While undergraduate student aid concerns were somewhat heeded by President Barack Obama’s signature on the debt ceiling bill Tuesday, it comes at the cost of extra strain on graduate students.
The bill provides $17 billion over the next two years for the Federal Pell Grant program, which is currently running at a multi-billion dollar deficit in its funds to qualifying undergraduate students, but eliminates federally subsidized graduate student loans, the Chronicle of Higher Education reported.
Starting July 2012, graduate students who once qualified for the Federal Direct Student Loan will have to start paying 6.8 percent interest on the loans once they receive the first loan check.
Previously, a portion of Federal Direct Student Loan for graduate students was interest-free while the student was enrolled in his or her program, which will include law school, medical school and other graduate programs, Assistant Vice President for Undergraduate Education and Executive Director of the Office of Student Aid Anna Griswold wrote in an email.
“For most, it will likely take longer to repay their loans, which also adds to the student’s debt since interest accrues over a longer period of time,” she wrote.
Last year at Penn State, 25 percent of undergraduates benefited from the Pell Grant and 3,000 graduate and professional students benefited from the Federal Direct Student Loan, she wrote.
For graduate and professional students, this totals to $19 million in support in subsidized federal loans out of $64.3 million in total loans.
Graduate Student Association President Jon Lozano said he knows from firsthand experience how the elimination of these loans could detrimentally effect graduate students at Penn State.
“Without the loans, I wouldn’t be able to afford my studies here,” Lozano (graduate- law and education) said.
He said he received a mix of federal subsidized and unsubsidized loans for both his graduate and undergraduate studies, and lamented that future graduate students won’t be so lucky.
And while Press Secretary Jay Carney said in the press briefing yesterday the new bill protects U.S. investments in research and education, Lozano said the cut could cause issues in the long term that may not be apparent right now.
“This move is really short-sighted,” he said. “With a much more specialized workforce going forward, it’s making it a lot harder for American citizens to get these degrees and compete in this economy for jobs.”
He said the deletion of subsidized funds could now become a major consideration for graduate students applying who don’t always hear about potential assistantship funding through the university until after they are accepted into their program.
The bill will also eliminate the interest rate reduction for the on-time repayment plan for all loan borrowers.
This plan rewarded borrowers who pay their loans on time with a rebate of half a percentage point for Federal Stafford Loans and a 1.5 percentage point for Federal Parent PLUS loans.
The reduction would take place once the student consecutively paid their monthly loan bill for a 12-month period, Griswold wrote.
The combination of these cuts to the subsidy and the on-time repayment plan program will save the federal government $21.6 billion over the next 10 years, according to the Congressional Budget Office, but most of this money will be re-allocated to the Pell Grant program according to the Chronicle.
Andrew Markosky (senior-history) said this forwarding of funds from graduate to undergraduate support seems to make sense because most people only need undergraduate degrees for their careers.
“More people would be benefited by increasing the ability and affordability of undergraduate loans,” Markosky said.
But undergraduate loans are not off limits for federal cuts in the future as far as Griswold is concerned.
“After 2013, this legislation will likely begin reducing the appropriations in the Pell Grant program and we will likely see fewer students qualifying and award amounts will likely fall below the current $5,550 maximum grant,” Griswold wrote.
She added that funding for other federal student aid programs could be reduced or eliminated in the future.
While Markosky said he would not be directly affected by the change because he does not benefit from any need-based federal loans, the “downward-spiraling” economy is still affecting his decision to go to graduate school.
“At this point, it’s looking like anything that will allow me to pay off the interest on my student loans will be the choice I have to make,” he said.