House and Senate leaders have agreed to cut funding for the nation’s largest source of grants for college students to pay student loan contractors, according to legislation that would fund the federal government through next year and avert a shutdown.
Money appropriated for the Pell grant program this year would fall $303 million, or 1.3 percent, to $22.5 billion, according to a proposal first introduced over the summer by retiring Sen. Tom Harkin (D-Iowa). Most of those funds would instead be used to pay private contractors that collect borrowers’ monthly student loan payments. Harkin has defended the move as necessary.
The provision, which faced a flurry of criticism after it was revealed in a Huffington Post article published Saturday, was expected. Lawmakers are likely to pass the more than $1 trillion spending bill in the coming days. The government’s spending authority expires Thursday.
The Pell program has a budget surplus that is forecast to turn into a deficit in two years. Cuts to the program would likely lead college students to increase the amount they borrow, further driving up the nation’s $1.3 trillion stack of unpaid student loan bills.
Meant for low-income students, three of every four Pell recipients during the 2012-13 award year had household incomes of $30,000 or less, according to the Department of Education. Nearly 8.9 million students are forecast to receive on average $3,826 from the program this fiscal year, White House budget documents show.
The Department of Education’s student loan servicers – companies that counsel borrowers, set them up with repayment plans and collect their monthly checks – are set to reap the rewards from lawmakers’ cuts to Pell. They’ll get up to $721.7 million, an $8 million cut from last year, but a nearly $44 million increase compared with 2013.
this is so painful to read