financial aid policy makers when they envision a sounder and fairer student aid system -- not just as it applies to graduate students, but for all student loan borrowers.

Robert Berdahl, president of the Association of American Universities, said his group is "concerned that the President’s proposal to eliminate the in-school interest subsidy on loans to graduate students as a means of covering some the costs of the Pell program may discourage American students from attending graduate school at a time when the nation needs to encourage its own best talent."

But Jason Delisle, a budget analyst at the New America Foundation, included the subsidy as one of his "key questions" about the administration's 2012 budget plan for education.

"The president’s proposal would end this benefit for graduate students arguing that it does not encourage students to attend graduate school, is not well-targeted to borrowers who need extra repayment help, and is unnecessary because of other loan repayment and forgiveness benefits available on federal loans," Delisle wrote. "These arguments seem to apply just as well to the in-school interest subsidy for undergraduate students. Why did the administration propose eliminating the benefit on these grounds for graduate students but opt to maintain it for undergraduate students? Are the policy’s weaknesses only applicable to graduate students?"

Among other highlights of the Obama budget:

  • The National Endowments for the Humanities and for the Arts would each see their budgets drop by $22 million, or nearly 13 percent. The cut would return the humanities endowment roughly to its budget for 2008, said Jim Leach, the agency's chairman. "It reflects NEH’s obligation to help restrain spending in a time of great fiscal challenges for the nation."
  • The Education Department budget would eliminate the TEACH Grant program, a several-year-old program aimed at encouraging teachers to work in high-need fields, and replace it with a new competition for states. The $185 million competitive program would let states give $10,000 scholarship to would-be teachers who attend the "most effective" teacher education programs.

Obama Administration's Key 2011 Funding Requests Related to Higher Education

EDUCATION DEPARTMENT 2010 Actual (000s) 2011 Continuing Resolution (000s) 2012 Request (000s)
Financial Aid  
Pell Grants $36,559,000 $35,820,000
Maximum Pell Grant $5,550 $5,550 $5,550
Supplemental Educational Opportunity Grants 757,465 757,465 757,465
Work Study 980,492 980,492 980,492
Perkins Loan cancellations 0 0 0
College Completion Incentive Grants n/a n/a 50,000
Leveraging Educational Assistance Partnerships 63,852 63,852
Academic Competitiveness /SMART Grants 1,336,000 (36,000) 0
Iraq/Afghanistan Service Grants 15
182 211
TEACH Grants 26,838 22,178
Institutional aid    
Strengthening Institutions 84,000 84,000 84,000
Strengthening Tribally Controlled Colleges and Universities 30,169 30,169 30,169
Strengthening Alaska Native/Native Hawaiian Institutions 15,084 15,084 15,084
Strengthening Historically Black Colleges and Universities 266,586 266,586 266,586
Strengthening Historically Black Graduate Institutions 61,425 61,425 61,425
Master's Degree Programs at HBCUs and Predominantly Black Institutions 11,500 11,500 11,500
Strengthening Predominantly Black Institutions 10,801 10,801 10,801
Minority Science and Engineering Improvement 9,503 9,503 9,503
Aid to Hispanic Serving Institutions 239,429 239,429 239,429
Strengthening Asian American and Pacific Islander-serving Institutions 3,600 3,600 3,600
Strengthening Native American-serving Nontribal Institutions 8,600 8,600 8,600
Tribally controlled Voc-Tech Institutions 8,162 8,162 8,162
Gallaudet U. 123,000 123,000 118,000
National Technical Institute for the Deaf 68,437 68,437 65,037
Howard U. 234,977 234,977 234,977
International education/foreign language 125,881 125,881 125,881
Fund for Improvement of Postsecondary Education 159,403 159,403
Demonstration Projects to Ensure Access for Students With Disabilities 6,755 6,755 0
Vocational and adult education  
Carl D. Perkins Act State Grants 1,160,911 1,160,911 1,000,000
Tech Prep 102,923 102,923
Adult Education 639,567 639,567 658,346
Student assistance  
TRIO programs 910,089 910,089
Gear Up 323,212 323,212 323,212
College Access Challenge Grant Program 150,000
150,000 150,000
Special programs for migrant students 36,668 36,668 36,668
Child Care Access Program 16,034 16,034 16,034
Graduate education  
Byrd Scholarships 42,000 42,000
Javits Fellowships 9,687 9,687 0
Graduate Assistance in Areas of National Need 31,030 31,030 40,717
Thurgood Marshall Legal Educational Opportunity Program 3,000 3,000 3,000
Other offices  
Research and statistics 659,006 659,006
Office for Civil Rights 103,024 103,024 107,772
Inspector general 60,053 60,053 67,187
Adult Employment and Training 861,540 861,540 860,527
Green Jobs Innovation Fund 40,000 40,000 60,000
Dislocated Workers Training 1,413,000 1,413,000 1,403,763
Career Pathways Innovation Fund 125,000 125,000 0
AmeriCorps state and national grants 372,547 372,547 399,790
Institute of Museum and Library Services 282,251 282,251 242,605
National Endowment for the Humanities 167,500 167,500 146,255
National Endowment for the Arts 167,500 167,500 146,000
National Historical Publications and Records Commission 13,000 10,000 5,000
State Department Academic Exchanges (Fulbright, etc.) 358,627 357,348 358,998


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