New Threat to GI Bill: A Limit on Tuition Increases

The promise of a GI Bill that fully pays for a four-year college education could be eroding.
The Joint Select Committee on Deficit Reduction, the 12-member bipartisan panel empowered to come up with $1.2 trillion in cuts in federal spending, has before it a plan to cut $7 billion from veterans education benefits over 10 years by capping the annual increase in tuition rates at 3 percent.

The Veterans of Foreign Wars is stridently opposed to such a change, Executive Director Robert Wallace wrote in an Oct. 21 letter to the committee: “Your colleagues in the House and Senate both recognized at the time of [the Post-9/11 GI Bill’s] passing that this investment in our nation’s battlefield leaders would create a new ‘Greatest Generation’ to help our nation recover from its current economic woes. Now, only two years into the fledgling program, this benefit is on the chopping block while many of those eligible cannot utilize it, as they continue to defend our nation.”

The Post-9/11 GI Bill, which took effect in 2009, is the most generous education benefit since World War II. It’s also expensive. The Veterans Affairs Department has paid $11 billion in benefits, and there is no limit on how much more could be spent as Iraq and Afghanistan veterans leave the service and enter a poor job market that makes attending college more attractive.

With its promise of paying tuition and fees, a living stipend, book allowance and tutorial assistance, the GI Bill became even more attractive Oct. 1 when it was expanded to cover vocational and technical schools, and living stipends were extended to students getting their education through distance learning.

The high cost makes it a target when lawmakers are worried about saving other core veterans programs, such as health care for the disabled.

Modeled after similar limits temporarily applied to veterans education benefits during previous cutbacks, the tuition cap is suggested by leaders of the House and Senate Veterans’ Affairs committees as one of several modest cuts in benefits and programs that is preferable to the across-the-board cuts that might occur if the deficit panel, known as the “supercommittee,” fails to achieve its savings target.

The GI Bill cap is mentioned, without specifics, in an attachment to an Oct. 14 letter from the veterans committees to the supercommittee. It mentions only that the average annual increase in college tuition is 6 percent and that “slowing the growth” would result in savings.

However, the $7 billion savings estimate calculated by the nonpartisan Congressional Budget Office is based on a rough concept that would allow a maximum 3 percent annual increase in tuition reimbursement for new students, while allowing existing students to receive a full, uncapped rate increase as long as they do not change schools.

The cap would apply to tuition and fees at public and private schools, but not to the living stipend based on the military’s basic housing allowance for the location of a school’s main campus.

The effect would be uneven. The College Board reports tuition has increased an average of 6 percent a year over 10 years. For the 2010-11 school year, average tuition increased 4.5 percent at private colleges and universities and 7.9 percent at public colleges and universities.

That does not mean a public school student would be hurt more than a private school student by the cap, because tuition generally is higher at private schools.

Average tuition at four-year public schools is $7,605. Under the proposal, if tuition increases 7.9 percent but the GI Bill tuition pay is capped at 3 percent, a student would be on the hook to pay $373 out of pocket to the school.

Average private school tuition is $27,300 a year. If private school tuition increased 4.5 percent but the GI Bill was capped at 3 percent, a student would be left to pay $409.

Making up the shortfall

There could be ways to offset those unpaid expenses, according to congressional aides who described what they called a “concept” on the condition of not being identified.
In some cases, students could qualify for other federal student aid, such as Pell Grants, or some could qualify for Yellow Ribbon Program benefits where a school and VA agree to each make matching contributions to cover tuition costs not covered by the GI Bill, aides said.

Students also could use their living stipend, which would not be capped under the proposal, to pay the difference. This would mean they would have less money for living expenses.
Some students would not be hurt at all because tuition at their school may not increase by more than 3 percent a year.

Caps on benefits have been used before, and even when they start small, their effects can build over time. For example, caps on military pay raises that began in the Reagan administration led by 1993 to a 13.5 percent gap between military and private-sector pay. Caps places on military housing allowances in the 1980s and 1990s resulted, over time, in service members being required, on average, to pay almost 19 percent of the cost of off-base housing out of their own pockets in 2002.

Past limits on GI Bill benefits have eroded the value of benefits. For example, the Montgomery GI Bill, which still exists, did not keep pace with rising tuition costs because annual increases were linked to the cost-of-living adjustment in disability compensation, which averages 3 percent a year, while college tuition increased by an average of 6 percent a year.


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