President's Budget Protects Pell Grants, but Makes Deep Cuts to Career and Technical Education

February 14, 2011

President Obama released a budget on Monday that would make millions of dollars in cuts to student aid to preserve the popular Pell Grant program.

To maintain a maximum Pell award of $5,550, the president's fiscal 2012 budget would eliminate the in-school interest subsidy on loans to graduate students and end a policy that allows students to receive two Pell Grants in a single year.

It would provide level support for most other student-aid programs, including Supplemental Educational Opportunity Grants and Federal Work-Study, while making deep cuts to career and technical education.

In a conference call with reporters, Secretary of Education Arne Duncan said the cuts were "painful" but "absolutely necessary," given skyrocketing demand for Pell Grants. Some 9.6 million students are expected to receive the awards next year, up from 6 million in 2008.

"We must cut where we can to invest where we must," he said.

In addition to Pell Grants, those "investments" include the Perkins Loan program, which would grow from $1-billion to $8.5-billion under the president's proposal, and two new college-completion programs, which would receive $175-million between them.

Over all, education fared better in the president's budget than most other domestic programs. Though the budget would cut total federal discretionary spending by almost $5-billion, it would increase the department's discretionary budget by more than $13-billion, including Pell spending. Such growth is in keeping with the president's promise, in his State of the Union address, to spare education and research from a five-year spending freeze.

But such increases face long odds in Congress, where Republicans have called for far deeper spending cuts than the president has requested. On Friday, the U.S. House of Representatives introduced an appropriations bill for the remainder of fiscal 2011 that would slash the maximum Pell award by $845 and abolish 56 education programs, including Supplemental Educational Opportunity Grants and several programs benefiting minority-serving institutions.

In a statement issued Monday, the chairman of the House education committee accused Democrats of expanding the Pell program "beyond what taxpayers can afford."

"We need to make tough choices now to strengthen the program for students most in need," said Rep. John P. Kline Jr., Republican of Minnesota.

Unsustainable Growth?

The fight over the Pell program comes amid rising demand for the grants, which help low-income students attend college. The economic downturn, coupled with recent increases in the maximum award, has severely strained the program, creating a shortfall that could reach $20-billion next year.

Congress created "year-round" Pell Grants in the last reauthorization of the Higher Education Act to help students earn degrees more quickly. The program went into effect only a year and a half ago.

The president argues in his budget that "year-round" Pell Grants have "failed to demonstrate a meaningful impact on students' academic progress." In the first year the program was in effect, enrollment in summer courses increased only 1 percent, according to the Education Department.

But Justin Draeger, president of the National Association of Student Financial Aid Administrators, said it's too soon to tell whether the program is helping accelerate academic progress.

"More time is needed for a data-based assessment," he said.

A bigger factor in the president's decision to end year-round Pell appears to have been the program's cost; Year-round Pell Grants have cost 10 times more than the department anticipated, according to the budget.

"In an ideal world, if we weren't under budget pressures, it's something you would keep," Mr. Duncan said during the conference call, adding that "it was a bigger priority to maintain the maximum award, rather than having a smaller number of students get $11,100 a year."

Mr. Draeger said that maintaining the maximum Pell award was his group's top priority as well.

Cuts in Career Ed

Another program that would take a hit under the president's proposal is career and technical education, which would be cut by $265-million, or roughly 20 percent. Asked about the cut during the call, Mr. Duncan said the department wanted to remake the programs before expanding them.

"You have some programs that have done a good job, but, frankly, there hasn't been enough accountability for results," he said.

Supporters of the programs said the cuts would undermine the president's goals of reducing unemployment and graduating five million more Americans with certificates and degrees by 2020. They point out that career and technical education programs help laid-off workers obtain new skills.

"These programs teach students to be college- and career-ready," said Jan Bray, executive director of the Association for Career and Technical Education. "If Congress and the administration want to restore job growth, reduce the dropout rate, and improve the U.S. economy, then we need to continue to invest in career and technical education."

The budget reiterates the president's proposal to expand and overhaul the Perkins Loan program, which supplements Pell Grants and Stafford Loans for needy students. Like Mr. Obama's two previous budgets, it would remove colleges from the process of making Perkins Loans and end the interest subsidy on Perkins Loans while borrowers are in college. It would use a portion of the money for the program to reward institutions that hold down their tuition or graduate large numbers of low-income students.

But the most recent budget is not identical to the president's past proposals on Perkins, which is set to expire in 2014. It would provide $2.5-billion more for the program, and raise the interest rate on the loans from 5 percent to 6.8 percent.

The budget would also extend the president's signature "Race to the Top" program from schools to colleges, providing $50-million to encourage states to make systemic changes to their higher-education systems. And it would create a $125-million grant competition within the Fund for the Improvement of Postsecondary Education to test innovations in college access and completion.

The budget would also replace the Teach Grant program, which provides grants worth up to $4,000 to students who agree to work in a high-need field after graduation, with a $185-million competitive program for the states. Winning states could use the money to award $10,000 scholarships to future teachers "attending the most effective programs in the state," according to the budget.