asaeazgz: llll!!HMflflflW]fllF (M .'- I. I ‘ . 3: .f . . __;“.- J :H_ CONGRESSIONAL RESEARCH % SERVICE t:ir»(i,it@H«9I:ijgiy1,:[i1Hjgi@1H{fl: um -1 STUDENT FINANCIAL ASSISTANCE: FY82 BUDGET ISSUE BRIEF NUMBER IB8lO42 AUTHOR: Osman, David Education and Public Welfare Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM DATE ORIGINATED O3/16/81 DATE UPDATED O6/O2/82 FOR ADDITIONAL INFORMATION CALL 287-5700 0603 CRS- 1 IB8lO42 UPDATE-O6/O2/82 ISSUE DEFINITION The Reagan Administration proposed reductions in FY82 budget authority for Federal student aid programs administered by the Department of Education (ED) in March and September, 1981, land February, $982. In February, the Administration requested an aggregate rescission of $141.5 million in FY82 budget authority from the Pell Grant and certain other ED student aid programs and a number of cost-cutting amendments to the Guaranteed Student Loan (GSL) program to reduce the amount of required FY82 supplemental funding from $1.3 to $1 billion. Reductions in FY82 funding for Federal student assistance programs are part of the Reagan Administration's effort to cut Federal spending for domestic programs to improve the national economy, and re-emphasize the traditional role of students and their families in financing higher education. Critics respond that the education of many lower and middle income students will be adversely affected by reductions in Federal student aid, and that a number of postsecondary institutions, especially higher cost private and public schools, could suffer enrollment losses as students shift to lower cost schools in an attempt to compensate for decreases in Federal student aid. Currently awaiting resolution by the Congress are differences between the House- and Senate-passed versions of H.R. 5922, the FY82 supplemental appropriations bill, that includes $1.3 billion in additional GSL funding, and differing amounts of added Pell Grant appropriations and language concerning the allocation of "campus based" aid among States and institutions. BACKGROUND AND POLICY ANALYSIS On Mar. 10, 1981, the Reagan Administration released its Fiscal Year 1982 Budget Revisions outlining changes in the FY82 budget which had been proposed by the Carter Administration on Jan. 15. On this same date, rescission and supplemental requests affecting FY81 spending also became available. Together, these Mar. 10 budget documents added budgetary and programmatic details to the Feb. 18 budget document, America's New Beginning: A_ Program for Economic Recovery, that had outlined the Reagan Administration's view of the condition and needs of the current American economy, including its proposals for Federal spending cuts and tax reductions. This issue brief provides a description and analysis of the Reagan Administration's FY81 and FY82 budget revisions concerning postsecondary student assistance, and the subsequent action on these proposals by the Congress. To adequately address a broad spectrum of questions concerning this topic, the BACKGROUND AND POLICY ANALYSIS section of this issue brief is organized into the following three parts: -- "Part A -- Overview of Federal Student Assistance" provides a brief description of the principal Federal student aid programs and their role in helping students to finance postsecondary education; CRS- 2 IB8l042 UPDATE-06/02/82 -- "Part B -- FY81 Funding" provides summary information concerning the Reagan Administration's budget requests for FY81 and subsequent congressional action resulting in P.L. 97-92, the Supplemental Appropriations and Rescission Act, 1981. This FY81 budget discussion is subdivided into the following three areas: -- Reagan Budget Proposals; =- Appropriations Activity; and -- Analysis of Effects. -- "Part C -— FY82 Funding" provides description and and analysis of the several Administration FY82 budget requests for Department of Education (ED) student assistance programs and subsequent congressional activity. As the primary focus of this issue brief, the FY82 budget discussion is subdivided into the following seven areas: 1 == Reagan Budget Proposals: Mar. 10, 1981; —- Omnibus Budget Reconciliation Act of 1981; —— Reagan Budget Proposals: Sept. 30, 1981; av Appropriations Activity; =— Continuing Resolution; ,-- Reagan Budget Proposals: Feb. 5, 1982; —- Urgent Supplemental Appropriations Activity; and, -u Analysis of Effects. Those interested in only the most recent developments affecting FY82 funding for ED student aid are advised to focus on the last three subdivisions under Part C. PART A -- OVERVIEW OF FEDERAL STUDENT ASSISTANCE Federal assistance for postsecondary students accounts for about $3 of every $4 available from all student aid sources (i.e., Federal, State, college, and others). Of an estimated $16 billion in student aid available for the 1980-81 academic year from all sources, nearly $12 billion flowed from Federal programs, with the Guaranteed Student Loan (GSL), the Pell Grant, and the Social Security Student Benefit programs accounting for almost 75% of this Federal total. According to figures from the College Entrance Examination Board, the "average" freshman in the fall of 1980 paid college costs totalling $2,840, with approximately 33% of this amount from Federal student aid, 31% from parents, 15% from student earnings and savings, and 21% from State, college, or other sources. During the 1980-81 academic year, it is conservatively estimated that at least 5 million of over 12 million students enrolled in the postsecondary sector were receiving some form of Federal student financial aid. The largest aggregate amount of Federal student assistance is provided through six programs authorized under title IV of the Higher Education Act (HEA), as amended, and administered by ED. The Pell Grant, Supplemental Educational Opportunity Grant (SEOG), College Work Study (CWS), National Direct Student Loan (NDSL) and State Student Incentive Grant (SSIG) programs are found under the "Student Financial Assistance" appropriations account in the FY82 budget, while the GSL program is under the "Student Loan Insurance" account. CRS- 3 IB8l042 UPDATE-06/02/82 The Pell Grant, SEOG, CWS, and NDSL programs are all "need-based" assistance -- i.e., the student and his or her family must undergo a financial needs analysis in order to determine eligibility for aid -- while the SSIG program provides matching grants to States to encourage the establishment or expansion of State student aid programs. From FY79 through FY81 the GSL program provided educational "loan of convenience" without regard to student or family financial need. As of Oct. 1, 1981, however, the GSL program is also need-based for students whose family income exceeds $30,000. (For students whose family income is under $30,000, student loans remain available without proof of financial need.) The paragraphs that fOllOW provide a brief summary Of the basic purposes and provisions Of these programs. * The Pell Grant program is the largest of ED's needs—based student aid programs ($2.346 billion appropriation in FY81). It provides assistance in the form of grants to undergraduate students who demonstrate financial need. The Pell Grant program uses a federally established need analysis system to determine a student's eligibility for an award, and is considered the "foundation" program of Federal student aid for undergraduates. For the 1981-82 academic year, Pell Grant awards ranged from $120 to $1,670. About 2.7 million undergraduates are estimated to be Pell Grant recipients in 1981-82, with $906 the estimated "average" award. Reflecting the strong correlation with low family income and financial need for student assistance, over 75% of all FY81 Pell Grant funding is expected to assist students whose family adjusted gross income is $15,000 or less. The SEOG, CWS, and NDSL programs each provide need based assistance that is awarded to students through postsecondary institutions and, as a result, these three programs are often referred to as "campus-based." -The-SEOG-program*($370 million appropriations in FY81) provides grant assistance to undergraduate students who demonstrate exceptional financial need.. SEOG awards are supplemental to the "basic" Pell Grant awards, with $2,000 the maximum annual award per student. ~ During the 1981-82 academic year, approximately 652,000 students are expected to receive an average SEOG award of about $554. The cws program ($550 million appropriation in FY81) provides support for part-time work programs for undergraduate, graduate, and professional students. Federal funds pay up to 80% of a student's wages with the remaining 20% paid by the employer. During the 1981-82 academic year, approximately 980,000 students are expected to benefit from an average CWS award of $625. The NDSL program ($200.8 million appropriation in FY81) provides loans to undergraduate, graduate, or professional students who demonstrate financial need. Undergraduate students may borrow up to $6,000 and graduate students up to $12,000 (including undergraduate borrowing). NDSL's are repaid at 5% interest, with repayment beginning 6 months after a student ends at least part—time enrollment. Repaid principal from loans previously made accrues to each institution's "capital fund" which is to be used for making new NDSL's. During the 1981-82 academic year, an estimated 780,000 students are expected to benefit from an coverage NDSL award of $830. The SSIG program ($76.8 million appropriation in FY81) provides student CRS- 4 IB8l042 UPDATE-06/02/82 assistance to States to use under their own State student aid programs, provided that the States match each Federal dollar under this program with another dollar from State sources. For the 1980-81 academic year, approximately $912 million in combined SSIG and State "matching" dollars were available to make over 300,000 State awards to students, with most States choosing to "over-match" the minimum requirements for SSIG participation. The gg program ($2.581 billion estimated FY81 funding according to (ED; CBO estimates final FY81 appropriation requirement of $2.602 billion in August 1981) provides education loans either directly to students or their parents. GSLs are to be used to meet the costs of postsecondary education, and are available to students or their parents through banks and other private lenders. The Federal Government directly or indirectly "guarantees" the eventual repayment of GSL principal to lenders, and