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Davis, California

Wednesday, April 24, 2024

Obama proposes cut of federally-subsidized loans

The Pell Grant Protection Act – part of President Barack Obama’s proposed 2012 budget – would cut the Federal Subsidized Loan Program, which subsidizes student loans on the basis of financial need.

Groups such as the UC Student Association and the Student Advocates for Graduate Education Coalition are working to prevent the elimination of the program, saying the proposal would make graduate education more expensive. 

Those from SAGE said it is likely that the cut will lead to tuition increases for graduate and professional students and to reductions in grant aid. As a result, more students will need to take out loans. For every $10,000 of unsubsidized loans taken over a five-year program, it will cost students an additional $4,094 in interest, SAGE stated.

At present, students are not charged any interest before beginning to repay the loan because the federal government subsidizes the interest during this time, whereas unsubsidized loans charge interest from the time the money is first disbursed, until it is paid in full.

The U.S. Department of Education administers the subsidized loan program. The department’s Under Secretary Martha Kanter defended the cut to the program to Congress in March.

She said the cut is necessary to save the Pell Grant program, which provides financial aid to undergraduates. The subsidized loan program also covers aid for graduate school.

According to congressional testimony by Kanter, eliminating the student loan interest subsidies for graduate and professional students would save $1 billion in 2012 and $29 billion over 10 years.

“There is little evidence the subsidy influences students’ ability to enroll in graduate school, which school they attend or whether they graduate,” Kanter said in her testimony.

“It is also a poorly-targeted subsidy; for instance, among all education levels, those who have completed graduate education have the highest median incomes,” she said. “Congress and the administration have already expanded income-based repayment to help students, including graduate and professional students, who struggle to afford their loans.”

She noted the importance of the Pell Grant program.

“More students than ever are relying on Federal aid, and if we are to reach our goal of out-innovating, out-educating and out-building the rest of the world, we need to continue our investment in these students,” she said in her testimony. “Protecting the $5,550 Pell Grant will require coordinated effort.”

Jamal Madni, director of communications for SAGE, said the group wants the Obama administration to reconsider the cut.

“Graduate education has a direct correlation with global economic standing,” Madni said. “This change could affect us not just now, but five, 10, 20 years down the line.”

SAGE’s current campaign to save the subsidized loan program includes collecting 20,000 signatures and testimonials against the cut.

“In an era where most new jobs will require some kind of higher education, we have to keep investing in the skills of our workers and the education of our children,” Obama said in his budget message to Congress.

He said expanding the Pell Grants would put education on firm financial footing.

ANGELA SWARTZ can be reached city@theaggie.org.


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