Advertisement

Archive for Tuesday, August 9, 2011

Graduate and professional students take a hit in federal budget compromise

August 9, 2011, 12:38 p.m. Updated August 9, 2011, 5:09 p.m.

Advertisement

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.

Comments

Shardwurm 2 years, 8 months ago

The only thing Scam$us Univer$ity can do in times like these is raise tuition!

Seriously - bunch of whiny people trying to get an education complaining about the fact that they can't borrow mortgage-level money to get a worthless degree that will never pay for itself.

Hilarious. We all know that the middle class has WAY too much money laying around right now. If they haven't emptied their 401k yet then there's still room for higher tuition.

You all should be honored that Scam$us will even accept your paultry offerings. We all know that a degree in English from that fine enterprise is worth at least $200k - $300k. At $80k+ it's a bargain.

Stop complaining and get four or five jobs. Who needs sleep anyway?

0

Jimo 2 years, 8 months ago

I suspect student debt is just the next debt crisis to hit. If students graduate to no jobs, they ain't got any cash, and they can't just extend forbearances forever and ever.

Besides, every $1 students end up paying on loans is a dollar they don't spend at the local auto dealer, restaurant, shoe store, or realtor. But then ... who needs more business!?!

Thanks Tea Party! You're doing a heck of job.

0

ahyland 2 years, 8 months ago

peartree,

That was a great question, so I went back to the folks at NASFAA and asked them. They told me the changes will apply to new loans only. I'll be updating this story soon, and will include that new bit of info in it.

Thanks for asking it!

Andy Hyland

0

madcow 2 years, 8 months ago

And here I was thinking about going back to school again.

0

Jayhawk_N_Denver 2 years, 8 months ago

peartree, I work in the Financial Aid field and sadly, this is the first I'm hearing of this. I work for a college that currently has no graduate programs so my students won't be affected, but I've been trying to keep close tabs on the latest developments. I tried researching this more and couldn't find much. It's possible that they made this change and haven't quite settled on an answer to your question. My guess is that any current subsidized loans taken out prior to July 1, 2012 will continue to be interest free while in deferment. When student loans went from a variable interest rate to a fixed interest rate, all previous loans stayed at the variable rates and the new loans are all fixed based on what year they were taken out. Since they've been able to keep pretty good tabs on this change, I would think they can extend the same courtesy to graduate students with prior loans and not change the way the prior loans are being handled. Sorry for the long-winded answer that doesn't really give you an answer, but hopefully it eases your concerns until someone can give you a clear cut answer. Talk to your school's FA office to see if they can update you as soon as they find out.

0

peartree 2 years, 8 months ago

Does anyone know how this will affect students who currently hold subsidized Stafford loans if they are still in school after July of 2012? Will the loans previously acquired begin to accrue interest while the student is still in school? Obviously, any new loans after that date will be collecting interest.

0

parrothead8 2 years, 8 months ago

Awesome. I was afraid the government wasn't going to find a way to make it tougher on this segment of overworked, underpaid citizens.

0

Commenting has been disabled for this item.