With the debt deal wrapped up, we’ve already seen cuts for graduate and professional students. But should there be more? Would shrinking the federal student loan program actually help make higher education cheaper? Here’s the argument for it, according to Thomas D. Parker, senior associate at the Washington, D.C.- based Institute for Higher Education Policy.
One thing Parker suggests? In his own words:
“A reduction in federal-loan availability might just encourage higher education to think a bit more seriously about reducing the rate of increase in their costs or developing more cost-efficient ways to deliver high-quality education.”
Why? Also in his own words:
“There has long been concern that one reason colleges can increase their prices at such a rapid rate is that students and their parents can borrow at favorable terms from the federal loan programs. In the case of PLUS, the government offers a program that will lend at good rates with minimal credit requirements for the entire cost of education, no matter what the colleges charge. It’s a deal that the car companies or any other industry reliant on consumer-credit financing would envy.”
But who eats the cost in the time between lower federal funding and a trickle-down effect that manifests in the form of a smaller tuition bill? Students. And beyond that, state funding to public institutions has seen widespread cuts across the country, accounting for at least a portion of the increases in tuition fees. So unless the government counters a cut in federal student loans with an increase in education funding, can we really expect a significant decrease in cost of attendance?
What do you think? Sound off on Facebook or in the comment section below and let us know if you think more cuts in federal student loans is a proper response to the spike in tuition fees.
With a deal on the debt ceiling debate nearly over, we’ve been tirelessly trying to keep track of what is going to change for students. Thanks to Reuters and Huffington Post, we have the answer. If passed by the U.S. Senate, the changes will be:
- In exchange for an increase in Pell Grant funding, the Budget Control Act of 2011 kills interest subsidies on federal student loans for graduate students and professional students beginning July 1, 2012.
- However, the amount of money graduate students can borrow will be increased to help supplement that increase in cost.
- The maximum value of a Pell Grant will be increased by $819, to $5,550.
The question becomes: is it worth it? Are those changes fair? Do they help you? Sound off in the comments and let us know.
There’s nothing quite so dramatic as lawmakers fighting over ideology at a time that calls for swift compromise: the United States is set to default on August 2nd, at which time the American public will face rising interest rates, a sinking dollar, and a slew of funding cuts that will affect everyone, including those who are walking one of the thinnest financial tightropes of all: students trying to get an education. Possible changes that could result from a U.S. default or even a poorly-negotiated deal to raise the debt ceiling include but are not limited to:
- Cut funding to Pell Grants, which have long benefited low-income students. The question becomes how will these students find money to cover the difference between what they have for school and what they owe?
- A possible goodbye to subsidized Stafford loans, meaning interest would accrue on those Federal loans while students are still in school instead of being covered by the government, making it more expensive to borrow. The bottom line is that borrowing the same amount of money could now cost you even more.
- Perhaps overstated, but some fear a renewed, even deeper financial collapse than 2008′s recession, which could further dampen an already weak economy. This potentially means higher unemployment rates, higher interest rates, crisis on Wall Street, and severely cut public funding across-the-board, which could affect things like the cost of tuition at public institutions.
How to get involved: Whatever side of the debt fence you fall on, whether you are a Republican, or a Democrat, or some kind of fictional water-pony with a keen sense of compromise, stay involved. Contact your Representatives and U.S. Senators and let them know they should stop looking out for their own interests and start looking out for yours.
According to the Department of Education, the expected average level of student loan debt for 2012 will be $29,000. Unfortunately some students find themselves stuck in a pile of debt even larger than that. Last November, Gawker profiled a recent grad who had a staggering $200,000 in student loans. The first of her family to go to college, she didn’t have a lot of experience to go on when choosing where to study, who to borrow from, how much to borrow, and what other sources of money she could have used to help cover her costs.
Now Gawker is offering an update on her plight: after $10,000 in donations, some hate mail, and an appearance on NBC Nightly News, she’s still $166,000 in debt. The lesson here? Education is an investment, and it’s a worthwhile one, but borrow within your means. Choose a school you can afford. Pick a major with career opportunities.
All of this may sound basic, but you’d be surprised how many students get caught up in the idea of college and forget the repercussions of its cost. So stay smart and get wise by crunching the numbers first, then compare your student loans and make a budget. You don’t want to be the next person with a debt-burden so big you end up on the news. We promise that kind of spotlight isn’t worth it.
For more tips on how to keep your debt manageable: