State PIRGs' Higher Education Project
218 D Street SE
Washington, DC 20003
(202) 546-9707

Director:
Ivan Frishberg

Advocate:
Ellynne Bannon

 

May 6, 2001

Midnight Budget Guts Student Aid Funding, Gives Banks and Lenders $6.6 Billion Boost

Congressional leaders killed last week's budget agreement to spend an additional $6 billion on education programs in the discretionary part of the budget. The rejected agreement maintained the core of Senator Harkin's amendment to provide enough funding for a $600 increase in the maximum Pell Grant for this fiscal year and for continued increases beyond this year.

In what seemed to be a last ditch effort to push even more funds towards tax cuts, the Congressional leadership tried Thursday night to force through a revised budget that would result in a $1 billion cut for education. This new budget would kill both Senator Harkin's amendment and President Bush's $1billion proposal for student aid, and lead to cuts in education funding.

Adding insult to injury, the last minute budget deal also included a budget rider that will provide lenders with as much as $6.6 billion for increased subsidies to the FFEL loan industry. This rider, sought by loan industry lobbyists, is a half step towards implementing lowered interest rates on student loans that are scheduled to go in to effect in 2003.

What is bitterly disappointing about the huge increase in loan industry subsidy is that it provides incredible sums of taxpayer money to the loan industry without doing anything to ensure that the federal government will be able to provide the scheduled reduction in interest rates for students. All of this at the same time as making devastating cuts to grant based student aid programs.

Late Thursday night the House of Representatives had to delay passage of the budget resolution because of technical problems and both the House and Senate are now expected to vote on the budget this Tuesday.

Action:

Call your Senators and Members of Congress immediately and urge them to reject this backroom budget deal. Let them know that we should not be spending billions more on the loan industry while cutting grants to students. Congress should support the increased spending provided for by the Harkin amendment that was originally agreed to by the Senate.

Call your representatives by using the student aid hotline 1 (800) 574-4AID.
Senate Switchboard: (202) 224-3121
House Switchboard: (202) 225-3121