https://www.nasfaa.org/news-item/7537/President_Obama_s_Final_Budget_Proposal_Renews_Push_for_Signature_Policy_Initiatives
President Obama’s Final Budget Proposal Renews Push for Signature Policy
Initiatives

By Stephen Payne, Policy & Federal Relations Staff <[log in to unmask]>

With a little less than a year remaining in office, President Obama
released his final budget proposal
<http://www2.ed.gov/about/overview/budget/budget17/index.html> on Tuesday.
The $4.1 trillion budget for federal fiscal year (FY) 2017, which affects
award year 2017-2018, provided little surprises for observers, as key
higher education initiatives had already surfaced in previous budgets or
prior to Tuesday’s announcement. A focus on improving outcomes at
historically black colleges and universities (HBCUs) and minority-serving
institutions (MSIs) stands as one of the broad themes of President Obama’s
final budget.

In terms of funding levels, President Obama proposes an estimated $5,935
maximum Pell Grant award, a $120 increase, and will look to freeze funding
for Federal Work-Study (FWS) and Federal Supplemental Educational
Opportunity Grant (FSEOG), which were also flat-funded in December’s FY16
spending agreement.
<https://www.nasfaa.org/news-item/7022/Student_Aid_Programs_Largely_Level-funded_in_Spending_Deal>
ACCESS AND AFFORDABILITY PROPOSALS

   - Develop “America’s College Promise,” a 10-year, $60.8 billion proposal
   to make two-years of community college free
   <https://www.nasfaa.org/news-item/991/President_Obama_Provides_Framework_for_Two_Years_of_Free_Community_College>
for
   “responsible” students. The proposal, designed to be a federal-state
   partnership, would have the federal government cover three quarters of the
   average cost of community college, with states expected to contribute the
   remaining amount of outstanding tuition. New to this year’s budget, and to
   match the legislation introduced in Congress
   <https://www.nasfaa.org/news-item/4942/Lawmakers_Introduce_Legislation_to_Implement_President_Obama_s_Community_College_Proposal>,
   America’s College Promise would also provide grants to four-year HBCUs and
   MSIs to offer students up to two years at zero or significantly reduced
   tuition.
   - Create a College Opportunity Bonus program that would provide $5.7
   billion over 10 years to schools that enroll and graduate low-income
   students on time. Funds would be given directly to the institution to
   expand need-based aid, enhance student support, or employ other best
   practices to help low-income students succeed. The total annual bonus
   amount an institution could receive would be calculated based on the number
   of on-time Pell graduates at the institution multiplied by a tiered bonus
   amount: $1,000 at four-year schools; $700 at two-year schools; and $350 for
   less-than-two-year schools. The school’s cohort default rate and graduation
   rate would also be considered in determining eligibility.
   - Dramatically reduce the number of questions on the Free Application
   for Federal Student Aid (FAFSA) by eliminating questions related to
   “assets, non-IRS untaxed income, non-IRS income exclusions, and other
   income adjustments.” “Non-IRS” income and exclusions refers to data
   elements that cannot be verified using the IRS Data Retrieval Tool (DRT).
   The questions being targeted for elimination are those considered to be
   confusing for students and families. To guard against any Pell award
   decreases, these changes are offset by a reduction of $600 to Expected
   Family Contributions (EFC). The budget does not further explain the
   rationale or operational details of the $600 EFC decrease.
   - Decrease the percentage of funds at proprietary institutions that can
   come from the federal government to 85 percent, thereby returning the 90/10
   calculation to the original 85/15 ratio. Department of Defense tuition
   assistance and GI Bill Benefits would be counted as federal funds.
   - Develop a new $30 million HBCU and MSI Innovation for Completion fund
   to encourage these institutions to support evidence-based strategies aimed
   at increasing completion.

PELL GRANT PROGRAM

   - Maintain discretionary Pell Grant funding at current levels, which
   would lead to a maximum Pell Grant of $5,935 for award year 2017-18. This
   amount takes into the account the scheduled Consumer Price Index (CPI)
   increase in mandatory funds.
   - Pell for Accelerated Completion (Year-Round Pell): Limited to 150
   percent of a student’s regular Pell Grant award, an additional semester of
   eligibility will be awarded to students who have already completed 24
   credits.
   - On-Track Pell Bonus: Students who enroll in 15 or more credits per
   semester would be eligible for an additional $300 award per year, split
   evenly to $150 per semester.
   - Second Chance Pell: Individuals incarcerated in federal or state penal
   institutions would be eligible for Pell Grant funds.
   - In order to “encourage students to complete their studies on time,”
   the president’s budget proposes to modify the satisfactory academic
   progress (SAP) requirements. Specific details are absent from the proposal.
   - The proposal would prevent additional Pell disbursements to
   “recipients who repeatedly enroll and obtain aid but do not earn any
   academic credits.”
   - Move Iraq and Afghanistan Service Grants to the Pell Grant Program to
   avoid further award reductions as a result of sequestration and ensure that
   eligible students receive the full, non-sequestered Pell Grant award for
   which they are eligible.
   - Extend the automatic inflationary increase to the maximum Pell Grant
   award, which expires at the end of the 17-18 award year.

