U.S. Department of Education

President Obama sent his fiscal year 2014 budget request to Congress on April 10, 2013. The New America Foundation’s Education Policy Program released this subsequent issue brief, “Key Questions on the Obama Administration’s 2014 Budget Request."

Today, President Obama released the first budget of his second term. The budget would increase overall appropriations funding for the U.S. Department of Education by about $3 million over 2012 levels, to $71.2 billion. It consolidates a number of programs and creates a few new ones -- including a broad new pre-K package.

The president’s budget comes two months behind schedule (by law, the budget request is due on the Hill in February), and both the House and Senate have already voted on budget resolutions for fiscal year 2014, although they haven’t yet agreed on a joint resolution. Still, the budget request acts as a weathervane, indicating the president’s priorities over the next few years. Below are a few of the highlights from this year’s budget request:

Early Education

• The White House hopes to initiate a new early learning program, first outlined in February’s State of the Union address. States would partner with the federal government to receive $75 billion over 10 years to fund pre-K for 4-year-olds at or below 200 percent of the federal poverty level. A separate, $750 million investment next year would help states develop their early learning systems. Home visiting programs for infants and children would also be extended.

PreK-12

• The Promise Neighborhoods program would receive $300 million in fiscal year 2014, up from $60 million last year. It would be incorporated into a new cross-agency “Promise Zones initiative, and a portion of the Promise Neighborhood funds would be reserved for Promise Zone awardees.
   
• School turnaround grants would receive $659 million, up from $534 million in 2012. That includes a new, $125 million competition to expand schools’ capacity for reform.
   
• As in prior budget requests, Obama included a proposal to reorganize teacher programs to a “teacher and leader innovation” fund and an “effective teachers and leaders” formula grant to states – the latter with a 25 percent set-aside for competitive grants. There would be a $100 million competition to design professional development programs for school leaders, as well as a one-time, $5 billion entitlement cost for the previously proposed RESPECT program. The White House also proposes another $12.5 billion in mandatory funding to prevent teacher layoffs – a legacy proposal since the stimulus legislation was passed in 2009.

Higher Education

• The White House request moves Race to the Top out of the early learning and K-12 arenas and into the higher education world, with a $1.0 billion competition designed to develop higher education reforms while keeping costs low. It also significantly expands the request for an innovation-focused First in the World competition, funded at $260 million, which includes approximately $175 million for an evidence-based program (similar to i3), as well as $75 million to support competency-based education efforts Both competitions have been proposed before, but neither has received funding.
   
• Student loan interest rates, which are scheduled to double on certain loans next year from 3.4 percent to 6.8 percent, would be moved to a market-based approach. Adapted from a proposal last year by New America’s Jason Delisle, the approach would tie rates to the 10-year Treasury notes. Subsidized Stafford loans would total the 10-year Treasury rate plus .93 percent; Unsubsidized Stafford loans would total 10-year Treasury rate plus 2.93 percent, and PLUS loans would be 10-year Treasury rate plus 3.93 percent.
   
• Pay As You Earn, the latest version of income-based repayment for federal student loans, would be available to all borrowers, not just to those who borrowed in 2008 or later, and the loan forgiveness granted after 20 years of payments would be tax-free. The budget is silent on the issues we raised last year of windfall payments for high-debt, high-income borrowers, though, so we’ll be looking to the U.S. Department of Education to see how it plans to address those concerns.

We’ll be writing on these and many other topics in the budget request in the coming weeks, so check back with Ed Money Watch for more details.

President Obama is scheduled to submit his fiscal year 2014 budget request to Congress this Wednesday, April 10. This year’s proposal – the president’s fifth budget request and the first of his final term – will likely include education policies from his past budgets, and certainly some new ideas. It will also show how the Obama administration would allocate fiscal year 2014 funding for every federal education program, which starts October 1, 2013.

Here are a few of topics worth keeping an eye out for on Wednesday.

• Pre-K Initiative: President Obama proposed in his State of the Union address that the Department of Education work with states to expand access to high-quality pre-K to all four-year-olds whose families earn below 200 percent of the federal poverty line. But there were no other details in the weeks that followed, except that we could expect more information when the president’s budget was released – and according to The New York Times, that the pre-K program will be funded with an increase to the federal tobacco tax.

