In late 2017, House Republicans released a bill aimed at reauthorizing the Higher Education Act. Known as the Prosper Act, the bill makes substantial changes to student loan programs and loosens restrictions on for-profit colleges. And last week, the nonpartisan Congressional Budget Office released its official score of the bill.
Initial reports on the CBO score stated that the bill will decrease spending to federal student aid by $14.6 billion over the next 10 years. Republicans seized on this information, claiming it demonstrates that the bill is “fiscally responsible.” Meanwhile, Democrats and higher education advocates used this score to criticize the bill, claiming it will hurt borrowers by limiting financial aid options.
But neither portrayal is accurate, according to Jason Delisle and Preston Cooper of conservative think tank American Enterprise Institute. In a recent opinion piece, Delisle and Cooper wrote that a closer look at the CBO score reveals that rather than cutting funds to student aid, the Prosper Act will actually increase federal spending over the next 10 years.
The bill does cut funding to entitlements, such as the Public Service Loan Forgiveness Program. But the bill also makes a number of changes to the Pell Grant program. The Pell Grant program provides grants to undergraduates that come from low- and middle-class backgrounds.
The Prosper Act makes a number of regulatory changes to the Pell Grant program, increasing the number of students that would qualify. The CBO estimated that under these new changes, an additional 1.1 million students would be eligible to receive Pell Grants.
Increasing the number of Pell Grants distributed will cost the government more money. And this increase in spending would be reflected on the discretionary side of the budget. Unlike entitlement spending, discretionary spending is contingent on annual appropriations, which causes many people to overlook them.
If the Prosper Act is passed, discretionary spending on student loans will increase by $16.8 billion over the next 10 years. So rather than cutting the budget by $14.6 billion, spending on federal student aid would actually increase by $2.2 billion over the next 10 years, according to Delisle and Cooper.
But that figure is still too low because it uses outdated rules to estimate the costs of student loans, according to CBO estimates. By using updated accounting practices, according to Delisle and Cooper, the Prosper Act would increase federal student loan spending by $11.7 billion over the next 10 years.