Comments on the Trump Higher Education Budget Proposal

The Trump administration released its first full budget proposal for Fiscal Year 2018 today, and it is safe to say that it represents a sharp break from the Obama administration’s budget proposals. The proposed discretionary budget for the Department of Education is about $69 billion, $10 billion less than the Fiscal Year 2017 budget. Below, I offer brief comments on three of the key higher education proposals within the budget, as well as my take on whether the proposals are likely to be enacted in some form by a Republican-controlled Congress that seems fairly skeptical of the Trump administration’s higher education policy ideas.

Public Service Loan Forgiveness would no longer be available for new borrowers. Public Service Loan Forgiveness (PSLF) was first made available in 2007 in an effort to encourage individuals to work in lower-paying nonprofit or government jobs. This plan allows students enrolled in income-driven repayment plans who annually certified their income and employment status to have any remaining balances forgiven after ten years of payments of 10% of discretionary income. However, the plan has been criticized due to its likely high price tag to taxpayers and because it provides far larger subsidies to graduate students than undergraduate students.

The Trump administration’s budget proposal would end PSLF for new borrowers as of July 1, 2018—and require all people currently on PSLF to maintain continuous enrollment in the program to remain eligible. This is likely to be a difficult hurdle for many people to clear, as a large number of students have been tripped up by annual recertification in the past. I’m glad to see that the Trump administration didn’t completely end PSLF for current students (as people reasonably relied on the program to make important life choices), but otherwise saving PSLF in the current form isn’t at the top of my priority list because of how most of the subsidy goes to reasonably well-off people with graduate degrees instead of low-paid individuals with a bachelor’s degree in early childhood education.

Prognosis of happening: Low to medium. This will generate howls of outrage in The New York Times and The Washington Post from groups such as the American Bar Association and the National Education Association, but there is a reasonable argument for at least curtailing the amount of money that can be forgiven under PSLF. A full-fledged ending of the program may not happen, but some changes are quite possible as quite a few members of Congress are upset with rising costs of loan forgiveness programs.

Subsidized loans for undergraduates would be eliminated, and income-driven loan repayment periods would change. Undergraduate students can qualify for between $3,500 and $5,500 per year in subsidized student loans (meaning interest is not charged while they are in school), with the remainder of their federal loans being unsubsidized (with interest accumulating immediately). The Trump administration would end subsidized loans, with the likely rationale that the interest subsidy is not an efficient use of resources (something that is hard to empirically confirm or deny, but is quite plausible).

The federal government currently offers students a menu of income-driven loan repayment options, and the Trump administration proposed to simplify these into one option.  Undergraduates would pay up to 12.5% of the income over 15 years (from 10% over 20 years for the most popular current plan), while grad students would pay up to 12.5% for 30 years. Undergraduate students probably benefit from this change, while graduate students decidedly do not. This plan hits master’s degree programs hard, as any graduate debt would either trigger a 30-year repayment period for a potentially small amount of additional debt or push people back into a standard (non-income-driven) plan.

Prognosis of happening: Medium. There has been a great deal of support for streamlining income-driven repayment plans, but the much less-generous terms for graduate students (along with ending PSLF) would significantly affect graduate student enrollment. This will mobilize the higher education community against the proposal, particularly as many four-year colleges are seeking to grow graduate enrollment as a new revenue source. But potentially moving to a 20-year repayment period for graduate students or tying repayment length to loan debt are more politically feasible. The elimination of subsidized loans for undergraduates hits low-income students, but a more generous income-driven repayment program mainly offsets that and makes that change more realistic.

Federal work-study funds would be cut in half and the Supplemental Educational Opportunity Grant would be eliminated. The federal government provides funds for these two programs to individual colleges instead of directly to students, and colleges are required to provide matching funds. The SEOG is an additional grant available to needy undergraduates at participating colleges, while federal work-study funds can go to undergraduate or graduate students with financial need. Together, these programs provide about $1.7 billion of funding each year, with funds disproportionately going to students at selective and expensive colleges due to an antiquated funding formula. Rather than fixing the formula, the Trump administration proposed to get rid of SEOG (as being duplicative of Pell) and halve work-study funding.