assists borrowers in the payment of loan interest. A 5 >- At present there are two types of GSLs: student loans and auxiliary loans. Student loans are available to undergraduate, graduate, or professional students. As of Oct. 1, 1981, student loans are based on financial need for students whose family adjusted gross income exceed $30,000. The rate of interest for a student loan is 7% for students who have previously borrowed at this rate, and 9% for new borrowers. All student loan borrowers are subject to a 5% loan origination fee as of Aug. 23, 1981. Repayment periods for a student loan may range up to 10 years after a student leaves school. Auxiliary loans (formerly parent loans) are available without regard to financial need to parents of dependent undergraduates, independent undergraduates, and graduate or professional students. As of Oct. 1, 1981, the interest rate for an auxiliary GSL is 14% for all borrowers. For students borrowing under the auxiliary loan program, repayment of interest (only) begins within 60 days of loan disbursement, provided such students are attending school full-time. For all parent borrowers or students attending less than ful1-timevvrepeyment-ofi=betm-auxiliary—1oanrprfncipaI“and interest is to begin within 60 days of disbursement. Because the auxiliary loan was first authorized in October 1980, many States were still in the process of granting authority to lenders to make such loans by the end of FY81. As a result few auxiliary loans were actually made in FY81. For the 1981-82 academic year, an undergraduate student can borrow up to $2,500 a year under the student loan program, and accumulate a maximum GSL debt of $12,500 while an undergraduate. A graduate or professional student can borrow up to $5,000 a year under the student loan program, with a maximum GSL debt not to exceed $25,000, including undergraduate borrowing. Parents of dependent undergraduates and graduate and professional students may borrow up to $3,000 a year under the auxiliary loan program, but may not accumulate more than $15,000 in unpaid auxiliary loan principal. Independent undergraduates may borrow up to $2,500 a year under the auxiliary loan program, minus any amount borrowed that year under the student loan program. ED estimates that 3.5 million student loans and about 12,000 auxiliary loans were made during FY81, with a total principal borrowed of approximately $ billion. Some of this loan volume represents loans made for use in the latter months of the 1980-81 academic year, but most of this volume was for- loans for the 1981-82 academic year. A 1980 analysis of GSL undergraduate student data for the 1978-79 academic year indicated that about 41% of all undergraduate borrowers for that year CRS- 5 IB8lO42 UPDATE-O6/O2/82 came from families with under $18,000 in annual income, another 33% came from families with income over that amount, with 26% undetermined. In general, the GSL program appears to play a significant role in financing the costs of education at higher priced public and private colleges and universities. The GSL program is especially important for a number of graduate and professional students, in part because of their lack of eligibility for several other Federal student aid programs. Reflecting this importance, approximately 30% of all GSL volume represents borrowing by graduate and professional students. Among the various ED student assistance programs, the GSL program is unique in one key respect: it is an "entitlement" program that requires the Congress to provide sufficient appropriations in order to meet the financial obligations incurred on behalf of its beneficiaries, student and parent borrowers. Together, the Pell Grant, SEOG, CWS, NDSL, SSIG, and GSL programs accounted for over 47.3% == over $6.1 billion -~ of ED's total estimated FY81 budget authority of $12.9 billion. In addition, ED also provides grant and fellowship assistance to graduate students through several programs authorized under title IX of the HEA. Located under the "higher Education" appropriation account, the Graduate and Professional Educational Opportunities program ($12 million appropriation in FY81) provided approximately 2,000 grants and fellowships for the l980-81 academic year for graduate and professional students, including those in the area of public service. Finally, several other Titel IV and IX programs authorize special student service programs. These student service programs may be summarized as follows: —— Special Programs for the Disadvantaged (TRIO) which provide grants for projects intended to help disadvantaged youth with college potential to complete high school, and to enter and complete college ($156.5 million in FY81 appropriations); -- the Migrant Education: High School Equivalency and College Assistance programs which provide assistance to help migrant and seasonal farmworkers complete a high school education and make the transition to college ($7.3 million in FY81 appropriations); -- the Veteran's Cost-of-Instruction (VCIP) program which provides grants to postsecondary institutions to expand and improve educational services for enrolled or potentially enrolled veterans ($5.0 million in FY81 appropriations); -- the Legal Training for the Disadvantaged and Law School Clinical Experience programs ($4 million in FY81 appropriations). Outside of ED, the two largest sources of Federal student assistance are the Social Security Student Benefit program, administered by the Department of Health and Human Services, and the several veterans education programs, administered by the Veterans Administration. The Social Security Student Benefit program had FY80 outlays of approximately $2.0 billion, of which CRS- 6 IB8l042 UPDATE-06/02/82 about $1.6 billion went to aid about 650,000 postsecondary students (the remaining $.4 billion provided assistance to about 150,000 secondary students). (See "Social Security Student Benefits,“ IB8l030, for additional information on FY81, FY82, and other out-year funding proposals for this program.) Similarly for FY80, the Veterans Administration provided approximately $2 billion in estimated budget authority and outlays to assist an estimated 1,110,000 Vietnam and post—Vietnam era veterans receive postsecondary and other educational services. Also outside the Department of Education is the Student Loan Marketing Association (Sallie Mae), a federally chartered, for-profit corporation‘ that provides secondary marketing and loan warehousing for the GSL program. Established in 1972, Sallie Mae contributes to the (overall availability of GSLs by purchasing loans from lenders (secondary marketing) and by advancing funds to lenders (warehousing) at low interest rates. To .generate~ capita1~ for these activities, Sallie Mae can issue stock and sell government-guaranteed debt obligations to the Federal Financing Bank (FFB)- Among other provisions, the Education Amendments of 1980 (P.L. 96-374) extended Sallie Mae's government-guarantee and access to the FFB through Sept. 30, 1984, after which time Sallie Mae is to be required to offer debt obligations on the open market. The Reagan Administration proposed in its February budget documents to terminate FFB borrowing by Sallie Mae at the end of FY81. The Administration estimated that this action, would save $1.9 billion in FY82 "off—budget" outlays. On Mar. 9, 1981, however, the Department of the Treasury announced that an agreement with Sallie Mae had been signed extending access to FFB borrowing through FY82. PART B -- FY 1981 FUNDING The Reagan Administration's budget documents of Mar. 10, 1981 contained proposed revisions in funding for ED student assistance programs for both FY81 and FY82. This issue brief section summarizes the action by the Congress with regard to the FY81 budget proposals. Reagan Budget Proposals when the Reagan Administration succeeded the Carter Administration on Jan. 20, 1981, FY81 funding for ED's student aid programs was authorized through June 5, 1981 under the terms of P.L. 96-536, the Further Continuing Appropriations Resolution for FY81. As column (b) of Table 1 indicates, a total of $6.2 billion was available under P.L. 96-536 for ED student assistance programs. On Mar. 10, the Administration released its revised FY81 budget proposals for ED student assistance programs, followed shortly thereafter by the specific supplemental and rescission justifications for the House and Senate Committees on Appropriations. The amount of the Administration's requested revisions in FY81 budget authority for each of ED's student assistance programs is summarized under column (c) of Table 1. CRS- 7 IB81042 UPDATE-O6/O2/82 TABLE 1. FY81 budget authority under P.L. 96-536, FY81 supplemental and ' rescission activity, and FY81 budget authority under P.L. 97-12 for selected postsecondary student assistance programs (in millions) (a) (D) (C) (d) (e) Estimated Admini— Congres— FY81 stration sional Est. FY81 budget requested: Action: FY81 budget authority FY81 suppv FY81 supple- authority under P.L. mental or mental or P.L.97-12 Programs 96-536 a/ resc. b/ resc. c/ d/ f/ Guaranteed 6 1 t A ’ student loan $2,617.5f/ s-103.3 $- 36.5 $2,581.0f/ Pell Grant: 2,159.0 +661.0 +445.0 2,604.0. Supplemental educational opportunity Grant: 370.0 -~ -— 370.0 Co11ege—work study: 550.0 -— -- 550.0 National direct student loan: 200.8 =- ‘ —- 200.8 State student incentive Grant: 76.8 -- -- 76.8 Special programs for the disadvantaged: 159.5 -- - 3.0 156.5 Migrant education (high school and college): 7.6 -- -- 7.6 Veterans cost-of- instruction: 12.0 -- - 6.0 6.0 Graduate and professional opportunity _ grant: 14.2 e/ - 3.2 e/ - 2.2 e/ l2.0e/ Legal training for the disadvantaged: 1.0 - .3 -- l.0 Law school clinical experience: 3.0 $- 3.0 -- 3.0 TOTAL $6.l7l.4f/ $+55l.2 $+397.3 $6,568.7f/ .21 |n|o \c\ J P.L. 96-536, the Further Continuing Appropriations Resolution for FY81, expired on June 5, 1981. An estimated $258 million of FY81 budget authority under the Pell Grant program was used to meet a FY80 program deficit. All programs, except the Guaranteed Student Loan (GSL) program, are "forward funded" (funds appropriated for one year are obligated to students for use during the following fiscal year); the GSL program is "current" year funded (funds are obligated for use during the same year as that for which they are obligated). Department of Education Budget documents, P.L. 97-12, Conference Report (H.Rept. Mar. 1981. 97-124). 