Debt-Ceiling Deal Provides $17-Billion for Pell Grants

This from the Chronicle of Higher Ed via Linked In:

The White House and Congress reached a deal Sunday to raise the nation’s borrowing limit and shrink the federal deficit, just two days before the August 2 deadline.

The agreement, which the president announced late Sunday, would cut $1-trillion right away and create a committee to reduce the deficit by another $1.5-trillion by November, according to news reports. If approved by both chambers of Congress, it will avert default on the nation’s debts and ensure that the government has enough money for federal benefits, including student aid.

Like the House’s version of the bill, it would provide $17-billion for the Pell Grant program, which is expected to run an $11-billion shortfall this year. The Senate had proposed $18-bilion for the program. It’s unclear if the agreement would end the in-school subsidy on federal loans to graduate students, though it’s likely, since both the House and Senate supported the idea.

Regardless, the measure offers only a temporary reprieve for the Pell program. Given that House conservatives vehemently oppose tax increases, it’s likely that the committee charged with reducing the deficit will favor spending cuts over revenue increases. That puts Pell grants and the other student-aid programs at risk of cuts in the near future.

The programs could also face cuts or eligibility changes in future years, as appropriators cut programs to comply with the bill’s spending caps.

Obama Invests in College Affordablity

This from Ed Week:

President Obama on Thursday proposed a huge expansion of the government's role in making college more affordable and putting it within reach of more students... The president was following through on a campaign promise to give every child the chance to go to college or pursue some form of higher education.

In his budget plan, Obama seeks to link growth of the Pell Grant program to inflation for the first time since the program began. It would grow by more than 75 percent over the next decade.

Obama seeks to save money and protect students from the current turmoil in financial markets by boosting direct lending by the government and discontinuing government-subsidized loans made by private lenders.

During the Bush administration, a massive student loan scandal exposed student lending companies that were improperly collecting hundreds of millions in federal subsidies. At the time, Education Secretaries Rod Paige and his successor, Margaret Spellings, argued repeatedly that under existing law they were powerless to stop the payments and that it was Congress that needed to act.

Obama apparently disagrees.

Congress Passes Overhaul of Student Aid Programs

WASHINGTON, Sept. 7 — Congress gave final approval to a broad overhaul of federal student loan programs Friday, sharply cutting subsidies to lenders and increasing grants to needy students.

In quick succession, the Senate and the House approved the changes, allowing Democrats to say they had made good on one of their campaign promises last year, to ease the strain of rising college costs. In the Senate, the bill passed 79 to 12, reflecting broad bipartisan support, while the House approved it 292 to 97 .

The federal education secretary, Margaret Spellings, said she was recommending that President Bush sign the bill because it “answered the president’s call to significantly increase funding” for Pell grants for low-income students. The administration had issued a veto threat against an earlier House version of the legislation.

Republicans in the House expressed disappointment at the administration’s change of course, arguing that the cuts in lender subsidies went too far.

The final bill, hammered out this week in a House-Senate conference committee, alters many of the ground rules for financing higher education, offering forgiveness on student loans to graduates who work for 10 years or more in public service professions like teaching, firefighting and the police, and limiting monthly payments on federally backed loans to 15 percent of the borrower’s discretionary income.

It also raises the maximum Pell grant, the basic federal grant for middle- and low-income students, to $5,400 from the current $4,310 over the next five years. To pay for the changes, the bill reduces federal subsidies to lenders by roughly $20 billion over the same period.

Democrats likened the legislation to the G.I. Bill that sent millions of veterans to vocational training and college after World War II. “Today we’ll need a similar bold new commitment to enable the current generation of Americans to rise to the global challenges we face,” said Senator Edward M. Kennedy, Democrat of Massachusetts and chairman of the education committee. “Today we’ll help millions of students achieve the American dream.”

Representative George Miller, Democrat of California and chairman of the House education committee, said that last year, Republicans took nearly $12 billion from federal student aid programs. “We took $11.39 billion and put it back into Pell grants,” Mr. Miller said. “That’s the difference that an election makes.” ...

This from the New York Times.