Prognosis of happening: Slim to none. Because funds disproportionately go to wealthier colleges (and go to colleges instead of students), the lobbying backlash against cutting these programs will be intense. (There is also research evidence showing that work-study funds do benefit students, which is important to note as well.) Congressional Republicans are likely to give up on changing these two programs in an effort to focus on higher-stakes changes to student loan programs.

In summary, the Trump administration is proposing some substantial changes to how students and colleges are funded. But don’t necessarily expect these changes to be implemented as proposed, even if there are plenty of concerns among conservatives about the price tag and inefficient targeting of current federal financial aid programs. It will be crucial to see the budget bill that will go up for a vote in the House of Representatives, as that is more likely to be passed into law than the president’s proposed budget.

How Should State Higher Education Funding Effort Be Measured?

The question of whether states adequately fund public higher education has been a common discussion over the last few decades—and the typical answer from the higher education community is a resounding “No.” This is evident in two recent pieces that have gotten a lot of attention in recent weeks.

The first piece is a chart put out by the venerable Tom Mortensen at the Pell Institute that shows that higher education funding effort (as measured by appropriations per $1,000 in state personal income) has fallen to 1966 levels, which was then picked up by the Washington Post with the breathless headline, “How quickly will states get to zero in funding for higher education?” (The answer—based on trendlines—no later than 2050.) The second piece is from Demos and claims that state funding cuts are responsible for between 78% and 79%1 of the increase in tuition at public universities between 2001 and 2011.

Meanwhile, state higher education appropriations are actually up over the last five fiscal years, according to the annual Grapevine survey of states. In Fiscal Year 2010 (during the recession), state funding was approximately $73.9 billion, falling slightly to $72.5 billion by FY 2013. But the last two fiscal years have been better to states, and higher education appropriations have risen to nearly $81 billion. Higher education has traditionally served as a balancing wheel for state budgets, facing big cuts in tough times and getting at least some increases in good times. However, this survey is not adjusted for inflation, making funding increases look slightly larger than they actually are.

So far, I’ve alluded to four different ways to measure state higher education funding effort:

(1) Total funding, not adjusted for inflation (the measure state legislatures often prefer to discuss).

(2) Total funding, adjusted for inflation.

(3) Per-full time equivalent student funding, adjusted for inflation (the most common measure used in the research community).

(4) Funding “effort” per $1,000 in state income (a measure popular with education advocates).

So which measure is the right measure? State legislatures tend not to care about inflation-adjusted or per-student metrics because their revenue streams (primarily taxes) don’t necessarily increase alongside inflation or population growth. Additionally, enrollment for the next year or two can be difficult to accurately predict when budgets are being made, so a perfect per-FTE funding ratio is virtually impossible. But on the other hand, colleges have to make state funding work to educate an often-growing number of students, so the call for the maintenance of funding ratios makes perfect sense.

I raise these points because policymakers and education advocates often seem to talk past each other in terms of what funding effort for higher education should look like. It’s important that both sides understand where the other is coming from in terms of their definition in order to work to find common ground. And I’d love to hear your preferred method of defining ‘appropriate’ funding effort, as well as why you chose that method.

———-

1 I question the exact percentage here, as it’s the result of a correlational study. To claim causality (as they do in Table 6), the author needs to establish causality—some way to separate the effects of dropping per-student state support from other confounding factors (such as changing preferences toward research). This can be done by using panel regression techniques to essentially compare states with big funding drops to those without, after controlling for other factors that would be affecting higher education across states. But it’s hard to imagine a situation in which per-student state funding cuts aren’t responsible for at least some of the tuition increases over the last decade.

