How Would Trump's Tax Reform Impact College Students? Pell Grant Funding Could Be In Trouble
Sens. Bernie Sanders (D-VT) and Ted Cruz (R-TX) duked it out over tax reform at a CNN town hall debate Wednesday night. While the debate devolved at times to slinging personal barbs and arguing over who was interrupting whom, the senators did broach at least one topic that college students present and future are anxious to know: how Trump's tax plan will affect college students and their prospects for a job.
In his closing remarks, Sanders blasted Trump's budget for cutting programs that support working and low-income families. Though the plan doesn't cut the Pell grant program completely, it cuts some of its funding that helps college students pay for tuition. Cruz argued earlier that tax cuts are about "more money in your pockets" while Sanders referred to Trump's tax plan as "a Robin Hood proposal in reverse."
Trump's 2018 budget proposal, released in the spring, slashes $3.9 billion out of the Pell grant program's "rainy day" reserve fund. The House and Senate also put forth funding bills for fiscal year 2018 that propose shaving billions of dollars off from the Pell grant surplus.
"Because of the way the program operates, cutting from the reserves could put the future of the program at risk and harm deserving college students down the road," wrote Megan McClean Coval for Inside Higher Ed. Coval is the vice president of policy and federal relations for the National Association of Student Financial Aid Administrators. She argued that while the Pell grant program's reserve fund looks like extra money that can be easily redirected, the purpose of the surplus is to protect students and taxpayers should the program face a funding shortfall in times of recession or an increase in college enrollment.
More than 7.5 million college students received Pell grants in the 2015-2016 school year, or 33 percent of the total undergraduate headcount. The federal government provides the subsidy to undergraduate students who have not earned their first bachelor's degree yet and have financial need — indicated by families earning less than $40,000 a year and prioritized for families earning $20,000 or less a year. Unlike with loans, students do not have to pay back grants. The Pell grant program makes up the largest expense in the U.S. Department of Education.
Both the House and Trump budget propose freezing the maximum Pell grant award, which is currently $5,920 per year for up to six years. If tuition costs continue to rise while grant amounts remain the same, the purchasing power of Pell grants would weaken and could affect college affordability. The United States is the second most most expensive country in the world for college and the purchasing power of Pell grants has already fallen to its lowest level.
In addition to education cuts in the Trump budget, the federal government would stop subsidizing interest on student loans, reduce the number of student loan repayment plans to one, and phase out the public service loan forgiveness program. The public service loan forgiveness program, which affects half a million people, erases student loans for people who have been employed for more than 10 years for the government or a qualifying nonprofit.
But as Sen. Cruz explained at the CNN tax reform debate, the overall budget changes will support college students and their families in the long run. Kelsey Yarzab, a George Washington University student, asked Cruz how the Senate bill justifies cutting the corporate tax rate to 15 percent while barely cutting individual rates for the middle class. "Because when you graduate, you want a job," he answered. According to Cruz, tax cuts for working families and small businesses equal more job opportunities and better wages.
"America is a land of opportunity," Cruz said in his closing remarks. "We are going to cut your taxes and it is going to make a difference in terms of a better future for Americans all across this great nation."