In case you missed it, it looks like the Budget Committee in the House of Representatives has effectively nixed President Obama’s new Perkins Loan program. The president’s Perkins Loan proposal would revamp the existing program, which is a revolving federal loan fund administered by individual schools, and replaces it with a new direct loan program that lets the most financially needy students take out larger federal Stafford loans. According to official budget estimates, this would free up federal funds that could be directed to the Pell Grant program. But a little-known provision in the fiscal year 2012 budget resolution that the House of Representatives passed last month makes that proposal moot.
The proposal was part of a series of legislative proposals (called the “Pell Grant Protection Act”) President Obama included in his fiscal year 2012 budget that would reduce spending on various higher education programs and move the money to the Pell Grant program. Costs for the Pell Grant program have risen steeply in recent years, mainly because Congress made the program more generous, forcing lawmakers to enact a series of ad hoc funding sources to supplement the regular annual appropriation. Those one-time funding sources will be exhausted this year, so Congress needs to boost the fiscal year 2012 appropriation for the program from the current $23.0 billion to $34.2 billion, unless it wants to cut the current maximum grant of $5,550.
Key education stakeholders and most members of Congress have assumed that all of the proposals in the president’s Pell Grant Protection Act are viable budget options that, if enacted, could help plug the hole in the Pell Grant budget. (In fact, one of the proposals in the president’s plan, elimination of the year-round Pell Grant, was adopted in the fiscal year 2011 appropriations bill enacted in April.) This is indeed true, except for the new Perkins Loan proposal. Under budget rules that the House of Representatives adopted in the fiscal year 2012 budget resolution, that proposal would actually increase federal spending, not reduce it.