The FY 2016 Obama Budget: A Few Surprises

The Obama Administration released their $3.999 trillion budget proposal for Fiscal Year 2016, and the higher education portion of the budget was largely as expected. Some proposals, such as increasing research funding, providing a bonus pool of funds for colleges with high graduation rates, and reallocating the Supplemental Educational Opportunity Grant to be based on current financial need instead of an antiquated formula, were repeats from previous years. Others, such as the idea of tuition-free community college, had already been sketched out. And one controversial proposal—the plan to tax new 529 college savings plans—had already been nixed, but remained in the budget document due to a “printing deadline.”

But the budget proposal (the vast majority of which is dead on arrival in a GOP Congress thanks to differences in viewpoints and preferred budget levels) did have some surprising details. The three most interesting higher education-related details are below.

(1) “Universal” free community college isn’t exactly universal. Pages 59 and 60 of the education budget proposal noted that students with a family Adjusted Gross Income of over $200,000 would be ineligible for tuition-free community college. Although this detail was apparently decided before the program was announced, the Obama Administration for some reason chose to hide that detail from the public until Monday. As the picture shows below, only 2.7% of dependent community college students had family incomes above $200,000 in 2011-12 (data from the National Postsecondary Student Aid Study).

income

But in order to get family income, students have to file the FAFSA. Research by Lyle McKinney and Heather Novak suggests that 42% of low-income community college students didn’t file the FAFSA in 2007-08, meaning that something big needs to be done to get these students to file. Requiring the FAFSA also means that noncitizens typically would not qualify for free community college, something that is likely to upset advocates for “dreamer” students (but make many on the Right happy).

Additionally, as Susan Dynarski at the University of Michigan pointed out, the GPA requirements (a 2.5 instead of a 2.0) make a big difference. In 2011-12, 15.9% of Pell recipients had GPAs between a 2.0 and 2.49, meaning they would not qualify for free community college.

gpa

 

(2) Asset questions may be off the FAFSA. The budget document called for the following changes to the FAFSA, including the elimination of assets (thanks to Ben Miller at New America for the screenshot):

fafsa

 

Getting rid of assets won’t affect most families, as research by Susan Dynarski and Judith Scott-Clayton shows. But it does matter more to selective colleges, more of which might turn to additional financial aid forms like the CSS/PROFILE to get the information they want. Policymakers should take the benefits of FAFSA simplicity as well as the potential costs to students of additional forms into account.

(3) Mum’s the word on college ratings. After last year’s budget featured $10 million for the development of the Postsecondary Institution Ratings System (PIRS), this year’s budget had no mention. Inside Higher Ed reported that ratings will be developed using existing funds and using existing personnel. Will that slow down the development of ratings? Given the slow progress at this point, it’s hard to argue otherwise.

Finally, the budget document also contained details about the “true” default rate for student loans, using the life of the loan instead of the 3-year default window used for accountability purposes. The results aren’t pretty for undergraduate students, with default rates pushing 23% on undergraduate Stafford loans. But default rates for graduate loans hover around 6%-7%, which is roughly the interest rates many of these students face.

default

 

What are your thoughts on the President’s budget proposal for higher education? Please share them in the comments section.

Quick Thoughts on the Ryan Higher Education Budget Discussion Draft

Representative Paul Ryan (R-WI) released a proposal called Expanding Opportunity in America this morning, which covered topics including social benefits, the Earned Income Tax Credit, education, criminal justice, and regulatory reform. My focus is on the higher education section, starting on page 44.

First of all, I’m glad to see a discussion of targeting federal funds right at the start of the higher education section. Ryan notes concerns about subsidies going to students who don’t need them (such as education tax credits going to households making up to $180,000 per year) and the large socioeconomic gaps in college completion. This is important to note for both economic efficiency and targeting middle-income voters.

