By Catherine Brown, Senior Director of Policy and Advocacy
Reading time: Four minutes
The White House and Speaker of the House Kevin McCarthy reached a deal on Sunday to increase the debt ceiling through January of 2025 and cut government spending. The agreement enables the US government to borrow enough money to continue to meet its financial
obligations, such as paying interest on its bonds and funding government programs. Treasury Secretary Janet Yellen warned that the US needs to increase the debt ceiling by June 5, or it will run out of money to fund essential services, so the deal
arrives not a moment too soon. This deal is different from the most recent agreement to raise the debt ceiling in that it provides Treasury with the latitude to borrow as much as it needs to meet its obligations instead of capping how much money the
government can borrow at a specific dollar amount.
Key education provisions include:
Two-year limit on spending. The deal includes a two-year agreement on spending that limits non-defense discretionary spending to 1% growth through 2025, roughly holding pace with current spending and providing $637 billion for spending
outside of veterans' medical care in the coming fiscal year. The deal rescinds $11 billion in COVID-19 relief funds, shifts $10 billion from the Internal Revenue Service, repurposes $10 billion from mandatory programs, and uses $23 billion in
emergency funding. This agreement will lead to a real - but small - cut in discretionary spending because inflation growth is expected to continue to be higher than 1%. According to Biden Administration officials on a budget briefing that National
College Attainment Network (NCAN) staff members attended, this spending level that will be “painful and difficult to manage” but is “not a major cut” and results in a budget that is “roughly flat” when compared with current spending. We do not
yet have clarity on what this agreement will mean for a Pell Grant increase, it’s fair to say we will need fierce advocacy to continue on a path to doubling the Pell Grant by 2030.
An end to the student loan repayment pause. The Administration has promised to restart student loan repayments 60 days after the Supreme Court (SCOTUS) decides on the legality of the Administration’s student loan cancellation program
or on June 30, whichever comes first. The agreed-upon debt ceiling deal codifies that promise, thus prohibiting the Administration from extending the current payment pause beyond August 30th. The deal does not roll back the loan cancellation program,
which the Administration has said it fully intends to implement if SCOTUS rules in its favor. It also does not prohibit the Administration from using other avenues to forgive student loans, such as Public Service Loan Forgiveness, or from providing
borrowers with additional flexibility like extended grace periods as repayments resume. In short, the bill continues the status quo of broad loan cancellation (if SCOTUS sides with the Administration) and loan payments turned back on by August
30, 2023.
Administrative PAYGO provisions. The bill establishes a requirement for administrative regulatory and other actions that is like existing PAYGO (pay as you go) requirements, which Congress has previously set for itself. If an agency
wants to promulgate a regulation that will increase spending – and doing so is not required by law – the agency will have to “offset” the increase with a decrease from another program. The bill language has a rather expansive waiver section allowing
the Office of Management and Budget to waive the requirement if, “necessary for the delivery of essential services or…for effective program delivery.” The Administration has publicly said this requirement will not impact their forthcoming Income-Driven
Repayment regulation, which will provide all student borrowers with an option to repay their loans that caps payments at 5% of their discretionary income.
Rescission of unobligated COVID-19 aid. Some funding that has not yet been obligated by the federal government will be pulled back through this bill. Funding that has not been obligated by school districts or state
education agencies will not be impacted by this provision because the Department of Education (ED) has told states that they can draw this funding down. Programs that are named in the legislation and at risk for rescission are listed below. It’s
important to note though that most of the funds in these programs have been obligated.
The Elementary and Secondary School Education Relief (ESSER), non-public schools, and Higher Education Emergency Relief Fund (HEERF) from the American Rescue Plan (ARP).
ED administrative funds from the 2021 COVID-19 relief package and ARP.
Student aid administrative funds from APR.
$100 million for the Institute for Education Sciences (IES) in ARP.
Unobligated funding from an allocation for ED for American Indian, Native Hawaiian, and Alaska Native Education in ARP.
Increase in work requirements or time limits for SNAP. SNAP, formerly known as food stamps, requires able-bodied working adults to work or participate in job training from age 18 until 49. This deal increases the upper age requirement
to 55. It also exempts former foster youth through age 24, veterans, and people experiencing homelessness. It’s important to note that this provision will not impact college students because they are already subject to work requirements and can
only receive SNAP if they meet one of a narrow set of exemptions. These changes sunset in 2030.
The House will take up the package today (May 31) and there are reports of mounting Republican opposition. Speaker McCarthy continues to express optimism that the House will pass the bill and avert an economic crisis. Only time will tell, and we at NCAN
will keep you posted.
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