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President to President

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President to President
Molly Corbett Broad's weekly email newsletter to higher education leaders.

President to President, August 3, 2011

Vol. 12, No. 31

​SPECIAL EDITION: President Signs Debt Ceiling Bill

Measure Preserves Pell Grants, Cuts Graduate, Professional Loan Subsidies

Much has changed since I wrote you on Friday: A compromise measure to increase the debt ceiling was finally agreed to by all parties, passed by both houses of Congress, and signed by President Obama yesterday.

The House voted 269-161 on Monday to pass the bipartisan agreement, known as The Budget Control Act of 2011. The Senate followed Tuesday, approving it 74-26, and the president quickly signed the bill, averting a potential debt default just hours ahead of the midnight deadline.

As usual, Congress has approved a very complex package. It provides an immediate $900 billion increase in the debt ceiling that will carry the federal government through February 2012 and requires $917 billion in discretionary spending cuts over 10 years. In addition, the measure establishes a joint congressional committee charged with developing a package of $1.5 trillion of additional deficit reduction by November. This package must then be voted on by both houses and cannot be amended or filibustered.

If Congress approves such legislation by the end of the year, the president may request the debt limit be raised by another $1.5 trillion. If the legislation is defeated, the president can request a $1.2 trillion increase and there will be an automatic, across-the-board, $1.2 trillion cut from FY 2013-FY 2021. The automatic cut would be divided evenly between defense and non-defense spending. (Among the programs exempted are Social Security, Medicaid, veterans' compensation, military pay and Pell Grants.) Congress must vote on either request and both houses must also hold a vote on a balanced budget amendment.

For higher education, the agreement contains both good and bad news. Included is $17 billion in supplemental funding for the Pell Grant Program for academic years 2012-13 and 2013-14. (Academic year 2011-12 was already funded.) This supplemental money will most likely enable the maximum award to remain at $5,550. This is a vastly better outcome for the Pell Grant Program than we had been told to expect as recently as three weeks ago. We are deeply appreciative for the support from both sides of the aisle for this program and the commitment demonstrated to helping keep college in reach for low-income students. I would also like to thank those of you who spent so much time advocating for Pell Grants—and other higher education programs—to your congressional delegation. It clearly made a difference.

However, it has to be noted that this two-year agreement does kick future funding for the Pell Grant Program down the road. Despite the funding approved for 2012-13 and 2013-14, we cannot ignore the fact that this program has become very expensive (current cost is about $38 billion a year) and, in the current budget climate, is bound to continue to be a target for cuts.

In addition, the good news about Pell comes at a real cost to other students: The agreement eliminates the in-school interest exemption for graduate and professional students and on-time repayment incentives for student borrowers, effectively increasing the cost of college for millions of students and families by about $21.6 billion over fiscal years 2012-21.

These two cuts come on top of the recent elimination of year-round Pell Grants and the Leveraging Educational Assistance Partnership (LEAP) Program, as well as funding cuts to the TRIO Programs, GEAR UP, the Supplemental Educational Opportunity Grant (SEOG) Program and graduate education programs.

While nothing in the legislation addresses scientific research directly, the sharp reductions in discretionary domestic spending will make it much harder for Congress to fund popular and important activities like TRIO, GEAR UP, Head Start, the Food and Drug Administration and the Centers for Disease Control. Funding for scientific research comes from the same part of the budget.

The legislation does not explicitly address funding for other key higher education programs like international education, Federal Work-Study, Historically Black Colleges and Universities or Hispanic Serving Institutions. Nor does it make specific provisions for funding scientific research at the National Science Foundation or the National Institutes of Health. However, the deep reductions in domestic spending the new law imposes undoubtedly mean that additional funding for these initiatives will be hard to achieve for the foreseeable future.

As we move into the August congressional recess and the beginning of the fall semester, we can be sure the debate about the size and role of the federal government will continue at least through December. While we no longer have an immediate threat to the Pell Grant Program hanging over our heads, we can still look forward to a long and interesting fall.

President to President will return in September after Congress returns from its August recess.

Molly Corbett Broad
President of ACE