La discusión sobre el presupuesto 2010 para la educación superior en los EE.UU. se centra sobre la propuesta del Gobierno de Obama de reducir los créditos estudiantiles financiados –con un fuerte subsidio público– por la banca privada y, en cambio, extender los préstamos directamente subsidiados por el Estado federal a los alumnos.
Ver más abajo dos artículos sobre le tema aparecidos en The Chroncile of Higher Education; uno hoy y el otro a comienzos de esta semana.
Recursos asociados
Apples and Oranges on Student Loans, Inside Higher Ed, June 4, 2009
Simplification Is … Complicated, Inside Higher Ed, May 27, 2009
Counterpoint: Why We Choose Direct Lending, Inside Higher Ed, May 27, 2009
The Future of Student Loans, Inside Higher Ed, May 22, 2009
Arne Duncan, Free Marketeer, Inside Higher Ed, May 21, 2009
On Students Loans, The New York Times – Topic, April 17, 2009
Plan to Change Student Lending Sets Up a Fight, The New York Times, April 12, 2009
Obama’s Budget Blockbuster, Inside HigherEd, February 27, 2009
Drilling Down on the Budget – Student Loans, The New York Times, February 26, 2009
Department of Education: 2010 Budget Proposal [pdf]
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Appropriators Question Duncan About Proposals on Pell Grants and Loans
By SARA HEBEL
Washington
The Chroncile of Higher Education, June 4, 2009
Appropriators in Congress questioned Education Secretary Arne Duncan on Wednesday about the administration’s budget priorities, pressing him to defend the White House’s proposals to overhaul the federal student-loan system and make Pell Grants an entitlement.
The education secretary received a mostly warm reception as he testified separately before the Democratic-led appropriations subcommittees of the U.S. Senate and House of Representatives that oversee education spending. President Obama’s plan [ver más abajo]for the 2010 fiscal year calls for providing the Education Department a total of $46.7-billion, about 3 percent more than the agency currently receives.
Mr. Duncan reiterated his arguments for ending the bank-based, guaranteed-student-loan program and switching all federal loans to direct lending. He touted the plan as one that would make the student-loan program “more efficient” to operate and that would generate at least $4-billion a year that the federal government could use to expand the Pell Grant program “without going back to taxpayers and asking them for an additional dollar.”
The education secretary also repeated several times that the department is placing an emphasis on giving money to programs, states, and institutions that do a good job of helping students complete degrees. “The goal is not just access,” he said. “It’s attainment.”
Questions About Lending
In the Senate hearing, Mr. Duncan fielded a series of pointed questions about the plan to move to 100-percent direct lending. Sen. Arlen Specter, a Democrat from Pennsylvania, asked whether the $500-million the president has requested to support the federal student-loan program would be enough to pay for the kinds of borrower services, like financial-literacy programs, that private and nonprofit lenders have provided under the current system.
Mr. Specter also wanted to know what would happen to the jobs of the many people employed by nonprofit lenders like the one in his home state, the Pennsylvania Higher Education Assistance Agency.
Mr. Duncan responded that the department wants to enhance the services borrowers receive. He called the $500-million “a starting point” but one that he considers a “significant investment” toward that end.
He also told Mr. Specter that private-sector companies and agencies would do all of the servicing of the student loans issued under the president’s plan. Mr. Duncan argued that those entities would benefit from having an increased market share of the loan-servicing business. “I am hoping job loss will be minimal,” he added.
Sen. Tom Harkin, a Democrat from Iowa and the subcommittee’s chairman, had a different concern. He asked Mr. Duncan how the department would select the lenders it would use to service federal loans. A company like Sallie Mae, the nation’s largest student lender, would have an advantage over others because its size would allow it to undercut everyone else on how much it would charge for loan servicing, Mr. Harkin argued.
The education secretary assured him that the department would consider other factors, too, when making its choices. “It’s got to be cost and the ability to help these students,” Mr. Duncan said.
Opposition to Pell Proposal
Appropriators in both chambers told Mr. Duncan they had concerns about the president’s proposal to make financing of the Pell Grant program mandatory.
Under the plan, Congress would retain a role in setting annual spending levels for the need-based grants, but legislators wouldn’t have as much discretion as they do now. The president proposes to automatically increase the maximum Pell award each year by a rate equal to that of the Consumer Price Index plus a percentage point, rather than allowing appropriators to continue to set the maximum amount each year. Congress, though, could choose to provide additional Pell aid if it wanted.
