(AP) -- As Congress moves to slash $40 billion in spending, no program will take
a bigger hit than college loans, where almost $13 billion would be cut over five
students, the upshot is mixed. Excessive government payments to banks would be
halted, freeing up some dollars for new grants, larger loan limits and reduced
overall, the student loan program would endure the largest cut in its history,
and most of the money would not be pumped back into education. Instead, under
a plan the House approved Monday, the money would be counted only toward reducing
the federal deficit.
a time when the entire country believes we need to make higher education more
affordable, Congress is trying to balance the budget on the backs of students,"
said Jasmine Harris, legislative director for the United States Student Association.
who take out loans on behalf of their students would pay higher interest rates.
And other parts of the college package could indirectly drive up costs for students,
if banks pass on new expenses or offer less attractive loans as their profit margin
don't want to say the news is all bad. It's a decidedly mixed bag," said Terry
Hartle, senior vice president of the American Council on Education, the largest
coalition of colleges and higher education groups in the nation.
on balance, one comes to the conclusion that this is a sad step in the history
of the student loan program," Hartle said.
$12.7 billion in college cuts are part of an effort, led by conservative Republican
lawmakers, to show discipline with the public's money. But Democrats say GOP leaders
only want to pay for tax cuts, all the while eroding the ability of parents to
pay for college.
timing of Senate action was unclear. Colleges and university associations scrambled
Monday, urging the Senate to reject the bill as the Congress tried to end its
higher education, the single biggest cut appears to be in the profits of lenders.
current law, banks get to keep the excess money when the amounts that students
pay in interest exceed the rate of return that the government has guaranteed.
That would end. Lenders would have to refund the difference to the government,
meaning billions of dollars.
were able to reduce spending through changes in the way lenders operate," said
Mike Enzi, R-Wyo., the chairman of the Senate education committee. "But at the
same time, we shielded the direct impact to students, and actually increased student
interest rate for parent loans would increase to a fixed rate of 8.5 percent in
July. It is now a variable rate and had been set to move to a fixed rate of 7.9
the interest on students loans would also move to a fixed rate of 6.8 percent
in July, up from its current variable rate of 4.7 percent. But that change was
already set to happen under law, and the deficit-reduction bill does not alter
that plan. Student groups tend to support a fixed rate as a protection against
unstable, rising interest rates.
limits would increase from $2,625 to $3,500 for first-year students, and from
$3,500 to $4,500 for second-year students. The total borrowing limit allowed for
undergraduates would remain at $23,000. Lawmakers aimed for a compromise of letting
students borrow more at the start of college, reflecting current needs, without
sanctioning a bigger overall debt.
bill would offer grants to poorer, high-achieving students in the first two years
of college and older undergraduates studying math, science or high-demand foreign
Boehner, R-Ohio, the chairman of the House education committee, said the bill
"offers significant new benefits to students pursuing a college education."
critics said the size of those benefits doesn't come close to offsetting the cuts.
Bob Shireman, director of The Institute for College Access and Success: "Overall,
there will be less money out there for helping students pay for higher education.
And it's not being returned to the system, except in some small ways."