Improving Postsecondary Access and Opportunity: Obama's Proposed FY 2011 Budget for Postsecondary Education

• 02/01/10

President Obama proposed on February 1st an education budget for fiscal year 2011 which includes a historic commitment to increasing college access and success by dramatically expanding financial aid — making it simpler, more reliable, and more efficient. Also, it proposes to index the Pell Grant maximum award above inflation, insulate student loans from financial turmoil, modernize and expand the Perkins Loan program, and simplify access to student aid.

This budget request coincides with the Student Aid and Fiscal Responsibility Act (SAFRA), which has passed the House of Representatives and is pending in the Senate.

Secretary of Education Arne Duncan stated in presenting the budget proposal, "The President has set a goal that America once again will lead the world in college completion, and to do that by the end of the decade, we need to improve the education at every level, from birth through the end of college. This budget puts us on a path toward success and meeting that goal."
 
The overall Department of Education budget request for fiscal year 2011 is $77.8B. The higher-education portion of the budget proposal should be viewed in two parts — student aid and higher-education programs. 
The key budget requests and policy changes made in the FY 2011 proposed budget for student financial aid include:

• A record request for $34.8B in Pell Grants to nearly 9M students during the 2011-2012 award year, with a projected maximum Pell award of $5,710 (an increase of $160). Under the provisions contained in the pending legislation and in the budget, the maximum Pell Grant would automatically rise by the rate of inflation plus one percentage point annually over the next decade, using the 2010-2011 maximum of $5,550 as a base.
• Make the Pell Grant mandatory to end the practice of “backfilling” billions of dollars in the Pell Grant shortfalls.
• End entitlements for financial institutions that process Federal student loans to students and parents under Federal Family Education Loans (FFEL). Under this request, the Department of Education would take advantage of low-cost sources of capital to make most postsecondary student loans through the Federal Direct Student Loan program. Ending FFEL loan origination beginning July 1, 2010 would save an estimated $45.6B through fiscal year 2020, which helps pay for the increase in Pell Grants.
• Create an expanded, modernized Perkins Loan program providing $6B in new loan volume annually — six times the current Perkins volume. The expanded program would support Perkins Loans at up to 2,700 additional postsecondary education institutions, reaching up to 2.4M students at full implementation. The Department would service Perkins Loans along with other federal loans. The loans would have the same low five percent interest rate and allowed loan amounts (both undergraduate and graduate) as in the current Perkins program. Overall, this proposal will save $5.5B over 10 years.
• Continue in fiscal year 2011 the American Opportunity Tax Credit. About 8M students and families will claim an estimated $11.4B under the new American Opportunity Tax Credit, which allows a credit of up to $2,500 for tuition and fees and course materials during the first four years of postsecondary education. Other benefits include $3.4B under the Lifetime Learning tax credit, which allows a credit of up to $2,000 for undergraduate and graduate tuition and fees; and $1.1B in above-the-line deductions for interest paid on postsecondary student loans. For more information on tax benefits for education, visit Tax Benefits for Education.
• Help student borrowers struggling to repay student loans by easing the terms of repayment in the Income-Based Repayment (IBR) program by reducing the maximum monthly payments under the program from 15 percent of a borrower's prior-year income to 10 percent, and reducing the length of time a borrower is in the IBR program before his or her loan is forgiven from 25 years to 20 years. Borrowers in public service jobs would continue to receive forgiveness after 10 years of payments.
• Continue the effort to simplify the cumbersome process for applying for student aid with the Free Application for Federal Student Aid (FAFSA). The administration supports pending legislation that would simplify the financial aid application process by eliminating questions from the FAFSA. The legislation would complement efforts to make the online application faster and easier, partly by using IRS data to help answer questions. FASFA has already gone through one simplification during the Obama administration.
• The Supplemental Educational Opportunity Grant, Work-Study, and Perkins Loan programs are collectively referred to as the "campus-based" programs; grants in these programs are made directly to participating institutions, which have considerable flexibility to package awards to best meet the needs of their students. Participating institutions would continue to have extensive flexibility in determining student eligibility and award levels.
• Also, the proposal creates a combination of Department student aid and selected tax benefits that will grow from $105B in fiscal year 2008 to almost $173B in fiscal year 2011, an increase of nearly $68B, or 64 percent.

The request for higher-education programs is $2.1B plus $10.6B American Graduation Initiative to improve and modernize community colleges and a $3.5B College Access and Completion Fund. The higher-education programs request is a combination of new programs and funding that would be provided under the Student Aid and Fiscal Responsibility Act that support a comprehensive set of programs that will help achieve the President's goal of significantly increasing the percentage of Americans with postsecondary degrees or industry-recognized certificates.

Key higher-education program budget requests include:

•  $508.5M in discretionary funding for the Aid for Institutional Development programs, an increase of $23.8M over the 2010 level, which is to help close the gap in college enrollment and degree attainment between minority and low-income students and others.
• $98M for Historically Black Colleges and Universities (HBCUs), a five percent increase.
• $96.57M for Hispanic Serving Institutions, and other Minority Serving Institutions, a five percent increase.
• $125.9M for the International Education and Foreign Language Studies programs to help meet the nation's security and economic needs through the development of expertise in foreign languages and area and international studies. Dramatic changes in the world's geopolitical and economic landscapes and the war on terrorism underscore the importance of maintaining and expanding American understanding of other peoples and their languages.
• $910.1M in combined discretionary and mandatory appropriations to maintain college preparation and college student support services for participants in the federal TRIO Programs.
• $323.2M for Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) that serves an estimated 748,000 middle- and high-school students preparing for college.
• $64M for the Fund for the Improvement of Postsecondary Education (FIPSE) to support innovative projects to reform and improve postsecondary education, including $25M for a STEM initiative to identify and validate effective approaches for recruiting, retaining, and teaching undergraduate students in STEM fields.
• $40.7M for merit- and need-based scholarships and fellowships to postsecondary students under the Javits Fellowships and Graduate Assistance in Areas of National Need (GAANN) programs.

While not everyone is pleased with some of the requests, there is a definite focus on college access and completion with increases in student financial aid, changes in student aid policy, and increases in support for programs that support students in the greatest need for services to ensure their graduation.

Fritz Edelstein is a principal in the Public Private Action, a consulting group. His work focuses on strategic government and constituent relations; business development strategy; advocacy research and policy analysis; strategic planning and resource development; and advocacy, outreach and public engagement. This work includes producing Fritzwire, a leading education Internet newsletter providing timely information on education and related issues. He can be reached at [email protected].