Though a recent federal debt budget compromise protected Pell Grants for low-income undergraduate students, graduate and professional students who receive federally subsidized Stafford loans did take a hit.
The federal budget deal removed government subsidies for interest payments on those loans, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.
Under the old system, interest would not accrue on those loans while the students were in school, or during any periods of loan deferment, he said. Those loans can still be deferred in several qualifying situations, like if a student returns to school or enters the armed forces.
Ora McWilliams, a Kansas University doctoral student in American studies, received a subsidized Stafford loan for his graduate studies. He said the interest subsidies certainly helped out, especially considering he had about $100,000 in student loans combined from his undergraduate, master’s and doctoral studies.
If he had to pay the interest that would have piled up while he was in school, he’d be looking at thousands more in debt.
“That hurts to think about,” he said.
Most of the savings achieved in the cuts would be redirected to the Pell Grant program, Draeger said. While his organization was disappointed that costs for graduate students would be going up, he said that he was pleased to see the support for Pell Grants.
“That’s no small thing,” he said, as the Pell program is the “bedrock” of financial aid programs. “To see bipartisan support in the deficit reduction budget is a huge win for students.”
McWilliams said, as a probable future educator, he was pleased to see that the cuts would result in additional support for undergraduate students. Still, the cuts will be felt, he said.
“I wonder if something else could have changed a little bit,” he said.
The changes will go into effect for new graduate loans made after July 1, 2012. The budget compromise bill also made one other change, Draeger said. Some incentives for repaying loans on time were dropped for both undergraduate and graduate students, he said.
At KU, about 35 percent of graduate and professional students receive need-based loans each year, said Jill Jess, a KU spokeswoman, with an average loan amount of $7,700.
That figure is higher, however, at KU Medical Center, where about 53 percent of KUMC graduate and professional students take out need-based loans every year.