Last week, President Trump introduced his budget proposal for fiscal year 2021, A Budget for America’s Future. The Higher Education proposal for the Department of Education (ED) includes changes to loan borrowing limits, federal funding and FSA oversight. Below are highlights regarding the ED proposals; the full budget can be viewed through the Office of Management and Budget.
Federal Loan Updates
The budget proposes to provide institutions with more flexibility and the authority to make prudent budgeting and borrowing choices, as well as the option to mandate annual loan counseling. The proposal also includes simplification of the student loan programs by eliminating the subsidized direct loan, consolidating the graduate loan programs, and developing “sensible annual and lifetime limits” on graduate and parent loans.
- Direct and PLUS Loans: As mentioned above, the budget eliminates the subsidized direct loan for undergraduate students in an effort to “simplify the Federal student loan programs.” Additionally, the proposal establishes an aggregate limit for Parent PLUS loans at $26,500, the difference between the dependent and independent student aggregate limit ($31,000 and $57,500 respectively).
- Graduate Loans: The budget also institutes an annual and aggregate limit on Graduate PLUS loans. According to NASFAA, the budget proposes a cap of $50,000 annually on graduate PLUS loans, with an aggregate limit of $100,000. The budget also proposes consolidation of all graduate borrowing under one loan program, with the loan terms and conditions of the Graduate PLUS Loan, which is supported by financial aid organizations such as NASFAA.
- Loan Forgiveness: The budget proposes to eliminate default for impoverished borrowers and provide expedited loan forgiveness for borrowers who make 15 years of responsible payments. However, it also proposes to eliminate the Public Service Loan Forgiveness (PSLF) program altogether.
Federal Funding Updates
- Pell Grant: The budget supports a FY 2021 Pell Grant maximum award of $6,345, the same amount currently available. The proposal also addresses eligibility for the Pell Grant to include students in high-quality, short term programs as well as certain incarcerated students through the Second Chance Pell program.
- FSEOG: The budget eliminates the Federal Supplemental Education Opportunity Grant (FSEOG) program entirely. The proposal indicates that the FSEOG program duplicates the Pell Grant, but are “less targeted to those who need the most help.” Initial budget proposals from the last three years have also included the elimination of FSEOG, however Congress chose to reject it each time. Congress will have this opportunity again this year.
- Federal Work Study: The budget proposes to cut funding to $500 million for the Federal Work Study (FWS) program, down from $1.2 billion in FY 2020. Similar to the FSEOG, cuts have been proposed to the FWS program over the last three years and have been rejected by Congress each year.
Transforming Federal Student Aid (FSA)
The budget proposal supports the multiyear Next Generation Financial Services (NextGen) already underway. ED has recently consolidated all customer-facing websites to a one stop hub to build a “seamless experience from application through repayment.” The budget proposes $1.9 billion for student aid administration to continue this work and build the technology for a new loan servicing program. The budget also includes a proposal to start the “evaluation of FSA as a separate organization, with reformed governance.”
Additional Proposals
- HSBU funding: The budget supports the FUTURE Act, which provides $85 million in funding to HBCUs each year. The proposal also provides $749 million in funding to support HBCUs, as well as $150 million to support science, technology, engineering, and mathematics (STEM) activities at HBCUs and other institutions serving historically disadvantaged students located in Opportunity Zones.
- Postsecondary Preparation Programs: The budget proposes to restructure and streamline the TrIO, GeArUP, and CAMP programs by consolidating them into a $950 million State formula grant.
- Additionally, the budget addresses the protection of free speech on college campuses, implements standards to safeguard students from fraudulent institutions, and funds a new block grant program for elementary and secondary schools that gives states flexibility to fund their own priorities.
The next step for this budget proposal is Congress. Congress will begin consideration of FY 2021 funding levels, with the goal to complete the appropriations process by the new federal fiscal year, October 1.
Sources:
A Budget for America’s Future PDF
ED: President Trump Proposes Transformative, Student-First Budget to Return Power to States, Limit Federal Control of Education
NASFAA: Trump 2021 Budget Proposes Borrowing Limits, FSA Oversight, Significant Cuts to Student Aid