Proposed DeVos Budget Cuts to Higher Ed Will Encourage Harmful Choices, Heavier Debt

The Department of Education Budget Cuts Funds from Better Alternatives to Predatory For-Profits and Eliminates Aids to Debt Reduction

WASHINGTON, D.C. – Today, the Center for Responsible Lending (CRL) assessed that cuts of $10.6 billion from federal education initiatives announced in the Department of Education’s proposed budget include measures that will drive low-income college students to for-profit colleges that leave them with heavy debt and frequently, no degrees. The budget is also expected to exacerbate the explosive burden of student loan debt that now follows millions of Americans over the course of their lives, with the worst impact hitting women and people of color.

The proposal cuts the federal work-study program by $490 million, eliminates the Supplemental Education Grant for very low-income students, and begins the process of eliminating subsidized federal student loans. It also provides no increase in the maximum annual Pell grant award, another program aimed at assisting low-income students. The award remains at less than $6,000 per calendar year despite the fact that the average cost of tuition for even state residents at a public college is close to $10,000 per year.

Cuts to the TRIO program, which identifies and provides services to people from disadvantaged backgrounds from middle school to post-grad, will weaken support for students that could have steered them away from predatory for-profit colleges and into institutions that provide higher quality education at lower costs. African-American and Latino students in particular have a high risk of experiencing poor outcomes at for-profit colleges, which have a long record of engaging in deceptive practices to pressure students to enroll. Cuts to career and technical education could be expected to diminish opportunities at community colleges, which often have waiting lists, and further steer students to for-profit colleges.

The DeVos budget also rolls back Public Service Loan forgiveness, a program set up to help hundreds of thousands of borrowers meet their debt obligations while committing themselves to service for the public good. This would hit women and middle-class workers particularly hard. Labor Force Statistics from the Current Population Survey (2016) show that although women compose 46.8% of the overall workforce, they represent 73.1% of Education, Training and Library Occupations and 81.5% of Social Worker occupations. These occupations are largely nonprofit and/or government related, require higher education and in some cases graduate degrees, and have relatively low pay compared to the student debt load of many within their ranks.

Blacks and Hispanics would also be disproportionately affected by the elimination of the Public Service Loan Forgiveness Program. These groups constitute 28.6% of the overall workforce, but 36.5% of the Social Worker occupations.

Female college graduates, particularly African-American and Hispanic women, already lag behind in student debt repayment due to a number of factors, including larger debt loads and lower earnings relative to their white male peers.  A recent study by AAUW found that in 2012, women overall had paid off 33% of the student debt they owed 3 years prior compared to 44% overall for men.  African-American women had only paid off 9% of their student debt and Hispanic women, 3%.   

CRL Policy Counsel Whitney Barkley-Denney made the following statement:

The proposed budget would harm students at every stage of borrowing. From the reduction in grant dollars and increased loan burden caused by the elimination of the subsidized loan program, to a more expensive monthly payment under income-driven repayment programs and the elimination of Public Service Loan Forgiveness, this proposal makes going to college and repaying student loans harder—especially for low-income communities, women, and people of color.

Our next generation of leaders deserve an education that is affordable—one that, with a little hard work, will help them achieve the American dream. Instead, this proposal offers student borrowers little more than lasting debt.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Carol Hammerstein at carol.hammerstein@responsiblelending.org or 919-313-8502.