We have a lot of questions about the plan, like how many children is it expected to cover? How expensive will it be and for how much will states be on the hook? How will the White House ensure pre-K offerings are high-quality? We’ll be looking to the budget request for these and other details on the plan.

• Program Consolidations: In each of President Obama’s first four budgets, he proposed consolidating 38 existing K-12 programs into just 11.  The proposed reorganization formed a basis of the administration’s Elementary and Secondary Education Act (ESEA) reauthorization – a long overdue legislative action by Congress, given that No Child Left Behind, its most recent iteration, expired in 2007. Will the administration still be pushing for ESEA reauthorization?  Will the budget include the same consolidations it has in every one of President Obama’s budgets before that?  Or will the Obama administration propose something new altogether?
   
• Competitive Grants: In the American Recovery and Reinvestment Act, President Obama launched several new competitive grant programs for school districts, among them the Race to the Top and Investing in Innovation (i3) programs. The programs have been refunded each year, and in the case of Race to the Top, used to fund new versions of the competition. Obama’s past proposals include a Race to the Top round for higher education and a “First in the World” college access and completion competition – neither of which received funding.

In his State of the Union address, Obama previewed a partnership program between high schools and colleges and employers to develop classes that promote career readiness in the STEM fields.  So far, no details have emerged on the proposal. But we wonder whether President Obama’s budget request will include funding for a new Race to the Top competition – this time for high schools. And will he push for any of his other lost proposals? Or will programs like the Race to the Top-Early Learning Challenge receive another injection of federal spending instead?

• Pell Grants: The Congressional Budget Office estimated this year that the Pell Grant program has had ample funding in recent years, such that it has accumulated a $9.2 billion surplus. That funding gives Congress and the Obama administration more time than originally estimated before big increases in temporary funding for the program run out. In other words, the president’s budget need not include any supplemental funding for the Pell Grant program in fiscal year 2014 or even 2015. But the Pell Grant program will eventually need an increase of about $6.2 billion by 2016 to continue in its current form, and given that the president’s budget covers a 10-year period, it may include a proposal to address the long-term funding challenge for Pell Grants. Of course, the president could duck the issue altogether. Last year, the president included only a one-year fix and punted on what he’d do in the longer term.
   
• Student Loan Interest Rates: Last year, the president proposed extending for one year the 3.4 percent interest rate for newly issued Subsidized Stafford student loans. Congress obliged, which means that the interest rate on Subsidized Stafford student loans is set to increase this year from 3.4 percent to 6.8 percent on July 1…again. Ed Money Watch wrote last year about this interest rate increase, which would save borrowers only about $9 a month. Each one-year extension costs between $4 and $6 billion and affects a portion of loans made to about two-thirds of undergraduates. One year later, Congress is back to the same debate. The New America Foundation has proposed another interest rate option: tying rates to the 10-year Treasury note rate, plus 3.0 percentage points. The alternative would put an end to annual debate that makes little real difference to students – especially the low-income borrowers who enroll in income-based repayment. Will the president propose another one-year extension or a permanent extension? Or will he propose something bigger and longer-term?
   
• Income-Based Repayment for Student Loans: In Safety Net or Windfall: Examining Changes to Income-Based Repayment for Federal Student Loans, we explored the effects of recent Obama administration changes to Income-Based Repayment for student loans. Namely, the program is set to provide graduate school borrowers with exceedingly generous benefits even if they earn a high income after they leave school. Graduate schools can now tell borrowers that they will bear little to no extra cost in borrowing more to pay ever-higher tuition – even if they expect to earn a relatively high income.

Will the Obama budget propose any corrections to this problem?  Or will he propose to make it worse? Each year the president has proposed making loan forgiveness a tax-free event under Income-Based Repayment. Such a policy would make the benefits of the program for high-debt (and high-income) graduate students even more generous, regressive, and expensive. To be sure, we agree that the loan forgiveness should be tax-free and recommend the change – but only after the program’s benefits for high-debt and high-income borrowers with graduate and professional degrees are scaled back.

Look for answers to these and other questions over the next several weeks as we read the president’s budget request and publish our analyses. Check out Early Ed Watch, Ed Money Watch, and Higher Ed Watch for details.

