Key Questions on President’s 2016 Education Budget – Higher Education

President Obama released his fiscal year 2016 budget request to congress this week. The Education Policy Program at New America has reviewed the president’s budget and generated a list of key questions that policymakers, the media, stakeholder groups, and the public should ask about the proposals. These are divided into three categories. Those covering Higher Education are below. Those covering PreK-12 will be available here. Those covering Workforce Training will be available here.

Income-Based Repayment: The president’s budget includes the same set of proposal to limit benefits in the income-based repayment program (IBR) for student loans that the president included last year. These changes, many of which New America proposed several years ago, would reduce the benefits that graduate students can collect through the program’s loan forgiveness provisions. These changes roll back some of the changes the administration made to IBR in 2010. Specifically, borrowers with larger loan balances would need not qualify for loan forgiveness until 25 years of payments, rather than 20 years under current law; married borrowers could not exclude their spouse’s income from the calculation by filing separate taxes; and Public Service Loan Forgiveness would be capped, not unlimited as is the case under current law. It would also add a new benefit by forgiving half of any unpaid interest each month.

Last year, the budget showed that that these changes would reduce the cost of IBR by $627 million per year once fully in place. This year the budget shows $1.5 billion in savings per year. What explains such a large increase in savings from the initial estimate? Did the administration underestimate the degree to which borrowers – mainly graduate students – would benefit from the changes the administration made to IBR in 2010? What new information has come to light?

Tuition-Free Community College: The budget documents include additional details of the America’s College Promise program. When it was unveiled a few weeks ago the proposal was described as free community college for all. But the materials released today show that students from families with adjusted gross incomes over $200,000 would not be eligible for the program. While this restriction does better target the program, it also makes it more complicated since it will require some way to verify income and weakens the message of free community college being available for everyone. It also likely makes little difference from a practical standpoint since higher-income students generally do not attend community colleges. Given these complications, why did the administration include the income limitation?

Pell Grant Funding Increase for Inflation: The budget includes an increase of $30 billion over 10 years on the mandatory side of the budget for the Pell Grant program. The new funds would pay for increasing the maximum grant annually according to the Consumer Price Inflation index. Under current law, annual increases based on inflation are scheduled to end after fiscal year 2017.

Given the president’s willingness to increase funding for Pell Grants by $30 billion, why not reinstate a year-round Pell Grant program instead? The administration in 2011 argued that the year-round grant was too expensive (it cost around $2.1 billion per year according to the Congressional Budget Office) and led efforts to end it. But now the president’s budget includes a proposal to increase spending on Pell Grants by more than the amount the administration wanted to save in 2011. As New America has found, there was nothing flawed about the year-round Pell Grant. Yet, the administration has never proposed to reinstate this valuable program.

Veteran’s Benefits: For years there have been concerns the way veteran’s benefits are treated in the calculation that limits the share of a private for-profit college’s revenues that can come from the federal government. Under that formula, for-profit schools must take in at least 10 percent of their revenue from sources other than federal student aid benefits. But the current calculation treats veterans educational assistance as part of that 10 percent share, so each dollar received through those programs allows the school to receive nine more dollars in federal student aid benefits.

The President’s budget request proposes to fix the formula by now treating dollars received through the veterans educational assistance programs. Doing so will close a loophole that has been exploited for far too long. Given that the administration is now admitting a flaw in this formula, what does it plan to do to address concerns about the accuracy of other accountability measures–such as the potential manipulation of student loan default rates through the usage of deferment or forbearance?

College Opportunity and Graduation Bonuses: The budget includes the same smart proposal from last year to give colleges a bonus based upon their success with Pell Grant recipients. These College Opportunity and Graduation Bonuses would be awarded based upon things like the number of Pell students who graduate on time. But colleges do not currently have to report any data on their Pell Grant graduation rates and the National Center for Education Statistics has shown a reluctance to start collecting this information into the Integrated Postsecondary Education Data System (IPEDS). So how does the Department plan on obtaining information on the number of Pell students completing on time and how does it plan to construct the cohort for this measurement if it relies on non-IPEDS data sources, such as the National Student Loan Data System?

Better Data: Building and acting upon evidence is given great attention in the budget. Pages and websites are devoted to the importance of using existing administrative data in order to increase transparency, improve outcomes, and reduce duplicative reporting requirements. This rhetoric echoes legislation introduced by Senator Patty Murphy and Congressman Paul Ryan to create a Commission on Evidence-Based Policymaking. The budget calls for Congress to reverse a ban on a federal unit-level workforce data system in order to improve job training programs under the Workforce Investment and Opportunity Act (WIOA). While WIOA is an important source of job training, it pales in comparison to the financial aid dollars spent under the Higher Education Act (HEA). Yet HEA has a similar ban on an unit-level data system.

This prohibition reduces transparency, makes informed college choice nearly impossible, and increases expensive and time-consuming reporting burden for colleges and universities. House Education and Workforce Committee Chairwoman Virginia Foxx (R-VA) has said that getting better data to students and families is one of her primary goals. Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-TN) has said that reducing burden is one of his. Why does the budget not call to end the student-unit record ban in HEA?

Tax Benefits: Evidence-based policy making has been a major component of this administration’s approach to education spending. The creation of programs like Investing in Innovation and First in the World introduce the importance of evaluation and evidence instead of just funding things that seem interesting. Yet at the same time, the administration appears to be ignoring the importance of evidence in its tax proposals. For example, recent research has shown the large and expensive  American Opportunity Tax Credit to have no effects on college outcomes. Given that the administration is proposing to spend far more on this tax credit than on its other evidence-based programs in the Department of Education, does it have plans for conducting an evaluation of the benefits of the tax credit? Or does it have any concerns that funding such an unproven program could undercut its broader message about the importance of evidence?

[Cross-posted at Ed Central]

Jason Delisle

Jason Delisle is director of the Federal Education Budget Project at the New America Foundation. Before joining New America, Mr. Delisle was a senior analyst on the Republican staff of the U.S. Senate Budget Committee. Mr. Delisle holds a master’s degree in public policy from George Washington University.