By CHARLENE CROWELL
Center for Responsible Lending
For consumers, businesses, organizations and governments alike, annual budgets typically reflect not only line items but priorities as well. As A. Philip Randolph reminded us more than 50 years ago with the release of the “Freedom Budget,” such documents reflect the morals of our nation, especially when they show how much we value the most vulnerable among us.
The recent White House fiscal year 2021 proposal would fund the Defense Department at $636.4 billion dollars, a slight increase above that of FY 2020. At the same time, $339.1 billion in budget cuts are proposed. These cuts would severely impact the nation’s social service safety network, comprised of a wide range of services and programs like food stamps, consumer financial protection, low-income energy assistance, enforcement of federal laws, transportation projects, environmental remediation and more.
And at a time when higher education is increasingly essential to the nation’s economic future, the White House proposal would eliminate $5.6 billion, a 7.8% reduction from current levels.
“Eliminated programs include Federal Supplemental Education Opportunity Grants, which duplicates Pell Grants but are less targeted on those who need the most help,” states the Education budget summary.” Its summary also notes how the budget “protects students by eliminating default for impoverished borrowers” and “closing loopholes currently allowing high-earning graduate degree holding borrowers to avoid repaying their student loans, leaving taxpayers holding the bag.”
To be clear – no one really chooses to default on a student loan. Defaults occur when loan payments exceed a borrower’s ability to repay, not a willful choice. A significant number of these defaults were incurred at high-cost for-profit colleges.
Research and analysis by the Center for Responsible Lending finds that although for-profit college enrollment represents 6% of all college students, these schools generate over 33% of all students who default on their loans. Further, CRL found that only 21% of all for-profit students in four-year programs graduate within six years.
Today there are over 44 million student loan borrowers whose growing reliance on loans corresponds with the still-rising cost of higher education. Except for the financially well-off, student loans are being used more, not less, and include consumers of varying income levels.
If these cuts take effect with Congress’ approval, the federal commitment to higher education will become yet another funding retreat begun nearly a decade ago at the state level.
“State funding for public colleges and universities has steadily declined, contributing to higher tuitions for most students,” say James Kvaal and Jessica Thompson, co-authors of a new policy brief by the University of New Hampshire’s Carsey School of Public Policy. “State funding is not only declining, but it is also distributed inequitably.”
“The maximum Pell grant – the federal college scholarship that helps low-income students pay tuition and living expenses – today covers only 28% of college costs, the lowest share in over 40 year,” continued Kvaal and Thompson. “The current financial aid system is not only underfunded but is not designed to help students meet extra needs or absorb unexpected financial blows.”
Even so, the White House education budget proposal would carve out more than $2 billion for Career and Technical Education state grants and CTE National Programs. Eligible CTE recipients could be private businesses offering short-term, training or apprenticeships. Under the proposal, Pell Grants could be also used for CTE training, siphoning off funds traditionally used at two and four-year institutions.
To put it another way, taxpayer-funded on-the-job training – as short as 30 days or as long as six months – could soon enhance the profit margins of businesses. Historically, higher education leads to a credential – an associate, bachelor, or graduate course of study that upon completion leads to a higher competitive edge in the general marketplace.
“As states begin to think about their long-term career and technical education strategies,” said Education Secretary Betsy DeVos, “I would encourage them to continue to act boldly and break down the silos that exist between education and industry so that all students are prepared for the in-demand, high-paying jobs of today’s economy and tomorrow’s.”
What does seem to be bold is an administration that consistently and deliberately seeks new ways to benefit private enterprise at the public trough. These new funding streams are also accompanied by departmental deregulation that “streamline and reduce unnecessary costs with accreditation”, states the budget summary.
Sounds like in the name of ‘deregulation,’ this administration is intent on eliminating more ‘checks and balances’ on the use of public monies.
“Instead of preventing predatory institutions from wasting taxpayer dollars, Secretary DeVos is undermining the federal investment in higher education by shielding the interests of for-profit institutions and private corporations that prey on students of color, low-income borrowers, veterans, women, and older Americans,” said Ashley Harrington, CRL’s federal advocacy director. “We urge Congress and the current Administration to stop protecting these predatory institutions at the expense of already vulnerable and marginalized groups.”
Charlene Crowell is the communications deputy director with the Center for Responsible Lending. She can be reached at firstname.lastname@example.org.