House Student Aid Bill Spending and Savings

The U.S. House of Representatives Committee on Education and Labor last week approved legislation, the Student Aid and Fiscal Responsibility Act of 2009, that would eliminate the Federal Family Education Loan (FFEL) program and use much of the savings to increase funding for other education programs. The full House may vote on the bill soon, but the Senate Health, Education, Labor, and Pensions Committee is not likely to release its companion proposal until the fall. Let’s take a look at some of the new spending proposed in the bill.

Congress is using the budget reconciliation process to move the bill to final passage, which allows for expedited consideration and filibuster-proof privilege in the Senate. Under the reconciliation instructions adopted by Congress earlier this year, the student aid bill must result in $1 billion in savings over the coming five years. Because the bill’s core proposal—administrative savings in student loan programs—reduces spending by $41.8 billion over the 2009-2014 period, the bill’s drafters are able to increase funding in other programs and still meet the $1 billion requirement. In fact, the bill includes $30.3 billion in gross new spending over that time period.

By far the largest new spending initiative is an increase in funding for Pell Grants, a program that provides grant aid to college students from low-income families. The bill creates a new funding stream and formula for the program, resulting in a $10.3 billion boost in funding from 2009 to 2014. For more specifics on this proposal, see the Ed Money Watch post from last week.

Interestingly, the next two largest new spending initiatives in the bill are not directed at higher education assistance. Over the next five years the proposal would spend $4.1 billion to modernize, renovate, and repair K-12 schools. Another $3.7 billion would be spent on grants to states to improve early childhood education.

New community college initiatives are also funded through the proposed legislation. One funding stream would spend $2.6 billion from 2009 to 2014 for colleges and states to institute reforms and evaluations. Separately, an additional $2.5 billion is provided for community college renovations and repairs.

In short, the House Education and Labor Committee has approved a bill that finds significant new savings in federal student loan programs and reallocates these funds to a wide range of efforts, from early childhood education to K-12 school construction and college grant aid. We’ll have more on these proposals as the bill makes its way through both the House and Senate.

Note: All funding figures reflect Congressional Budget Office estimates of outlays.