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The Next Front in the Pell Grant Fight

Published:  August 2, 2011

The debt ceiling legislation that President Obama signed into law today puts the Pell Grant program in a much stronger position in the short term than it would have been otherwise. But the program is not quite out of the woods yet. Congress is still going to have to do some heavy lifting if it wants to maintain the current maximum grant of $5,550 in the upcoming 2012 fiscal year.

As has been widely reported, the debt ceiling legislation provides a one-time infusion of $17 billion for the Pell Grant program, spread between fiscal years 2012 and 2013. The bill would pay for this supplemental funding by eliminating the “in school interest subsidy” on subsidized Stafford loans for graduate and professional students and ending on-time repayment incentives for student loan borrowers. This supplemental funding for Pell Grants replaces short term funding sources that helped boost the maximum Pell Grant in recent years (such as the American Recovery and Reinvestment Act of 2009 and last year’s student loan reform bill) but will run out at the end of fiscal year 2011.

However, Congress will still need to provide a regular appropriation later this year that is sufficient to fully fund a maximum grant of $5,550 for fiscal year 2012. This is going to be a challenge because the debt ceiling bill would cut total appropriations spending by $7 billion in 2012. As the budget experts at our sister blog Ed Money Watch explained yesterday:

To maintain the current maximum grant of $5,550, Congress needs to appropriate $24.2 billion -- an increase of $1.3 billion from the current year level – but the new cap on annual appropriations reduces total spending in 2012 compared to 2011. In other words, Congress will have to find additional funding for Pell Grants while reducing appropriations spending overall.

Can appropriators come up with the additional funding? Sure, but it would probably require significant cuts in other important and popular programs, such as Title I grants to local education agencies, funding for early education, or the National Institutes of Health. At Higher Ed Watch, this doesn't seem like a very realistic option to us.

We also don’t think that Congress will reduce the maximum Pell Grant. The Obama administration has made clear that maintaining the award at its current level is a top priority. And while some conservatic House Republicans may push for a cut, the party’s Congressional leaders know that taking such a step is fraught with political danger.

In our opinion, the most likely scenario is that appropriators will seek to make changes to the Pell Grant program’s eligibility rules as a way to reduce the program’s costs. They may consider, for example, reducing the number of semesters that students can receive the grants [they can currently get them for up to 18], or eliminating the eligibility of less-than-half-time students for the awards. And, as we said last week, even if lawmakers manage to avoid making major changes now, they will certainly have to do so before the supplemental funding contained in the debt ceiling agreement runs out in 2014

Given the stakes, Pell Grant supporters can not afford to be complacent. In fact, at Higher Ed Watch, we think that the program's advocates (including the Department of Education) need to get out front of this debate and identify potential changes with which they can live. Because like it or not, major changes are coming to the Pell Grant program. The program's champions won't want to be stuck on the sidelines when those decisions are made.

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