Pell Grants Spared, Graduate Student Funds Cut in Debt-Ceiling Deal


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.”

A few graduate students, undergraduates and parents have posted comments at the New York Times Bucks blog; these give a sense of the real impact of the cuts, and at a time when it’s become more important than ever to get a graduate degree:

This is infuriating. What are those of us that were axed during the Recession, and thought returning to school would give us the edge we needed to thrive again in the workplace, supposed to think about this? We’ve been thrown to the sharks. (toni, new york city)

Cuts to student loans here, a tuition increase there, throw in a hike in interest rates – sure, all these little chips to higher education affect me (an undergrad biology student) directly. But when college becomes less economically feasible as the quality of our education stagnates, we all pay the price. (Andrew R., Flag, AZ)

It’s a well-known fact that the people with the most spare cash lying around are, indeed, grad students. My college knows this, because they keep asking me for donations every other week…..

As a grad student in public policy, I’m amazed that the political leaders want to lower the deficit by squeezing pennies out of grad students, rather than get millions of dollars in actual owed taxes from corporations who are using loopholes to escape their actual governmental obligations. Pretty sweet deal, these CEOs have. I think grad students need to get it together and start lobbying Congress. There must be one or two (tens of thousands) unemployed law grads looking for a job. (Rachel, Chicago)

The Chronicle of Higher Education also observes that, while Pell Grants have been saved for now, it’s only a “temporary reprieve”:

Given that House conservatives vehemently oppose tax increases, it’s likely that the committee charged with reducing the deficit will favor spending cuts over revenue increases. That puts Pell grants and the other student-aid programs at risk of cuts in the near future.

The programs could also face cuts or eligibility changes in future years, as appropriators cut programs to comply with the bill’s spending caps.

In other words, forget about graduate school, federal funding for college is not assured. This seems almost tragic, as one commenter on the New York Times Bucks blog says:

This seems counterproductive for a country that wants to remain competitive in the future. The subsidy may be relatively small for each graduate student, but increasing the cost of advanced degrees will undoubtedly decrease the number of students who seek better training. Hopefully the economy can continue to grow with fewer workers receiving the full training they would have sought if they were a member of previous generations. We may also have to do without the innovations that have been started by many graduate students (think Google). (Disturbed, California)


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ERIKA S1 years ago


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ERIKA S1 years ago


Christopher M.
Christopher M.6 years ago

Well, I didn't want to get a Ph.D and now I have an excuse.

Ruth R.
Ruth R6 years ago

Some people have a high school Diploma and they have jobs now. It depends on the support system to every person to accomplish life goals. People need to consider giving emotional, spiritual, support and kindness and encouragement to help each and every person -- man, women, child to achieve their true goals, and use their talent, and reafirm their self-worht -- so that as a people we all become stronger together and as individuals. I challenge you as people: let us work to not let one person, man, women, child miss out on living to their fullest -- by starting with one good thing that each person can and desires to do -- to help herself and others. This is the true goal -- not about about money, about talent and working to help one another to have all needs and some desires met at each different time period in a person's life.
I fully support the fact that high school or a GED, is a good thing for most people, or learning a trade if the above does not fit the person. Respect is more important.
College, University and Graduate school needs to be free in exchange for the students chosen volunteer work or work, or work created by the student that is approved by the faculty/ or community or a group as having value.
Thank You care2.

If students were offered half a day of school and half a day of work for graduate school, and under-grad, and PH.D's then we would have a fair and just system -- with this offer for all students -- the poor to the rich, those with con

mary l.
mary l6 years ago

Budgets do not come from the White House. They come from Congress and the party that controlled Congress since January 2007 is the Democratic Party. Furthermore, the Democrats controlled the budget process for FY 2008 & FY 2009 as well as FY 2010 & FY 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases. For FY 2009 though, Nancy Pelosi & Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets. And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009. Let's remember what the deficits looked like during that period. If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets. That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets. If Obama inherited anything, he inherited it from himself. In a nutshell, what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th. Stay Focuse

Shirley Marsh
Shirley Marsh6 years ago

Yvonne, Obama was against cuts in education and health; the Repubs (and some Democrats) held the 'debt ceiling' deal to ransom and 'no compromise' would have seen a catastrophic result not only for the US, but for the world at large, through the dominos effect. Don't blame Obama for the ills of the US; he's doing his absolute best to turn things around.

Once again, take the time to research the facts before throwing the country's best asset to the wolves!

Dennis F.
Dennis F6 years ago

This is just a fine idea - it's SO much easier to lead an uneducated populace around by their collective noses, cater to your every whim, and in short make serfs out of people who by reasons of circumstance, or birth don't have the money to get on in life.

Don M.
Don M.6 years ago

USA College Planning Pros


Time to move it move it.

Grab a pail and start to bail.

This boat is sinking.

Don M