College Grants Spared From Spending Cuts

One federal program emerged with more money in the deficit-reduction deal signed into law this week: Pell grants, which help low-income students pay for college.

The White House and its allies cited the increase when they urged Democrats to vote for the broader legislation, which was almost all about cutting government spending.

The final deal "protects Pell grants from deep near-term cuts," Sen. Kent Conrad (D., N.D.) said Monday on the Senate floor. "I think most of us understand how important Pell grants are to providing opportunities to young, talented people all across America to improve themselves through higher education."

It was a rare bright spot for a White House that pushed unsuccessfully for a variety of other provisions, including raising taxes on certain corporations and wealthy individuals, extending a payroll-tax cut, extending unemployment benefits and spending new money on infrastructure in hopes of stimulating the economy.

The deal to raise the government’s $14.29 trillion borrowing limit reduces federal spending by $917 billion over 10 years. It also creates a special congressional committee to shrink the government’s budget deficit by an additional $1.5 trillion.

The $17 billion increase in Pell-grant spending came at a price, with negotiators paying for it by killing federal subsidies for graduate-student loans. President Barack Obama had suggested that tradeoff in his budget, and other negotiators adopted it.

Under the eliminated program, lower- and middle-income graduate-school students didn’t have to pay interest on their loans while they were still in school.

Killing the subsidy will affect about 1.5 million students, said Terry Hartle, senior vice president of the American Council on Education, a Washington-based advocacy group that represents university executives.

More than nine million students currently have Pell grants.

Cutting the graduate-school subsidies for 10 years provided only enough money to maintain Pell grants for undergraduates for two more years, through the 2013-2014 school year.

Before the deal, Pell funding had been set to drop in the 2012-2013 school year. That would have reversed a boost Mr. Obama had won in 2009 as part of the economic-stimulus program. It increased the maximum Pell grant by $819 per student, per year to $5,550, and it was renewed as part of an education plank of the health-care overhaul.

Mr. Obama views enhanced Pell funding as one of his signature achievements, and the administration pushed hard for it early on in the deficit-reduction negotiations.

The increase in Pell funding—and cut in the graduate-school subsidies—also was included in an earlier version of the bill House Speaker John Boehner put forth, angering some House conservatives who wondered why they were increasing spending for something when the bill was supposed to be about cutting.

"Some of the conservatives were thinking, ‘Man does this do what we think it does?’ " said Rep. Trent Franks (R., Ariz.). "There was some consternation there."

The topic was raised at a meeting of Republican House members during discussion of the bill. Mr. Franks said he opposes expansion of Pell grants because, in his view, they encourage colleges to raise their prices.

A Boehner spokesman said the provision was included because the bill was written to be a compromise. Still, the legislation won no Democratic votes when it passed the House, and it immediately died in the Senate.

But why Pell grants and not some other Democratic priority? Mr. Obama rarely, if ever, made a public pitch for this funding during the recent debt negotiations, whereas he talked about other spending programs and tax cuts repeatedly.

Officials in both parties explained that Pell grants fall under discretionary spending—the type that Congress must approve each year and that was facing a hard cap as part of the final measure. So unlike other administration proposals in other areas of the budget, any changes in Pell funding would have to be done here.

In addition, officials had to act by October to lock the Pell funding in place for next school year. Other issues on the White House priority list are expected to be debated again by the new congressional committee.


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