There’s good news and bad news about education funding under the debt ceiling deal. Subsidized federal student loans for undergraduates have been spared, but most funding for graduate students in the form of an in-school subsidy on federal loans will be eliminated.
The proposal provides $17 billion for the Pell Grant program for low-income college students; the Senate had proposed $18 billion for the program, which is expected to have an $11 billion shortfall this year, says the Chronicle of Higher Education. However, the proposal eliminates the federal subsidized graduate student loan program, for an estimated savings of $26.3 billion from 2012 from 2021.
Here’s what the proposal says about eliminating the graduate student subsidy, which allowed those enrolled more than half-time in their studies to pay no interest on their student loans:
Beginning July 1, 2012, the bill would eliminate the interest subsidy on subsidized student loans for almost all graduate students while a borrower in school, in the post-school grace period, and during any authorized deferment period. (Certain post-baccalaureate students would still be eligible.) The current annual and cumulative loan limits for unsubsidized loans would be adjusted to permit students to borrow additional funds in the unsubsidized loan program. CBO [Congressional Budget Office] projects that, over the 2012-2021 period, the provision would shift approximately $125 billion in loan volume from the subsidized to the unsubsidized loan program. Because borrowers would be responsible for the interest accrued on those loans while in school, CBO estimates that this provision would reduce direct spending by $8.2 billion over the 2012-2016 period and $18.1 billion over the 2012 – 2021 period.
The New York Times Bucks blog also says that those with federal student loans would no longer receive incentive bonuses that some students now receive for making on-time payments.
As Think Progress notes, the lowest income graduate students “would still receive assistance for their loans thanks to newly-enacted Income Based Repayment (IBR), and this shift would not make graduate education any more expensive for those students.”
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