Federal Budget Proposals Threaten Cuts to Higher Education

Investments in higher education have long been understood to provide the best pathway to economic opportunity and upward mobility. College graduates achieve significantly higher incomes, improved life outcomes, and improved multigenerational economic and social outcomes for their families compared to individuals without college degrees. Public sector investments in higher education have proven to be particularly successful in improving economic mobility. A recent study found that public institutions of higher education are most likely to enroll low-income students and successfully prepare them for higher-earning careers.

One reason for this is that public policies have typically sought to ensure that high-quality higher education remains accessible and affordable. At the federal level, such policies primarily involve a mix of grants, loans, and other aid programs that help students from lower- and middle-income families to afford college. Policymakers adjust discretionary funding for these programs each year through the appropriations process, while mandatory funding is maintained year over year absent changes from policymakers

However, the Trump Administration’s budget proposal threatens to divest billions of dollars from higher education programs that provide pathways to opportunity for millions of students.

In order to help shed light on the emerging federal deliberations regarding support for access to higher education, the following sections examine how key programs would fare under recent budget proposals for federal fiscal year (FFY) 2018 put forward by the Trump Administration and by congressional leaders.

Pell Grants

The Pell Grant program is the largest federal need-based grant program for low-income college students. Here in California, Pell Grants provide financial aid for nearly 1 million students. Federal funding for Pell Grants in FFY 2017 consisted of $5.3 billion in mandatory funding and $22.2 billion in discretionary funding. The program has faced operating shortfalls in the past, either as a result of economic conditions or policy decisions to provide less ongoing funding than was needed. In recent years, the program has built up a reserve to protect against future shortfalls. Rather than adequately fund the program on an ongoing basis, the Administration and congressional proposals call for reducing the reserve. Here’s what’s being proposed:

  • Trump Administration: Eliminates $3.9 billion of the program’s reserve while maintaining the FFY 2017 discretionary funding level and the maximum award of $5,920.
  • Congress: Increases the maximum Pell Grant award by 1.7 percent from $5,920 to $6,020 in the 2018-19 academic year — the first discretionary increase in the maximum Pell Grant in over a decade — and rescinds $2.6 billion from the program’s reserve.

Student Loans

The federal government offers several loan and loan-repayment options for students attending college. Subsidized Stafford Loans are need-based loans that the Department of Education pays the interest on while students are in school. The Perkins Loan program provides low-interest loans to students with “exceptional financial need.” As recently as the 2014-15 academic year, over 45,000 of California’s neediest students received nearly $107 million in aid through this program. The Public Service Loan Forgiveness program forgives loan debt for students who work for the government or a nonprofit, provided the student has made 10 years’ worth of qualifying payments. Here’s what’s being proposed:

  • Trump Administration: Eliminates Subsidized Stafford Loans, forcing financially needy students to take out more unsubsidized loans and, in turn, pay more in interest and take on greater debt. Consolidates four income-based loan repayment options into one single plan with an increased monthly payment of 12.5 percent (up from 10 percent) of discretionary income and a shorter repayment timeframe for undergraduates. Eliminates the Public Service Loan Forgiveness program, leaving about 550,000 public service workers with thousands of dollars each in unexpected loans. Allows the Perkins Loan program to expire in 2017.
  • Congress: Recommends the Administration reconsider their decision to rescind the Public Service Loan Forgiveness program. While making no specific recommendations for Stafford and Perkins loans, does include $199 billion in cuts over the next 10 years to the “Education, training, employment, and social services” area, which includes these student loans.

Federal Work-Study (FWS) Program

The FWS program funds part-time employment for financially needy students to pay for college expenses. In 2014-15, California received about $107 million through the FWS program. Here’s what’s being proposed:

  • Trump Administration: Cuts FWS nearly in half — to $500 million — the program’s lowest annual funding level since its inception in 1980. Also, eliminates FWS program eligibility for graduate students.
  • Congress: Maintains the FFY 2017 funding level of $989.7 million in FFY 2018.

Federal Supplemental Educational Opportunity Grant (SEOG) Program

The SEOG program provides postsecondary institutions with need-based grants for low-income undergraduate students. Students with the most financial need receive between $100 and $4,000 per year through the SEOG. More than 7 in 10 (71.6 percent) of SEOG recipients who are dependents come from households with incomes under $30,000, and 76 percent of recipients are independent students making less than $20,000 per year. Here’s what’s being proposed:

  • Trump Administration: Eliminates the SEOG program completely. Ending this program reduces the amount and variation of funding available to low-income students.
  • Congress: Maintains the FFY 20117 funding level of $733.1 million in FFY 2018.

TRIO and GEAR UP

TRIO programs refer to a number of student outreach and support programs. These programs, along with Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP), provide scholarships, mentoring, and other resources to low-income and first-generation college students as they matriculate from K-12 through college. Here’s what’s being proposed:

  • Trump Administration: Cuts $262 million from TRIO and GEAR UP programs, limiting the tutoring, mentoring, and research opportunities available to low-income students preparing for college.
  • Congress: Increases funding for TRIO by $3 million and maintains the GEAR UP funding at the 2016-17 level of $340 million.

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Budget choices reflect our collective values, priorities, and ideals. While the 2018 budget proposal put forth by congressional leaders would maintain many commitments to higher education, the Trump Administration’s proposal would significantly cut back federal investment in programs that ensure access to higher education for low- and middle-income communities. The likely result of these or similar proposals being enacted would be reduced access to high-quality, affordable higher education for millions of eligible students. Amid heightened concerns across the political spectrum about the affordability of higher education and escalating levels of student debt, the Administration’s  budget proposal represents a dramatic turn in the wrong direction. Instead of these proposals, policymakers should provide stable, ongoing funding and protect the reserve to cover future shortfalls, or invest a portion of the reserve in increasing the grant award and expanding program eligibility.

It’s especially troubling that the President and congressional leaders are pursuing major tax cuts (the large majority of which would benefit the wealthiest households), without proposing a plan to offset the revenue loss. Without a concrete plan in place, policymakers will likely rely on cuts to higher education and other vital programs and supports in order to pay for these tax cuts — which would overwhelmingly impact the state’s most vulnerable populations. If the President and congressional leadership want to strengthen pathways to economic opportunity, they should put forth proposals that invest in programs that make college affordable and accessible for more low- and middle-income Americans.

— Amy Rose