There is much to worry about in the major spending cuts the Trump administration advocates in its first budget proposal to Congress, which includes a $9.2-billion (13.5 percent) cut in funds for the Department of Education.
Some of the cuts would be in financial-aid programs for college students, but the greatest risks to those students would come from deep cuts in other support systems and from the movement to abandon efforts to regulate colleges that don’t serve students well and loan servicers who exploit struggling borrowers.
Some of the proposed changes might actually improve the higher-education system if the dollars saved were redirected to other supports for college students. But that is not the plan. The Trump budget incorporates a far different set of priorities.
Nonetheless, it is worth asking which proposals are really dangerous and which might actually strengthen the higher-education funding system if the money could be redirected.
Medicaid, SNAP, and employment and training: Cuts outside the student-aid programs stand to make life much more difficult for many college students. For example, deep reductions in Medicaid and the Supplemental Nutrition Assistance Program, or SNAP, would create hardships for many students and their families.
The president’s budget would make a 15-percent cut in the $1.1-billion program of grants to states for career and technical education. Although it maintains support for apprenticeships, the budget would also slash the Department of Labor’s support for training and employment under the Workforce Innovation and Opportunity Act. Those programs improve the chances for some of the most vulnerable Americans to become productive members of the work force.
Consumer protection: Weaker federal government support for career- and technical-education programs outside the higher-education system means that more students who are seeking occupational training could wind up dependent on federal student loans — and using them to attend for-profit institutions. And if regulations designed to protect students from taking their federal-aid funds to such institutions are dismantled, a growing number of students are more likely to find themselves deep in debt with little to show for it.
Subsidized student loans: The proposed budget eliminates subsidized loans for undergraduates. All loans would accrue interest from the time they are issued.
Some of the changes might actually improve higher education if the savings were redirected to other supports for students. But that is not the plan.
Because subsidized Stafford Federal Loans go only to students with documented financial need, those loans are more skewed toward lower-income students than the Stafford program overall, which includes unsubsidized loans — but they are not well targeted. Unlike Pell Grants, the Stafford subsidy is based not on a measure of financial capacity but on need — the difference between the official cost of attendance and expected family contribution. A moderate-income student enrolling in a community college might not qualify for the subsidy, while a student from a family with two or three times his income level receives the subsidy on a loan for enrollment at a high-priced private college.
Loan subsidies are best directed to borrowers struggling to repay, rather than being based on pre-college circumstances. So, in fact, the dollars devoted to this loan subsidy would be better targeted and have more impact on student enrollment and success if they were added to the Pell Grant program. Of course, the Trump budget does not propose this use of the funds, and incorporates very different priorities. Still, if there are going to be cuts to the student-aid budget, this one is far from the worst option.
Public-service loan forgiveness: The budget proposal eliminates the Public Service Loan Forgiveness Program, which forgives remaining balances after 10 years for student-loan borrowers in qualifying jobs.
Eliminating the program for borrowers who have planned their educational and professional careers around this promise would be a breach of trust. But allowing it to expire and be replaced by a single well-designed income-driven repayment plan would be good public policy.
This would eliminate the frequently arbitrary distinctions between jobs that qualify borrowers for loan forgiveness after 10 years and those that require 15 years or more of payments. It would diminish the chance that taxpayers will end up footing the bill for a subset of professionals with large debts and high lifetime earnings. And it would eliminate a complex bureaucratic structure inevitably associated with this program.
The Trump budget proposes a revamped income-driven repayment plan but does not provide enough detail for us to know how well designed it would be and whether it would be strong enough to protect borrowers entering public-service occupations. Eliminating the current loan-forgiveness plan without a strong replacement would be harmful — but the best replacement would not include most elements of the existing plan.
Federal Work-Study program: The proposed budget would cut this program significantly, from about $1 billion to $500 million. It peaked at $1.8 billion (in 2015 dollars) in 1975-76 but has fluctuated around its current level for years. Its 632,000 participants pale beside the 7.6 million Pell Grant recipients.
Work-Study is a popular program with considerable problems. The funds are distributed to institutions largely on the basis of historical patterns, not the financial circumstances of enrolled students. In 2014-15, 40 percent of the funds went to private nonprofit colleges and universities, which enrolled 21 percent of postsecondary students. Only 18 percent went to public two-year colleges, which accounted for 28 percent of full-time-equivalent enrollment.
It is really a subsidy to the institutions that employ students under the program. Students are earning their wages — and the fact that some of the dollars come from the federal government does not make those students any better off financially than they would be if they had the same job with a different source of funds. Nevertheless, it is vital that college students have access to good part-time jobs.
The federal government can play an important role in ensuring that colleges and other employers provide those jobs, and that they do so for far more students than the existing program serves. Cutting the funding in half will just make the program less effective so it can dwindle to nothing. Using existing funds and augmenting them to support a more effective employment program would make much better sense even than maintaining Work-Study as it is currently structured.
Some of the cuts in the budget proposal — while moving in the wrong direction in terms of national priorities — would not eviscerate the financial-aid system. Rather, they represent both a lost opportunity to strengthen that system and a diversion of funds to questionable priorities.
Other aspects of the administration’s plans are much more threatening to college students. Leaders in higher education should work to oppose the abandonment of a social safety net, to develop a successful system of career and technical education, and to enforce a strong and well-designed regulatory structure to protect students.
Sandy Baum is a senior fellow in the Education Policy Program at the Urban Institute and a professor emerita of economics at Skidmore College.