While many congressional Republicans are touting the final passage of the federal budget as fiscally responsible, including a $12 billion cut of federal student loans, opponents are emphasizing the reality for students: Most will lose money.
In a narrow 216-214 vote, the U.S. House of Representatives finalized the legislation on Feb. 1, sending it to the desk of President George W. Bush, who is expected to sign it. Members of Congress passed the bill in hopes of reducing the federal deficit by $50 billion.
“The [legislation] represents an important first step in addressing the federal government’s fiscal troubles,” stated John Boehner (R-Ohio), the former Education and Workforce Committee chairman and new House majority leader, in a press release. “Our ability to generate new job opportunities, provide for a strong defense and meet unforeseen fiscal challenges will be severely compromised if we don’t address the fundamental problem of runaway entitlement spending.”
The plan will raise interest rates for student loans. Parent PLUS loans, currently at 6.1 percent, will increase to an 8.5 percent fixed interest rate. Stafford loans will have a 6.8 percent fixed interest rate starting in July, a jump from the current 4.7 percent in-school rate and 5.3 percent out-of-school rate.
Despite the increases, fixed rates will protect student loans during future rate hikes, according to U.S. Student Association Legislative Director Jasmine L. Harris.
In addition, the bill includes money for targeted aid first proposed by Bush, introducing special Pell Grants in the form of “Academic Competitiveness Grants” for low-income students who take “rigorous” high school classes and “Smart Grants” for low-income students who major in certain disciplines.
How these provisions will affect students is uncertain, according to UCSD Financial Aid Director Vincent De Anda.
“While these [grants] sound good in theory, the funding seems woefully inadequate and it is my estimation that the amount of these grants won’t reach anywhere near the published maximums,” De Anda said. “We’re not sure, as ‘rigorous’ has not yet been defined. I’m of the opinion that every student at a UC has taken a rigorous [courseload].”
The bill’s supporters also highlighted other student benefits included in the bill, such as the $3.7 billion allocated to pay for “merit” Pell Grants for upperclassmen majoring in certain subjects.
“The measure provides key student benefits, including lower loan fees, higher loan limits and expanded grant aid to low-income high achieving students and particularly those students studying key subjects including math, science and critical foreign languages,” Boehner stated. “These reforms will increase financial aid opportunities for the millions of students who attend college each year with the help of the federal student loan programs.”
College lobbyists, including the USSA and State Public Interest Research Groups, said that the legislation’s provisions are too confined to actually save money for most students.
“Last week, in his State of the Union speech, President Bush talked a lot about ‘global competitiveness,’” State PIRGs Higher Education Associate Luke Swarthout said. “Global competitiveness is more than just educating a small amount of students in math and science. … We need to be making college more affordable. Ultimately, all students lose out as they take the bulk of the cuts.”
Part of the USSA’s and PIRGs’ frustration with the bill is that, although student-loan programs make up only a fraction of a percent of the annual federal budget, approximately 30 percent of the nearly $40 billion in cuts in the newly approved budget bill is coming from student aid.
“Instead of investing in higher education and the future of our country, Congress passed legislation that puts college even further out of reach for America’s families,” USSA President Eddy Morales said.
In order to minimize indebtedness, students will have to look to other sources, such as Cal Grants, as well as off-campus and national scholarships to help subsidize their education, according to De Anda.
“I think it is a disgrace that low-income students bore the brunt of these cuts, while Congress is considering a bill cutting taxes for the rich that will increase the budget deficit,” De Anda said.
In an effort to push legislation through before the holidays, the Senate passed the measure late on Dec. 21 in a landmark 51-50 vote, with Vice President Dick Cheney casting the tie-breaking vote.
Democratic opponents then used a rare parliamentary procedure because of minor changes made to the bill, and called for further consideration that led to the final House approval.