The policy points are below:

  • Simplify the FAFSA. Most policymakers like this idea at this point, but the question is how to do so. The document doesn’t specify how it should be simplified, or if it should go as far as the Alexander/Bennet proposal to knock the FAFSA back to two questions. Ryan supports getting information about aid available to students in eighth grade and using tax data from two years ago (“prior prior year”) to determine aid eligibility, both of which make great sense. I’ve written papers on both early aid commitment and prior prior year.
  • Reform and modernize the Pell program. Ryan is concerned about the fiscal health of the Pell program and is looking for ways to shore up its finances. He raises the idea of using the Supplemental Educational Opportunity Grant (SEOG)—a Pell supplement distributed by campuses—to help fund Pell. I’ve written a paper about how SEOG and work-study allocations benefit very expensive private colleges over colleges that actually serve Pell recipients. It’s a great idea to consider, but parts of One Dupont just may object. Ryan also suggests allowing students to use their Pell funds however they want (effectively restoring the summer Pell Grant), something which much of the higher education community supports.
  • Cap federal loans to graduate students and parents. This will prove to be a controversial recommendation, with the possibility of interesting political bedfellows. While many are concerned about rising debt and the fiscal implications, there are different solutions. The Obama Administration has instead proposed capping forgiveness at $57,500, while letting students borrow more. I’m conflicted as to what the better path is. Is it better to shift students to the private loan market to get any additional funds, or should they get loans with lower interest rates through the federal government that may result in a fiscal train wreck if loan forgiveness isn’t capped? The Ryan proposal has the potential to help slow the growth in college costs, but potentially at the expense of some students’ goals.
  • Consider reforms to the TRIO programs. TRIO programs serve low-income, first-generation families, but Ryan notes that there isn’t a lot of evidence supporting these programs. I admittedly don’t know as much about TRIO as I should, but I like the call for additional research before judging their effectiveness.
  • Expand funding for federal Work-Study programs. The proposal increases work-study funds through allowing colleges to keep expiring Perkins Loans funds instead of returning them to the federal government. This is the wrong way to proceed because Perkins allocations (and current work-study allocations) are also correlated with the cost of attendance. I would rather see a redistribution of work-study funds based on Pell Grant receipt instead of by cost of attendance, as I’ve noted previously.
  • Build stronger partnerships with post-secondary institutions. Most of this is empty platitudes toward colleges, but the last sentence is critical: “Colleges should also have skin in the game, to further encourage their commitment to outcome-based learning.” There seems to be some support on both sides of the aisle for holding institutions accountable for their performance through methods such as partial responsibility for loan defaults, tying financial aid to outcomes, or college ratings, but an agreement looks less likely at this point.
  • Reform the accreditation process. Ryan supports Senator Lee (R-UT)’s proposal to allow accreditors to certify particular courses instead of degree programs. This is a good idea in general, but the political landscape gets much trickier due to the existence of MOOCs, for-profit colleges (and course providers), and the power of the current higher education lobby. I’ll be interested to see how this moves forward.

Overall, the tenets of the proposal seem reasonable and some parts are likely to get bipartisan support. The biggest questions remaining are whether the Senate will be okay with the House passing Higher Education Act reauthorization components piecemeal (as they are currently doing) and what funding levels will look like for particular programs. In any case, these ideas should generate useful discussions in policy and academic circles.

Exploring Trends in Pell Grant Receipt and Expenditures

The U.S. Department of Education released its annual report on the federal Pell Grant program this week, which is a treasure trove of information about the program’s finances and who is receiving grants. The most recent report includes data from the 2012-13 academic year, and I summarize the data and trends over the last two decades in this post.

Pell Grant expenditures decreased from $33.6 billion in 2011-12 to $32.1 billion in 2012-13, following another $2.1 billion decline in the previous year. After adjusting for inflation, Pell spending has increased 258% since the 1993-94 academic year.

pell_fig1

Part of the increase in spending is due to increases over the maximum Pell Grant over the last 20 years. Even though the maximum Pell Grant covers a smaller percentage of the cost of college now than 20 years ago, the inflation-adjusted value rose from $3,640 in 1993-94 to $5,550 in 2012-13.

