Federal Pell Grant Program: How The Debt Ceiling Debate Affects You or Someone You Know

It was announced this morning that House Republicans called a floor vote on their revamped Debt Ceiling bill for sometime today. Since this debate has began, the Federal Pell Grant program has been on the chopping block and it is clear that it will remain there in today’s House vote.

The Federal Pell Grant program provides need-based grants to low-income undergraduate and certain postbaccalaureate students to promote access to postsecondary education. According to the programs website, students may use their grants at any one of approximately 5,400 participating postsecondary institutions.

What makes Pell Grants unique is those who receive them do not have to pay them back after graduation.

When the program began 30 years ago, the Pell Grant’s had the ability to cover almost three-fourths of the cost of attending  four years at a public college. Today, however, the maximum award from the program only covers about a third of the cost. 63% of Pell recipients take out other loans to pay for their schooling.

The program is open to students of all races and genders, but nearly half of African Americans pursuing an undergraduate degree receive Pells, as do 40 percent of Latino undergrads.

When the 2012 fiscal budget was up for debate, things were looking pretty good for the Pell Grant program. Overall, Obama wanted to raise Pell funding by more than $5 billion dollars. House Republicans,  however, wanted to lower the maximum Pell grant to $4,705 and cut other education spending by $4.9 billion. The program ended up taking a $4 billion hit.

However, Congress’s failure to pass this year’s budget has kept the Pell Grant program in limbo, showing up on college bills as being present but with no amount assigned to it.

If  Pell grants are cut down, not only will fewer students be able to go to college but the students benefitting financially from the program currently will have a tough time finishing.

Students who have not even started packing for college in the Fall may have to reevaluate their financial situation before they swipe into their dorms.  Colleges will have to roll back a portion of their financial-aid offers if the Pell Grant program gets cut down.

Michigan State’s financial aid-director, Rick Shipman, told The Chronicle of Higher Education  that Michigan State would have to reduce the financial-aid packages offered to more than 9,000 students if cuts to the Pell program are enacted. Most of those students are already receiving the university’s maximum aid award, he said.

For politicians who are so invested in the future of this nation, it appears that they are looking over one detail; the generation who is going to run it. It does not make sense to cut funding from education or programs that help students pay for the outrageous price of public and private colleges today.

Further, I would be willing to bet my own college education that this issue would be less contested if the majority of its recipients were not minorities.

Everyone comes from different backgrounds and not all families have an equal start when it comes to raising money for their students education. There is certainly an underlying theme of elitism in the Pell Grant debates, because by cutting scholarship funding for minorities it returns higher education to the white-privilege opportunity it once was.


The Debit Ceiling: What Happened, What is Happening

How We Got Here: A Brief Legislative History  

Since World War 1, Congress has had the ability to pass a budget which requires financial dependency on other countries while arguing to approve the budget later. This system was created during the first World War so Congress could put a limit on just how much debt the federal government could acquire. The limit was a part of a law that allowed the Treasury to issue liberty bonds to help pay for the war.   The law hoped to eliminate the need for Congress to approve each new issuance of debt and therefore give the Treasury greater discretion.

The raising of the debt limit has been almost an every day occurrence for past presidents; GOP hero Ronald Regan raised the debt limit 18 times, while President Bush raised it seven times.  Over the years the limit has been raised repeatedly, to $14.3 trillion today from roughly $43 billion in 1940.

Federal Spending in the Past 11 Years 

“In the year 2000, the government had a budget surplus. But instead of using it to pay off our debt, the money was spent on trillions of dollars in new tax cuts, while two wars and an expensive prescription drug program were simply added to our nation’s credit card.” -Barack Obama in his July 25 address

People are asking, how we got from the post Clinton administration surplus to almost ten years of deficits. The New York Times reported that the economic decline is largely a result of the Bush-era tax  cuts, war spending in Iraq and Afghanistan and recessions.

This first graph shows the difference between what the budget was expected to be and what the budget reality ended up being. As of 2001, the Congressional Budget office predicted the financial surplus would only continue if the economy sustained. But because of over spending, the federal budget fell into a deficit every year. Just before Obama took office, the budget office projected a $1.2 trillion deficit for the 2009 fiscal year and deficits for years to come after that. Obama’s 2009 and 2010 policies, including the stimulus package, did add to those deficits but on more of a temporary level.

The second graph shows under President Bush, tax cuts and war spending were the greatest actors in the swing of a could be surplus to a deficit. Barack Obama clearly adds significantly less.

So wait, what does this mean? 

If the United States does not raise the debt ceiling like it has in the past, it will default on its loans. This means the country  will be given no additional time to pay back the loans we owe with the money we don’t have.

We will owe about $307 billion during the rest of the August but will only be taking in $172 billion dollars in revenue. Without enough money to pay for everything, the nation will have to prioritize who they are making payments to or pay the bills in the order in which they were/are received. Depending on how they choose, the government could not have enough money left to pay for things like the  salaries of the federal workers and members of the military, and Pell Grant college scholarships.

According to the US Treasurey, raising the debt limit does not increase our federal governments obligations, but instead allows for the government to address its current obligations. Refusing to raise the debt limit does nothing to reduce those existing obligations or cut the deficit.

Where we stand today 

For political reasons only, the “debt ceiling crisis” remains unsolved.  Republicans are holding the Debt Ceiling hostage until their spending cut demands are reached. Nations around the world are baffled by how U.S. officials are handling this issue and are terrified of what the indecisiveness of this country means for their own economy.

In this hour, an important time measurement to point out because this issue changes hourly, talks are stalled as the GOP rewrites their proposal due to miscalculations.  The Congressional Budget Office (CBO) announced  on Tuesday night that House Majority leader John Boehner’s  bill would have only cut spending by $850 billion  over the next decade, not the $1.2 trillion he had aimed for.

However, Boehners plan is even proving to be a bit radical for his fellow Republicans. As of 3:30 this afternoon Talking Points Memo reported conservatives have renewed their campaign against the House Majority leaders plan…

 They’re opposed to any plan that doesn’t guarantee vast spending reductions, and allow conservatives to declare victory in a decades long fight over the propriety of federal safety net programs.

Democrats continue to bide their time in the Senate, waiting for the vote on Boehners bill before making decisions of their own. If the bill succeeds in the House, Senate majority leader Harry Reid will have to decide whether to bring it up for a symbolic vote (symbolic because Democrats rule the Senate and will not vote for it) or if he will just proceed with his own bill. Democrats will be hard pressed to pass anything that severly cuts Medicare, social security and other social programs.