10, W\ Im I“, \.W CRS- 8 IB8lO42 UPDATE-O6/O2/82 An estimated $258 million of FY81 budget authority for the Pell Grant program is to fund a FY80 deficit, leaving $2.346 billion available for student awards for the 1981-82 academic year. The FY81 total for this program also includes $2 million under the Public service Grants and Fellowship program and $1 million under Mining Fellowships, both of which are merged with the Graduate and Professional Opportunity Grant program in FY82. V On Oct. 14, 1981, ED released new estimates of requred FY81 budget authority for the GSL program. These revised figures increased the estimated amount required to fund GSL obligations in FY81 from $1,913 million (the amount which appears in the conference documents associated with P.L. 97-12) to $2,581 million. Such a "re-estimate" has also been derived, retrospectively, for P.L. 96-536. The result is GSL budget authority estimate that appears in column (6): $2,6l7.5 million in lieu of $l,950.3 million that appears in budget documents associated with P.L. 96-536. Similarly, the ED "Total" under column (b) has been retrospectively revised to $6,l7l.4 million, from the previous estimate of $5,504.2 million. It should be noted that as of April 1982, ED has re-estimated than an-additional $269 million in FY82 budget authority was required to meet all FY81 obligations, resulting in an unofficial total FY81 budget authority "cost" of $2.85 billion for GSLs. the. CRS- 9 IB8lO42 UPDATE-O6/O2/82 with respect to both the Pell Grant and GSL programs, the Administration also proposed a number of changes to the authorizing legislation, with a requested implementation date of July 1, 1981. These legislative changes were proposed both in the form of requested appropriation language and in the form of bills (H.R. 3641 and S. 1109) referred respectively to the House Committee on Education and Labor and Senate Committee on Labor and Human Resources. Appropriations Activity As introduced in the House, the bill providing FY81 supplemental appropriations, rescissions, and further continuing appropriations became H.R. 3512. On May 13, 1981, H.R. 3512 was passed by the House without any changes in the House Appropriations Committee recommendations for ED student assistance. the following week, on May 21, the Senate version of H.R. 3512 was passed by the Senate without any changes in the Senate Appropriations Committee recommendations for ED student assistance programs. In the ensuing conference to resolve the differences between the House- and Senate-passed versions of H.R. 3512, the compromise funding levels indicated under column (d) of Table 1 were agreed to. For the GSL program, the conferees agreed to rescind the $36.5 million that was to have gone to pay postsecondary institutions for processing GSL applications. By contrast, the Pell Grant program received a $445 million supplemental appropriation, but with the following stipulations in the conference agreement: —- the maximum Pell Grant for the 1981-82 academic year is not to exceed $1,750; -- all Pell Grant awards are to be reduced from the amount otherwise authorized by $80 (this will make $1,670 the actual maximum Pell Grant award that any student may receive); and -- the Secretary of Education is authorized to establish cost of attendance rules for Pell Grant eligibility. In addition a total of $258 million of this Pell Grant supplemental appropriation was to be used to fund a FY80 deficit for the program. The conferees also agreed that ratable reduction would be used in making FY81 State allocations under the NDSL program. on June 4, 1981, the House and Senate each agreed to the conference report on H.R. 3512 (H.Rept. 97-124). On June 5, President Reagan signed H.R. 3512, making it P.L. 97-12, the Supplemental Appropriations and Rescissions Act, 1981. Column (e) of Table 1 indicates an estimated net budget authority of $5.9 billion available for ED student assistance programs -as a result of P.L. 97-12. Analysis of Effects The Administration's budget proposals and the congress’ legislative CRS-10 IB81042 UPDATE-06/O2/82 actions with regard to FY81 funding for ED student assistance programs had both an immediate effect on students seeking Federal student aid for the 1981-82 academic year as well as broader implications as part of the Administration's overall plan to reduce the role of the Federal Government in financing the student's cost of a postsecondary education in the years ahead. The first of these effects is discussed in the paragraphs which follow while the second is discussed in the companion "Analysis of Effects" section under FY82 Funding. One of these immediate effects from a student's viewpoint was the decreased award levels available under the Pell Grant program for the 1981-82 school year. While the "average" costs of a full—time, resident student at a public college increased from $3,409 in 1980-1981 to $3,873 in 1981-1982 (up 14%), the amount of the maximum Pell Grant award dropped from $1,750 to $1,670 (down 5%) between these two academic years. with regard to the GSL program, an aura of uncertainity about possible changes to the program late in FY81 caused many lenders to delay processing GSL applications until after passage of the Omnibus Budget Reconciliation Act of 1981 in mid-summer. (See the discussion of this legislation in the FY82 funding section, which follows.) After passage of this legislation, however, GSL student loan volume reached record levels, as students hurried to apply for student loans before several changes affecting student eligibility took effect on Oct. 1, 1981. PART C -- FY82 FUNDING Notwithstanding the various supplemental appropriation and rescission requests affecting FY81 budget authority for ED's student assistance programs, the primary focus of the Administration's Mar. 10 budget proposals was FY82 funding. This section focuses on (1) the Administration's budget revisions of Mar. 10, 1981, Sept. 30, 1981, and Feb. 5, 1982; (2) on the effects of the Omnibus Budget Reconciliation Act student assistance programs; and, (3) on the subsequent FY82 appropriation action of the Congress. Reagan Budget Proposals: Mar. 10, 1981 The FY81 revised budget for the Pell Grant program proposed to reduce program costs for the 1981-82 award year. To these FY81 reductions, the Administration added for FY82, several additional cost-cutting proposals intended to yield still further savings for the 1982-83 award year. As indicated in the Mar. 10 budget, the Administration proposed to save over $1 billion from the FY82 current policy estimates for the Pell Grant and GSL programs, while most other ED student assistance programs were to be continued at or below their FY81 revised funding level. Only the NDSL program was to receive a significant increase (of $110 million) over its FY81 funding base. Column (c) of Table 4 (Appendix A) summarizes the Administration's requested FY82 budget authority amounts for the ED student assistance programs. In addition, for comparison purposes, the estimated net FY81 budget authority amounts under P.L. 97-12 for these student assistance programs are repeated under column (b) of Table 4. What the totals for these two columns indicate is that the FY82 budget request for the ED student CRS-ll IB8l042 UPDATE-06/O2/82 assistance programs would be approximately $150 million less than the» FY81 appropriation available under P.L. 97-12. Thus, the Administration's FY82 ED student assistance proposals would not only save budget authority when measured against the "inflation-adjusted" FY82 currently policy estimates, but also when measured against the "unadjusted" actual budget authority available for FY81. ; As in the case of its FY81 revised budget request, the Administration's FY82 budget proposals for ED student assistance programs were A also accompanied by proposed appropriations language to change certain requirements of the Pell Grant and GSL programs. These proposed changes for FY82 were as follows: (1) The Pell Grant program was proposed to be amended by: -- restricting the maximum Pell Grant for the 1982-83 academic year to $1,800 rather than $2,100 as provided under the Higher Education Act; -- requiring that Pell Grant cost of attendance be determined by the Secretary of Education rather than under revised provisions added by the Education Amendments of 1980 (P.L. 96-374); -— requiring an annual self-help contribution of $750 from students, except in cases of extreme financial need; -- eliminating the deduction of State and local income taxes that were to have been used beginning with the 1982-83 award year to help determine the expected family contribution yunder the Pell Grant need analysis procedure; -- increasing the maximum assessment rate on parental discretionary income for families with less than $25,000 adjusted gross income from 14% to 20%; and —- eliminating the $10 per recipient payment _to postsecondary institutions for Pell Grant administrative costs. (2) The Guaranteed Student Loan (GSL) program was~ proposed to be amended by: -- providing student GSLs only for remaining need after other sources of Federal student aid and family contributions have been counted (currently a need test is not required for this program); —— eliminating the in-school interest subsidy (the Federal Government currently pays CRS-12 IB81042 UPDATE-O6/O2/82 to lenders the interest on a loan while the student is in school); —- extending eligibility for parent loans to parents of dependent graduate students and spouses of independent students; —- eliminating the Federal special allowance payment to lenders on parent loans (the special allowance is that portion of total, current interest on a GSL loan that is paid by the Federal Government after the student's or parent's "fixed" interest rate is subtracted from the current market rate); -= allowing lenders to set the interest rate of parent loans at the prevailing market rate rather than at the current authorized rate of 9%, and -- allowing up to 20 years for repayment on parent loans. As in the case of the FY81 budget revisions, this FY82 revised budget request was referred to the House and Senate Committees on Appropriations. Before either House or Senate Appropriations Committee reported its FY82 recommendations, however, Federal budget targets were to be established for FY82 under the congressional budget process, as authorized under P.L. 93-344, the Congressional Budget and Impoundment Control Act