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THURSDAY BUZZ: Obama Budget Proposes Unprecedented Upgrade to Pell Grant Program 

Feb. 26, 2009

President Barack Obama submitted his preliminary FY 2010 budget proposal to Congress today, and one of the surprise provisions would tie the Pell Grant Program to inflation for the first time since it began in 1965, taking the program out of the hands of congressional appropriators and instead making it an entitlement program similar to Social Security and Medicare.

Under the plan, the maximum Pell Grant award would be $5,350 next year and starting in the 2011-2012 award year, would receive annual increases in line with the Consumer Price Index plus 1 percent.

The president’s budget also proposes an end the Federal Family Education Loan Program, instead filtering all student loans through the government's own Direct Lending Program.

American Council on Education President Molly Corbett Broad released the following statement today on the president’s budget proposal:

“One would be hard pressed to find another week in history when higher education was such a focal point in Washington. On Tuesday, President Obama placed higher education squarely in the national interest and outlined in his speech before Congress ambitious new goals for student aid, educational attainment and research capacity. Today’s budget proposal released by the White House is equally bold, outlining sweeping new proposals to enhance student aid and simplify its delivery.  

President Obama’s new budget proposal outlines the most dramatic changes to federal student aid since the passage of the Higher Education Act in 1965. A central thrust is a plan to make the Pell Grant Program an entitlement and index the maximum grant to inflation. The president would pay for this by eliminating the Federal Family Education Loan (FFEL) Program and the subsidies it provides to banks and guarantee agencies to lend money to students.  In any other budget year, proposing even one of these changes would be considered dramatic—proposing both of these together is truly extraordinary.

We applaud this unprecedented commitment to student access—the changes in funding for Pell will bring much-needed stability and predictability to this program.  Still the plan will not be without controversy and much will depend on key details that have yet to come to light.

The coming legislative debate will be constructive and the fact remains that the needs of students and families will be front-and-center, which is as it should be. We look forward to working with President Obama and Congress as the policy discussion moves forward.”

For initial reaction from the media, see the following:

Drilling Down on the Budget: Student Loans
The New York Times (free reg. req.)

Budget Expands Tax Cuts, Military Spending
USA Today

Also see:

Education Secretary Duncan Highlights Budget Proposals to Increase College Access and Affordability (news release)