Stopping the Raid on Student Aid

Stopping the Raid on Student Aid
Higher education leaders call on lawmakers to use Pell Grant surplus to expand the program, rather than divert funds to other projects
By Charles Dervarics

Call it bad timing: After racking up a $4 billion shortfall due to heavier-than-anticipated student demand in recent years, the Pell Grant program now is running a surplus at the same time Congress is looking for new revenue to shore up the federal budget.

The turn of events is raising an alert among higher education leaders, who want to make sure lawmakers use the savings to expand the program and not spend it on other activities. Despite the added student demand that triggered the shortfall, Pell has not seen an increase in its maximum grant in nearly four years.

“Any surplus should go to increase the maximum grant,” says Luke Swarthout, higher education associate at the Public Interest Research Group’s Higher Education Project. “The maximum grant has been frozen at $4,050 while college costs continue to rise.”

At a recent Senate hearing, lawmakers raised the idea of using this newfound surplus to fund lawmakers’ favored projects or to increase federal health care funding — while leaving the maximum Pell Grant alone. Some of higher education’s top leaders wasted little time mounting an opposition to such efforts.

“Whenever the student aid programs produce savings, Congress takes them to spend on other areas of government, whether deficit reduction, hurricane relief or other education and health programs,” say Drs. David Ward and David Warren, co-chairs of the Student Aid Alliance. “Congress must stop the raid on student aid.”

With the surplus, the leaders note, Congress could raise the maximum grant by $260, bringing it to more than $4,300 per year. Such a boost would mean “a much-needed increase for low-income students pursuing their higher education dreams,” say Ward, president of the American Council on Education, and Warren, president of the National Association of Independent Colleges and Universities.

In a letter to senators, Ward and Warren say Pell is running a surplus due to an improving economy. During the economic downturn earlier this decade, Pell costs rose as more Americans attended or returned to college rather than trying to navigate a difficult job market.

The debate over Pell comes at a tense time for college lobbyists, since Congress is facing huge obstacles in trying to pass a 2006 education spending bill and a long-term deficit reduction plan. Lawmakers are going back to the drawing board on the spending bill after the full House rejected a compromise between earlier House and Senate proposals. That compromise for the 2006 fiscal year left Pell without an increase in the maximum grant but protected other student aid programs.

Lawmakers were expected to re-open debate on the plan following the holidays, at which time the Pell Grant surplus is likely to get attention.
“We need to increase need-based grant aid,” says Swarthout. Pell is “a critical program that has been given short shrift in recent years.”

Casting a shadow over the process is the deficit reduction bill, which could chop as much as $14 billion from student loan programs to help offset government red ink. Both the House and Senate have approved separate bills, each containing loan program cuts. The steepest are in the House, where lawmakers are proposing a major shift in loan policy. Under current law, borrowers can lock in low long-term interest rates when they refinance their loans. New House language would make that option much more expensive, a move critics say would cost borrowers more than $5 billion.

Democrats — including members of the Congressional Black Caucus — also contend the GOP budget cuts would add new fees and taxes on students while burdening many borrowers with higher interest rates. Already subject to bitter debate, this bill cleared the House by two votes despite sharp criticism.

“This raid on student aid is simply unfair. We are paying for our rich to become richer on the backs of our middle- and low-income students,” says U.S. Rep. Eddie Bernice Johnson, D-Texas.

The bill represents the largest student aid cut in the history of the program, adds U.S. Rep. George Miller, D-Calif., senior Democrat on the House Committee on Education and the Workforce. “Republican leaders here in Washington have no vision for the future.”

But Republicans counter that those charges are overblown and that the budget plan will help students while it reins in federal spending. Some student-friendly measures, they say, include provisions to raise loan limits for first- and second-year students and cut loan origination fees.
“The bill provides the best possible policy given the budget constraints facing the nation,” says committee chairman U.S. Rep. John Boehner, R-Ohio, who adds that the bill “reflects our long-term goals of expanding college access for low- and middle-income students and securing the retirement of American workers.”

Among other provisions, he says, the bill will reduce loan fees, ease the financial aid process and expand flexibility. It also will cut subsidies to lenders.

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