Graduate subsidized loans to be cut
USF graduate students may feel the implications of spending cuts made during the summer’s legislative season well after graduation.
The Budget Control Act, which was created to reduce the U.S. debt by $2 trillion, was signed by President Barack Obama on Aug. 2 and included eliminating subsidized graduate loans starting July 2012 to support the maximum Pell Grant amount for another school year.
USF Financial Aid Director Billie Jo Hamilton, who is on the Board of Directors for the National Association of Student Financial Aid Administrators, said cutting the loans allowed for $17 billion of funding for the Pell Grant, which provides financial assistance to students from low-income families. She said for the past two years about one-third of USF undergraduates have been Pell-eligible.
“The Pell Grant is what we call an entitlement program,” she said. “If you qualify for it, the government has to give it to you, and so they have what they call a budget shortfall. They had more students who are eligible … in college, so they had to increase the appropriations to
Hamilton said the subsidized loans prevented students from accruing the interest while they are in school because the federal government will pay for it. After graduating, there is a six-month grace period before students have to pay back their loans.
She said the same amount of unsubsidized and subsidized loans that were once offered will still be available, but all will be unsubsidized loans where the interest will accrue while
graduate students are still enrolled.
“What they are doing for graduate students is that they are eliminating (the) subsidized part of that, so they are not reducing the amount of loans that students can get; they are just saying, ‘If you are a graduate student we are not providing the interest subsidized,'” Hamilton said. “For the average graduate student, it would end up costing them about $20 to $35 more per month to pay it back. Every month, it’s worth one Starbucks a week. It’s not horrible, but obviously it would be an increase.”
Hamilton said graduate students can pay their loans while they are in school, but Jamie Mendez, a graduate student in biology, said it would be an unnecessary stress.
“I guess the whole point of taking out loans is to make sure that we don’t have the added stress of how to take care of ourselves and support ourselves,” she said. “I’m sure it will lead to people to looking for weekend jobs, which will slow down the whole process.”
Rachel Raynes, a graduate student in biology, said students in the graduate program don’t usually have time to work an additional
job. In the Cell, Molecular and Microbiology Department, she said, it is required that students do not have outside jobs since most have research hours to complete every weekday, as well as a teaching assistant position.
“It’s really a vicious circle because, for the undergrads who are going into science, they are facing the problems that we have to face,” she said. “Not everyone gets to professional school … but what this is doing is … hurting people that are wanting to be moving up to higher education. The idea of cutting money from people who are doing that doesn’t seem very intuitive.”
In the 2010-11 school year, 4,398 USF graduate students received more than $33 million in subsidized graduate loans, Hamilton said.
“My biggest concern is that students will see that and think, ‘Oh my gosh. I can’t afford to go to school,'” she said. “I think that explaining that over the course of repaying the loan, it may cost you $2,000 more, but it’s only $20 a month or $30 a month,”
Cutting the Pell Grant was an option discussed during this summer’s debt ceiling debate. Currently, the maximum Pell Grant amount a student can receive during the fall or spring semester is $5,550, which will be maintained for the 2011-12 school year. For the past two summer semesters, some students who were Pell-eligible received grant funding for summer classes, but this has been discontinued since the 2011 fiscal budget passed in April.
Hamilton said Pell Grants could be cut next year.
“We’re talking about the 2012-13 school year … for our national association from what they are hearing is that nothing is sacred and
everything is on the table, and that is certainly a concern,” she said. “I’ve been doing this for 30 years … It’s like these factors are all coming together — the federal economy is getting bad. In the state economy, we’re raising tuition, so all of these are coming together to affect students’ financial ability to attend. I think these times are going to be the biggest challenges to maintain.”