Obama Ditches Students in New Budget

President Barack Obama's budget proposal for the 2012 fiscal year cuts two popular federal programs that make it possible for many Americans to receive higher education: summer Pell Grants and loan interest subsidies for graduate students. The elimination of either program may make it more difficult for low-income Americans, especially the 800,000 students throughout the country who currently receive summer Pell Grants, to pay their tuition.

The Federal Pell Grant program only began giving extra grants for summer classes last year. Even though the program was popular, the Obama administration says it did not boost graduation rates. But traditional Pell Grants have been proven to raise graduation rates significantly. A 2004 study by Eric Bettinger showed that students were 6.4 percent less likely to drop out with every $1,000 increase in their Pell Grants. By eliminating the summer program, the government will be able to maintain the maximum Pell Grant for the regular school year at $5,500, which most people feel is a fair trade.

"We recognize that some tough choices had to be made," read a statement by the Institute for Higher Education Policy issued shortly after the budget was announced. "But [we] are grateful for the commitment to preserving educational opportunity for millions of low-income students by not compromising the Pell Grant maximum award of $5,550."

Still, the elimination of summer Pell Grants will affect many students. The program was surprisingly popular. One-tenth of all students receiving Pell Grants get the extra money for summer classes. For them, the program's termination could cause difficulties.

"The typical college student today is not the traditional college student who finishes in four years," wrote David Leonhardt, an economics columnist for the New York Times. "Many are working at the same time and need to organize their classes around their work schedules. For them, summer classes can make a big difference."

The loan interest subsidies for graduate students will also be eliminated in order to uphold the maximum Pell Grant. The subsidies keep interest on students' loans from accumulating until after they graduate. If the program is terminated, interest will begin building up while graduate students are still in school.

Many questioned whether cutting this program would have a negative effect on student enrollment, but the Obama administration rejected this idea.
"It will increase the burden for paying back the loans," White House Budget Director Jacob Lew said February 13 on CNN's "State of the Union." "But it will not reduce access to education."

The public reaction has been surprisingly accepting of the Obama administration's budget cuts - even organizations devoted to education policy have accepted the elimination of these programs as inevitable and necessary. Kevin Carey, a policy director at Education Sector, a D.C. think tank, pointed out that summer Pell Grants would cost an estimated $5 billion by 2013 if the program continued - more than the entire Pell Grant program cost 20 years ago. Were the Pell Grant program to continue with no budget cuts at all, the cost would be more than $40 billion, which is about 10 percent of the domestic budget.

"Even those with an expansive attitude towards federal education spending - hey, that's me - need to respect the challenges of balancing revenues and expenditures," wrote Carey on Education Sector's blog, "The Quick & the Ed."

Perhaps the biggest complaints about Obama's budget cuts have come from Republicans who think the president isn't cutting enough. House Republicans have proposed even sharper cuts, not for 2012, but for the remainder of the 2011 fiscal year. If they have it their way, the maximum Pell Grant will be cut by $800. But President Obama has vowed to veto the Republicans' spending plan for this year, on the grounds that it is too extreme.

Still, the Obama administration admits it had to make "tough choices" when preparing the 2012 budget. While few are complaining about the cuts to higher education, it's still not an ideal situation.

"We really do have to do what every American family does," Lew said. "We have to start living within our means."