The FY 2016 Obama Budget: A Few Surprises

The Obama Administration released their $3.999 trillion budget proposal for Fiscal Year 2016, and the higher education portion of the budget was largely as expected. Some proposals, such as increasing research funding, providing a bonus pool of funds for colleges with high graduation rates, and reallocating the Supplemental Educational Opportunity Grant to be based on current financial need instead of an antiquated formula, were repeats from previous years. Others, such as the idea of tuition-free community college, had already been sketched out. And one controversial proposal—the plan to tax new 529 college savings plans—had already been nixed, but remained in the budget document due to a “printing deadline.”

But the budget proposal (the vast majority of which is dead on arrival in a GOP Congress thanks to differences in viewpoints and preferred budget levels) did have some surprising details. The three most interesting higher education-related details are below.

(1) “Universal” free community college isn’t exactly universal. Pages 59 and 60 of the education budget proposal noted that students with a family Adjusted Gross Income of over $200,000 would be ineligible for tuition-free community college. Although this detail was apparently decided before the program was announced, the Obama Administration for some reason chose to hide that detail from the public until Monday. As the picture shows below, only 2.7% of dependent community college students had family incomes above $200,000 in 2011-12 (data from the National Postsecondary Student Aid Study).

income

But in order to get family income, students have to file the FAFSA. Research by Lyle McKinney and Heather Novak suggests that 42% of low-income community college students didn’t file the FAFSA in 2007-08, meaning that something big needs to be done to get these students to file. Requiring the FAFSA also means that noncitizens typically would not qualify for free community college, something that is likely to upset advocates for “dreamer” students (but make many on the Right happy).

Additionally, as Susan Dynarski at the University of Michigan pointed out, the GPA requirements (a 2.5 instead of a 2.0) make a big difference. In 2011-12, 15.9% of Pell recipients had GPAs between a 2.0 and 2.49, meaning they would not qualify for free community college.

gpa

 

(2) Asset questions may be off the FAFSA. The budget document called for the following changes to the FAFSA, including the elimination of assets (thanks to Ben Miller at New America for the screenshot):

fafsa

 

Getting rid of assets won’t affect most families, as research by Susan Dynarski and Judith Scott-Clayton shows. But it does matter more to selective colleges, more of which might turn to additional financial aid forms like the CSS/PROFILE to get the information they want. Policymakers should take the benefits of FAFSA simplicity as well as the potential costs to students of additional forms into account.

(3) Mum’s the word on college ratings. After last year’s budget featured $10 million for the development of the Postsecondary Institution Ratings System (PIRS), this year’s budget had no mention. Inside Higher Ed reported that ratings will be developed using existing funds and using existing personnel. Will that slow down the development of ratings? Given the slow progress at this point, it’s hard to argue otherwise.

Finally, the budget document also contained details about the “true” default rate for student loans, using the life of the loan instead of the 3-year default window used for accountability purposes. The results aren’t pretty for undergraduate students, with default rates pushing 23% on undergraduate Stafford loans. But default rates for graduate loans hover around 6%-7%, which is roughly the interest rates many of these students face.

default

 

What are your thoughts on the President’s budget proposal for higher education? Please share them in the comments section.

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About Robert

I am an assistant professor of higher education at Seton Hall University. All opinions are my own.
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