of 1974. Omnibus Budget Reconciliation Act of 1981 On May 14, 1981, Senate and House conferees resolved their differences on the First Concurrent Budget Resolution for FY82, H.Con.Res. 115. This conference agreement was composed of four basic components: (1) revisions to the FY81 budget in the form of reconciliation instructions to Senate authorizing committees; (2) spending goals for FY82; (3) reconciliation instructions to Senate and House authorizing committees affecting savings in budget authority and outlays in FY82; and (4) broad outlines of budget policies for FY83 and FY84. ’ As part of the reconciliation instructions, congressional authorizing committees were instructed to cut legislative authorizations underlying spending programs sufficiently to save approximately $35.1 billion below the current policy level in FY82. Under these instructions, the Senate Committee on Labor and Human Resources was to decrease FY82 budget authority for programs within its jurisdiction by $10.8 billion from the FY82 current policy base. Likewise, the House Committee on Education and Labor was instructed to decrease FY82 budget authority for- the programs under its jurisdiction by $12.1 billion from the FY82 current policy base. On June 25, 1981, the Senate passed an amended version of S. 1377, the Omnibus Reconciliation Act of 1981. Among its provisions, S. 1377 as passed by the Senate included (1) restrictions on the authorization levels for most ED student aid programs for FY82 through FY84; and (2) certain substantive amendments to the authorizing legislation of several programs, including Pell CRS—13 IB8lO42 UPDATE-O6/O2/82 Grants, GSLs, and NDSLs. On June 26, 1981, the House passed an amended version of H.R. '3982, the Omnibus Budget Reconciliation Act of 1981. Along with other ED programs, ED student assistance programs were affected by an amendment adopted by the House which was introduced by Representatives Gramm and Latta. As in the case of the earlier Senate-passed bill (S. 1377), the House—passed version of H.R. 3982 included (1) restrictions on the authorization level for most ED student aid programs for FY82 through FY84; and (2) other substantive amendments to the authorizing legislation of several programs including Pell Grants and GSLs. On July 21, 1981, Senate and House conferees met and reached agreement on differences concerning postsecondary student assistance in the House- and Senatewpassed reconciliation bills. On July 31, 1981, both the House and the Senate approved the conference report (H.Rept. 97-208) to accompany H.R. 3982, the Omnibus Budget Reconciliation Act of 1981. On Aug. 13, 1981, President Reagan signed the Act making it P.L. 97~35. Table 2 provides a summary of the compromise authorization ceiling levels for ED student assistance programs as specified under the Omnibus Budget Reconciliation Act of 1981. TABLE 2. CRS=l4 IB8lO42 UPDATE-O6/O2/82 New authorization ceiling levels for selected ED student assistance programs under the Omnibus Budget Reconciliation Act of 1981 (P.L. (In millions of dollars) Higher Education Act: Title IV and IX Programs Guaranteed student loan: Pell Grant: Supplemental educational opportunity grant: College work study: National direct student loan 2 State student incentive grant: Special programs for the disadvantaged: Migrant education (high school and college): Veterans cost-of- instruction: Graduate and professional opportunity grant: Legal training for the disadvantaged: Law school clinical experience: (a) Because the GSL program is an $2,603(a)r 2:$5O 370 550 286 7608 l65 12’ 14 97—35): "entitlement" s£,eo9(a) 2,800 370 550 286 7608 170 12 14 FY82—FY84 $2,750(a) 3:000 370 550 286 76.8 170 l2 14 program, no specific authorization levels are specified under H.Rept. 97-208 for either FY82, FY83, Budget Office (CBO) provided estimates or FY84. However, the Congressional (July 31, 1981) of current policy budget authority and of reconciliation savings that permit FY82 through FY84 calculations of remaining budget authority to be made. CRS-l5 IB8l042 UPDATE-06/02/82 In the case of most of these student assistance programs, an authorization ceiling that closely approximated the FY81 appropriation level was provided for each of the years FY82 through FY84. The principal exceptions to this pattern (1) the Pell Grant program which increased its authorization level by a total of $350 million between FY82 and FY84; (2) the NDSL program for which the authorization ceiling for each year was approximately $85 million above its FY81 appropriation, and (3) the Law School Clinical Experience program which decreased to a $1 million annual authorization after receiving an FY8l appropriation of $3 million. The budget reconciliation conferees also resolved differences on a number of substantive amendments to the Pell Grant, GSL, and NDSL programs. Under the conference agreement, the Pell Grant program was amended: == by providing authority to the Secretary of Education (with approval of the Congress) to waive any provision of the Pell Grant program in order to meet the new authorization levels established under the Omnibus Budget Reconciliation Act; and -- with regard to "Need Analysis" by providing (a) that separate family contribution schedules must be submitted for the Pell Grant and GSL programs;_ (b) that student GSLs may no longer be counted as part of the expected family contribution in determining eligibility for Pell Grants, SEOGS, NDSLs, CWS, and SSIGs; (c) for a revision in the publication dates for the Pell Grant "Family Contribution Schedule," and by establishing such dates for the newly required GSL "Family Contribution Schedule;" and (d) that the Secretary of Education set a series of assessment rates on parental discretionary income (rather than applying the current 1981-82 flat rate of 10.5% to discretionary parental income, whatever the level of such income) under the Pell Grant "Family Contribution Schedule;" -- and by establishing a $5 institutional allowance for each Pell Grant processed by a postsecondary institution (but prohibiting institutions from levying a charge on students for either GSL or Pell Grant processing). Under the conference agreement, ‘amendments ‘[20 the GSL program included: -- establishing a "need test" (to be developed by the Secretary of Education, subject to disapproval by either house of the Congress) for a student GSL in the case of a student whose family income exceeds $30,000, with a $1,000 minimum loan to be provided if at least) $500 in need is established (effective Oct. 1, 1981); -- specifying that "financial need" for a student GSL is the estimated cost of attendance minus expected CRS-16 IB8lO42 UPDATE-06/O2/82 family contribution and estimated financial aid; -- counting all GI Bill and Social Security student benefits as student aid under the GSL need analysis; -- establishing a 5% loan origination fee on student GSLS, with the amount of such fee to be used to offset both the Federal in-school interest subsidy and special allowance interest payments (effective 10 days after enactment of the Omnibus Budget Reconciliation Act of l98l); -- raising the interest rate for parent GSLs from 9% to 14% (effective Oct. 1, l98l); ~ E -- extending the eligibility for parent loan borrowing to independent undergraduate students, with a student's borrowing not to exceed $2,500 in any year, less the amount of any student GSL; -- extending the eligibility for parent loan borrowing to graduate students; -- eliminating the higher loan limits for student GSL borrowing for independent students; -- eliminating all grace periods for the repayment of GSLs except the 6-month grace period immediately following the in-school deferment; -— raising the minimum annual repayment for a student GSL from $360 to $600; and -— granting various new authorities to the Student Loan Marketing Association (Sallie Mae) that provide greater flexibility in purchasing and warehousing student loans and in acting as a lender of last resort (effective 30 days after the enactment of this Act). In addition to these amendments to the Pell Grant and GSL programs, the conference agreement raised the interest rate for the NDSL program from 4% to 5%, effective Oct. 1, 1981. Reagan Budget Proposals: Sept. 30; 1981 On Sept. 30, 1981, the Reagan Administration sent the Congress a second revised budget request for FY82. This budget request proposed an additional 12% budget reduction for the Department of Education (ED) programs, including Pell Grant and most other student aid programs authorized under titles IV and IX of the Higher Education Act (HEA), as amended. Because of rising costs associated with the Guaranteed Student Loan (GSL) program, however, this Sept. 30 revision also recognized a need for additional GSL funding for FY 1982. Table 4 provides a comparison between the Administration's March and September budget requests for selected student assistance programs authorized CRS-l7 IB8l042) UPDATE-O6/02/82 under Titles IV and IX of the HEA. Note that although all programs except the GSL were decreased under the September request, the prospect of meeting significantly higher GSL program costs resulted in an overall increase of $225.1 million from the March to September requests for the student aid programs considered. This GSL cost increase resulted in part from an upward revision in the expected number of GSLs in FY82, and in part from an upward revision in anticipated interest rates during this period. Accompanying the Sept.. 30 revised FY82 budget amounts for student assistance was proposed budget language that would affect the Pell Grant and certain other programs. The requested appropriations language for the Pell Grant program included provisions to accomplish the following for the l982-83 academic year: -- restrict the maximum Pell Grant for 1982-83 academic year to $1,750; -- reduce all Pell Grant awards from the amount otherwise authorized by $80, making the "actual" maximum award $1,670 (the same amount as for the 1981-82 academic year); -- authorize the Secretary of ED to determine the "cost of attendance" used in calculating the eligibility for and the_ amount of Pell Grant awards; -- change the determination of the "expected family contribution" also used in calculating the eligibility for and amount of Pell Grant awards by: (a) counting all of a dependent student's assets and all equity in his parent's home (excluding an asset reserve of $30,000), all equity