Students Footing the Bill?
Dec. 23, 2005 — -- College students got an early lump of coal from the Senate, or a lesson in the harsh reality of personal finance, depending on how you look at it. And just in time for the holidays.
Senate lawmakers approved a deficit measure this week that could make paying for a college education a bit more daunting.
About one-third of the savings in the final budget bill comes from student aid, the Congressional Budget Office said Wednesday. The plan cuts $39.9 billion from entitlement programs over the next five years, including $12.7 billion from the student-loan programs. Approval came amid a flurry of votes by senators before their end-of-the-year recess. Under the bill, college students would pay higher interest rates on loans and banks would receive lower subsidies. And, there would be a renewed effort to target students and parents who under-report incomes on financial-aid applications.
The House will vote on the bill before it's sent to President Bush for his signature. Passage is expected.
At a time when college costs have reached record levels, "[f]inancing one-third of the deficit reduction for the entire government on the backs of college students is a terrible precedent," said Becky Timmons, director of government relations for the American Council on Education. The council is an umbrella group for public and private colleges and universities.
The proposed changes promise to make college financing even more difficult than it is now. After college, countless graduates start new jobs that don't always pay big salaries. They struggle with this slight salary, work long hours to get closer to their goals, and then, after an all-too-short grace period, the bills come.
"I just moved to a new city, started a new job, and am not yet financially able to even pay my loans," Julia Kelderman said. "The bills are already piling up, and the student loans are a huge portion of those bills."
Kelderman, who graduated from Brown University in Rhode Island, last spring, is working for the re-election campaign of Mayor Will Wynn in Austin, Texas. Her student-loan bills total $500 a month.
"My parents are helping me out right now," she said. "But in a few months, I will be on my own."
Republican negotiators argue that most of the cuts in student aid will be the burden of banks and other lenders. But Democrats and lobbyists dispute that assertion.
"This is the biggest cut in the history of the federal student-loan program," said David Ward, president of the American Council on Education.
The interest rate for federal student loans would be fixed at 6.8 percent for students and 8.5 percent for parents. Current rates, which vary with market conditions, are several percentage points lower.
So a scramble to consolidate may be the best next step for graduates, according to financial-aid experts.
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