On December 16th, President Obama signed into law a bi-partisan appropriations bill that authorized over $1 trillion in funding across federal agencies through Fiscal Year 2015. What follows is an overview of higher education’s federal provisions for the upcoming fiscal year.
Two significant issues leading up to the passage of the final bill were a) whether Senator Tom Harkin’s (D-IA) push to spend $2 billion out of the current Pell surplus on other initiatives would be successful and b) whether opponents would be able to block the Department of Education from implementing its Gainful Employment regulations. Gainful Employment did not make it into the bill. Worth mentioning here is that NASPA joined other national higher education associations in opposition of the plan to shift Pell funding to other programs. The push to repurpose Pell funding was only partially successful, with $303 million shifted from the Pell Grant Program to cover increased costs of student loan servicing. The appropriation measure provides $22.5 billion for Pell Grants and allows the maximum award to increase by $100 (from $5,730 to $5,830).
A welcome policy change is a provision that restores Ability to Benefit (ATB), which, until it was suspended in 2012, allowed students who had not received a high school diploma or GED to be eligible for federal student aid if they passed an approved Ability to Benefit test and were enrolled in a career pathway program. That is good news, but the policy also says ATB students can only receive the portion of the Pell Grant that is funded by appropriations – or an ATB maximum grant award of $4,860.
Federal Work-Study will be increased by $15 million, TRIO programs by $1.5 million, and the Department of Education’s Office for Civil Rights by $1.6 million. Funds for historically black colleges, minority-serving institutions, and other programs were increased slightly. Supplemental Educational Opportunity Grants are frozen.
There is no funding for President Obama’s proposed college rating system.
Congress directed the Department of Education to issue applications for the Student Support Services Grant competition by Thursday (December 18). Given that the competition windows usually run 30 to 60 days, it is likely that applicants will have to start working on their proposals over the holidays.
A few other changes merit attention. First, lawmakers directed the Department of Education to add a flag to the Free Application for Federal Student Aid (FAFSA) for applicants who are or were foster children. The Department would then use those data to target those applicants for additional information about their federal student aid eligibility. Lawmakers also reiterated a call for the Department to produce a report on the graduation rates of Pell Grant recipients. Legislators also provided funds with the intention for states to further develop data systems that link Pre-K-12, higher education, and workforce data.
One thing that is not present in the legislation is the Perkins Loan program, which is set to expire without legislative action. That means if the House and Senate do not take up a reauthorization of the loan program next year, students will no longer be able to access Perkins loans.
The biggest cut was to the First in the World Program, an evidence-based competition focused on college success and completion. The program’s funding was decreased from $75 to $60 million. Congress also asked the Department of Education for information about what took place in the first competition, which ran last year.
Two additional areas that may be of interest are the provisions related to research and tax-benefit extensions. A summary of each has been provided below.
National Institutes of Health: NIH is funded at $30.1 billion, an increase of $150 million. The agency will also receive $238 million from the $5.4 billion emergency package to fight Ebola, which will be used for clinical trials to evaluate potential vaccines and therapies, reports CQ.com.
National Science Foundation: NSF will receive $7.3 billion, an increase of $172 million. Within that increase, Research and Related Activities will increase by $124 million to $5.933 billion, and Education and Human Resources will increase by $19.5 million to $866 million. Major Research Equipment and Facilities Construction will receive a modest increase of $760,000, resulting in a total allocation of $200.7 million.
NASA: The space agency will be funded at $18 billion, an increase of $364 million. Within that increase, NASA Science will increase by $93 million to $5.244 billion, Aeronautics by $85 million to $651 million, and Space Technology by $10 million to $596 million. Education will be funded at $119 million and the Space Grant will be funded at $40 million.
Department of Energy (DOE) Office of Science: The Office will be level-funded at $5.071 billion, as will ARPA-E at $280 million.
The National Endowment for the Humanities: Funding for NEH will remain flat at $147 million.
On December 3rd, the House of Representatives passed a tax extenders package (H.R. 5771) that will extend more than 50 expired tax benefits through 2014 (a retroactive measure that expires December 31st). The package contains tax benefits important to higher education, which include the Above-the-Line Deduction for Qualified Tuition and Related Expenses and the Tax-Free Distribution from IRA Plans for Charitable Purposes benefit. Approval of the retroactive extension means that the next Congress will seek to address these and other tax benefits for individuals and corporations upon taking office in the new year.
Above-the-Line Deduction: Through the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), Congress created an above-the-line tax deduction for qualified higher education expenses. The maximum deduction was $4,000 for taxpayers with an adjusted gross income (AGI) of $65,000 or less ($130,000 for joint returns) or $2,000 for taxpayers with an AGI of $80,000 or less ($160,000 for joint returns). Through the legislation, lawmakers extended the deduction until the end of 2015. A two year extension of this provision is estimated to cost $596 million over 10 years.
Tax-Free Distributions from Individual Retirement Plan for Charitable Purposes: For two years, Congress extended the provision that permits an Individual Retirement Arrangement (“IRA”) owner who is age 70-1/2 or older to exclude up to $100,000 per year in gross income for distributions made directly from the IRA to certain public charities. A two year extension of this provision is estimated to cost $1.8 billion over 10 years.
Special thanks to Carol Holladay for providing much of the language from which this overview is derived.