Examine Budget Proposals' Impact on Student Loans

The federal budgets proposed by the House and Senate would affect student loans very differently.

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Proposed House legislation would limit the maximum Pell Grant award to $5,645 for the next 10 years.

Back in April, we took a look at the president's budget proposal and what it might mean for postsecondary education. The House and the Senate have also released vastly different fiscal year 2014 budget resolutions.

Just like the president's proposed budget, congressional budget resolutions are not law. But they do show Congress' priorities and serve as self-imposed taxing and spending guidelines.

The most important benchmarks established by the budget resolutions are the overall appropriations funding levels they set. The total amount of funding will determine in turn how much every committee – including the Senate Health, Education, Labor and Pensions Committee and the House Education and the Workforce Committee – can spend and therefore if specific programs can be increased or if they will either be cut back or eliminated entirely.

[Learn the perks, pitfalls of student loan repayment proposals.]

This is also one of the biggest differences between the House and Senate proposals. The House's budget resolution sets an appropriations limit of $966.4 billion. That's about $18 billion less than the fiscal year 2013 postsequester funding and $477 billion less than the presequester funding.

In addition – as the New America Foundation points out in its Federal Education Budget Update – the House intends to divert money from nondefense to defense programs. This will further reduce the amount available for education programs.

The Senate, in contrast, sets a nearly $1.1 trillion appropriations limit. This amount of spending would require the budget passed by Congress to amend the Budget Control Act – known also as the sequester – in order to exceed the limits it sets. It's also about $92 billion more than the House wants to spend. That's a large gap to bridge.

It is clear Congress is also deeply divided in the policy realm as well. The House, led by Rep. Paul Ryan, R-Wisc., has produced what it calls The Path To Prosperity: A Responsible Balanced Budget that aims to balance the budget in 10 years. According to the resolution, a key problem with education funding is that federal student aid – led by Pell Grants – is driving up tuition costs and results in graduates having to make large student loan repayments.

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Many of the policy responses outlined in the House bill are devoted to cutting costs, including limiting the maximum Pell Grant award to $5,645 for the next 10 years, rolling back changes made in the College Cost Reduction and Access Act of 2007 that broadened the eligibility of needy families for student aid and moving to fair-value accounting for student loans. The resolution also implies it would be good to reinstate the wasteful Federal Family Education Loan program.

The Senate budget resolution produced by Sen. Patty Murray, D-Wash., – which sports the equally anodyne title of Foundation For Growth: Restoring the Promise of American Opportunity – also identifies the increased cost of college as a key problem, and "assumes Congress will enact proposals to reduce college costs while expanding college access and completion."

However, it calls for increasing the nation's investment in education and proposes solutions that are almost diametrically opposed to those in House budget resolution.

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Specifically, the resolution implies the Senate would expand Pell Grants and lauds the ending of the FFEL program. It also proposes getting rid of the student loan fee increases that were created by sequestration, retaining subsidized loans that help needy families and ensuring student loan interest rates are affordable.

It's possible the House and Senate will bridge these and other gaps and produce a joint budget resolution – perhaps though the budget reconciliation process – but it seems highly unlikely. Instead, those interested in the education budget have to wait out the larger budget battle that will be waged this summer to see if our nation will invest, or divest, in postsecondary education.

Isaac Bowers is a senior program manager in the Communications and Outreach unit, responsible for Equal Justice Works's educational debt relief initiatives. An expert on educational debt relief, Bowers conducts monthly webinars for a wide range of audiences; advises employers, law schools, and professional organizations; and works with Congress and the Department of Education on federal legislation and regulations. Prior to joining Equal Justice Works, he was a fellow at Shute, Mihaly & Weinberger LLP in San Francisco. He received his J.D. from New York University School of Law.