Today the US Department of Education and President Obama released details of its education budget. The proposal, if passed, would change the nature of financial aid programs for the better and massively increase their impact on students and their families who struggle to pay for college. Right now, close to 7 million students receive need based Pell grant aid to attend school.
The budget proposal would make all Pell grant aid mandatory, rather than subject to a congressional allocation year after year. It would begin with a maximum Pell grant award of $5,550 for the 2010-2011 school year, and a $5,750 increase for 2011-12. After that, the maximum award would be increase by inflation + 1%. Thirty years ago, the maximum Pell grant funded 77% of the total cost of attendance for students attending the average four year public college, but now only covers 35%.
“Making the Pell grant reliable for students and families is by far and away the single most significant policy that the President could undertake to communicate to students and families that he understands their struggles to finance college. Now, they can count on a certain level of aid from year to year. We are thrilled that the President is undertaking this transformation of the Pell grant. It comes not a day too soon,” Williams said.
In addition, the proposal would help students stay in college to graduate, by creating a five year, $2.5 billion federal-state partnership which aims to design and implement retention practices state by state that are proven to work. Only about half of college students graduate within six years, and for lower income students, completion rates are even lower. “Getting in to college is only half the battle,” Williams stated. “Getting to graduation can be a huge hurdle, and this budget proposal will help low income students overcome the odds to succeed.”
The budget proposes to help students pay for college by making the new American Opportunity Tax Credit, which is partially refundable, permanent. Recently created in the economic recovery package, the tax credit allows millions of families previously excluded to take advantage of the cut, but expires after 2010. The budget invests $23.3 billion over five years to make it permanent. “Making the temporary relief of this tax cut permanent eases the college financing burden for families and students,” Williams noted.
The proposal aims to provide additional aid to students facing special circumstances like the loss of a parent’s job, by providing a $6 billion increase to Perkins student loan aid, allocated to schools to respond to individual student emergencies. Rather than helping these students through a blanket increase to federal student loan limits, which drives up college costs, the Department of Education’s plan is to allocate this loan aid to colleges based on a formula, as yet undetermined, that assesses the strength of the college’s need based aid program. “We’re looking forward to engaging in discussion with the Department about the best approach to protecting students from too much debt within this new program,” Williams commented.
Finally, the proposal pays for these changes by eliminating inefficiencies within the student loan programs, thus freeing up more taxpayer dollars to go toward the proposed aid programs. “For years, lenders and banks have been overly-subsidized to deliver student loans,” Williams explained. Most recently, in response to the uncertainty within the banking industry, Congress and the Department created an emergency loan origination program for banks in the event that they lacked the capital necessary to give out federal loans to students. “USPIRG supports a more efficient and more reliable student loan system. We need a system that benefits students, rather than banks.”
“I applaud President Obama and Education Secretary Arne Duncan for their bold leadership in their budget proposal to resolve some of the most lingering and stubborn challenges to college access and affordability. In particular, their plan to make the Pell grant reliable over the long term is profound and will change the game for good for low income students and their families,” Williams added.
