Explore Congressional Budget Proposals' Impact on Student Aid

It’s that time of year again – budget season. In the last week or two, both the House of Representatives and the Senate have released and passed budget blueprints for the 2016 fiscal year.

While this may not seem remarkable, if you consider the last few years of continuing resolutions, fiscal cliffs and government shutdowns, the fact that the Senate passed their first budget in six years is pretty noteworthy. Here's what this means to current students and federal student loan borrowers:

Before any changes can take place, the House and the Senate will have to work out the differences between their two budget proposals. Those negotiations will likely begin after the two-week recess, which started this week.

The resulting budget resolution does not require President Barack Obama’s signature – more on that later – and therefore is not binding. But it does set a blueprint for the appropriations process over the coming year.

Both the House and Senate proposals contain reconciliation instructions, which require one or several Congressional committees to pass legislation to meet budgetary goals. This is where there is likely to be significant changes to federal aid programs if there were going to be any.

Education Changes Are on the Table

Both the House and Senate have stated goals to reduce and eventually eliminate the federal deficit over the next 10 years or so. Most of this is achieved through cuts in discretionary spending and an overhaul of entitlement programs, including higher education.

Both the House and Senate proposals, for example, would freeze the maximum Pell Grant award at $5,775 for the next 10 years. While the Pell program is currently in a surplus, a freeze could mean fewer grants available to students in future years.

The House also indicated that ending the in-school interest subsidy on Stafford loans, rolling back the expansion of the Pay As You Earn program and terminating the Public Service Loan Forgivenessprogram were on the table. Such cuts would save an estimated $60 billion.

While not explicit, the proposal also seeks to "streamline programs that provide aid to make them more effective," an indication that the House may seek to consolidate aid programs deemed duplicative and that serve the same constituencies.

New Amendments and Proposals

During the Senate’s 15-hour voting session last week, several amendments were passed related to higher education. Senator Richard Burr, R-N.C., offered an amendment to streamline the myriadincome-driven repayment options to either a 10-year or single income-based repayment option. The simplification of income-driven repayment options is an idea we also saw in the president's budget proposal, released in February, and in several Higher Education Reauthorization Act proposals.

Other amendments recommend allowing additional Pell Grant payments during an academic year and simplifying higher-education-related tax credits. A few other proposals, while not explicitly mentioned in either the House or Senate blueprints, may be up for grabs as the budget goes through that reconciliation process.

For example, the president’s budget proposal recommends capping the Public Service Loan Forgiveness program at the federal borrowing limit for independent undergraduate students, which is currently $57,500. It also suggests streamlining higher education tax credits and deductions to a single credit and/or deduction rather than the multiple options available now.

What This Means for Borrowers

Before Educational loans borrowers panic, it’s important to remember that some of these proposals have been on the agenda for years without gaining any traction. With that said, the climate is different this time around as the Republicans currently hold a large House majority while also leading the Senate. There is also a significant push to reduce the federal deficit – which is rarely good news for entitlement programs.

Still, don't panic. Historically, any changes made that affect borrowers’ eligibility for forgiveness, lower payment or deferment options grandfather in borrowers who are already eligible for those programs. This means that any changes made as a result of this or any other Congressional action will likely only affect future borrowers.

But this doesn't meant that if you are borrowing now you can rest easy and take the maximum allowed, assuming you’ll be eligible for forgiveness in the future. Even with the rules written as they are now, taking on debt assuming forgiveness later is always a terrible strategy. But borrowers in these programs now can almost certainly be confident that they won’t be taken away.

Source: (http://educationloanformba.tumblr.com/post/137544397215/explore-congressional-budget-proposals-impact-on)