by Nicole Alvarez, Staff Writer
Congress has begun discussing the 2016 fiscal year budget as of Monday 23, 2015. The plan, however, proposes the slashing of approximately $150 billion in student aid. The budget cut would take affect over a period of ten years and mainly effect Pell Grants and student loans.
The 2016 fiscal year budget proposal will cut $150 billion in student aid over a period of ten years as one method to reduce government spending. It will also balance out the increase in budget for defense discretionary spending that would take place over the same period of time. The budget proposal will reduce federal spending over the ten years by $5.5 trillion.
For college students who depend on financial aid to cover tuition, Pell Grants and student loans are extremely important. Pell Grants are usually awarded to undergraduate students who have not earned a bachelor’s or a professional degree. Unlike loans, Pell Grants do not need to be repaid and typically the only way a student cannot be eligible for Pell Grants is to have been incarcerated and sent to a federal or state penal institution. The amount of money any student can receive from Pell Grants varies depending financial need, costs to attend school, whether students are full-time or part-time, and plan to attend school for a full academic year or not. The current maximum amount allotted for a Pell Grant is $5,775 for the 2015-2016 academic year.
What the budget proposal suggests is freezing the Pell Grant program at the 2015-2016 maximum, $5,775, for the next ten years. The proposal will also reduce eligibility for Pell Grants making it harder for students to pay their tuition and eliminate all mandatory funding for Pell Grants. According to the Committee for Education Funding, the budget assumes the costs for Pell Grants will be covered by the discretionary side of the budget. Discretionary spending is the portion of the government’s expenditures, or pay outs, which is used for non-essential or voluntary disbursements. Discretionary spending is different from mandatory spending, which funds programs according to current laws. The Student Aid Alliance states that this will force students in need of financial assistance to take out more loans in order to afford college. Aside from Pell Grants the budget proposal would also affect in-school interest subsidies, loan forgiveness, income-based repayment programs, domestic discretionary funding, and market risk penalty to student loan scoring.
The budget proposal will eliminate in-school interest subsidies for undergraduate students. With interest subsidies no longer available, students who take out loans will have increased loan payments. In-school interest subsidies do not allow loans to accrue interest while students are enrolled in school for at least half the academic year. Public sector loan forgiveness will be eliminated as well. Public sector loan forgiveness encourages individuals to enter public service employment by forgiving the remaining balance these individuals may have on their loans after at least 120 payments have been made. Without loan forgiveness, students will become discouraged from entering public service careers, such as public health and education.
Income-based repayment programs for student loans will be terminated by the 2016 fiscal year budget proposal. Income-based repayment programs are plans that are designed to specifically make student loan debts more manageable. Such plans reduce monthly payment amounts and there are three income-based plans. The three income-based plans are the income-based repayment plan, the pay as you earn repayment plan, and the income-contingent repayment plan. One last item that the budget affects is student loan scoring. The cost of student loan programs would increase due to artificial inflation because the budget would require the Congressional Budget Office to utilize Fair Value Accounting when scoring student loans, according to the Committee for Education Funding. The CEF says that this will create more pressure to cut student aid or other programs to reduce the higher cost.
The main priority of the budget proposal for the 2016 fiscal year is to reduce government spending by $5.5 trillion. The proposed cuts of $150 billion to student aid is among one of the cuts the proposal details. The Student Aid Alliance, an association of over 80 organizations and institutions, has written a letter to the House of Representatives on the proposed cuts to student aid and the negative impacts it would have. Saint Leo sent out an email about this issue on Monday 23, 2015 with ways to contact Congress and Senators.