The California Office to Reform Education (CORE) is closer to becoming the first consortium of school districts to receive a flexibility waiver from No Child Left Behind (NCLB). Although the nine CORE districts -- Clovis, Fresno, Long Beach, Los Angeles, Oakland, Sacramento, Sanger, and Santa Ana Unified -- submitted a formal waiver proposal to the U.S. Department of Education in February, speculation around district-level waivers had been percolating for months, particularly in states that were reluctant to apply for a waiver or failed to meet the Department’s waiver guidelines, like California.

Naturally, groups representing states -- like the Council of Chief State School Officers -- have significant concerns about district waivers, as it throws the relationship between local, state, and federal authority off kilter. Meanwhile, influential leaders in California, including State Board of Education President Michael Kirst and State Superintendent of Public Instruction Tom Torlakson, theoretically support the CORE request, but raise questions about how it would work in practice.

I share these concerns. Many states sought to unify state and federal policies via waivers and create a streamlined, more effective system of school accountability and improvement. But despite their intentions, most waivers are convoluted, confusing, and vague, presenting a challenge to those trying to monitor states’ progress and figure out what’s working (like me!). In other words, despite a common map and itinerary from the U.S. Department of Education, states chose very different, and often, indirect routes to arrive at their final waiver destination. Don’t get me wrong: variation and creativity aren’t necessarily bad things. Some states needed to spend more time developing teacher evaluations, or take a side trip and explore new approaches to student assessment. But, these variations certainly make the system more difficult to understand.

When it comes to waivers at the district level, the roadmap simply flies out the window. Most of the flexibility provisions within NCLB operate at the state level, making districts a far less logical driver of change. In most waiver states, local policies can be aligned with the federal-state waiver approach through legislation, regulation, and technical assistance from state education agencies. Schools and stakeholders within district waivers, however, will still have to navigate changing local, state, and federal systems -- just with fewer tools and resources at their disposal to bring the systems together. Thus, district waivers, by design, will likely create even more confusion.

Despite its deviations from the Department’s careful roadmap, the CORE proposal deserves to be taken seriously by waiver-watchers. Last week, the Department moved the request to the peer review stage, which means CORE’s proposal has already made it further down the road than California’s failed attempt. Therefore, it’s worth taking a closer look at the specifics within the CORE approach. Stay tuned for a full rundown of the CORE request in an upcoming post.

A legislative provision, buried eight hundred pages into the continuing resolution passed by the House and Senate last week and signed into law by President Obama, could hold significance for states that have reduced their spending on special education in recent years.

Under the Individuals with Disabilities Education Act, the federal law that governs special education policy, states are required to meet maintenance of effort every year to continue receiving federal education spending. Maintenance of effort (MOE) forces states to provide levels of funding for special education that are at least equal to the prior year’s state spending levels. Unless they are granted waivers from the U.S. Department of Education, states that fail to comply see their federal special education allocations drop by the amount that they failed to provide at the state level – permanently.

But the new language in the continuing resolution says states that fail to meet maintenance of effort will no longer be held permanently liable for that drop in state spending. Instead, the Department of Education will only be able to cut a state’s federal allocation for one year. In the following year, and in every year thereafter, the state’s federal allocation will revert to the higher amount.

Additionally, in the year in which the Department of Education cuts a state’s federal IDEA allocation, the amount of federal funding that the state loses will be redistributed across all other states.  The funding will follow the same formula as regular IDEA spending, with 85 percent distributed according to the population of children ages 3-21 in the state and the remaining 15 percent according to the poverty rate of children ages 3-21. States will pass on the additional funds to school districts under the same statute as regular IDEA funds.  Any state that fails to meet maintenance of effort is not eligible to receive a portion of the extra funds.

The policy change is hardly hypothetical, as this post from Education Week’s Politics K-12 blog explains. South Carolina, whose congressional delegation was instrumental in pushing for the measure, currently stands to benefit the most. In each of fiscal years 2009, 2010, and 2011, South Carolina cut its special education budget. The 2010 cuts were a bridge too far. The Department of Education refused to grant the state a full waiver for its excessive cuts that year and vowed to cut the state’s IDEA allocation by $36 million, effective October 2012.