in a family farm (excluding an asset reserve of $50,000), all equity in a business (excluding an asset reserve of $50,000), and all other assets (excluding an asset reserve of $8,000); (b) counting all of a married, independent student's assets, and those of his spouse, the same as if the student were single. (This applies only to independent students with no other dependents except a spouse.) (c) adding to the student's expected family contribution any veteran's education or Social Security student benefits that he may be receiving; -- eliminate the payment to.postsecondary institutions for Pell Grant administrative costs. " Additional appropriations language was also requested to permit the Secretary of ED to establish separate systems of need analysis for the SEOG, CWS, and NDSL programs for the 1982-83 academic year without regard to most of the "Need Analysis" requirements contained under Section 482 of the Higher Education Act, as amended. Language was also requested to permit the Secretary of ED to pay NDSL teacher cancellations from the capital contribution appropriation for the program, and to use any funds collected on previously defaulted loans for any purpose authorized under the NDSL program. Table 4 (Appendix A) provides a summary of the Administration's Sept. 30, CRS-18 IB8l042 UPDATE-06/02/82 1981 student aid revised budget for FY82. Appropriations Activity On Sept. 23, 1981, the House Committee on Appropriations reported H.R. 4560, the Department of Labor, Health and Human Services, and Education, and Related Agencies Appropriation Bill, 1982 * (H.Rept. 97-251). This House-reported bill used the Mar. 10 budget request amount as the base for comparison with recommended appropriations for, all ED student assistance programs. The committee recommended the Mar. 10 budget request amounts for all student assistance programs, except for increases of $40 million for the Pell Grant program, $2 million for Graduate Fellpwships, and $1 million for the Law School Clinical Experience program- Accompanying its funding recommendation of $2.526 billion for) thel Pell Grant program, the committee stated the following assumptions: * -- a maximum Pell Grant of $1,800 for the 1982-83 academic year; -- the "cost of attendance" to be determined by the Secretary of ED; -- a $5 institutional allowance to postsecondary institutions for each Pell Grant processed; and -- use of the "scheduled reduction" of student awards authorized under section 4l1(b)(3)(B) of the Higher Education Act, as amended, in case appropriated funds are insufficient to pay in full all student awards. With regard to the GSL program, the committee noted in its report that ... "the amount required to cover the costs of the program will be much higher than the current budget estimate" and that "... the budget estimate will have to be revised and appropriations made to cover entitlement costs." (H.Rept. 97-251, p. 104). Pending such a revised budget estimate, the committee recommended the $1,773.8 amount of the Mar. 10 budget request. On Oct. 6, 1981, the House debated and passed an amended version of H.R. 4560 which included one floor amendment to the committee's recommendations on postsecondary student assistance. This amendment, agreed to by a voice vote, added to the appropriations language for the Pell Grant program a provision that specified that the family contribution schedule used to determine Pell Grant awards for the 1981-82 academic year was also to be used for the 1982-83 academic year. " On Nov. 9, 1981, the Senate Committee on Appropriations reported H.R. 4560 (S.Rept. 97-268). The Senate Committee's recommendations for most student aid programs for FY82 were below the House-passed levels. Such lower recommendations were provided for Pell Grants ($152 million below the House level), SEOG ($80 million lower), NDSL (110.2 million lower), SSIG ($76.8 million lower), Special Programs for the Disadvantaged ($3 million lower), Graduate programs ($4 million lower) and the Law School Clinical Experience program ($1 million lower). For the CWS and Legal Training for the Disadvantaged programs, House and Senate recommendations were identical. CRS-19 IB8lO42 UPDATE-O6/O2/82 Finally, the Senate recommendations were above the House totals for the GSL program ($829.2 million above the House level) and for Veterans Cost-of-Instruction ($5 million above the House level). As the previous sentence suggests, it was the large disparity between the House and Senate with respect to GSL funding that explained why the overall Senate total of $6.2 billion for these ED Student Financial Assistance programs exceeded the House total of $5.8 billion. - In its report language for the GSL program, the Senate Appropriations Committee noted that an increase in the expected average Treasury bill rate for FY82 (from 8.85% to ll.3%) was the principal reason for the committee's adjustment in the estimated FY82 cost of the GSL program. Noting that the FY82 GSL estimate was still subject to further change, the committee chose to use the July, l98l CBO estimate for FY82 GSL costs rather than either the March or September estimates of the Administration. With respect to the Pell Grant program, the Senate Appropriations committee (as had the House) assumed an $1,800 maximum award for the l982-83 award year. However, the Senate Committee also included language to allow ED to use a different Pell Grant need analysis for 1982-83 than was in either the authorizing legislation, the Administration's proposals, or the House passed version of H.R. 4650. As of Mar. 25, 1982, Senate floor consideration of H.R. 4650 had not yet occurred. Table 3 compares the FY81 budget authority available under P.L. 97-l2 with the proposed FY82 amounts proposed under the House-passed and Senate-reported bills. CRS°20 FY81 budget authority under P.L. IB8l042 UPDATE-O6/02/82 97-12 and FY82 budget authority under H.R. 4560, as passed (Nov. (Oct. 6, 1981) and reported by the Senate Appropriations Committee 9, 1981) for selected student assistance programs authorized under Title IX and IX of the Higher TABLE 3. by the House Education Act. (a) (b) FY81 budget authority under Programs P.L- 97-12 Guaranteed student loan Pell grant: 2,346.0 (258.0) Supplemental educational opportunity grant 370.0 College work study 550.0 National direct student loan 200.8 State student incentive grant 75.8 Special programs for the disadvantaged 156.5 Migrant education (high school and college) 7.3 Veterans cost- of-instruction 6.0 Graduate and professional opportunity grant 12.0 Legal training for the disadvanteged 1.0 Law school clinical experience 3.0 TOTAL $2.5e1.o a/ $6,568.7 a/ (in millions) (c) FY82 budget authority under H.R-y4560,*as passed by the House $1,773.8 a/ 2,525.0 ( .0) 370.0 550.0 311.0 76.8 159.5 " loo $5,789.4 (d) FY82 budget authority under H.R. 4560. as reported by the Senate $2,603.0 2137400 ( .0) 290.0 550.0 200.8 O0 $5pl89.3 a/ ED estimates, as of September 1981, of the amount of FY81 and FY82 budget authority that will actually be required for the FY81 -- $2.581 billion, and GSL program are as follows: FY82 -- $2,753 billion. See also footnote f, additional discussion of the GSL program. Table l for CRS-21 IB8lO42 UPDATE-06/O2/82 Continuing Resolution Since ED did not have a regular FY82 appropriations measure enacted as of Apr. 1, 1982, all ED programs, including those providing student financial assistance, are currently funded under the terms of H.J.Res. 409, the FY82 Continuing Resoiution, which was passed by House on Mar. 24; and by, the Senate on Mar. 31, and which was signed by President Reagan on Mar. 31, 1982 (P.L. 97-161). The terms of P.L. 97-161 will remain in effect through Sept. 30, 1982 or the enactment of a regular FY82 ED appropriations act (whichever comes first). P.L. 97-161 extends all of the provisions ;and funding levels of the previous FY82 continuing resolution, P.L. 97-92, which was in .effect from Dec. 15, 1981 through Mar. 31, 1982. Under P.L. 97-92, ED programs were funded at the lower of the House-passed or Senate-reported funding levels in H.R. 4560, except where a program had been zero funded under one of these bills, in which case FY82 funding is to continue at the lower of either the FY81 funding level or the amount in the FY82 bill which provides same funding. P.L. 97-92 also required a 4% further reduction in each "appropriation account" from the funding level determined in accordance with previous sentence. However, no individual program may be reduced by more then 6% and no program (or project) may be terminated as a result of applying this reduction. In addition to funding requirements affecting all ED student aid programs, P.L. 97-92 also contained the following specific requirements concerning the Pell Grant program: -- a maximum student award of $1,800 for the 1982-83 academic year; -- cost of attendance criteria to be established by the Secretary of ED; -- the family contribution schedule for the 1982-83 award year is to be the same as that for 1981-82 except that there are modifications concerning the treatment of Veterans Education and Social Security Student Benefits and the Secretary of ED is given discretion in the establishment of assessment rates applicable to discretionary income. P.L. 97-92 also authorized the Secretary of Ed to establish or approve need analysis systems for the CWS, SEOG, and NDSL programs that werey different from that used for the Pell Grant program, thus postponing a statutory requirement for a single need analysis system for these programs that was scheduled to take effect in FY82. In conformity with the Pell Grant requirements under P.L. 97-92, the Secretary of ED on Jan. 6, 1982 issued final regulations (Federal Register, 736-742) for the 1982-83 "family contribution schedule." In discussing the cost implications of this Pell Grant schedule, however, ED noted that fully CRS-22 IB8l042 UPDATE-06/O2/82 funding these regulations would cost $2.483 billion in FY82 budget authority, an amount $204 million above that available under P.L. 97-92 and $295 million more than the Administration's Sept. 30 budget request. In a related action, the Senate on Dec. l0, 1981, had passed Senate Resolution 256 disapproving ED's Oct. 13 Pell Grant need analysis that had been previously proposed for use for the l982-83 award year. More specifically,the Senate disapproved of ED's proposal to impose a minimum 40% assessment on family discretionary