The debate about raising the federal debt ceiling has real consequences for the US’s colleges and universities. Today’s Chronicle of Higher Education says that, according to a report issued by Moody’s Investor Service on Thursday, only elite schools would not see their credit ratings downgraded in the event that President Obama and Congress are unable to come to an agreement about the debt ceiling and reducing the deficit by August 2. Without such a deal, the US government is in danger of defaulting on its debt and Moody’s rating of federal debts such as U.S. bonds would be downgraded.
25 universities (17 private and 8 public) which hold Moody’s highest rating, Aaa, would feel little effects if federal debt are downgraded, as they have “substantial capacity to withstand cuts and interruptions in federal funding for research programs or federal student tuition assistance.” It’s not looking so good for the remaining schools and certainly not for the small, Jesuit college in Jersey City where I teach. Says the Chronicle of Higher Education:
The rest of higher education is at a greater risk of a rating downgrade, not to mention a rough fiscal patch, in the event of a federal-government default, said John Nelson, an analyst for Moody’s, because a higher proportion of their income comes from the government, in particular Pell Grants for low-income students.
The vast majority of students at my college — most first-generation college students and many first-generation Americans from families waiting to get their green cards — are dependent on financial assistance in the for nof scholarships and/or loans to pay their tuition and other expenses. We’re a private, non-profit college and therefore more costly for students to attend than New Jersey’s state universities and community colleges. We do offer students some educational options and more one-on-one attention than larger schools, but these are luxuries that get sacrificed when there are no dollars to pay tuition.
Obama has also rejected a Republican proposal that would have increased student debt by requiring students to pay interest on their loans while still in college, according to a report at The Daily Beast. When House majority leader, Rep. Eric I. Cantor proposed end the in-school interest subsidy on federal student loans, Obama said:
“I’m not going to do that. I’m not going to take money from old people and screw students.”
As the Chronicle of Higher Education notes, ending the in-school subsidy would result in savings of $43 billion for the government over 10 years; a 2010 report by a deficit-reduction commission appointed by Obama had endorsed the cut.
Ending the subsidy would mean I’ll be seeing more empty seats in my classroom and in many others across the nation.
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