Budget Questions for Obama

Higher Ed Watch has some questions for the Obama administration about the president’s fiscal year 2010 budget request, which it released today. We hope these questions are helpful to policymakers, the news media, and the public in evaluating these proposals.

1) The president’s 2010 budget proposal would end the Federal Family Education Loan (FFEL) program and use the savings to finance the Pell Grant program as an entitlement. This proposal has been controversial in Congress, as some lawmakers oppose creating a new entitlement program. If Congress does not go along with this aspect of the plan, would the administration support using FFEL program savings to increase spending on Pell Grants without making the program an entitlement? Or is the administration open to other ideas for spending this money in ways that would promote its higher education agenda?

2) The president’s budget request proposes an increase in funding for the Perkins Loan program from $1.1 billion in available loan assistance in 2009 to $5.8 billion in 2010. Yet the 2010 funding allocated for this change is negative $498 million. Furthermore, the administration shows that the proposal saves $3.2 billion over five years. How does the $4.7 billion increase in available loan funds achieve savings? Is this accomplished by recalling the federal share of the revolving fund that colleges use to make Perkins Loans? If so, why not be more upfront about it?

3) The campus-based aid programs – Federal Work Study, Perkins Loans, and Supplemental Educational Opportunity Grants (SEOG)) – are intended to supplement Pell Grants for low-income students. The federal government provides campus-based aid funds to colleges, which then award them to their students. However, the formula the government uses to distribute the aid overwhelmingly benefits elite public and private colleges and universities, even though these institutions serve a relatively small proportion of disadvantaged students. The administration has criticized this formula and proposes changing it for the Perkins Loan program. However, the president’s 2010 budget request would leave the formula unchanged for the SEOG and work study programs. Does the administration plan to address this discrepancy in the future?

4) In calling on Congress to rewrite the formula the government uses to allocate Perkins Loan Funds, the administration says it intends for the new formula to provide incentives to colleges to reduce their costs, provide more need based institutional aid, and possibly reward schools for enrolling and graduating low- and middle-income students. Are achieving all of these goals realistic? Does the administration have a sense of which goal would be the easiest to achieve and would have the most significant impact on promoting college access and success among financially needy students?

5) The budget request includes $500 million in 2010 and $2.5 billion over five years to fund national and state efforts to improve degree attainment rates in higher education and identify and promote what works in helping needy students get a degree. It also discusses granting states considerable flexibility in the types of programs that can be funded, and allowing states to set aside a portion of their funding to continue college outreach and information activities now undertaken by the guaranty agencies in the FFEL program. Given this last allowance, will these dollars will be distributed to the states by formula or will states be required to compete for funds? If it is a formula program, can one assume that dollars could be sub-granted out to institutions? If the program is competitive, will allowances be made to allow institutions of higher education, perhaps in partnerships with local educational agencies, to apply directly for these funds?

6) The 2010 budget request proposes to cancel $511 million in surplus funds for the Academic Competitiveness (ACG) and SMART Grant programs. The programs provide grant aid to Pell Grant-eligible students who meet additional requirements. We already know that many first-year ACG recipients are unable to meet the 3.0 grade point average required to receive a second-year grant worth $1,300. Instead of cancelling the unused funds, has the administration considered, increasing the second-year ACG award to provide a greater financial reward for strong academic achievement?

7) The president’s budget proposal seems to suggest that the administration will allow the ACG/SMART grant programs to expire after fiscal year 2010 under current law. Does the administration believe that the programs have been ineffective?

For all of the New America Foundation’s Federal Education Budget Project questions on the FY10 Obama education budget, click here.