Every year around this time, the president of the U.S. submits a budget proposal to Congress for consideration for the next fiscal year, which begins Oct. 1. This request, first required under the Budget and Accounting Act of 1921 , lays out the spending and revenue plans for all federal agencies and departments, including the Department of State, Department of Agriculture and, of course, the Department of Education .
The proposals are analyzed by the Congressional Budget Office and submitted to the House and Senate Budget Committee for consideration. How receptive these committees are to the president’s proposals depends on several factors, not limited to — but certainly including — party politics.
[Check out what presidential candidates want to do on the student debt issue.]
The Department of Education’s higher education portion of its proposed budget attempts to continue the administration’s focus on enrollment, affordability and completion. The proposal puts an extra emphasis on completion, stating, ” the Administration has doubled down on its efforts toward a new higher education focus on degree completion, in addition to college access and affordability, seeking to help shift incentives at every level to focus on student success, not just on access.”
While that likely sounds good, students and graduates are probably more interested in what the proposed budget really means for them. Here’s a look at some of the Education Department’s proposals, as well as their implications.
Summer Pell Grants
The proposed budget reinstates the ability for full-time students who have exhausted their Pell Grant eligibility for the year to receive additional Pell funds for the summer semester.
The idea here is to offer low-income students an incentive to complete their credentials and do so more quickly, which would hypothetically reduce student loan debt. The proposal also wants to speed things up by allowing an additional $300 “Pell bonus” for those students taking at least 15 hours per semester, which is more than a full-time course load — defined as 12 hours by federal aid policies.
[Get the answers to frequently asked questions about Pell Grants.]
Perkins Wind Down
The budget proposal alters the Perkins loan program , which is winding down, to an unsubsidized loan program. That means the interest on the loan would be the responsibility of the borrower and would start accruing upon disbursement; currently, the federal government pays the interest on Perkins loans while the borrower is in school, in a grace period or during certain periods of payment postponement.
The new program would still be at an institution’s discretion, but would be administered at the federal level as a direct loan program.
Easier FAFSA
The Department of Education is looking to reduce the questions on the Free Application for Federal Student Aid. It proposes doing this by relying primarily on tax return information and removing questions related to assets and additional types of income, including savings and investments.
[Get to know how the FAFSA will change and what that means for college students.]
One Income-Driven Repayment Plan
The proposed budget creates a single income-driven repayment plan for borrowers who take their first loan on or after July 1, 2017. The plan would be similar to the new Revised Pay As You Earn plan. Existing borrowers would still have access to whichever repayment plans they are eligible for today.
Greater Teacher Loan Forgiveness
The Education Department is seeking to simplify and increase the existing teacher incentive programs by combining the current TEACH Grant with the Teacher Loan Forgiveness benefit for a maximum forgiveness amount of $25,000.
Borrowers who graduate from “an effective preparation program” and who begin teaching in a low-income school starting in 2021 would potentially be eligible for this maximum amount, while others with lesser credentials could potentially qualify for up to $10,000. The proposal also bases forgiveness amounts on time spent teaching in these high-need areas
Capped Public Service Loan Forgiveness
The proposed budget would cap the forgiveness benefit under Public Service Loan Forgiveness to $57,500. The reasoning for this proposal is to protect students and taxpayers against institutional practices that may encourage over-borrowing. The Student Loan Ranger wants to emphasize that this is only a proposal, and if it should pass, it would not apply to existing borrowers.
While the goal for the budget process is a budget resolution that passes both the House and Senate, doing so is not a requirement. With an upcoming presidential election and therefore a fairly short number of voting days in Congress this year, the Student Loan Ranger isn’t sure that completing a budget will be a priority.
Even if it completes a budget, it’s unlikely that this Congress would prioritize any of these proposals, unless they meet certain agendas — which most do not. In short, the Student Loan Ranger advises readers to look at this proposed budget as more of a suggestion for future Democratic policy proposals when Congress initiates the reauthorization of the Higher Education Act, likely in 2017 or later.
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6 Financial Aid Implications of Obama’s Proposed 2017 Budget originally appeared on usnews.com
