Higher Ed Funding Remains for Now, But Future Uncertain

Uncertainty over research funding persisted to the last possible minute, but in the end, a budget deal that averted the “fiscal cliff” was passed by Congress and signed by President Barack Obama just in time. And that deal contained a number of provisions that will be welcome to colleges and universities nationwide, as it leaves untouched funding for higher education research as well as the tuition tax credit that helps families reduce their college education expenses.

The tuition tax credit – called the American Opportunity Tax Credit – will be extended for at least five years. The program allows families to deduct up to $2,500 from their taxes per year for up to four years for college expenses. If the deal on the budget had not been struck, the AOTC would have likely become a victim of the 8.2% across-the-board cut to domestic spending which would have gone into effect on January 1st, 2013.

Without the bill’s passage, an 8.2 percent across-the-board cut to domestic discretionary programs and a 7.6 percent cut for mandatory spending programs would have immediately affected several funding streams critical to universities, including sources of scholarship programs and research grants. Affected programs included the National Institutes of Health, the National Science Foundation and Department of Defense aid to veterans to attend college. Those sequestration cuts are now delayed for two months. (Pell Grants were not affected because they were not subject to sequestration.)

However encouraging the results of this round of budget talks have been, it still remains only a temporary reprieve. The bulk of negotiations over the Federal budget aren’t scheduled to begin until early this spring when government watchers are already predicting a tough fight between the President and House Republicans over the hike in the debt ceiling.

The Huffington Post is anticipating that higher education funding will be on the table as one place where cuts could be made, and research funding is likely to become an outsized target for deficit hawks looking for ways to cut government spending. Also on the table will be changes in federal financial aid eligibility, to cut the number of people who qualify for financial assistance like Stafford loans and Pell grants.

But the president warned against any further spending reductions Tuesday night after the fiscal cliff bill passed, saying, “We can’t simply cut our way to prosperity,” and referring specifically to higher education.
“We can’t keep cutting things like basic research and new technology and still expect to succeed in a 21st century economy,” Obama said. “So we’re going to have to continue to move forward in deficit reduction, but we have to do it in a balanced way, making sure that we are growing even as we get a handle on our spending.”