Republicans target US student subsidies

Republican threats to stop US government borrowing are raising concerns about the stability of federal student loan programmes just as students make their enrolment decisions for the coming academic year.

The Republican speaker of the US House of Representatives has been warning for months that his party will not take the procedural step of allowing an increase in the nation's debt ceiling if his party is not granted its demand for a package of $4.5 trillion (£3.6 trillion) in federal budget cuts.

The cuts demanded by the speaker, Kevin McCarthy, include sharply reducing funding for the Pell Grant – the main federal subsidy for low-income students – and ending President Biden’s attempts to provide broad student debt forgiveness.

The Biden administration has declared itself unwilling to negotiate over the matter, noting that the nation’s legal borrowing limit is routinely extended by Congress during Republican presidencies, then used by Republicans when they control at least one chamber of Congress to force the adoption of their political agenda.

The US education secretary, Miguel Cardona, on a call with reporters, accused Mr McCarthy and his party allies of being willing to “force a catastrophic default, and plunge America into recession”, in order to undermine educational opportunities.

“Today we face a moment of truth in education,” Dr Cardona said. “But while this administration is meeting the moment with urgency and resolve, it’s clear that Republicans are planning to meet it with staggering recklessness, prioritising extreme politics over practical policies to help our nation’s students. That’s unacceptable.”

The US reached its current congressionally authorised borrowing limit in January. In an exercise that has become familiar during similar showdowns in past years, the US Treasury is able to avoid major effects for several months by moving money in various accounts to avoid defaulting on any debt. But its ability to avoid the major harms of a federal default is estimated to run until only about July.

The Pell Grant provides needy college students up to $6,895 a year, with an average of nearly $4,200 among more than 6 million recipients. The McCarthy plan would cost them about $1,000 per year, including ending the benefit outright for about 80,000 students, according to Biden administration estimates.

“Imagine being one of those 80,000 students,"”Dr Cardona said. “Imagine beating the odds and winning admission to a great college, only to find out that your grant was cut, and doesn’t exist any more.”

Most selective US universities have a deadline of 1 May for incoming freshmen to accept offers of admission and pay enrolment deposits.

The secretary cited research showing that Pell grant awards “pay for themselves, by generating higher incomes and greater tax revenues”.

The McCarthy plan also would end the Biden administration's efforts – now caught up in court battles – to provide up to $20,000 in student loan debt forgiveness for more than 40 million borrowers. Republicans are pursuing that strategy even while some of them personally received "triple that amount" in federal forgiveness of business-loan debts during the pandemic, Dr Cardona said.

Other education-related cuts sought by House Republicans include a $4 billion reduction for public grade schools serving low-income children.

The US Department of Education already has been reporting staffing-related obstacles to issuing student loans due to a combination of Covid-related policy shifts and the expected post-pandemic resumption of loan repayments, after Congress last year rejected a Biden administration request for more funding to handle those higher administrative costs.

paul.basken@timeshighereducation.com