On February 6, President Bush unveiled his FY2007 budget request. The $2.7 trillion dollar budget focuses on reducing discretionary spending by proposing to eliminate 141 programs and slowing the rate of growth in mandatory spending, particularly in the Medicare program.

Specific to the Department of Education, the budget requests $54.4 billion in discretionary spending at the department. This is a $1.5 billion decrease from FY2006 spending levels.

Specific to higher education, the request does not propose any additional changes to the Federal Family Education Loan (FFEL) or Direct Loan programs. The Department of Education request is very similar to FY2006’s, requesting the elimination of several programs and providing even funding for many others. Included in the request is the elimination of the Perkins Loan Program, with campuses ordered to send most of their revolving funds to the federal government. No new appropriations for the Federal Capital Contribution and Loan Cancellations. The Department estimates that it would save $664 million in FY2007 by recalling the revolving fund and prohibiting any additional Perkins loans. In FY2006, there was no Federal Capital Contribution and loan cancellation funding was $65.4 million.

Obviously, this was bad news, but it was to be expected. President Bush proposed the same thing in his FY2006 budget proposal. It is critical to remember that this budget is a proposal, not a requirement. Congress has shown that it plans to continue the Perkins Loan program by including its reauthorization in both the House and Senate bills reauthorizing the Higher Education Act and by partially funding reimbursements for loan cancellations for the current fiscal year.