income, a move which would eliminate an estimated 900,000 students from Pell Grant eligibility. Reagan Budget Proposals: Feb. 5, l982 The Reagan Administration on Feb. 5, 1982, released its: proposed FY83fi Federal budget, including its requests for ED student and budget authority for FY83, as well as proposals for supplemental and rescissions affecting. FY82 budget authority. on Feb. 8, ED released additional documents providing more detail for these FY82 and FY83 student aid budget proposals. (See CRS IB820l8 for an analysis of the FY83 proposals.) The discussion which follows focuses on the FY82 proposals accompanying the FY83 budget request. As outlined in Administration budget documents on Feb} 5, 1982, the latest FY82 budget revision requests the same FY82 budget authority for ED student aid programs as that of the Sept. 30, 1981 budget revision (see Table 4, column (d) in Appendix A). Programs for which the same net FY82 budget authority would remain under both the Sept. 30 and Feb. 5 documents include: Pell Grants, CWS, SSIG, Special Programs for the Disadvantaged, Migrant Education, Veterans Cost-of-Instruction, Legal Training for the Disadvantaged and Law School Clinical Experience programs. In the case of SEOG, NDSL, and Graduate and Professional Opportunity Grant programs, the resulting net budget authority for FY82 would be less than under the Sept. 30 request. Finally, for the GSL program, the requested FY82 supplemental is greater under the Feb. 5 than under the Sept. 30 version. In a rescission message to the Congress dated Feb. 5, I982, President Reagan proposed the following specific FY82 rescissions from the pamounts available under P.L. 97-92: -— $91.4 million from the $2.279 billion available for the Pell Grant program; —- $44 million from the $528 million available for the CWS program; -= $6.1 milllion from the $73.7 million available for the SSIG program; and -- the entire $1.9 million amount available for the Graduate and Professional Opportunity Grant program. In conjunction with the rescission request for the Pell Grant program the Administration also asked for appropriations language that would -- -- reduce each student's entitled award by the amount that the sum of such Pell Grant, expected CRS-23 IB81042 UPDATE-O6/O2/82 family contribution, GI bill benefits, and Social Security Student benefits exceeds the student's cost of attendance for the 1982-83 academic year; take into account the full-time or part-time enrollment status Of a student; and reduce each student's "net" entitled award by $80 (resulting in a maximum grant of $1,720 for the 1982-83 academic year). A with respect to the GSL program, the Administration requested a $978.2 billion FY82 supplemental appropriation, which would be added to the $1.774 billion budget authority already available unden P.L. 97-92 and result in a revised FY82 budget authority requirement of $2.752 billion for this program.. To "hold" this GSL supplemental to $978.2 billion, however, the Administration also requested that the following changes be made to the GSL. program, effective Apr. 1, 1982: -- increase the "loan origination fee" on student loans from the present 5% to 10%; -- make all student applicants meet a test for financial need; -- allow graduate and professional students to borrow only under the 14% "auxiliary" loan (formerly, parent loan) component of the GSL program (the loan limits would be $8,000 annually, $40,000 cumulative, and full-time students would have to make periodic loan interest payments, while part-time students would have to make both principal and interest payments); -- eliminate the Federal "special allowance" interest payments for GSLs 2 years after the borrower leaves school, allowing lenders to convert the loan to either a new fixed or variable repayment contract with no further Federal interest subsidies; “ increase the insurance premium for GSLS directly insured by the Federal Government from l/4% to 1%; and -- charge State Guarantee Agencies a new "reinsurance premium" equal to one-half of their insurance premium income (to help offset the Federal costs of paying reinsurance claims).- Without these amendments to the GSL program, the Administration estimated that the required FY82 supplemental would need to be $309 million higher, and result in an aggregate FY82 "current program" requirement of $3.061 billion in budget authority. Table 4 (Appendix A) ‘provides a summary of .the Administration's Feb. 5, 1982 budget revisions with respect to FY82 ED student aid. Since the Congress had not enacted any of the Administration's requested FY82 amendments to the GSL program as of Apr. l,- 1982, the Administration revised its requested implementation date, moving it forward to July 1, 1982. CRS-24 IB8lO42 UPDATE-O6/O2/82 Urgent Supplemental Appropriations Activity House Action. On Mar. 23, 1982, the House Committee on Appropriations reported H.R. 5922 (H.Rept. 97-469), which would provide urgent FY82 supplemental budget authority for certain Federal programs, including the GSL and Pell Grant programs. For the GSL program, H.Rept. 97-469 recommended $1.3 billion in FY82 supplemental budget authority in addition to the $1.774 billion already available under the provisions of P.L. 97-161. This committee-recommended amount for GSLs is $321.8 million above the level requested by the Administration in the February 1982 budget revision. With respect to the various changes t0 the GSL program that the Administration requested be enacted by Apr. 1, 1982 through the use of appropriations language, the committee took no action, indicating that it felt "that such language would be out of order in a general appropriations bill." In explaining why it was recommending $1.3 billion in supplemental budget authority for the GSL program at this time, the committee included the following paragraph in its report: At this time, it seems unlikely that Congress will enact further major legislative changes in the program for FY82. The Administration's request to make legislative changes through appropriation bill language has been rejected. The amount recommended is based on the additional amount required to cover estimated costs under current law for the balance of FY82. Nearly $1 billion of the total supplemental funds recommended are for interest benefits and special allowances to lenders under the current provisions of law: with regard to the Pell Grant program, H.Rept. 97-469 recommended $4.65 million in supplemental budget authority to cover additional costs associated with processing students‘ Pell Grant applications in FY82. In addition, H.Rept. 97-469 also instructs ED not to implement for the 1982-83 acedemic year an expanded Pell Grant student validation effort that would require all Pell Grant recipients to submit a copy of their own -- or their parents‘ -- 1040 Federal income tax form to the postsecondary education institution which they plan to attend before receiving their Pell awards. As the reason for this recommendation, the committee cited its concern "...about the delay and possible confusion resulting from the initiation of 100% validation for academic year 1982-83." Instead, the committee instructed ED to proceed with the processing of Pell Grant applications using existing validation criteria by which the Pell grant central processor relies on certain income criteria to identify selected recipients for further validation. Finally, H.Rept. 97-469 also instructs ED that it is the intent of Congress that the same Pell Grant cost of attendance criteria in use for the 1981-82 academic year also be used for the 1982-83 academic year. On May 12, 1982, the House debated and passed H.R. 5922 without any changes in the student aid recommendations made by the House Committee on Appropriations. Senate Action. On May 18, 1982, the Senate Committee on Appropriations CRS-25 IB8lO42 UPDATE-O6/O2/82 reported its version of H.R. 5922 (S.Rept. 97-402), including recommendations for supplemental FY82 budget authority for the GSL and Pell Grant programs, and appropriations language concerning the allocation of available FY82 funds among the States under the SEOG and CWS programs. For the GSL program, S.Rept. 97-402 recommended $1.3 billion in FY82 supplemental budget authority, the same amount as in the House-passed bill. In making this recommendation, the committee noted that such GSL funds "...must be provided on an urgent basis to prevent the program from running out of money and the Federal Government incurring millions of dollars in penalties for delayed payment of interest costs to banks." The Senate Committee also stressed, however, "...that a comprehensive revision of the guaranteed student loan program is imperative. ... Otherwise, the .funding requirements for the GSL program and other entitlements will continue to rise, and this will leave fewer funds available for {important discretionary programs." With regard to the Pell Grant program, S.Rept. 97-402 recommended $6.55 million in FY82 supplemental budget authority, the same amount as the Administration requested and $1.9 million more than in the House-passed bill. As in the House version, $4.65 million of this recommended amount is to be used to meet increased Pell Grant processing costs. Unlike the House, however, the Senate Committee recommended an additional $1.9 million in supplemental Pell Grant funds to be used for the income verification of all Pell Grant recipients for 1982-83 throgh the use of selected Federal income tax data, as requested by ED. However, before ED can use any of this $1.9 million in validation funding, the Senate committee specified that ED had to yfirst publish final regulations "...WhiCh precisely instruct participating schools as to the steps they must take to preserve the confidentiality of the tax returns that come into their possession." Finally, S.Rept. 97-402 added appropriations language for the SEOG and CWS programs that specified that ED should ratably reduce awards among States from the FY81 level, in order that the burden of program funding reductions be shared proportionally by all States. On May 27, 1982, the Senate debated and passed its version of H.R. 5922 without any changes in the student recommendations of the Senate Committee on Appropriations. On May 28, the House and Senate recessed for the Memorial Day District work period without further action to resolve the differences between the House and Senate-passed versions of H.R. 