Trump’s Higher Education Budget: The Good, The Bad and the Ugly

NationalPolicy
Posted By Derek Johnson on May 25, 2017 at 10:17 am
Trump’s Higher Education Budget: The Good, The Bad and the Ugly

The reaction to the release of President Trump’s recommended spending plan, including the higher education budget, has been as swift and harsh as some of the cuts it imposes. In order to free up $52 billion in increased military spending, the administration was forced to slash domestic discretionary programs up and down the government. Even in a Congress controlled by the president’s own party, multiple Republican senators went out of their way to use the term “dead on arrival” when describing the spending plan’s prospects for passage in its current form.

The proposals and funding decisions that touch on education are only a small part of the overall budget, but serve as a micro example of the larger macro problem that makes passing the spending package as currently comprised such a challenge. In essence, the budget spreads its $9.2 billion in cuts over so many different programs, it has had the effect of uniting an army of opposition groups who all benefit if the plan goes down in flames.

In the realm of the higher education budget, the spending plan eliminates programs such as subsidized student loans and loan forgiveness for graduates who work in public service jobs, reduces funding for the work study program by one half, cuts spending on Career and Technical Education by 15 percent and lets a provision that ties Pell Grant funding to inflation expire, which will result in lower overall dollars being spent for the program. All of these programs have their own constituencies, special interests and most importantly, champions in Congress.

“If you’re fighting a budget war on a thousand fronts, it makes it [very easy] for someone who is looking to prevent change to prevent change,” says Patrick Riccards, chief strategy officer for the Woodrow Wilson Foundation.

For its part, the administration has framed the higher education budget cuts as a value judgment between programs that have been proven through research to be effective and those that have not. “If taxpayer money were limitless, we wouldn’t need a budget at all. This budget puts an emphasis on programs that have proven to help students,” Secretary of Education Betsy DeVos said during testimony to the House on Wednesday.

With that, GoodCall® dove into the details of the president’s funding proposals and spoke to experts across the ideological spectrum about what this higher education budget might mean for the nation’s college students if enacted.

The Good for the higher education budget

One thing everyone seems to agree on is that the current patchwork arrangement of income driven repayment programs – known as IDR – is a confusing mess. The practice of tying a graduate’s monthly student loan payments to a percentage of their discretionary income has become increasingly popular over the past decade. As the idea started gaining more traction and enrollment figures continued to rise, policymakers kept adding new and slightly different versions of the program. This made it a nightmare for students (and journalists who cover IDR) to figure out which plans they were eligible for and which one would be the most financially beneficial.

This chart shows the variety of income driven repayment programs.

The many IDR programs currently available. Source: U.S. Department of Education

The Trump higher education budget radically simplifies and streamlines IDR, creating one set of rules for undergraduates and another for graduate students. It reduces the repayment time period for undergraduates from 20 or 25 years to 15 years, while increasing the repayment period for graduate students to 30 years. Miranda Marquit, senior writer for the loan consolidation and financial advice company Student Loan Hero, called the Trump budget “a bloodbath for higher education” but acknowledged that a more straightforward IDR system would be beneficial for many student borrowers.

“Honestly the proposal to … have one plan, I actually kind of like that. It simplifies things,” Marquit says. “The 15-year forgiveness for undergrad loans is also a nice touch.”

She did take issue with the decision to increase the repayment period for graduate students, which, when combined with the elimination of the Public Service Loan Forgiveness program, would make IDR a much less attractive option for students pursuing a master’s degree or Ph.D.

“One of the biggest benefits of income driven repayment is the way you could use it with public loan forgiveness, where you could be on IDR for 10 years while working at a nonprofit or in an underserved community, and after 10 years, you could have the remaining balance forgiven,” Marquit says.

To others, that change to the higher education budget is a feature, not a bug. Higher education researchers at the right-leaning American Enterprise Institute have been arguing for years that the current IDR system is an unnecessary boon to graduate students. Research analyst Preston Cooper said it doesn’t make sense for the federal government to spend so much on subsidies for graduate students, many who go on to secure high-paying jobs in the private and public sector after graduating.

“I think it’s a pretty good reform because right now graduate students are getting huge, huge benefits from this program, and those are the students that are best off,” Cooper says. “That’s the highest earning category of students and pretty low on the list of people we want to give taxpayer money.”

The higher education budget also largely spares Historically Black Colleges and Universities (HBCU) from funding reductions. In the context of the many cuts facing other programs, that could be construed as a victory. Rep. Barbara Lee, D-MO, did complain in a House hearing Wednesday with DeVos that HBCU proponents had requested a slight increase in funding and that the administration did not include $7.5 million in funding for a master’s degree program geared toward HBCUs that was inserted into the omnibus spending bill passed in April.

