Fiscal busget for 2010

The President's 2010 Budget makes a historic commitment to increasing college access and success by expanding financial aid while making it simpler, more reliable, and more efficient. Under the Budget, the Department of Education will administer over $129 billion in new grants, loans, and work-study assistance in 2010—a 32 percent increase over the amount available in 2008—to help more than 14 million students and their families pay for college.

More specifically, the request would establish a Pell Grant maximum of $5,550 for the 2010-11 academic year and then index the maximum grant to grow faster than inflation in future years (at a rate equal to the consumer price index plus 1 percentage point). The Budget would also make Pell Grant funding mandatory, rather than discretionary, to eliminate uncertainty and end the practice of "backfilling" billions of dollars in Pell shortfalls. These changes would result in a 2-year increase in funding for Pell Grants (from the 2008-09 school year to the 2010-11 school year) of $10.4 billion, or 57 percent. The number of recipients would rise by nearly 1.5 million, or 24 percent, over the same period.

The Budget also asks Congress to end entitlements for financial institutions that process Federal postsecondary student loans to students and parents. The Federal Family Education Loan (FFEL) program relies on excessive subsidies and no longer is capable of playing its historical role of raising private capital to help finance Federal student loan programs. As a result, FFEL needlessly costs taxpayers billions of dollars and subjects students to uncertainty because of turmoil in the financial markets. The request would address these problems by making all new loans through the direct lending program. Direct lending takes advantage of low-cost and stable sources of capital so students are ensured access to loans and provided high-quality servicing by using competitive, private-sector providers to process loans and payments. Using direct lending to originate and service all new postsecondary student loans would save an estimated $21 billion over 5 years, savings that would be reinvested in student aid through the expanded Pell Grant program.

In addition, the request proposes to expand and modernize the Perkins Loan program so that it would provide $6 billion a year in new loan volume—six times the current Perkins volume—for up to 2.7 million students at roughly 2,700 additional postsecondary education institutions. The loans would have the same low 5 percent interest rate and allowed loan amounts (both undergraduate and graduate) as in the current Perkins program. Institutional loan forgiveness costs on existing loans, currently supported by discretionary appropriations, would be fully funded from the Federal share of Perkins Loan collections. To make loans more broadly available and help finance the expanded Pell Grant, interest on the loans would accrue while students are in school. The Department would service Perkins Loans along with other Federal loans, with estimated overall savings totaling $3.2 billion over 5 years.

Finally, the proposed College Access and Completion Fund would invest $2.5 billion in mandatory funding over 5 years to build a Federal-State-local partnership to improve college success and completion, particularly for students from disadvantaged backgrounds. This initiative would provide flexible funding to States and national entities to help expand the knowledge base about what works in increasing college enrollment and graduation and disseminate these best practices.