House Committee on Education and Labor
U.S. House of Representatives

Republicans
Rep. Howard P. “Buck” McKeon
Ranking Member

Fiscally responsible reforms for students, workers and retirees.

Photos

Fact Sheet

FOR IMMEDIATE RELEASE
July 10, 2007

MYTH vs. FACT: The Democrat Entitlement Bill

Democrats tout the College Cost Reduction Act (H.R. 2669) as a historic investment in student aid programs, but under the microscope, it’s clear that these claims fall flat.  In reality, this legislation would create nine new entitlement programs, while placing the interests of graduates, colleges, and universities above the needs of low-income students.  The following facts expose some of the most common myths propagated by those who aim to mislead students and parents about this Trojan Horse legislation.

MYTH: The Democrat entitlement bill represents the single largest investment in student aid since the GI Bill.

FACT:  Out of $18-plus billion in new spending under the bill, House Democrats only manage to direct about one-third to Pell Grants, the most successful student aid program on the books.  Instead, the Democrat bill cuts interest rates for those who already have graduated from college, at a cost of $6.2 billion to U.S. taxpayers.  This means the Democrat “student aid” bill’s largest amount of new spending, ironically, wouldn’t impact a single college student.

Moreover, the Democrat entitlement bill represents a significant change in the way federal entitlement dollars are spent.  Historically, the federal government reserves entitlement spending for individuals, such as Social Security recipients, Medicare enrollees, and students.  The Democrat bill shifts the focus of entitlement spending away from individuals to colleges, universities, and private organizations.  Once the government starts down this path, it will be difficult to stop the spending in other areas.

MYTH:  The Democrat entitlement bill will establish new programs at no new cost to taxpayers.

FACT:  The bill is nothing more than a Trojan Horse for new spending at the long-term expense of American taxpayers.  The measure has been considered under the expedited procedure of budget reconciliation, which protects it from a potential filibuster in the Senate.  Even though reconciliation is intended for deficit reduction, this bill simply exploits the procedure.  It cuts roughly $18.58 billion over five years in payments to student loan providers, but simultaneously spends more than $17.13 billion during that same time period on multiple programs, including nine new entitlement programs – an apparent net savings of less than 9 percent. 

However, once these new entitlement programs are created, history has proven that they will never die.  The long-term costs of these new programs will be substantial.  And other proposals included in the bill, such as the interest rate cut for college graduates, will have exploding long-term costs that could amount to over $32 billion after an initial phase-down over the next five years.  If these proposals continue in the future, taxpayers will be forced to pay billions more to cover this new spending.

MYTH:  The Democrat entitlement bill balances fiscal responsibility with the goal of expanding college access.

FACT:  The bill increases aid to college graduates, as well as colleges and universities, at the expense of students who receive Pell Grants.  To begin, the legislation would cut student loan interest rates at a potential long-term expense of $32 billion after an initial five-year phase-down.  On top of that, the measure would place billions of federal dollars on spending auto-pilot over the next five years by triggering an onslaught of new entitlement spending including:

  • A new entitlement program at a five-year cost of $375 million to provide grants to colleges and universities to provide scholarships to students who teach in high need subject areas for four years after graduation.
  • A new entitlement program at a cost of $50 million over five years to provide federal dollars to institutions for the creation of Centers of Excellence to increase teacher development and improve teacher preparation programs at minority serving institutions. 
  • A new entitlement program at a cost of $300 million over the next five years to provide federal dollars as matching funds to companies doing philanthropic activities to improve college access and retention.
  • A new entitlement program at a cost of $147 million over the next five years to provide federal dollars to colleges and universities to create cooperative education programs, which require students to gain work experience, even though the existing federal work-study program already provides similar benefits.
  • New entitlement spending for minority-serving institutions at a cost of tens of millions to U.S. taxpayers.  In addition to discretionary funding already strongly supported on both sides of the aisle, this new entitlement spending would flow to institutions such as Historically Black Colleges and Universities, Hispanic-serving institutions, Tribally Controlled Colleges and Universities, Alaska Native and Native Hawaiian-serving institutions, and Predominantly-Black Institutions and Asian-American and Pacific-Islander-serving institutions – two new classifications created by the Democrat bill.
  • New entitlement spending at a cost of nearly $6 billion over the next five years to increase the maximum Pell Grant with mandatory funding.
  • A new entitlement program at a cost of $1.3 billion over five years to provide up to $5,000 in loan forgiveness will be provided to nurses, teachers, librarians, school counselors, and other professions.
  • New entitlement spending at a cost of $500 million over five years to provide mandatory money to fund the Federal Capital Contributions (FCC) in the Perkins loan program.  The Democrats include this new entitlement spending even though the FCC has not been funded by the appropriators since FY 2004.  The appropriators did not include any funding for the FCC in their Labor-HHS-Education Appropriations bill this year.
  • New entitlement spending at a cost of $228 million to provide additional financial support IN ADDITION to what already is appropriated each year for the federal college preparation program, Upward Bound.

With billions in new programs – most of which is misdirected toward institutions and graduates rather than students – this bill marks the first step toward an explosion in new, unchecked entitlement spending and another unfortunate step toward further hyperinflation in college costs.