Budget Focus: Higher Education

The President’s budget proposal for Fiscal 2014 contains several initiatives that could significantly change programs affecting students as well as the colleges and universities they attend.

The president’s proposal for the most well used program for higher ed student grant support — Pell Grants – calls for raising the maximum grant level by $140 per year, to $5,785 for the 2014-2015 school year. Overall, 9.3 million students would be supported, an increase of 202,000 over the current academic year.

For those who rely on student loans, changes could be in the offing as well.

Proposals are included to reform the student loan program structure by moving away from the current fixed-rate system. The idea is to return to a market-based approach without a fixed cap on the interest rate – a concept that has many Democrats in Congress concerned. Rates would be determined based on the 10-year Treasury note rate with add-ons of 0.93 percentage points for Subsidized Stafford Loans; 2.93 percentage points for Unsubsidized Stafford loans; and 3.93 percentage points for PLUS Loans. For the past several years, Congress has frozen the borrowing rate at the subsidized rate of 3.4 percent.

The Education Department also wants to offer to all student borrowers the “Pay as You Earn” repayment plan. That would cover all Stafford and Grad PLUS loan borrowers, as well as Consolidation loan borrowers who repaid Stafford and Grad PLUS loans made under the Direct Loan or FFEL programs. Borrowers would be assured that their student loan payments would not exceed 10 percent of their discretionary income and, after 20 years of repayment, that any remaining balances would be forgiven.

For colleges and universities involved in STEM (Science, Technology, Engineering and Math) research and education, several changes are included in this year’s proposal.

Among them, the Administration is proposing to reorganize and consolidate most federal STEM education efforts across the government to the National Science Foundation. The portfolio would total nearly $1.3 billion under the proposal.

The new effort would consolidate existing programs and add a new $123 million program named CAUSE – Catalyzing Advances in Undergraduate STEM Education. Recommendations for such STEM program improvements have been made in various reports by the National Research Council and the President’s Council of Advisors on Science and Technology. At the Department of Education, a three-part STEM Innovation initiative would be focused to produce 100,000 STEM teachers over the next decade.

And, in the category of “if at first you don’t succeed,…”, the FY2014 budget again seeks $1 billion for a new grant program — “Race to the Top–College Affordability and Completion” competition – in an attempt to drive systemic reform in postsecondary education in the states. This idea has been floated twice before but not funded by Congress.

Since Republicans in Congress have similar ideas on letting student loans float on a market based system, it seems likely that approach will eventually be adopted this year. It’s easy to reorganize so it seems a safe bet that the STEM proposals will go forward — even if all the funding is not provided by a cash-strapped Congress. And it’s probably “three strikes and you’re out” for The Race to the Top that wasn’t a hit with Congress the first two times it was proposed.

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