How Much Will the Debt Ceiling Agreement Hurt College Students?
For weeks, we’ve been resisting our temptation to write an alarmist blog post about how much students were going to suffer if congress passed a budget-slashing bill. After all, we had no real way of knowing how much harm would be done to American college students. Why should we declare that the sky was falling before we were absolutely sure?
Well, the bill has passed, the sky really has fallen, and some of the dust has now cleared. Although it will take a while before we really know what the effects will be on student loans and other programs that are intended to help American students, here are some of the changes that were recently outlined in “Students to Feel Pinch in Debt Deal,” a recent post on CNN Money:
- Overall, the bill cuts $21.6 billion from student aid programs over the next 10 years.
- Subsidized loans for postgraduate study have been hit especially hard. It appears that our congresspeople place more emphasis on helping undergraduates earn their college degrees. Seems like a good priority to us.
- Following on that thinking, funding for Pell Grants has been only slightly affected. It seems that even the most rabid budget-slashers didn’t want to be seen as opponents of these loans, which help a lot of underprivileged students attend college.
- Interest will now start accruing on the loans that graduate students take while they are still in school, rather than after they graduate. However, students won’t be required to pay anything back until after they graduate – neither interest nor principal. Is that clear? (It isn’t that clear to us either, but we asked because maybe it makes sense to you.)
And here’s something that’s a bit crazy to ponder . . .
Up until now, all students who were applying for Federal Stafford loans had to pay 1 percent of the amount they were borrowing as a loan origination fee. If they didn’t miss a payment during the first 12 months after they started to repay their loans, they got half of that 1 percent back!
So if a student borrowed, say, $10,000 from the Stafford program, he or she would pay a $100 origination fee, then get $50 back from the Feds. No longer!
But it gets even weirder, because according to the post on CNN Money, the government expects to save $3.6 billion over the next 10 years by making just that one small change in one loan program.
So there is money to be made in nickel and diming American students. Lots of money, apparently. Just how much, we are apparently about to find out.
Student Loan Programs under Fire in Washington Budget Talks
What’s a Pell Grant? How Can You Get One?
Three Compelling Reasons to Avoid College Debt
Seven Things Every Parent Needs to Know about Paying for College
The Human Side of College Debt