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Thursday, March 25, 2010

Pell Grant Increase Proposed

NY Times

The federal government would provide $36 billion in new financing for Pell grants to needy students over the next 10 years under legislation announced Thursday by Congressional Democrats.

The maximum annual Pell grant would rise to $5,975 by 2017, from $5,350 this year. The new Pell initiative includes $13.5 billion to cover a shortfall caused by the sharp increase in the number of Americans enrolling in college during the recession.

Congress would pay for the larger grants by ending subsidies to private banks that make student loans and shifting to direct federal lending.

But the amount going to education spending and aid for college students is far less than the Obama administration had hoped, largely because the savings from the switch to direct federal lending is now estimated to be $61 billion, rather than $87 billion.

In addition, $9 billion of the savings would be used to offset the costs of the health care overhaul proposed by the Democrats — an amount that lets the health care proposal meet requirements for the package to go through the budget-reconciliation process.

On top of that, $10 billion of the savings would go to deficit reduction.

“This legislation offers the most sweeping changes to the federal student loan program in a generation,” said Representative George Miller of California, chairman of the House Education and Labor Committee. “With one move, Congress can make college more affordable, keep jobs in America, prepare young people for our global economy, and reduce our deficit by billions.”

The banking community, which has lobbied fiercely against the student-loan legislation, rallied against the use of education savings to pay for health care.

“This is entirely unnecessary — there’s nothing in the reconciliation instructions that requires such a draconian cut in student aid, whatever the cause,” said a statement Thursday from America’s Student Loan Providers. At a news conference Thursday, Senator Tom Harkin of Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, said he was confident that there would be enough votes to pass the legislation, which is likely to be put to a vote Sunday.

Congressional leaders, and Arne Duncan, the secretary of education, hailed the package as a historic opportunity to help working- and middle-class Americans afford a college education.

But it is also true that the student-loan proposal has been cut back sharply from the Student Aid and Fiscal Responsibility Act that the House passed in October, based on a previous Congressional Budget Office estimate of $87 billion in savings.

The House bill provided billions for the construction, modernization and repair of school and community-college buildings, billions more to early childhood education, and further billions to help community colleges improve their graduation rates. All those have been eliminated, although community colleges would still get some new financing under the legislation.

Then, too, the House bill called for increasing Pell grants each year by the consumer price index plus 1 percent starting in 2013, to $6,900 by 2019. But to save money, the extra 1 percent was eliminated.

One of the few areas not cut was $2.55 billion for historically black and minority-service colleges, which remains the same as in the House legislation.

The Obama administration’s effort to end the subsidies and federal guarantees for student loans, known as the Federal Family Education Loan program, and redirect billions of dollars to students, has been strongly opposed by bankers, Republicans and some Democrats from areas with strong student-loan businesses.

They say the conversion to required direct lending is an unwarranted government takeover that will lead to the widespread loss of banking jobs, and poor service for students.