Mr. Harkin was the first to question the idea on Wednesday. “There may be a little bit of concern on this committee and others” about the plan, he told Mr. Duncan.
The education secretary said the plan would help ease the minds of families and students who worry about whether they can afford college. By automatically increasing Pell Grants each year, Mr. Duncan said, students would be able to know at a young age that the aid will be available for them.
Mr. Harkin suggested that there might be other ways to provide early assurances and incentives, such as by guaranteeing aid to students who keep their grades above a certain level. But the senator said he was open to discussing the administration’s idea further, adding that he doesn’t have a “closed mind” on the topic.
Hours later, in the House subcommittee’s hearing, Rep. David R. Obey, a Democrat from Wisconsin and the panel’s chairman, said he was “dubious about the wisdom” of creating a new entitlement program “in the midst of trying to convince people that we’re financially responsible.”
“We’re all friends here, but I have to be honest and lay out my misgivings,” he told Mr. Duncan.
He warned that indexing the maximum award to a measure of inflation could “have a perverse reverse effect by putting a ceiling on the maximum award.”
The education secretary responded that he appreciated Congress’s “commitment” to the Pell program but added that “even with your dedication, the maximum grant has not kept up with the average cost of attending college.”
Later, Rep. Dennis R. Rehberg, a Republican from Montana, suggested that the president spend the increased money on the TRIO college-preparatory program, rather than Pell Grants, arguing that it would be a “more holistic approach to helping students move forward so they can compete when they get to college.”
Improvements Sought for Job Training
On another topic discussed in the Senate hearing, Sen. Patty Murray, a Democrat from Washington, applauded the goal President Obama set in his speech to a joint session of Congress this year to have all Americans complete at least one year of postsecondary training.
But she told Mr. Duncan that she wants to make sure the career-oriented training students receive in high schools and colleges aligns with business needs. She said she often hears complaints from businesses in her state that the skills students come to them with don’t match with job requirements. She asked whether the Education Department would encourage local partnerships among employers, schools, and colleges to improve job training.
Mr. Duncan told Ms. Murray that he shares her concerns. Employers, he said, do need to be involved in shaping the curriculum in high schools and community colleges. “We have to tie education to the real world,” he said.
Kelly Field contributed to this article.
Copyright © 2009 by The Chronicle of Higher Education |

President’s Budget Would End Bank-Based Student Lending and Significantly Expand Pell Grants
By KELLY FIELD
Washington
The Chroncile of Higher Education, June 4, 2009
To the dismay of lenders and the delight of students, President Obama on Thursday unveiled a budget blueprint that would abolish the bank-based student-loan program and use the savings to raise the maximum Pell Grant and make it an entitlement.
The preliminary budget for the 2010 fiscal year, which administration officials say they will flesh out in April, would also provide a $5-billion increase for Perkins Loans, making an estimated 2.7 million more students eligible for the aid and reducing borrowers’ reliance on private loans.
The plan would make permanent a pair of tuition and research tax credits and create a $2.5-billion grant program aimed at helping states improve college-completion rates. The program is part of Mr. Obama’s goal, which he outlined in a speech to Congress Tuesday, for the nation to have the world’s highest proportion of college graduates by 2020.
While the budget outline does not detail spending levels for most education programs, Education Department officials promised that there would be no cuts to student aid in the 2010 fiscal year.
In a conference call with reporters on Thursday, Secretary of Education Arne Duncan defended the president’s plan to do away with the bank-based Federal Family Education Loan program, or FFEL, saying that the program is on the way out anyway. The department estimates that switching 100 percent to the alternative direct-lending program will save the government $4-billion.
The FFEL program “has basically been on life support,” Mr. Duncan said, referring to the rescue plan adopted by Congress last year and subsequent government steps to prop up the system. “Rather than continuing to subsidize banks, we want to help more students get access to more aid,” he said, by putting the savings in the Pell Grant program.
Making Pell Predictable
The Pell Grant program, which provides need-based aid to low-income students, already operates as a quasi-entitlement, in that all students who qualify for a grant receive one. However, the maximum award is set through the annual appropriations process, and spending levels are based on projections made far in advance of when students receive the awards. When money is tight, or the political climate unfavorable, the maximum award stagnates, and occasionally shrinks; when student demand exceeds expectations, as it has in recent years, the program runs shortfalls that must be covered in the following years’ budgets.
