More Resources President's Budget Request for 2008

Mr. Chairman and Members of the Committee:

I am pleased to appear before you today to present the President's fiscal year 2008 Budget request for postsecondary education. This request sharpens the Federal Government's focus on its key roles in higher education: broadening access, encouraging preparation, and enabling success for all Americans. The Budget would simplify student aid program structure, enhance efficiency, and increase the Federal investment in need-based student aid by over $20 billion over the next 5 years, with most of those funds supporting an unprecedented expansion of the vital Pell Grant program.

From 1997 until joining the Department late last year, I served as President of the Hispanic Scholarship Fund, a non-profit organization dedicated to helping needy students overcome the academic, social, and financial barriers to higher education. One of the best things about this job was the opportunity it gave me to talk to students and parents—more than 90,000 in the last 3 years alone. One of these discussions stands out for me now. At a high school in Georgia, I asked a crowded gymful of students to tell me the number one obstacle to college. Their answer won't surprise you: they all said, "money." The surprise came as we were leaving the gym. Parent after parent came up to us with the same question: "What about me? I need a postsecondary education to support my family. How do I start? How can I get in or re-connect?"

These kinds of comments really shouldn't be a surprise, a fact that was underscored for me during my service last year as a member of Secretary of Education Margaret Spellings' Commission on the Future of Higher Education. My colleagues and I looked closely at the demographics of higher education in this country. Thirty years ago, 9 out of 10 American college students were enrolled in school full-time, most at 4-year institutions. Today, 7 out of 10 American college students are "non-traditional" in some way: most students work full-time, have children, or do not have a high school diploma; many attend local community colleges or pursue their education through the internet. These trends will only accelerate in the years to come. By 2015, the college-age population will have grown by 4.3 million, or 16 percent; 75 percent of this growth will be among racial and ethnic minorities.

As demographics change, financial barriers continue to grow. The Commission's 2006 report, A Test of Leadership, highlighted that for the poorer half of American families, the percentage of out-of-pocket family income required to pay for a public 2-year and 4-year college education increased significantly over the past 15 years. For the poorest quarter of the population, the percent of a family's income needed to attend a public 4-year college increased to 47 percent in 2006, from 41 percent in 1992. By contrast, families earning $75,000 or more a year in 2006 spent 18 percent of their annual income to attend a public 4-year college.

After assessing the state of American postsecondary education, the Commission recommended "that the U.S. commit to an unprecedented effort to expand higher education access and success by improving student preparation and persistence, addressing nonacademic barriers and providing significant increases in aid to low-income students." The 2008 Budget proposed by the Administration is a downpayment on making that recommendation a reality.

Making College Affordable Through Student Financial Aid

The fiscal year 2008 President's Budget proposes substantial new investments in need-based grants, targeting limited Federal resources to the neediest students, those most affected by tuition increases in the last 15 years. The Administration also strongly supports both Federal student loan programs; the competition between Federal Family Education Loans and Direct Student Loans encourages innovation and efficiency and offers invaluable flexibility to meet student and institutional needs. To address the Commission's call for greater simplicity and efficiency in the student aid programs, and to help pay for new investments in Pell Grants and Academic Competitiveness Grants, the Budget would reduce some subsidies to lenders and eliminate duplicative programs to redirect resources toward higher grant and loan aid for America's most needy students.

The Administration supports a three-pronged approach: 1) increased Federal investment in the Pell Grant program; 2) larger Academic Competitiveness Grants; and 3) more aggressive early notification efforts. These three prongs must work together seamlessly, for without one, the other two cannot succeed. Higher grant amounts are no help to students who lack the skills necessary to succeed in college; before needy students seek these skills, they must believe college is a realistic alternative they will be able to afford. Once these students and their families are convinced that college is within their reach financially, they will push States and school districts to invest in broadening the availability of challenging college preparatory coursework. For these proposals to be effective, institutions must also do their part to keep tuition increases moderate.