pell_fig2

The number of Pell recipients has also increased sharply in the last 20 years, going from 3.8 million in 1993-94 to just under 9 million in 2012-13. However, note the decline in the number of independent students in 2012-13, going from 5.59 million to 5.17 million.

pell_fig3

Recent changes to the federal calculation formula has impacted the number of students receiving an automatic zero EFC (and the maximum Pell Grant), which is given to dependent students or independent students with dependents of their own who meet income and federal program participation criteria. Between 2011-12 and 2012-13, the maximum income to qualify for an automatic zero EFC dropped from $31,000 to $23,000 due to Congressional action, resulting in a 25% decline in automatic zero EFCs. Most of these students still qualified for the maximum Pell Grant, but had to fill out more questions on the FAFSA to qualify.

pell_fig4

The number of students receiving a zero EFC (automatic or calculated) dropped by about 7% from 2011-12, or about 400,000 students, after more than doubling in the last six years. Part of this drop is likely due to students choosing a slowly recovering labor market over attending college.

pell_fig5

UPDATE: Eric Best, co-author of “The Student Loan Mess,” asked me to put together a chart of the average Pell award by year after adjusting for inflation. Below is the chart, showing a drop of nearly $500 in the average inflation-adjusted Pell Grant in the last two years after a long increase.

pell_fig6

I hope these charts are useful to show trends in Pell receipt and spending over time, and please let me know in the comments section if you would like to see any additional analyses.

College Accountability and the Obama Budget Proposal

The Fiscal Year 2015 $3.9 trillion budget document from the Obama Administration includes a request of $68.6 billion in discretionary funds for the Department of Education, up $1.3 billion from 2014 funding. This excludes a great deal of mandatory spending on entitlements, including student loan costs/subsidies, some Pell Grant funding, and some other types of financial aid. (Mandatory spending is much harder to eliminate than discretionary funding, as illustrated by this helpful CBO summary.) The budget is also a reflection of the Administration’s priorities, even if many components are unlikely to be approved by Congress. For a nice summary of the Department of Education’s request, see this policy brief from the New America Foundation.

On the higher education front, the Obama budget implies that accountability will be a key priority of the Department of Education. The Administration made two key requests in this area: $10 million to fund continued development of the Postsecondary Institution Ratings System (PIRS) and $647 million for a fund to reward colleges that enroll and graduate Pell recipients. There was a holdover request for $4 billion in mandatory funds for a version of Race to the Top in higher education, but few in the higher education policy community are taking this plan seriously.

The $10 million for PIRS would go toward “further development and refinement of a new college rating system” (see p. T-156). This request is a signal that the Administration is taking the development of PIRS seriously, but the $10 million in funds suggests that large-scale additional data collection is unlikely to happen in the near future. It is also unlikely that the federal government will work to audit IPEDS data for the rating, something that I called for in my recent policy brief on ratings. Even if the specific $10 million request for PIRS is not acted upon, the Department of Education will use other discretionary funds to move forward.

The $647 million request for College Opportunity and Graduation Bonuses, if approved, would provide bonuses to colleges that are successful in enrolling and graduating large numbers of Pell recipients. I view this as a first attempt to tie federal funds to college performance using metrics that are likely to be in PIRS. I would be surprised if any Pell Grant funds get reallocated through college ratings except for perhaps a handful of very low-performing colleges, but it is possible to get some additional bonus funds tied to ratings.

I had a poll on a blog post a couple weeks ago asking for readers’ thoughts of the likelihood that PIRS would be tied to student financial aid dollars by 2018. The majority of the respondents gave this less than a 50% chance of happening, and I am inclined to agree as well. The Administration’s budget priorities suggest a serious push toward tying some funds to performance, although it is worth emphasizing that a future Congress and President must agree.

What are your thoughts of the Obama Administration’s higher education budget, particularly about accountability? If you have any comments to share, please do so and continue the conversation!

Can Maintenance of Effort Programs Fund Public Higher Education?

