Washington Update - January 2012

Limited cuts to Pell Grants, student loans in FY2012 congressional budget deal, slight increase for TRIO; Military Tuition Assistance MOU delayed; Obama administration, Congress focus on college costs, productivity.

Federal Budget Deal Mostly Spares Higher Ed

Congress reached a last-minute, pre-holiday agreement to fund the government through September 2012 that will keep the maximum Pell Grant at $5,550, but restrict eligibility and suspend for two years the post-graduation, six-month grace period during which student loan borrowers do not have to pay interest. About 100,000 of the nine million Pell Grant recipients will become ineligible, and the maximum number of semesters an individual can qualify for a grant will drop from 18 to 12, which will be prorated for part-time students. Additionally, Congress changed the income level at which the expected family contribution is automatically zero from $30,000 to $23,000. A high school diploma or equivalent will be required of all Pell Grant recipients. Compared to an earlier, House Republican plan that would have cut the maximum grant by $2,000, this is a reasonably good outcome for the federal financial aid program, which has expanded significantly since 2008. The interest subsidy, in particular, has been criticized because it is not means-tested. Overall, the financial aid changes will result in savings to the government of $11 billion through the next decade. Other programs of significance to student affairs face only minor changes. Work study and SEOG were funded at 2011 levels minus a 0.189 percent cut that will impact most federal education programs. TRIO will receive a $13 million increase for a total FY2012 budget of $840 million. 

Changes to Military Tuition Assistance Delayed

Amid protests from institutions of higher education and a letter from a majority of Senators asking for changes, the Department of Defense agreed to delay the implementation of a Memorandum of Understanding for the Military Tuition Assistance (TA) program until March 31, 2012. The Defense Department is trying to ensure that TA dollars are spent at quality academic institutions that are set up to serve the needs of often-mobile active service members, such as through flexible credit transfer policies. However, some institutions are concerned that the MOU intrudes too far into some academic matters and are threatening to leave the program. The delay provides time for DoD and higher education associations to attempt to find an agreement acceptable to all parties.

Obama Administration Puts Spotlight on College Costs

Recently, the administration and Congress have held several high-profile events focused on the increasing cost of higher education.  Education Secretary Arne Duncan gave a speech asking the higher education community to be more creative and act with more urgency to control college costs, highlighting innovative efforts such as four-year tuition-level guarantees and the online, proficiency-based Western Governors University. Rep. Virginia Foxx chaired a House subcommittee hearing on tuition and the cost of higher education. President Obama met with a group of higher education leaders to discuss the cost of educating students, and reportedly emphasized the need to increase productivity in order to meet the nation's educational attainment goals. The administration is working on proposals to fund demonstration projects and reward universities that increase completion rates and close achievement gaps in ways that increase efficiency. It is also developing a concept for a low-interest loan program that would only be available to campuses that meet certain targets for Pell Grant recipient graduation rates.