5922. Analysis Of Effects The Reagan Administration's proposals to reduce budget authority and outlays for Federal student assistance in FY82 through FY84 are part of an overall strategy of reducing aggregate Federal spending, in the belief that such spending reductions will help ease inflation and otherwise contribute to a heathier national economy. The Administration's particular proposals to amend and reduce spending under the GSL and Pell Grant programs, however, also reflect a basic policy interest in "restoring" the focus of Federal student aid to the "truly needy," with reeemphasis on the traditional role of the student and family in meeting the costs of higher education. Since the passage of the Middle Income Student Assistance Act (MISAA) in CRS-26 IB8l042 UPDATE-06/02/82 1978, there have been substantial increases in the costs of and participation in these student aid programs. This has occurred largely among students from middle to upper-income families, some of whom may be using student aid to supplant family contributions. If there were no changes in the GSL program, total principal borrowed would have increased from $3 billion in FY79 to an estimated $9 billion in FY82. Likewise, Federal expenditures for loan interest and other costs would have increased from $700 million to an about $3 billion for this same period. Pell Grants have shown a similar expansion. In the last pre-MISAA award period (1978-79), there were expenditures of $1.6 billion for 1.9 million Pell Grant recipients. In the first post-MISAA award period (1979-80), estimated expenditures were $2.5 billion for 2.6 million recipients. In addition, the number of qualified applicants with annual adjusted family income of $20,000 or more grew from 33,000 in 1978-79 to 431,000 in 1979-80. - - Senate and House compromises involving student aid in the conference version of the Omnibus Budget Reconciliation Act, that President Reagan signed on Aug. 13, 1981 left most student assistance programs law (P.L. 97-35) on Aug. 13 left most student assistance programs authorized under titles IV and IX of the Higher Education Act.with new authorization ceilings below their previous authorization levels for FY82-FY84, yet at or slightly above their actual appropriation level for FY81. In the case of the Pell Grant program, authorization ceilings for the period FY82-FY84 were imposed for the first time. These new ceiling levels, however, do permit appropriations "growth" from the $2.346 billion appropriated in FY81 for the 1981-82 academic year, to $2.650 billion for 1982-83, $2.8 billion for 1983-84, and $3.0 billion for 1984-85. The Administration's September proposal to reduce ED programs by 12% from the March budget proposal, and the fact that the House-recommended appropriation level for FY82 is less than the FY82 reconciliation ceiling, suggest that the actual appropriation level for these programs may be below these new "maximum" authorization levels in one or more of these years. ' Outside of the Pell Grant and GSL programs, most other ED student aid programs have budgetary ceilings at or near their FY81 appropriation levels under the budget reconciliation bill. This means that as the two largest ED student aid programs contract over the next several years, there would be little room for any "relief" expansion in such remaining programs as CWS, SEOG, or NDSL. In general, students from middle income families and private postsecondary institutions would appear to be most severely affected by the FY82 student aid budget proposals of the Administration and the Congress; however, low-income students could also suffer from increased competition for remaining, more limited, Federal funds. Middle income students and their families would need to rely more heavily on the combination of GSL parent loans, self-help, and other non-Federal sources to meet college costs. At the same time, restrictions on Pell Grant eligibility for those now qualified could further increase demand for GSL's from both middle and lower income students. Whatever the short-or long-term adjustments that students make to the proposed reductions in Federal student aid, there are certain to be effects on a number of postsecondary educational institutions. In particular, small, high cost private institutions seem vulnerable to decreases in student enrollments because of the decreased availability of student financial aid. How these institutions, and other public and private postsecondary schools, adapt to this changing student aid environment is likely to significantly CRS—27 L IB8l042 UPDATE-O6/O2/82 affect the longer range outlook for their survival and prosperity. As of early May many students attempting to determine how much Federal student aid they will be able to count on for the 1982-83 academic year are encountering difficulties stemming from (1) the lesser amounts of Pell Grant, SEOG, CWS, NDSL and other Federal student aid funding generally available for next fall when compared with the l98l-82 academic year, and (2) the general state of "uncertainty" presently influencing GSL applications for this fall's loans. As the comparison between the FY81 and FY82 ~funding (levels for the ED student aid programs listed in Appendix A makes clear, there is less Federal student aid money available for students for 1982-83, when compared with l98l—82, under every ED student aid program except GSLs. Even with respect to GSLS, the increase in estimated required budget authority from $2.581 billion in FY81 to $3.061 billion tin FY82 will not necessarily translate into more students obtaining student loans for this fall. with the GSL "need-test" enacted last summer (see the discussion under "Omnibus Budget Reconciliation Act of l98l") now required of all GSL applicants from families with incomes exceeding $30,000, a number of students from middle and upper income families who previously received GSLs will no longer qualify for the maximum loan amount (i.e., $2,500 for an undergraduate) and some will no longer qualify for any GSL aid. In addition, ED's anticipated level of increased student and parent borrowing under the auxiliary loan (formerly, parent loan) program may prove too high, according to some analysts who note the slow start the auxiliary program has had in many States. (As of late April l982, lenders in about only half of the States had made any auxiliary loans to either parents or eligible students, i.e., independent undergraduates, graduates or professional students.) Even in States where lenders have made some auxiliary loans, most have been to parents. Lenders, in general, have shown little enthusiasm for making auxiliary loans to student borrowers who will be facing annual interest payments of l4% on each auxiliary loan that they take out even while in school). In addition, the following three factors combined to make many GSL lenders "uneasy" during the months of April and May about the near term stability of the GSL program, and, therefore, reluctant to process (and in some cases, even distribute) GSL applications for this fall: (1) the continuing Administration commitment to adoption of its proposed legislative amendments to the GSL program by this July 1; (2) the possibility that the Congress might yet attempt to reduce the size of the FY82 Federal budget deficit by enacting the Administration's or some other GSL program amendments with an effective date before the start of FY83; and, (3) the present funding status of the GSL program for FY82, whereby there currently are only enough FY82 funds available under P.L. 97+l6l to make outlays to meet GSL interest and insurance obligations to lenders through about CRS-28 IB8lO42 UPDATE-O6/O2/82 the middle Of June. At present, it appears that a substantial resolution of all three of these "uncertainties" may be required before "normal" lender participation in the GSL program resumes. LEGISLATION P.L. 97-12, H.R. 3512 Supplemental Appropriations and Rescissions Act, 1981. Among other provisions, makes supplemental and further continuing appropriations for ED programs for FY81, and rescinds certain budget authority. Introduced May 8, 1981; referred to House Committee on Appropriations. Reported (H.Rept.I) 97-29), and passed the House, amended, May 13, 1981. Reported by Senate Committee on Appropriations (S.Rept. 97-67), and passed the Senate, amended, May 21, 1981. House and Senate agreed to conference report (H.Rept. 97-124) June 4, 1981. Signed into law June 5, 1981. P.L. 97-35, H.R. 3982 Omnibus Budget Reconciliation Act of 1981. Among other provisions, establishes authorization ceilings or otherwise amends and extends virtually all ED programs, and consolidates the administration of most elementary and secondary education programs currently authorized by ESEA. Introduced June 19, 1981; referred to Committee on the Budget. Reported (H.Rept. 97-158), and passed the House, amended, June 26, 1981. House and Senate agreed to conference report (H.Rept. 97-208) July 31, 1981. Signed into law Aug. 13, 1981. Polio HoJoReso Provides further continuing appropriations for the period Dec. 15, 1981 through Mar. 31, 1982 for those Federal agencies, including ED, without a regular FY82 appropriations act. Reported as an original measure (H.Rept. 97-372) and passed House, amended, Dec. 10, 1981. Measure considered and passed Senate Dec. 11, 1981. Signed into law by President Reagan, Dec. 15, 1981. P.L. 97-161, H.J.Res. 409 Provides further continuing appropriations for the period Apr. 1 through Sept. 30, 1982 for those Federal agencies, including ED, without a regular FY82 appropriations act. Introduced Feb. 24, 1982; referred to Committee on Appropriations. Reported (H.Rept. 97-465) and passed House Mar. 24, 1982. Measure considered and passed Senate Mar. 31, 1982. Signed into law by President Reagan, Mar. 31, 1982. H.R. 5922 (Mottl, by request) Urgent Supplemental Appropriations Act, 1982. Provides supplemental appropriations for a number of Federal programs, including several ED postsecondary student aid programs, most notably $1.3 billion additional budget authority for GSLs. Reported (H.Rept. 97-459) by the House Committee on Appropriations, Mar. 23, 1982 and passed House, May 12, 1982. Reported (S.Rept. 97-402) by the Senate Committee on Appropriations, May 18, 1982 and passed Senate, May 27, 1982. CRS-29 IB81042 UPDATE-O6/O2/82 REPORTS AND CONGRESSIONAL DOCUMENTS U.S. Executive Office of the President, and Budget. March, 1981. Office of Management Fiscal year 1982 budget revisions. [Washington] America's new [Washington] White House, beginning: Feb. 18, Office of the Press Secretary. a program for economic recovery. 