The American Association of State Colleges and Universities released a policy paper this week calling for the federal government to enact (and fund) a program designed to encourage states to increase their support for public higher education. The AASCU brief rightly notes that per-student funding for public higher education has fallen over the past three decades (the magnitude of which is overstated somewhat due to their choice in inflation adjustments), and they propose a potential solution in the form of a maintenance of effort provision.

AASCU’s proposal would give colleges a partial match of their higher education appropriations, as long as per-FTE funding to institutions is higher than 50% of the value of the maximum Pell Grant and did not decline from the previous year’s value. The value of the matching funds would go up as state appropriations to institutions increased. They estimate that their hypothesized program would cost something in the neighborhood of $10-$15 billion per year, which could be paid for by cutting waste, fraud, and abuse in current financial aid systems (particularly among for-profits) and by implementing some sort of risk-sharing for student loans—which I’ve written on recently.

However, I view the plan as having a fatal flaw. By only including state appropriations to institutions in the calculation—and not requiring that the matching funds be spent on higher education—states can game the system to get additional money from the federal government. States could reduce funding to their financial aid programs and direct those funds toward institutional appropriations in order to get federal dollars, which could be used for K-12 education, healthcare, or tax cuts.

If states followed the incentive to eliminate all grant aid and fund institutions instead, tuition would likely decrease (something that AASCU institutions would appreciate). The most recent NASSGAP survey of state aid programs found that states spend $9.4 billion per year on grant aid, two-thirds of which is allocated based on financial need. Putting this money into state appropriations would cost the federal government several billion dollars, with no guarantees of any additional funding for students or institutions.

I have a hard time seeing Congress approving this maintenance of effort plan, regardless of the merits. Lobbyists for the private nonprofit and for-profit sectors are likely to strongly oppose this measure, as are lobbying groups for K-12 education, healthcare, and corrections spending (behind the scenes) since higher education is often cut at the expense of higher ed. In addition, this is likely to be a nonstarter in the House due to its placing restrictions on state priorities.

I’m glad to see this proposal from AASCU, but I don’t see it becoming law anytime soon. I would suggest that they follow up with some more details on their proposed risk-sharing program, as well as how elements of this plan could be incorporated into the Obama Administration’s proposed college ratings.

Something Old, Something New: The FY 2014 Obama Budget

Even though I know that it has no chance of being passed in anything resembling its current form, I am excited to get my hands on President Obama’s long-delayed budget for Fiscal Year 2014 (short version, long version, six-page summary of the education portion). The funding request for the Department of Education is for $71.2 billion in discretionary spending, 4.6% higher than this year’s (pre-sequester) budget; ED is unlikely to see an increase of greater than inflation this year given the current political climate.

I tweeted my way (follow me!) through some of the key points relating to higher education yesterday, and am now back with a more detailed summary of the budget. (I also recommend Libby Nelson’s excellent summary in today’s Inside Higher Ed.)This year’s theme is “something old, something new,” as many of the proposals are recycled from last year—but with one key difference that will affect millions of students.

First of all, not much changes with respect to the Pell Grant. The President proposes a $140 increase in the maximum Pell Grant to $5,785, while the program is on more solid financial footing for the next few years. He is again trying to get a higher education version of Race to the Top passed this year, which will look similar to the plan from last year. Again, there is a strong focus in the STEM fields and for program evaluation (the latter of which is welcome from my perspective). The biggest program boost I could find was to FIPSE (the Fund for the Improvement of Postsecondary Education), going from under $2.4 million to $260 million. Although it is unlikely to be adopted, it does show a commitment to demonstration projects in K-12 and higher education.