Under Mr. Obama’s plan, Pell Grants would become a true entitlement, with the maximum award indexed to the rate of inflation. After increasing by $200, to $5,500, in the 2010 fiscal year, the maximum award would grow at an annual rate of the Consumer Price Index plus one percentage point.
By making spending on Pell Grants mandatory, and tying the maximum award to the price index, the president’s budget would eliminate much of the uncertainty surrounding award levels and stop the cycle of shortfalls. It would also end the erosion of the grant’s purchasing power and ensure that the maximum award would not drop by $1,000 in a couple of years, when an infusion of mandatory money provided by Congress last year will run out.
Student groups, who have long called for converting Pell Grants into an entitlement program, applauded the plan.
“Making the Pell Grant reliable for students and families is by far and away the single most significant policy the president could undertake to communicate to students and families that he understands their struggles to finance colleges,” said Rich Williams, a higher-education associate for the U.S. Public Interest Research Group. “Now they can count on a certain level of aid from year to year.”
Lenders Nervous
Student-loan companies were disappointed, but not surprised, by Mr. Obama’s call for the elimination of the bank-based FFEL program; the president made similar calls as a candidate on the campaign trail. But the lenders question his claim that it will save the government $4-billion, and they continue to argue that banks provide superior service to students.
“During an economic crisis, more borrowers need the benefit of default-aversion services provided by lenders and guarantors,” said Marcia Sullivan, director of government relations for the Consumer Bankers Association. “It doesn’t make sense to switch to a program that gives these benefits short shrift.”
Share prices of student-loan companies plunged after Mr. Obama released the budget, with Sallie Mae’s stock sinking 41 percent in afternoon trading and closing at $5.80, down about 31 percent for the day. Shares of Nelnet Inc. dropped even more steeply, falling 54 percent to close at $4.91.
More than 1,600 colleges now participate in the federal direct-loan program, and almost 4,500 institutions take part in the FFEL program. Education Department officials say banks will continue to have a role in the student-loan system, as loan servicers. They argue that a shift to all direct lending will simply change the way banks are reimbursed, replacing politically set subsidies with competitively awarded contracts.
“We’re using the private sector, and using it well,” said Robert M. Shireman, a higher-education consultant to Mr. Duncan.
But lenders say they hope to work with the administration to remake the student-loan system without ending the bank-based program.
“I think we can come up with a really good loan program that saves the taxpayers money and provides the services in delinquency and default prevention that are needed now more than ever because the economy is shaken,” said Brett E. Lief, president of the National Council of Higher Education Loan Programs.
Mr. Lief and other lenders will have a lot of convincing to do. Many Democrats, including the chairmen of the House and Senate education committees, support a switch to 100-percent direct lending, and Mr. Shireman was involved in the program’s creation during the Clinton administration. The lenders’ allies will include Republicans like Howard P. (Buck) McKeon, of California, the education committee’s top Republican, who says a “government takeover” of the student-loan program will rob students of options and benefits.
At least one major lender is already positioning itself for a role in the new world order. Shortly after the budget was released, Sallie Mae issued a news release saying that the company is “the largest and lowest-cost provider of student-loan services.”
“We are committed to delivering and servicing federal student loans, regardless of their funding source,” the statement concludes.
Perkins Instead of Private Loans
The president’s plan would also take a bite out of the burgeoning private-loan sector, by expanding the Perkins Loan program from $1-billion to $6-billion. Private loans, which many students need to pay education costs beyond what they can borrow through the federal system, generally are more costly than federal loans.
The Perkins Loan program provides low-interest annual loans of up to $4,000 for undergraduates and $6,000 for graduate students with financial need.
The proposal would shift responsibility for servicing the loans from colleges to the federal government and change the way Perkins dollars are distributed, replacing a formula that has given a disproportionate share of the money to colleges that joined the program at its inception with one that would reward colleges that control costs and expand need-based aid.
To hold down the cost of the expansion, the president’s plan would eliminate the federal subsidy that allows borrowers to avoid accruing interest on their Perkins Loans while they are enrolled in college. The program’s interest rate and loan limits would not change.
Finally, the budget would make permanent a tuition tax credit and a research-and-development tax credit for businesses included in the recently signed economic-stimulus bill. That measure raised the tuition credit from $1,800 to $2,500 and expanded it to cover course materials and textbooks. It also made people who do not pay taxes eligible for a refund worth up to 40 percent of the maximum credit, or $1,000.
Copyright © 2009 by The Chronicle of Higher Education |