Greater Investment in Pell Grants

Over the next 5 years the President is proposing to invest an additional $21.9 billion in student aid funding, focused entirely on the neediest students. The Budget includes $19.8 billion over 5 years to increase the maximum Pell Grant, first to $4,600 in 2008, an increase of $290 over the 2007 level of $4,310 set by the year-long continuing resolution, and then by an additional $200 annually up to $5,400 in 2012. In 2008 nearly 5.5 million students will receive Pell Grants. The neediest students will have 75 percent of a typical public 4-year tuition and fees paid for if they qualify for the maximum grant, 42 percent if they qualify for the average grant.

Because early awareness efforts will be more effective if students know of the future availability of grant funds, the President is proposing to fund the grant increase from mandatory funds. The fiscal year 2008 Budget requests $13.2 billion in discretionary funds to support a $4,050 maximum grant and $2.2 billion in mandatory funds to increase the 2008 maximum grant to $4,600.

While Pell Grants have been very successful in expanding access to postsecondary education for low-income students, the Administration plans to work with Congress to increase the program's effectiveness and improve its overall operation. Accordingly, the 2008 Budget includes the following proposals:

• Pell Grants would be made available year-round at eligible 2- and 4-year degree granting institutions, giving students a more convenient option for accelerating their studies and promptly completing their education.

• As a further incentive for timely completion, and to eliminate an area of potential abuse, Pell Grant eligibility would be limited to the equivalent of 16 semesters.

• The Administration proposes to eliminate the Pell Grant award rule related to tuition sensitivity. This rule limits aid awards to needy students attending low-cost institutions. The Pell Grant Equity Act, which passed the House last month, would implement this proposal for the 2007-2008 academic year. I want to commend Representatives Miller and McKeon for sponsoring this important legislation.

Expanding Academic Competitiveness Grants

The Budget proposes an additional $1 billion investment over 5 years for Academic Competitiveness Grants. This mandatory program, new in 2006, currently provides needy freshmen who have successfully completed a rigorous high school curriculum with a maximum grant of $750; sophomores who met the first-year eligibility requirement and maintained at least a 3.0 GPA could receive up to $1,300. Increasing these amounts to $1,125 and $1,950, respectively, will provide a real incentive to needy students to plan for and excel in higher education. These substantially higher awards will encourage States and local school districts to raise their standards and improve the quality of their course offerings. They will also encourage students to graduate on time and complete the challenging classes necessary to ensure postsecondary success. In 2008, a combination of increased Academic Competitiveness Grants awards and the maximum Pell Grant would cover all tuition and fees and provide up to $4,000 in living expenses for community college students; sophomores at an average 4-year public institution would receive enough to fund all tuition and fees.

Simplifying Program Structure

The Commission on the Future of Higher Education emphasized that the multiple Federal student aid programs overlap in intent and cause confusion for students and their parents. To streamline the student aid process, the Budget proposes to eliminate three redundant or poorly structured programs—Supplemental Educational Opportunity Grants (SEOG), Perkins Loans, and Leveraging Educational Assistance Partnerships (LEAP)—and focus resources on programs like Pell Grants that are better targeted on the neediest students.

Funds in the SEOG program are provided to institutions through an outdated allocation formula that provides fewer resources to public institutions of higher education, which a larger percentage of low-income students attend. In 2005, institutions serving nearly 70 percent of Pell Grant recipients received 46 percent of the SEOG funds. In addition, SEOG awards are not optimally allocated based on a student's financial need. Though institutions are required by statute to give priority in awarding SEOG funds to Pell-eligible students, there is no requirement that the size of these awards be tied to the need of the student. Institutions are given the discretion to provide larger SEOG awards to students who do not exhibit the highest need. Lastly, payments to institutions for SEOG administrative costs are 25 times higher than in the more efficient Pell Grant program.

