College Lobbyists, What’s Your Plan for Saving the Pell Grant Program?

The reactions that President Obama’s budget request for the 2012 fiscal year elicited this week from the college lobbyists at One Dupont Circle were entirely predictable. They applauded the president’s desire to keep the maximum Pell Grant at $5,500, but made clear — in the most polite way possible — that they would not support the means by which the administration would achieve that goal.

“It is clear that the administration has put a lot of effort and care into producing a budget that strives to protect and preserve student financial aid,” Molly Corbett Broad, the president of the American Council, said in a written statement. “While the higher education community does not agree with all of the choices made, we support the overall objective of ensuring a viable array of student aid programs anchored by the indispensable Pell Grant program.”

At issue are proposals in the president’s budget plan that aim to shore up funding for the program, which is facing a serious budget crisis even as demand for the grants continues to escalate. This is primarily because short term funding sources (such as through the stimulus legislation and last year’s student loan reform bill) that helped finance a maximum Pell Grant award of $5,550 in fiscal year 2010 will be all used up. Congress has not yet found the money it needs to keep the maximum award in place the current 2011 fiscal year, which started in October, let alone in 2012, when the cost of doing so is expected to skyrocket to nearly $40 billion.

This week, House Republican leaders are considering a continuing resolution for the remainder of the current fiscal year that would deal with the Pell Grant program’s fiscal problems by slashing the maximum grant to $4,705. President Obama’s budget request rejects that approach, but instead would make spending reductions in the government’s student aid programs totaling $18.5 billion over five years and $43.9 billion over 10 years to keep the current maximum award in place.

As part of the president’s “Pell Grant Protection Plan,” the president’s proposed budget would end the year-round Pell Grant policy that lets students collect two grants in a single award year with the second grant generally used to pay for summer school. The proposal would reduce costs in the program by $3.4 billion in fiscal year 2011 and by $4.2 billion in fiscal year 2012. The administration argues that there is little evidence that year-round grants help students earn degrees faster — which was the goal of the policy when it was included in the Higher Education Opportunity Act in 2008.

The president’s plan would also eliminate the “in-school interest subsidy” on federal student loans for graduate and professional students, saving $13.3 billion over five years and $29.3 billion over ten years. Most federal student loans accrue interest while students attend school, but a subset of loans — those made to graduate and undergraduate students who have lower incomes (or whose families have lower incomes in the case of undergraduate students) — do not accrue interest until after students leave school. The president’s proposal would end this benefit for graduate students arguing that it does not encourage students to attend graduate school, is not well-targeted to borrowers who need extra repayment help, and is unnecessary because of other loan repayment and forgiveness benefits available on federal loans.

In a press release, Education Secretary Arne Duncan said, “”These are very tough choices but with rising demand, we have to stretch our dollars as far as possible and do more with less.”

The college lobbyists’ reactions to the president’s proposals were muted — undoubtedly because they are working closely with the administration to fight the House Republicans’ effort to slash Pell Grant funding. But some, like Robert Berdahl of the Association of American Universities (AAU), could not hold back their disappointment and frustration.

“We are concerned that the President’s proposal to eliminate the in-school interest subsidy on loans to graduate students as a means of covering some of the costs of the Pell program may discourage American students from attending graduate school at a time when the nation needs to encourage its own best talent,” Berdahl, AAU’s president, said in a prepared statement.

Really? That’s what students are thinking about when they’re considering going to graduate school? We haven’t seen any evidence to suggest that’s the case. Few students know whether they have subsidized or unsubsidized federal loans to begin wirh — making it all the more unlikely that this plays any role in their decision to pursue a graduate education.

Regardless, the responses from both Broad and Berdahl suggest that the college lobbying groups are not ready to face up to the funding crisis that is at hand. They would obviously like to see Congress maintain the $5,500 maximum grant without having to make any “tough choices.” But the stark reality is that we don’t have that option anymore. Congress is either going to slash the maximum award, and further deflate the grant’s purchasing power, as House Republicans have proposed, or it’s going to make the type of targeted cuts that the administration is recommending.

Now, that doesn’t mean they have to support the options that the administration has laid out. They can propose other ones that they believe will be less harmful to students and schools. But they can’t just continue to sit on the sidelines and pretend that any and all cuts to the federal student aid programs are equally bad.

So, One Dupont Circle, what’s your plan?