CAMPUS-BASED AID

   - Level-fund both the FSEOG and FWS programs at the FY16 amount and
   revise the allocation formulas. As in the past, the budget request also
   seeks to revise the allocation formulas to direct dollars toward
   institutions that enroll and graduate higher numbers of Pell-eligible
   students and “offer affordable and quality education and training such that
   graduates can obtain employment and repay their educational debt.” Details
   on metrics for these formulas are absent from the proposal.
   - The president’s proposal would make Perkins Loans unsubsidized with
   the same interest rate as the Unsubsidized Stafford Loan and expand the
   program from its current $1 billion funding level to $8.5 billion. Schools
   would continue to have some awarding discretion, though the federal
   government would take over origination and servicing. Federal government
   revenues from origination fees and interest rates would be redirected into
   student aid.

REPAYMENT

   - The Revised Pay as You Earn repayment plan, or “REPAYE,” would become
   the only income-driven repayment plan for borrowers who originate their
   first loan on or after July 1, 2017.
   - Other REPAYE modifications include: eliminating the standard payment
   cap; calculating payments for married borrowers filing separately on the
   combined household Adjusted Gross Income; establishing a 25-year
   forgiveness period for students who borrowed as graduate students; capping
   the amount of interest that can accrue when a borrower's monthly payment is
   insufficient to cover the interest; capping Public Service Loan Forgiveness
   (PSLF) at the aggregate loan limit for independent undergraduate students
   ($57,500); and preventing payments made under non-income driven repayment
   plans from being applied toward PSLF.
   - The president proposes to consolidate TEACH Grants and the other
   teacher loan forgiveness programs into a single loan forgiveness program
   with a cap of $25,000 beginning in 2021.
   - The Administration will allow the Department of Education (ED) to
   obtain from the IRS the addresses of borrowers who are delinquent in
   repaying their loans.

OFFICE OF FEDERAL STUDENT AID (FSA)

   - As announced on Monday
   <https://www.nasfaa.org/news-item/7523/ED_Launches_Student_Aid_Enforcement_Unit_Asks_for_13_6_Million_in_Funding>,
   the president proposes $13.6 million to create and expand a "Student Aid
   Enforcement Unit" to protect students and taxpayers by investigating bad
   actors in higher education.

HIGHER EDUCATION TAX PROVISIONS

   - Eliminate the lifetime learning credit.
   - Expand the American Opportunity Tax Credit (AOTC) to five years, and
   index expense limits and the refundable amount to inflation. In addition,
   less than half-time students would be eligible for a credit up to $1,250.
   - Exclude Pell Grants from gross income.
   - Exclude all loans forgiven or discharged by ED from gross income.
   - Repeal the current student loan interest deduction (SLID) for new
   borrowers.

WHAT'S NEXT?

With Republicans in control of both chambers of Congress, like in recent
years, President Obama's proposal is essentially "dead on arrival."

"This isn't even a budget so much as it is a progressive manual for growing
the federal government at the expense of hardworking Americans," Speaker of
the House Paul Ryan (R-WI) remarked in a statement
<http://www.speaker.gov/press-release/statement-president-obamas-budget-proposal>
.

Republicans in Congress will now develop their own budget resolutions in
each chamber's budget committee before appropriators decide how to
specifically allocate funds.

For more information on the federal budget and appropriations process,
check out NASFAA's Federal Budget and Appropriations page
<https://www.nasfaa.org/federal_budget_appropriations>, which features a
flowchart that explains the process and also includes recent news.

As always, student aid funding legislation
<https://www.nasfaa.org/legislative_tracker_student_aid_funding> introduced
in this session of Congress with links to NASFAA coverage and analysis can
be found in theNASFAA Legislative Tracker
<https://www.nasfaa.org/legislative_tracker>.



Publication Date: 2/10/2016

Teri

Teri Morse, Advisor  (2015-16 President, MEEOA)
Maine Educational Opportunity Center
Mid Coast Territory
207.551.3331 CELL
207.581.2532 FAX