To: AASCU Presidents and Chancellors
From: Ed Elmendorf, Sr. VP for Government Relations and Policy Analysis
Robert Moran, Director of Federal Relations and Policy Analysis
Makese Motley, Asst. Director of Federal Relations and Policy Analysis
Re: President’s FY 14 Budget
Date: April 10, 2013
*** Information Advisory ***
President Obama’s Fiscal Year 2014 Budget
Yesterday, President Obama submitted his Administration’s fiscal year 2014 (FY 14) budget to Congress and the nation. The submission is two months later than usual as a result of sequestration and an incomplete fiscal year 2013 budget. Discussed below are the key highlights for higher education programs. It should be noted that both the House and Senate have passed their respective, yet disparate, budget resolutions, and based on recent history, this budget should be dead on arrival. However, the President’s proposal provides specific funding levels for individual programs that are instructive as Congress begins debating appropriation bills. In addition, the budget document proposes a number of other broad policy level proposals for entitlement programs – namely Social Security and Medicaid – as well as specific tax policy changes that congressional leaders have indicated may have some merit. It is anticipated that Congress will be debating these proposals in other contexts beyond the appropriations process this coming year.
The overall budget submission with supporting documents (located as links on left-hand side of page) can be found here.
The specific Department of Education budget document can be found here.
Should you need any further information or have further questions, please do not hesitate to contact AASCU’s federal relations staff. In addition, AASCU will provide further budget analysis in the coming weeks to include a more detailed discussion of certain tax provisions, funding requests for research accounts, and an evaluation of how students and institutions may be affected.
Higher Education Provisions
Pell Grant Program: The Administration’s proposal would provide sufficient funding to support the Pell Grant Program without any eligibility changes to the program. The funding request for FY 14 would support an estimated maximum award amount of $5,785 in academic year 2014-2015. This is an increase from the current academic year award of $5,550, as well as the 2013-2014 academic year award of $5,645.
Campus-based Programs: The “campus-based” programs are financial aid programs that provide funds to campuses which then award those funds to eligible students. The programs include the Supplemental Educational Opportunity Grants (SEOG), the federal Work-Study (FWS), and the Perkins Loan programs. The Administration is again proposing a formula change to all three programs. For the SEOG and FWS programs, funds would be provided to institutions that keep net tuition down, provide good value, and service low-income students effectively. This is a similar proposal to last year’s budget submission. While none of these criteria are defined further, in the FWS program quality would include providing meaningful work to students. In addition, the proposal calls for an additional $150 million for FWS as a path to double the recipients in five years. The Administration is proposing to effectively double the capital available for Perkins Loans and expand the program to more institutions. The new loans would not contain those benefits currently offered in the program of a reduced interest rate and several loan forgiveness provisions, but would be offered under terms similar to unsubsidized federal loans.
Student Loan Interest Rates: The budget submission proposes changing the current fixed rate policy of 6.8% student loan interest rate for Direct Loans (3.4% for subsidized borrowers until July 1, 2013 and 7.9% for PLUS loans) to a market-based variable rate. The new proposed rates would not only be variable, but uncapped and would be equal to the 10-year Treasury Bill rate (currently about 1.8%) plus .93% for subsidized loans, 2.93% for unsubsidized loans, and 3.93% for PLUS loans. The rate would remain locked for the life of the loan.
Pay as You Earn: The Administration recently implemented a new Pay as You Earn program that is another variation of an income based repayment plan. The recently implemented proposal would offer recent borrowers, specifically new borrowers after October 1, 2011, the opportunity to calculate payment on their outstanding loan debt at 15% of their income. The budget proposal would open this program to all borrowers and reduce the payment option to 10% of their income. After 20 years of payment in good standing any outstanding loan balance would be forgiven. The Administration further proposes to eliminate the taxation of the amount that is forgiven after the 20-year repayment period.
Teacher Preparation: The fiscal year 2014 budget submission follows in the footsteps of earlier budget submissions in the area of teacher preparation. President Obama again proposes to eliminate funding for the Teacher Quality Partnership program authorized under Title II of the Higher Education Act, as well as a number of elementary and secondary teacher programs. He combines these funds into a new Teacher and Leader Innovation Fund that would support P-12 in identifying, rewarding, retaining, and advancing effective teachers, teacher leaders, and principals. In addition, the budget proposes eliminating the TEACH Grant which offers a $4,000 annual grant to students who indicate a desire to enter the teaching profession and creates a new Presidential Teaching Fellows program that would direct up to $10,000 in scholarship money to students further advanced in their program of study and enrolled in a “high-performing” teacher preparation program.
Race to the Top: The President is proposing to fund a $1 billion Race to the Top-College Affordability and Completion program. This funding would support up to ten states who commit to 1) sustain fiscal support for higher education while modernizing policies to constrain costs and improve outcomes; 2) remove barriers preventing the creation of innovative student learning methods and new degree pathways; 3) empower consumer choice through increased transparency; and 4) smooth transitions into college and between institutions of higher education. This is similar to a proposal in last year’s budget.
First in the World: Like President Obama’s FY 13 budget submission, the FY 14 proposal contains $260 million for a First in the World fund. Up to $175 million of the proposed fund would support an evidence-based grant competition encouraging innovative approaches to college completion, supporting the research to build evidence for successful strategies, and scaling-up and disseminating proven strategies. A priority would be included for projects designed to improve access and success of high-need secondary students.
High-School Redesign: The budget proposes a $300 million grant program for high school partnerships. In order to be eligible for these funds, a high school would need to partner with an institution of higher education and a business, industry, non-profit, or community-based organization in order to redesign the high school. This is modeled on the Brooklyn schools program which partnered with the City University of New York and IBM and was referenced in the State of the Union by the President. Redesigned high schools are expected to infuse college coursework and career-related experience into the curriculum to ensure students graduate college and career ready.
Dual-enrollment Programs: The FY 14 budget submission calls for eliminating federal support of the Advanced Placement program and directs that savings into a proposal to fund dual-enrollment programs. The focus of these funds will focus on dual-enrollment programs that align with and target local workforce needs and career pathways. President Obama is asking for $42 million be devoted to this effort.
Other higher education programs: There are a number of institutional focused programs that the federal government funds through Titles III, IV, V, and VI. These include all the minority serving institution programs, TRIO and GEAR-UP and international programs. The Administration’s budget proposal calls for level funding for all of these higher education programs, except for a small increase in funding for international education programs.