Kansas faced similar challenges from the Department of Education last year, and ultimately lost $2 million in federal special education funding. In both cases, the reduction in federal IDEA funding would permanently lower the state’s IDEA allocation, were it not for the new provision contained in last week’s continuing resolution.

In effect, the new IDEA provision is a win-win for states. Gone are the very serious punishments for states that do not preserve their special education spending levels every year. And if a state does fail to meet maintenance of effort, every other state benefits by sharing in the spoils of its rescinded funding. States have seen unprecedented challenges in filling budget shortfalls throughout the recession, and the new provision gives flexibility to states that have made significant sacrifices to other areas to preserve special education funding. Still, maintenance of effort has been a cornerstone of federal special education policy for years, requiring states to live up to their promises to kids with special needs and protecting those children from budget cuts. The new policy revokes that protection and instead gives states a pass when they fall on difficult budget times.

A federal district court judge dealt a huge blow yesterday to the U.S. Department of Education’s efforts to regulate the for-profit college sector. More broadly, the court’s decision in the case, which deals with the Department’s Gainful Employment regulations, could make it much more difficult to bring greater transparency and accountability to higher education as a whole.

The roots of this case go back to June when the federal district court vacated some of the Department of Education’s Gainful Employment (GE) regulations. While the judge affirmed the department’s authority to regulate on GE and held up requirements that GE programs disclose information like median debt to students, he found that one of the three measures used to determine whether a program prepared students for gainful employment -- the student loan repayment rate -- “lacked a reasoned basis.” And since the judge concluded that all the metrics were intertwined, he threw them all out. With no metrics to report, the disclosure requirements included in the regulations were also effectively eliminated.

The Department went back to the court and asked the judge to reinstate the reporting requirements so that it could implement the disclosure provisions of GE (without program-level information, disclosure would be impossible to achieve). In yesterday’s decision, the judge denied this request on the grounds that the reporting requirements would violate one of the worst laws in the history of higher education: the federal ban on a student unit record system.

Welcome to the Syllabus, a weekly guide that provides insight into what’s happening in higher education.

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Double Majors Produce Dynamic Thinkers, Study Finds, Dan Berrett
Chronicle of Higher Education

The amount of students double majoring has been increasing for years, and universities have been operating blind, knowing almost nothing about the benefits and drawbacks for students. Two sociologists from Vanderbilt University have shed some light on the issue. They found that, “Students who major in two fields are more apt than their single-majoring peers to think both integratively and creatively.” It’s important to note, however, that the sample included students from elite, selective schools that were more likely to double major than the general college population (19 percent versus 9 percent).

As I wrote on Tuesday at Higher Ed Watch, the recently introduced “Students First Act” would require the U.S. Department of Education to automatically conduct program reviews of colleges that are most at risk of violating federal law. But this is only one way in which the bill, which was sponsored by Democratic Senators Frank Lautenberg of New Jersey and Tom Harkin of Iowa, would strengthen the tools that the Education Department employs to protect the integrity of the federal student aid programs and safeguard students from unscrupulous schools. Here are some key features that would greatly enhance the Department’s oversight and enforcement authority and provide relief to students who have been harmed.

The bill would:

• Hold School Executives Accountable for Compliance

Under the measure, college presidents, chief executive officers, and chief financial officers would personally sign the student aid program participation agreements that the Education Department enters with their schools. They then would be held liable if their schools “knowingly and willfully” violated the agreements, or engaged in “gross negligence.” In such cases, these officials would be fined an amount equal to their yearly compensation, and they would be barred from working at another college that participates in the federal financial aid programs for at least five years.

Does the U.S. Department of Education have the guts to enforce its own federal student aid program integrity rules? Judging by the Department’s record and legislation recently introduced by Senate Democrats, entitled the “Students First Act,” the answer to that question appears to be “No.”

During President Obama’s first term, administration officials went to great lengths – and spent a substantial amount of political capital – to strengthen the agency’s authority to crack down on schools that deliberately mislead students into enrolling. Yet, the Department has shied away from using these expanded powers, even when evidence of abuse has been delivered to the agency on a silver platter.

Career Education Corporation is a case in point. In the fall of 2011, the publicly-traded for-profit higher education company revealed that a significant number of its schools had been cooking the books on the job placement rates they were disclosing to prospective students. But despite this remarkable admission, the company didn’t receive even a slap on the wrist from the Department.