The most controversial part of the President’s budget is the proposed shift to market-based interest rates. A day after Republican Senators Coburn, Burr, and Alexander introduced a bill to tie all interest rates to the ten-year Treasury rate (currently 1.8%) plus three percentage points, the President’s budget also proposed tying interest rates to the same measure. His plan is more nuanced, with different loans having different premiums over the Treasury rate (see p. 344-350):

Subsidized Stafford: Treasury plus 0.93% (about 2.75% currently)

Unsubsidized Stafford and Perkins: Treasury plus 2.93% (about 4.75%)

PLUS: Treasury plus 3.93% (about 5.75%)

GOP plan: All loans are Treasury plus 3% (about 4.8%)

These rates are far lower than the current rates (3.4% for subsidized Stafford, 6.8% for unsubsidized Stafford, and over 8% for graduate unsubsidized loans), but do shift risk onto students as the rate for new loans would change each year. There would also be no interest rate cap, which is lamented by many advocates. (Income-based repayment provides another alternative, however.)

If either of these plans is adopted, the interest rate cliff would be eliminated as students would no longer have to wait on Congress to know their rates. However, students are likely to see rates rise as Treasury yields return toward their historical norm. The Congressional Budget Office predicts that 10-year Treasury notes will yield 5.2% by 2018, which would put unsubsidized loans just over 8%. (This is still lower than the recent rate for unsubsidized graduate loans, with which I am quite familiar.) If rates go higher than that, I expect Congress to enact an interest rate cap in several years.

The federal budget process does not move quickly, especially with a divided Congress. While I do not expect large increases in the Department of Education’s budget, I am optimistic that a market-based solution to interest rates will be adopted in order to provide more certainty in the short run and to bring graduate loan rates closer to what the private market would otherwise offer.

The Benefits of Biennial Budgets

The federal government had a substantial problem with its budgeting process over the past several years, with funding being provided by a series of continuing resolutions outside the annual process for more than three years. With bipartisan frustration over this process growing, a group of centrist Senators, led by Jeanne Shaheen (D-NH) and Johnny Isakson (R-GA), have proposed a switch from annual to biennial budgets. This proposal was introduced in the past Congress and was not seriously discussed, but is likely to be considered this time around with the interest of Senate Majority Leader Harry Reid (D-NV).

Biennial budgets are not uncommon at the state level. A 2011 report from the National Conference of State Legislatures shows that 19 states have biennial budgets, including Ohio, Texas, and Wisconsin. Only four of these states have legislatures that only meet every two years, meaning that 15 states have actively chosen the biennial path.

Biennial budgeting allows for more time for debate and discussion of tricky matters, but the budgets often have to be adjusted because of the balanced budget requirements. (Budget repair bills are well-known here in Wisconsin.) The lack of such a requirement at the federal level makes biennial budgeting even more feasible. While I am a staunch supporter of a balanced budget, I recognize that a small error in economic growth or demographic assumptions can result in a slightly unbalanced budget over a two-year period. As long as the assumptions are reasonable, I’m fine with a small error which can be addressed in the future.

Requiring a budget every two years instead of one can help provide more stability to federal education funding, particularly regarding policies and levels of student financial aid and education research. This stability has the potential to have positive impacts which are independent of the actual funding levels. For example, if the exact dollar amount for the maximum Pell Grant is known, a push should be made to communicate that level to students who are likely to qualify upon entering college. Providing earlier information of financial aid could induce the marginal student to enroll in college and perhaps even take an additional high school course which would lower the likelihood of remediation. This push toward earlier notification of financial aid is consistent with other parts of my research agenda, and would have the added benefit (in my view) of allowing Pell Grant funding to be flexible as needed in the future.

A biennial budget process could also have the benefit of making student loan interest rates more predictable. Under current law, undergraduate subsidized Stafford interest rates are currently set to double (from 3.4% to 6.8%) on July 1. (This is a budgetary matter because the interest rate does determine the level of profit or loss for the federal government.) While I am a strong supporter of plans to tie student loan interest rates to market conditionssuch as the rate paid on Treasury bills plus 3%—biennial budgeting would at least allow interest rates to not face a cliff every single year.

Biennial budgeting has the potential to result in more stability in education funding, as well as result in budgets which are well-discussed and passed under regular order. For those reasons, I am supportive of moving from annual to biennial budgets. I would love to hear your thoughts on this proposal in the comments!