Perkins Loans are offered by institutions with a long history of program participation, rather than by institutions that enroll the largest share of financially needy students. With the number of Perkins Loan institutions declining from 3,338 in academic year 1983-84 to 1,315 in 2004-05 and with less than 3 percent of students enrolled in postsecondary education receiving Perkins Loans each year, the Administration believes the Federal share of funds held by this small group of institutions would be better invested in higher loan limits for the FFEL and Direct Loan programs, for which students are eligible regardless of the institution they attend.

The LEAP program has accomplished its objective of stimulating States to establish need-based postsecondary student grant programs. State grant levels have expanded greatly over the years, and most States significantly exceed the statutory matching requirements. State matching funds in academic year 2005-2006 totaled $1.19 billion, far in excess of the required dollar-for-dollar and 2-for-1 statutory matches.

Promoting Program Efficiency

In addition to these proposals, the Budget also proposes a number of initiatives to increase efficiency and reduce subsidies in the student loan programs. These proposals include reduced interest subsidies for lenders, greater risk-sharing to encourage default prevention activities, increased lender fees on new consolidation loans, and reduced or restructured administrative or debt collection charges for guaranty agencies. Taken together, these proposals would redirect nearly $19 billion in Federal investments to need-based grant aid over fiscal years 2008-2012.

Higher Education Programs

The Administration's request for fiscal year 2008 includes $1.8 billion for programs in the Higher Education account. The request complements the Administration's commitment to elementary and secondary education by ensuring that quality postsecondary education is available to every American.

Currently, low-income and minority students continue to be underrepresented in higher education. The Administration requests $1.1 billion for the TRIO and GEAR UP programs. These programs provide early intervention services to prepare over 1.5 million low-income students to enter and succeed in college. The request also includes $497.7 million for programs designed to strengthen institutions that enroll a large proportion of minority and disadvantaged students.

An essential component of national security in the post-9/11 world is American expertise in world affairs, economies, and foreign languages. The Administration requests $105.8 million for the International Education and Foreign Language Studies programs focused on increasing the national capacity in foreign languages and international studies. The request also includes $24 million for a new program, Advancing America Through Foreign Language Partnerships, to establish fully-articulated language programs from kindergarten through the postsecondary education.

To increase innovation and implement the recommendations of the Secretary's Commission on the Future of Higher Education, the Administration requests $22 million to support the Fund for the Improvement of Postsecondary Education—FIPSE. FIPSE grants support exemplary, locally developed projects that are models for innovative reform and improvement in postsecondary education. The request also includes $39.9 million for the Graduate Assistance in Areas of National Need—GAANN—and Javits Fellowship programs, to provide approximately 928 merit-based fellowships for graduate students studying in areas of national need, as well as the arts, humanities, and social sciences.

In order to increase support for areas of greatest need while remaining within the President's funding limit, we are proposing the elimination of a number of small programs that can be supported under other Federal, State, or local programs or for which there is no demonstrated need.

As my colleague Director Whitehurst will discuss in more detail, the Budget also includes $25 million for a pilot program to support a consortium of states to develop and implement a student-based information system. The funds would be allocated through a competitive grant program and tap the existing expertise among states that have already developed state-wide student record systems.

Conclusion

As never before, America's standing in the world is a direct function of our ability to provide our citizens with the skills they need to compete and succeed. I want to leave you with a sobering statistic: while the U.S. leads the world in the percentage of its population aged 55 to 64 with college degrees, we drop to eighth among those aged 25 to 34. In fact, Americans in the latter age group actually have a lower percentage of degree attainment than their immediate forebears aged 35 to 54, something that has never happened before in our Nation's history. If America and its people are to succeed in the coming decades, it's up to all of us to work together to reverse this trend. I believe the proposals in our 2008 Budget, by broadening access for our neediest students, encouraging better preparation in high school, and targeting investments on the most effective programs, point the way forward to success.

My colleagues and I will be happy to respond to any questions you may have.

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