1981. CHRONOLOGY OF EVENTS 05/27/82 -- 05/18/82 -- 05/12/82 -- 05/03/82 -- 04/21/82 -- 04/01/82 -- The Senate passed H.R. 5922, the Urgent Supplemental Appropriations bill for FY82, without change to any appropriation recommendations in the senate Appropriations Committee report (S.Rept. 97-402). The Senate Committee on Appropriations reported H.R. 5922 (S.Rept. 97-402) with recommendations for (1) a $1.3 billion supplemental appropriation for the GSL program for FY82, (2) a $6.55 million supplemental for the Pell Grant program, and (3) report language concerning the allocation of FY82 funds under the campus-based programs. The House passed H.R. 5922 without change to any of the appropriation recommendations for ED student aid in the House Appropriation Committee report (H.Rept. 97-469). The Department of Education (ED) published in the Federal Register (vol. 47, no. 85, PP. 19086-19110) the proposed GSL family contribution schedule that will apply to student loans for any period of instruction that begins between July 1, 1982 and June 30, 1983. This 1982-83 GSL family contribution schedule will apply only to students whose family income exceeds $30,000, and is effective in 30 days unless either the House or the Senate adopts a resolution of disapproval. ED published in the Federal Register pp. 17197-17238) final regulations for the auxiliary loan program (referred to by ED as the PLUS program, Parent Loans for Undergraduate Students). (vol. 47, no. 77, The Reagan Administration's original implementation date for its proposed FY82 GSL program changes expired without favorable congressional action on any of these proposals. As a result, the Administration revised its implementation date to July 1, 1982. O3/31/82 -- 03/23/82 -- O2/O8/82 -- O2/O8/82 -- O2/O5/82 -- 01/06/82 -- 12/14/81 -- 12/10/81 -- ll/23/81 -- ll/09/8l -- CRS-30 IB8lO42 UPDATE-O6/O2/82 President Reagan signed into law (P.L. 97-161) H.J.Res. which provides further continuing appropriations from Apr. 1 through Sept. 30, 1982 for those Federal agencies (including ED) without a regular FY82 appropriations act. 409, The House Committee on Appropriations reported H.R. 5922 (H.Rept. 97-469) with recommendations for (1) a. $1.3 billion supplemental appropriation for the GSL program for FY82, and (2) a $4.65 million supplemental appropriation to cover Pell Grant processing costs. Several committees in both the House and Senate, including House and Senate Appropriations, Budget, House Education and Labor, and Senate Labor and Human Resources, begin congressional consideration of various aspects of the Reagan Administration's FY83 and FY82 revised budgets, as these pertain to ED student aid programs. ED released various department budget briefing documents concerning its FY83 and revised FY82 budgets. Reagan Administration released FY83 budget documents, including proposals for FY82 rescissions and supplementals affecting ED student aid programs. ED published in the Federal Register (vol. 47, no. 3, pp. 736-743) final regulations concerning the Pell Grant expected family contribution for the 1982-83 academic year. President Reagan signed into law (P.L. 97-92), H.J.Res. which provided continuing funding through Mar. 31, 1982 for those Federal agencies without a regular FY82 appropriations act. 370, The Senate passed S.Res. 256 disapproving ED's Oct. 13, 1981, submission of a proposed Pell Grant need analysis schedule for use during the 1982-83 award year. The House and Senate approved H.J.Res. 368, a compromise extension of the FY82 continuing resolution of Oct. 1, 1981, through Dec. 15, Later that day, President Reagan signed H.J.Res. 368 into law as P.L. 97-85. . Earlier in the day, President Reagan vetoed H.J. 357, another version of the continuing resolution extension that had been approved on Nov. 22, 1981 by the House and the Senate. 1981. The Senate Committee (S.Rept. 97-268) its of Labor, Health and and Related Agencies (H.R. 4560). on Appropriations reported version of the Department Human Services, and Education, Appropriations. Bill, 1982 l0/O6/81 10/01/81 10/30/81 09/23/81 08/13/81 -- 07/31/81 07/21/81 06/26/81 06/25/81 06/05/81 03/10/81 CRS-31 IB8lO42 UPDATE-O6/O2/82 The House passed and sent to the Senate the Department of Labor, Health and Human Services, and Education, and Related Agencies Appropriation Act, (H.R. 4560) without amendment to any of the FY82 budget authority recommendations of the House Appropriations Committee. 1982 President Reagan signed H.J.Res. 325 (P.L. 97-51), which provides continuing appropriations through Nov. 20, 1981 for all ED programs at the lower of either the actual FY81 funding level or the level established under the House-passed version of the FY82 appropriations bill (H.R. 4560) for ED and related agencies. The Reagan Administration proposed a second revised FY82 budget request for ED programs. A The House Committee on Appropriations reported (H.Rept. 97-251) the Department of Labor, Health and Human Services, and Education, and Related Agencies Appropriation Bill, 1982 (H.R. 4560). The Omnibus Budget Reconciliation Act of 1981 was signed into law (P.L. 97-35) by President Reagan. The House and Senate approved the conference report (H.Rept. 97-208) on the Omnibus Budget Reconciliation Act of 1981. House and Senate conferees met and resolved differences concerning ED student aid and related programs under the differing versions of the Omnibus (Budget) Reconciliation Act of 1981 (H.R. 3982 and S. 1377, respectively). The House passed, amended, the Omnibus Budget Reconciliation Act of 1981 (H.R. 3982), including authorization ceilings and other amendments affecting Higher Education Act student aid programs for FY82 through FY84, with certain amendments to the 1 Guaranteed Student Loan program intended to affect FY81 spending. The Senate passed, amended, the Omnibus Reconciliation Act of 1981 (S. 1377), including authorization ceilings and other amendments affecting Higher Education Act student aid programs for FY82 through FY84, with certain amendments to the Guaranteed Student Loan program intended to affect FY81 spending. The Supplemental Appropriations and Rescission Act, 1981 was signed into law (P.L. 97-12). The Reagan Administration sent to the Congress revised FY81 and FY82 budget requests. cRs~32 IB8l042 UPDATE-O6/02/82 02/18/81 -- The Reagan Administration released the budget document, "America's New Beginning: A Program for Economic Recovery," which outlined its View of the condition and needs of the American economy, and proposals for Federal spending cuts and tax reductions. 01/15/81 -- The Carter Administration sent to the Congress its proposed FY82 budget and requested FY81 budget revisions. ADDITIONAL REFERENCE SOURCES Gladieux, Lawrence E. What has Congress wrought? Change magazine. v. 12, October 1980: 7 pages. Higher education daily supplement. [Description of the Education Amendments of 1980]. Oct. 8, 1980. 16 pages. U.S. Department of Education. Office of Student Financial_ Assistance. OSFA program book, 1981. July, 1981. 87 pages. U.S. Library of Congress. Congressional Research Service. Education: FY81 and FY82 funding issues [by] Angela Giordano-Evans. [Washington] 1981. (Issue brief 81119). Regularly updated. —---= Education: FY82 and FY83 funding issues [by] Angela Giordano-Evans. [Washington] 1982. (Issue brief 82019) Regularly updated. --—-- Social security student benefits [by] Nancy Miller. [Washington] 1981. (Issue brief 81030). Regularly updated. ----- Student financial assistance: FY83 budget [by] David Osman. [Washington] 1982. (Issue brief 82018) Regularly updated. Table 4. FY 1981 Budget Authority, FY 1982 Administration Requests, and FY 1982 Funding Under the Third Continuing Resolution for Selected Department of Education Student Aid Programs APPENDIX A. :;1:;;:;:i:: :;i1?:1i3;: Reagan Administration Budget Requests (a) (b) (c) (d) (e) (f) BA BA BA Revised Revised FY82 BA Under FY81 BA Under Request: Request: Request: P.L. 97-92, Third Programs P.L. 97-12 3] 03/10/81 09/30/81 02/05/82 Continuing Resolution Guaranteed Student Loan $2,581.0 3/ $1,773.8 $2,409.7 $2,752.0 E] $1,773.8_E/ Pell Grant: 2,346.0 2,486.0 2,187.7 2,187.7 2,279.0 (258.0) Supplemental educational opportunity grant 370.0 370.0 325.6 278.4, 278.4 College work study 550.0 550.0 484.0 484.0 528.0 National direct student loan 200.8 311.0 273.7 193.4 193.4 State student incentive grant 76.8 76.8 67.5 67.5 73.7 Special programs for the disadvantaged 156.5 159.5 140.4 140.4 150.2 Migrant education (high school and college) 7.3 7.6 6.6 6.6 7.0 Veterans cost-of- instruction 6.0 .0 .0 .0 4.8 Graduate and professional opportunity grant 12.0 11.0 9.7 8.6 10.6 Legal training for the disadvantaged 1.0 1.0 .9 0.1 1.0 Law school clinical _ experience 3.0 .0 .0 .0 1.0 TOTAL $6,568.7 E] $5,746.7 $5,905.8 $6,1l8.7 $5,300.9 13/ P.L. 97-12; Conference Report (H.R. 97-124). of FY81 Pell Grant budget authority is to be used to finance a FY80 program deficit. of FY81 budget authority actually available for Pell Grant awards for the 1981-82 academic Year is an estimated $2.346 billion. It should be noted that an estimated $258 million Thus, the amount See also footnote f, Table 1 for additional discussion of the GSL program. E] The Administration's revised budget request of $2,752.0 for the GSL program assumes enactment of a number of legislative proposals, effective April 1, 1982 (see discussion under "Reagan Budget Pro- posals: Feb. 5, 1982”). If these proposals are not enacted, the Administration estimates that the "current" GSL program will require an additional $309 million in FY 1982-a total budget authority of $3.061 billion. .g/ Under the provisions of P.L. 97-92, the lower of either the House passed or Senate reported level in H.R. 4560 (the FY82 Labor-HHS-ED appropriations bill) is to be used for ED programs. For the GSL program, the House budget authority level was $1.774 billion while the Senate passed $2.603 billion. The Administration, as of February 5, 1982, estimated the FY82 "current" program budget authority for the GSL program as $3.061 billion. David Qsman Analyst in Education Education and Public Welfare Division March 29, 1982 I , . I‘? E? jj ,4“ \. 1 L.i§‘_.).::f":/-"§.. ‘I. '1’ 0?-' Mi 55%;; {H GTO N U5’dW'EF%S§TY ST. LOUEEE - MO.