White House Budget Includes Calls for Higher Education Reform
3/21/2014
On March 4, the White House released its annual budget request, laying out FY15 budget priorities and many economic and social policy goals of the Obama Administration. The overall budget was limited by the discretionary spending caps set by last year's budget deal. While the budget request includes slight increases for a number of education and research programs, those increases generally do not cover inflationary growth.
The president continued to call for higher education policy changes introduced in the past year, such as reforming campus-based aid programs. This year, he also requests funding for development of a new college ratings system and asks for new money for a "State Higher Education Performance Fund" and a "College Opportunity and Graduation Bonus." All reflect his commitment to making a college education more affordable, encouraging students to complete their degrees on time, and ensuring that student debt remains affordable.
It is important to note that the president's budget request is simply that: a request. The House and Senate budget and appropriations committees will now take the White House proposals into consideration as they hold hearings and draft and mark-up their own respective versions of the FY15 budget. Congress and the White House must agree on a budget by the end of the federal fiscal year (September 30) or—if they cannot reach agreement by that date—pass temporary continuing resolutions to keep the government operating or face a government shutdown until they can find a resolution.
While many of the budget's provisions will remain unrealized in the FY15 budget process, Congress may consider some of the higher education proposals as it works on reauthorization of the Higher Education Act. Some of the tax proposals, included in the budget request as a part of the "Green Book"—the Treasury Department document that contains the administration's revenue proposals for FY15—would also impact college and university business operations and are likely to be a part of ongoing conversations about reforming the tax code.
Here is a recap of the budget request's proposals related to higher education.
Department of Education Proposals
Pell Grants: The president seeks a $5,830 maximum Pell Grant award for academic year 2015-16, a $100 increase over the 2014-15 maximum. This increase, however, is due to an automatic, mandatory increase in funding scheduled for the Pell Grant program. The White House budget does not request any additional discretionary funding for FY15. It does add language that would strengthen academic progress requirements in the Pell Grant program to encourage students to complete their studies on time.
Student loans: President Obama proposes expanding eligibility for the Pay As You Earn Repayment Plan, which currently allows certain borrowers to have their loans forgiven after 20 years of making payments tied to their income level and family size. In the FY15 request, the president calls for expanding eligibility for the repayment program to all student borrowers, regardless of when they took out their loans. Under current law, only borrowers who took out loans after Oct.1, 2007, and meet the hardship qualifications are eligible. Students who opt for certain government and nonprofit jobs can have their debt forgiven after 10 years. The budget request also addresses some concerns about the program being a windfall for high-income, high-debt borrowers.
Campus-based Aid: As in the FY14 request, this budget plan again calls for the distribution of federal campus-based aid—the Federal Supplemental Opportunity Grants (FSEOG), the Federal Work-Study (FWS) program, and Perkins Loans—to tie to three principles: keeping down net tuition; providing good value; and serving low-income students effectively, although these principles are not thoroughly defined. Funds for Perkins Loans would grow from the current $1 billion to $8.5 billion, but loan administration would no longer be campus-based; instead, the federal government would handle administration.
College Opportunity and Bonus Grants: A proposal for $7 billion to be spent over 10 years ($647 million in FY15) calls for new grants "to reward colleges that successfully enroll and graduate a significant number of low- and moderate-income students on time and encourage all institutions to improve their performance."
State Higher Education Performance Fund: Similar to last year's call for a Race to the Top for Higher Education, the White House seeks $4 billion for a State Higher Education Performance Fund. The fund would provide a dollar-for-dollar matching grant program to provide "multi-year (4-year) competitive grants to states to support (1) the successful implementation of performance-based policy and funding reforms that encourage and reward college attainment and affordability, as well as institutional innovation and reforms; and (2) maintaining state expenditures on higher education in states with a strong record of investment, or increasing state support in low-investment states."
First in the World: For the program, initially funded by Congress at $75 million in FY14, the president seeks $100 million to continue the First in the World competitive grant program. Run by the department's Fund for the Improvement of Postsecondary Education, this program would offer awards to support "innovative strategies and practices shown to be effective in improving educational outcomes, including on-time completion rates, and making college more affordable for students and families, particularly for low-income students."
Tax Proposals
The Treasury Department document containing the administration's revenue proposals for FY15 revisits a number of proposals included in the FY14 budget. Once again, the proposal would require institutions of higher learning to report on IRS Form 1098-T amounts paid rather than amounts billed for qualified tuition and related expenses, would limit to 28 percent (1) the charitable deduction for those making $250,000 per year or more; and (2) the exclusion of tax-exempt interest for municipal bonds, and calls for new capital financing programs. The President's budget would also permanently extend the American Opportunity Tax Credit (AOTC) and improve the coordination between AOTC and Pell grants so that the latter does not count against students for eligibility for the refundable portion of the tax credit.
Research Proposals
As reported by the Association of Public and Land-grant Universities (APLU)
Department of Agriculture (USDA) National Institute of Food and Agriculture (NIFA): The President's FY 2015 budget includes $325 million for NIFA's Agriculture and Food Research Initiative (AFRI), the core competitive research program at USDA. This represents a three percent increase over the FY2014 enacted level of $316 million. Other requested funding levels of note:
- Hatch Act: $244 million
- McIntire-Stennis Cooperative Forestry : $34 million
- Smith-Lever: $300 million
- Evans-Allen: $52 million
- 1890 Institutions Extension: $44 million
- 1994 Research and Extension: $6.2 million
National Oceanic and Atmospheric Administration (NOAA): The budget request for NOAA's Office of Oceanic and Atmospheric Research is $462 million for FY2015, a substantial increase when compared to $416 million in FY2014.
Department of Defense (DOD): The FY2015 budget request for the DOD proposes decreases to both basic research ("6.1") and applied research ("6.2") programs as compared to FY2014 enacted levels. Specifically, the Pentagon budget seeks approximately $2.017 billion for 6.1 research (compared to 2.167 billion in FY2014), while 6.2 research is proposed to be funded at $4.457 billion (down from the FY2014 level of $4.642 billion). The Defense Advanced Research Projects Agency (DARPA) would be increased nearly $135 million, to a proposed funding level of $2.914 billion.
Department of Energy (DOE): The President's budget would provide $27.9 billion for DOE's FY2015 Budget, a 2.6 percent increase over FY2014 enacted. For the department's Office of Science (SC), the Administration would provide $5.111 billion, a 0.9% increase over FY2014 enacted.
National Institutes of Health (NIH): The President's budget for FY2015 provides $30.2 billion for NIH, an increase of less than one percent over the FY2014 enacted level of $29.9 billion.
National Aeronautics and Space Administration (NASA): The President's budget request provides $17.5 billion in discretionary funding for NASA in FY2015.
National Science Foundation (NSF): The budget request provides $7.255 billion for the NSF, a one percent increase over FY2014.
