Trump’s Higher Education Cuts Are Neither Bold Nor Brutal

As is customary for presidents during their first year in office, President Trump on Thursday released a slimmed-down budget proposal to Congress outlining which federal government programs he’d like to expand, and which ones he’d like to cut. If Trump has his way, the Department of Education’s discretionary funding will shrink by 13% in 2018. But this change is not nearly as dramatic as it sounds.

Trump would eliminate or scale back a number of K-12 and general education programs, along with two programs exclusively pertaining to higher education. The budget abolishes the Supplemental Education Opportunity Grant, which allocates funds to colleges for financial aid, and “significantly reduces” Federal Work Study, which incentivizes students to hold campus jobs. Together, these two programs account for $1.7 billion in annual spending.

That figure may sound hefty, but it represents a drop in the bucket of overall federal spending on student aid in higher education, which was nearly $80 billion in fiscal year 2016. Federal Pell Grants, which defray college costs for low-income students, constitute the largest single expenditure at $28 billion annually. Federal tax credits that families can use to offset tuition costs represent the second largest expenditures category at $21 billion.

Preston Cooper/Forbes

Sources: Congressional Budget Office fair-value estimates (student loans), Education Department budget (Pell Grants, SEOG, Work-Study, Service Grants), Defense Department budget (military benefits), Veterans Affairs Department budget (veterans’ benefits), and Joint Committee on Taxation (tax expenditures). List is not exhaustive, as cost estimates do not exist for all programs.

Of twelve major federal programs that provide financial help to college students, the two programs affected by Trump’s budget rank eighth and ninth in terms of cost. Reality matches neither the big-thinking fiscal conservatism promised by Trump’s defenders nor the apocalyptic slashing alleged by his opponents. Trump’s budget cuts leave the vast majority of federal higher education spending untouched.

In fairness to Trump, his draft budget only touches discretionary spending—i.e., government spending that must be reauthorized by Congress from year to year. This contrasts to mandatory spending, which takes place automatically and without congressional approval. For instance, eligible individuals may take out student loans from the government even though Congress does not reauthorize the student loan program every year. Expenditures through the tax code, such as tuition tax credits, are also not discretionary spending. Anyone eligible may claim a reduction to their tax liability that Congress has once authorized—lawmakers do not have to re-approve these expenditures every year.

Of the items identified above, only a portion of Pell Grants, some military education benefits, and the two programs targeted by Trump’s budget count as discretionary spending. Therefore, while the proposed budget may appear to make dramatic cuts to the federal role in higher education, that case only stands up if you consider discretionary spending alone.

What are the two discretionary programs that Trump’s budget targets? The Supplemental Education Opportunity Grant (SEOG) is a holdover from the period before Congress established the larger and better-targeted Pell Grant. Since nothing is so permanent as a temporary government program, the SEOG remained even after the Pell Grant usurped its purpose. The SEOG routes funds through institutions themselves to reduce tuition expenses for low-income students. Unlike the Pell Grant, though, SEOG funds do not follow needy students themselves: rather, colleges receive SEOG money based largely on whether they have received it in the past. This makes the program not only redundant, but far less efficient than its larger counterpart, the Pell Grant.

The Trump administration proposes reducing, not eliminating, another program: Federal Work-Study. This program seeks to encourage students to work in part-time jobs (usually on campus) in order to pay tuition expenses and living costs. Research has found that roughly half of participants in Federal Work-Study would have worked anyways; moreover, the program sees high participation rates among wealthy students and at elite institutions. All this suggests Federal Work-Study could improve with an overall spending reduction and better targeting of funds, as the Trump budget proposes.

Eliminating a redundant program and scaling back an overbroad one are both sensible budgeting decisions. But if President Trump is looking for serious savings, he ought to think a little bigger. Loans to graduate students in particular will cause most of the increase in the student loan program’s costs over the next decade: ending these would save $37 billion by 2027. But recall that graduate student loans are mandatory programs. Congress cannot end these simply by failing to include them in the annual budget. And therein lies the difficulty. If discretionary government programs are permanent, mandatory programs are eternal.