What Does CBO Baseline Report Mean for Student Aid Reform Bill?

Sorry, I wasn't much help with my earlier post which tried to decipher how the new CBO baseline would impact student aid reform legislation stuck in the Senate.   Thanks to the folks at Higher Ed Watch Blog for their analysis of the CBO baseline which noted that the cost of Pell Grant funding increased by $17 billion from earlier estimates:

"Pell Grant funding in the House bill will now cost $56 billion over 10 years, not the originally estimated $39 billion, thanks to greater student enrollment and higher inflation expectations. That would eat up a lot more of the $87 billion in savings created by doing away with private lender subsidies in the Federal Family Education Loan program.

As is common practice, however, official spending and savings estimates that the Senate will use for any student aid bill that moves in the chamber in the coming months will likely reflect CBO’s March 2009 baseline, not the recently released January 2010 numbers. But as we pointed out last week, the Senate Budget Committee chairman could break with precedent and use the most up-to-date estimates. Republicans (and maybe a few self-described Democratic budget hawks) will surely wince at the ever rising Pell Grant costs and cry foul if the Senate goes with the lower number.

In the face of rising Pell Grant costs, the Obama administration and Congress may have to dial back their spending ambitions. If Democrats want to ensure the kind of Pell Grant increases they are promising, they might want to consider putting all direct loan savings toward the program. After all, that’s more in line with what President Obama proposed a year ago."

A recent analysis by SLA found that after six months of the 2009-10 academic year, Pell grant recipients are up 33% and total disbursements (or grants provided to students) were up 57% to $13.9 billion.  It is hard for me to fathom that the Budget Committee could turn back the clock and use more favorable estimates from the spring given that "deficit fever" has hit the city on the Potomac.  That would seem very irresponsible in this era of austerity.  I wonder if we will see the $10 billion budgeted in the original SAFRA bill will be sacrificed in order to retain many of the programs in the original bill. Here are the details on the original SAFRA bill passed by the House in September.