News: Federal Policy & Advocacy

President’s Budget Eliminates Subsidized Loans, SEOG

Monday, February 12, 2018  
Posted by: Carrie Warick, Director of Policy and Advocacy
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Today, the Trump Administration released its fiscal year 2019 budget proposal rife with cuts to federal student aid, including the elimination of subsidized student loans for undergraduates, the elimination of Supplemental Educational Opportunity Grants and a near-halving of Federal Work-Study funding. While such cuts are sometimes balanced by redistributing funds to other programs or new investments, on the whole, this budget does not address the college affordability challenges that low-income students seeking two- and four-year degrees face.

The proposal contains no apparent new investments that would support these students and balance the loss proposed to need-based aid programs. The proposal's two main investments in higher education include expanding eligibility for the Pell Grant program to include short-term workforce development programs and funding the shift of the Office of Federal Student Aid (FSA) to a more student-friendly agency – which is perhaps the only silver lining in this proposal.

“Our advisors walk side by side with students every day and tell us that students need more aid, not less," NCAN Executive Director Kim Cook said.

The budget proposal does not increase the maximum Pell Grant award, holding it steady at $5,920. On the SEOG front, the budget documents claim the program "is largely duplicative of the Pell Grant program and does not deliver need-based aid in the most targeted method." But with less than $300 impacting whether a student remains enrolled in college, the loss of these funds represents a loss in aid to low-income students. This budget proposal also declines to further invest in the Pell Grant program for students seeking to earn two- and four-year degrees, further exacerbating the impact of the SEOG loss.

Eliminating the subsidized Stafford Loan will make borrowing for college more expensive for NCAN-member students, though it does provide loan forgiveness on a shorter time frame than is currently available. Trump’s budget proposal renews his campaign pledge to consolidate the income-based repayment programs into one plan that would cap an undergraduate borrower’s monthly payment at 12.5 percent of discretionary income and forgive any remaining loan balance after 15 years. In a vacuum, this proposal is not a bad one for undergraduate students, even with the loss of subsidized loans; however, the entire budget proposal must be considered. On the student balance sheet, a student could lose Federal-Work Study, an SEOG award, and subsidized loans – all for the trade of earlier loan forgiveness. Given that the changes to the income-based repayment plan save the federal government money due to less generous terms for graduate students, this trade-off is not beneficial for NCAN students.

Additional changes to student-focused programs impact Federal Work-Study, Public Service Loan Forgiveness, TRIO, and GEAR UP programs. The Federal Work-Study funds would be cut nearly in half, which would diminish the bucket of funds sent to each campus to allocate to students. The president again recommends eliminating the Public Service Loan Forgiveness program entirely. The way TRIO programs are funded would be changed over time and shifted to state-based block grants, though the line item sees a small $6 million increase. The GEAR UP program would be completely eliminated.

The two primary investments this budget makes in higher education are for short-term Pell Grant programs and in the new innovation work happening at FSA. While the budget document calls for “guard-rails” around these programs, no legislative language or specific proposal for how to ensure the quality of these programs has been proposed. NCAN is supportive of the innovation work, including attempts to simplify the FAFSA, happening at FSA. The prioritization of these changes in this budget is the only silver lining for students.

The president’s budget proposal represents his recommendation to Congress on how lawmakers proceed with appropriations. It is likely that Congress will politely consider the president’s priorities before approving funding levels that match those established last week in the Bipartisan Budget Act of 2018.