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Pennsylvania State Senate
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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: December 11, 2012 01:08 PM
From: Senator Kim L. Ward and Sen. Richard L. Alloway, II
To: All Senate members
Subject: Memo #12 – Middle Income Student Debt Reduction Act
 

In the near future, Senator Alloway and I plan on introducing legislation that will establish the Middle Income Student Debt Reduction Act. The objective of this legislation is to establish a new student grant aid to middle income families, giving these students more help in paying tuition bills and more post secondary education options.

Many policy makers are frustrated by the current state funding system for higher education. Policymakers are blamed for inadequate state support and high tuition at the public universities, yet current economic conditions have made increases in appropriations extremely difficult.

Likewise, many believe that lower-income students receive student aid help through Pell and PHEAA grants but middle income families (Roughly $80,000 - $110,000 gross earnings) receive little or no student aid assistance. These families are either currently ineligible for PHEAA grants or receive very modest stipends, yet the strain for paying for college is great, which results in their students assuming more student loan debt than is healthy.

Directing some additional state higher education funding to students from middle income families in a freer marketplace will force all colleges and universities to compete for students on price and quality. It will also let middle class families know that the state is directly supporting their need for assistance to pay the college bills. Finally this proposal will start to shift the paradigm towards the needs of students instead of the institutions, and it will protect students with need from tuition increases.

In the FY 2012-13 state budget, several complicated steps involving PHEAA occurred to provide some additional non-tax revenue for state spending. Essentially, the PHEAA Board approved a plan to add an additional $25 million (above the already promised $50 million) from the Agency’s earnings to supplement the PHEAA grant program. Combined with a restoration of mid-year “frozen” funds, this supplement allowed the legislature to cut $36 million from the state appropriation to PHEAA while preserving the award values for students in the 2012-13 academic year. While the PHEAA supplemental is wonderful, it is vulnerable to economic developments outside of the state’s control. Indeed, PHEAA had provided a similar $75 million supplement that disappeared all at once with the capital markets crisis in 2008. Students took a sizeable cut in their grants the next year.

Therefore, prudent state fiscal policy would restore the $36 million to PHEAA as soon as possible to strengthen its base funding. This $36 million could be targeted to start the Middle Income Student Debt Reduction Act without harming current PHEAA grant recipients as long as PHEAA was able to maintain its supplement funding in 2013-14.

If you have any questions regarding this legislation, please contact Senator Ward’s office at 717-787-6063 or Melissa Knepper of Senator Alloway’s office at mknepper@pasen.gov or by phone at 717-772-2929.



Introduced as SB420