Administration Outlines Fiscal 2010 Student Aid Budget

The Obama administration has submitted to Congress a controversial budget outline for federal student aid programs for fiscal year 2010. The administration proposes the following changes to key student aid programs:

Pell Grants. The proposal would make the Federal Pell Grant program an entitlement program, no longer subject to the annual congressional appropriations process. The maximum Pell Grant award for the 2010-2011 academic year would be $5,500, and the maximum Pell Grant would be indexed to the Consumer Price Index plus 1 percent.

Federal Family Education Loan Program. The administration proposes the elimination of federal payments to private entities that support guaranteed student loans and the origination of all new loans in the direct lending program, effective July 1, 2010.

Federal Perkins Loans. The proposal would overhaul and enhance the Perkins loan program to provide $6 billion in loans every year, instead of the current $1 billion. The formula for distributing Perkins loan funding would change to reward schools that provide more need-based aid to students and those that maintain reasonable student costs relative to their peer institutions.

College Access and Completion Grants. The budget overview also proposes a five year, $2.5 billion Access and Completion Incentive fund to support research into what helps low-income students succeed and complete higher education.

Rep. George Miller, D-Calif., who chairs the House Education and Labor Committee, applauded the president’s budget proposals. “Today he has put forth a solid plan to make federal student loans more reliable, while saving taxpayers billions of dollars, and to ensure the value of the Pell Grant scholarship reflects families’ increasing financial burdens,” Miller said.

On the other hand, Rep. Howard “Buck” McKeon, R-Calif., ranking Republican on the House education panel, criticized portions of the proposal. “The Administration proposes a government takeover of the private sector-based student loan program, taking away options and benefits from students, while adding tens of billions to the government’s balance sheets,” McKeon said.

The administration plans to release details of its budget proposals in April. Congress can accept, reject or modify the administration’s requests. Typically, Congress then passes a budget resolution setting the broad parameters of spending for the year. Congress then fills in the details through individual appropriations and budget reconciliation legislation.