Don’t Balance the Budget on the Backs of Students Most in Need
Just a few months ago, Congress passed — and the president signed into law — a bipartisan budget agreement for 2016 and 2017. However, it now appears that Republicans in the House of Representatives want to abandon that agreement and implement their own, revised plan — complete with $1 trillion in spending cuts to non-defense programs and an estimated $200 billion in spending cuts for education and training (which includes student financial aid programs).
In past budget resolutions, we’ve seen three programs most likely to see reductions that have implications for low-income students and students of color:
- Pell: Previous budget resolutions have cut $80 billion to $90 billion from Pell Grants by proposing to eliminate mandatory Pell and freezing Pell at the previous year’s level because of “unsustainable funds” to maintain the program. Yet, Pell is not expected to face a shortfall in the foreseeable future. Furthermore, such deep cuts would increase costs for more than 8 million students and unfairly impact underrepresented minority students (63 percent of all black students and 51 percent of all Latino students receive Pell Grants). Not only would such cuts increase the financial burden for low-income students — low-income students spend 84 percent of their income to cover net college costs while wealthy students spend only 14 percent of their income — they also increase the chances that these students will drop out with debt and no degree.
- Subsidized Loans: Last year’s House budget resolution proposed eliminating the interest subsidies on student loans. Twenty-eight million students receive these loans, and by removing these subsidies, college costs are expected to rise by almost $4,000 for those students with financial need. Moreover, 4 out of 5 students with subsidized loans also have unsubsidized loans — leaving these students with even larger debt loads. Again, low-income students and students of color would feel the greatest effects from these cuts as 65 percent of low-income black students at four-year, public institutions and 52 percent of low-income black students in higher education overall receive subsidized Stafford loans. In addition, the House budget resolution proposes fair value accounting for student loans. This would likely increase student loan interest rates and provide additional profit to the government.
- Loan Repayment Plans: The House has also discussed repealing the expansion of income-driven repayment and public sector loan forgiveness plans. (The administration has proposed cost savings as well, but not the wholesale repeal that the House suggests.) These programs are designed to help address debt loads for struggling graduates such as teachers. Seventy percent of students using the income-based repayment plan have an adjusted gross income of $20,000 or less, and more than 80 percent of those in the same income bracket use the pay-as-you-earn plan. Finally, there is a pay gap between workers of color and their white colleagues, so debt loads may exacerbate this disparity; workers of color could stand to benefit from this protection.
Budgets are moral documents and outline policy priorities, and the proposed House budget signals that low-income students and students of color are being poorly prioritized. Significantly reducing these programs further squeezes low-income and underrepresented minority students out of higher education and saddles them with higher debt loads.