The Bad

The proposed elimination of the Public Service Loan Forgiveness program has received a mix of criticism and praise, depending on whom you ask. The program was started under the George W. Bush administration in 2007 and offers loan forgiveness after 10 years to graduates who enter into public service jobs and stay current on their loan payments.

Beneficiaries in the first cohort were set to see their remaining loan balances forgiven starting this year. There was initially some confusion about whether or not those already in the program would be grandfathered in. Details in Tuesday’s budget release confirmed that the change would only apply to new graduates.

Riccards criticized the argument made by administration officials that programs such as Public Service Loan Forgiveness were being cut from the higher education budget because they haven’t been proven effective. Apart from the fact that no one has reached the 10-year mark to begin taking advantage of loan forgiveness, Riccards says there is no research or evidence showing the program isn’t effective either.

“The irony in the OMB’s position is that if you look historically at spending in the education space, we don’t invest that many dollars into research. We certainly don’t invest that many dollars into research and evaluation of programs at the federal level,” Riccards says.

Cooper criticized the PSLF program for discriminating against graduates who went into similar fields, such as health care, depending on whether the organization was for-profit or nonprofit. He also questioned whether there were better ways to encourage graduates to go into public service than forgiving their loans.

“If you want people to work in government, why not just raise the pay in government instead of through these back end programs? It’s a very inefficient way to subsidize things that we may not want to subsidize,” Cooper says.

Meanwhile, even though most of the changes made to income driven repayment make it easier for undergraduates to afford their monthly loan payments, the administration did propose increasing the cap from 10 percent of a graduate’s income to 12.5 percent. Though that doesn’t sound like much, Marquit said it could disproportionately affect low-income graduates.

“The thing that might make [life] harder is the 12.5 percent cap. Right now you can find most plans with a 10 percent payment cap, and that can make the difference between being able to afford your monthly payments and not,” she says.

The Ugly

The items likely to encounter the fiercest resistance are the numerous cuts and phase outs of programs primarily designed to assist low-income students. That includes the elimination of subsidized loans for undergraduates while they are in school, major cuts to the federal Work Study program, and a phase out of the $700 million Perkins Loan program geared towards undergraduate and graduate students of “exceptional need.”

Many higher education advocates have pointed out that these changes will make it more difficult for poor and middle class Americans to afford a college education.

“President Trump has said that student debt should not be an ‘albatross’ around students’ necks, yet the almost $150 billion in cuts to grant aid, work study, and student loans in this budget would force millions of students to take on even more debt and make it harder for many to repay,” said Lauren Asher, president of The Institute for College Access and Success, in a statement to the press.

Perhaps the most surprising change was a 15 percent cut in funding for Career and Technical Education programs. Support for CTE was a big part of President Trump’s campaign and Vice President Mike Pence’s record as governor of Indiana. The programs mostly deal with certification and training for positions in growth fields like health care and information technology.

“I found this kind of surprising just because one of the biggest job shortages that we have [is for] highly skilled, non-routine, blue-collar jobs that CTE provides training for,” Marquit says, later adding: “These are opportunities offered to more working class people and can provide a pathway to the middle class without a traditional four-year degree.”

Both Riccards and Cooper thought the cuts could presage an increased role for states and the private sector. However Riccards still called the cuts “disappointing” because the current need for career and technical education is greater than ever.

“Looking at his campaign, at the stated goals of the Trump administration, one could say that a deeper investment in CTE would [have been] a huge win. That’s really where the future is.”

That argument was echoed in a statement released last week by the Association of Career and Technical Education:

“This draconian cut to federal funding for CTE is an extremely disappointing departure for a President who just last month claimed his administration was ‘working to ensure our workers are trained for the skilled technical jobs that will, in the future, power our country.’ This budget would also directly contradict a recent claim by Secretary DeVos that ‘this administration is committed to supporting and highlighting career and technical education … ’”

“Cuts to CTE funding would ignore employers’ consistent warnings of significant workforce shortages that are negatively impacting their businesses. Over the next several years, millions of high-wage, high-skill careers will go unfilled because the labor market does not have enough skilled workers to meet the demands of today’s economy.”

 

Derek Johnson
Derek Johnson is a writer, journalist and editor based out of Virginia. He received a Master’s degree in Public Policy at George Mason University and a bachelor’s degree in Communication from Hofstra University.

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