Washington Watch: CBO scores House HEA legislation

iStock

The Congressional Budget Office (CBO) has released its official cost estimate for the Higher Education Act (HEA) reauthorization legislation approved by the House Education and Labor Committee in October.

Under House rules, this action is needed for the legislation, titled the College Affordability Act (H.R. 4674), to move to the House floor. Floor action is expected to take place in early 2020.

H.R. 4674 cannot be ruled in order when it comes before the full House unless any new “mandatory” expenditures — i.e., spending that automatically occurs by law unless Congress acts to eliminate or alter it — are offset by corresponding spending reductions or revenue increases.

CBO has stated that CAA’s new mandatory costs total $331.9 billion over 10 years, the measurement period required under House rules. The necessary offsets or “pay-fors,” in Washington parlance, are expected to come from programs under the jurisdiction of the House Ways and Means Committee, which has authority over the tax code, as well as Social Security, Medicare and Medicaid. The Education and Labor Committee itself does not have sufficient programmatic jurisdiction to identify the required offset.

Proposed new spending for discretionary programs (i.e., annual appropriations) does not require offsets because their spending is not guaranteed. However, the CBO estimate includes assumptions about these programs as well.

Where CAA’s money goes

The CBO cost estimate surfaces the spending priorities embedded in the more than 1,200-page legislation. Some important features include:

Making student loans cheaper: Overall, H.R. 4674 spends an additional $169.9 billion over the next 10 years on changes to the federal loan programs. Much of this spending comes from:

  • Allowing the refinancing of loans and providing new income-based repayment options.
  • Making it easier for borrowers to qualify for Public Service Loan Forgiveness (addressing controversial implementation issues that have made it impossible for thousands of students to qualify).
  • Eliminating loan origination fees. These loan changes represent more than half of all the mandatory spending in the College Affordability Act.

Increasing Pell Grant funding: As staunchly advocated by the American Association of Community Colleges (AACC), H.R. 4674 would provide an initial boost of $625 to the Pell Grant maximum in award year 2021-22. It also would increase the maximum grant by the consumer price index in succeeding years. These enhancements cost $68.7 billion over 10 years. The annual cost of the Pell Grant program is slightly under $30 billion.

America’s College Promise (ACP): The proposed federal-state partnership that would support no-tuition community college also would be funded through mandatory funds, which is an indication of the committee’s commitment to ACP. The program would likely start slowly, as states identify the necessary financial resources to match federal funds (on a 1:3 basis) and adopt other required policies, including in the area of transfer.

CBO estimate states that “most” states would ultimately participate. In its 10th year of implementation, the program is projected to cost $14.3 billion, with a 10-year total of $59.3 billion.

Other new programs

H.R. 4674 would create several new programs that could greatly benefit community college students and institutions. These include focused efforts on student success and developmental education. However, these programs are subject to annual appropriations and therefore fall outside of the “PAYGO” rules that require offsets in new spending.

Similarly, new Pell Grant eligibility for short-term programs and incarcerated students, as well as that for graduate and professional students (which AACC opposes), would fall into this category of discretionary spending.

We’ll keep you posted with more information about the legislation as it heads to the House floor.

Further reading: AACC’s analysis of H.R. 4674

Frequently asked questions about CBO cost estimates

About the Author

David Baime
is senior vice president for government relations and policy analysis at the American Association of Community Colleges.