September26th

The Senate Appropriations Committee approved its FY 2012 Labor-HHS-Education
spending bill on Sept. 21, maintaining the SEOG and Federal Work-Study student
aid programs at last year’s levels. The committee also funded a maximum Pell
Grant of $5,500.

The Pell Grant program needed an additional $1.3 billion (on top of the $23 billion
baseline and the $9 billion from the Budget Control Act this summer) to
maintain the $5,550 maximum grant this year. To pay for that increase, the
committee decided to start charging low-income undergraduate students interest
on their subsidized student loans as soon as they leave school, for the first
time since the student loan program was enacted in 1965. The change is
effective July 1, 2012.

Currently, low-income students are given a six-month interest-free grace period after they
graduate. The committee’s cut comes less than two months after the in-school
interest subsidy for graduate student borrowers was eliminated in the Budget
Control Act.

With a subcommittee allocation of $157 billion ($308 million below last year), the
committee faced difficult decisions to maintain as much education, health, and
research funding as possible. Subcommittee Chairman Tom Harkin (D-Iowa) likened
the process to “cutting beyond the fat and muscle to the bone
marrow,” and noted that they had to eliminate 15 programs, which was
“painful and unpopular.” Ranking Member Richard Shelby (R-Ala.)
opposed the bill because of the spending for the Affordable Health Care Act,
and for continuing Pell Grant funding on an unsustainable path.

The committee considered tightening eligibility rules for Pell Grants instead, but
did not want to kick any students out of the program.

While it is a relief that Pell is maintained at $5,550, and that SEOG, Federal
Work-Study, TRIO, and GEAR UP are protected and level-funded, it is of great
concern that important federal loan benefits for low-income students are being
eliminated.

Next Steps

The House Appropriations Committee has twice cancelled mark-ups because
subcommittee members have not agreed on the draft bill. As the Student Aid
Alliance understands it, the dispute is related to the increased spending for
the bill provided in this summer’s Budget Control Act. The Alliance is not
aware of student aid provisions in the House bill, but knows committee members
face the same difficult choices as Senate appropriators. It is expected the
education bill will not see further action until the House and Senate
leadership begin working on an omnibus bill.

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