From the State PIRG's Higher Education Project:
The Senate is scheduled to vote on the budget reconciliation conference report Wednesday morning. The House voted early Monday morning to pass reconciliation by a vote of 212 to 206. The budget bill includes $12.7 billion in cuts to the student loan program, both the largest cut in the history of the loan programs and the largest single cut in the legislation. The bill derives approximately 70% of its savings from higher loan interest rates for borrowers and redirecting excessive student and parent payments to private lenders. While Congress directs several billion dollars to pay for grant aid and some student borrower benefits, the bulk of the cuts will be sent out of the program to pay for tax cuts for the wealthiest Americans.
The bill generates at least 70% of its savings by making loans more expensive for borrowers: approximately $15 billion out of the $21 billion in total cuts. Specifically the bill generates:
* Almost $13 billion from excessive subsidy payments that student and parent borrowers make to lenders. This bill uses this money to pay for new tax cuts rather than sending it back to students through additional need-based grant aid or lower interest rates.
* Approximately $2 billion by increasing the parent loan interest rate from 7.9% to 8.5%.
Two other cuts that won’t necessarily come from students but could have a significant impact on borrowers are:
* $2.2 billion in cuts to critical student loan delivery funds used to administer the federal student aid programs. Without these funds the administration of the federal student aid programs is in jeopardy.
* $1.4 billion by charging guarantee agencies collect a 1% insurance fee on all loans. Lenders could potentially pass on this cut directly to student borrowers.
The hit on students and parents are part of a larger package of more than $40 billion in cuts to federal programs like student loans, Medicaid and food stamps. A corresponding package of $50 to $70 billion in new tax cuts for some of the wealthiest Americans will be voted on early in 2006.
The budget measure will direct a small portion of the student loan cuts back to students. The bill spends $3.7 billion on grants for students majoring in math, science and foreign languages. In addition, the bill will gradually lower charges for some students, known as origination fees, over the next five years. Finally the bill retains 6.8% as the cap on student interest rates, a measure that will help protect students as interest rates continue to rise.
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Senate Voting Wednesday Morning on $12.7 Billion in Student Loan Cuts
Largest Cuts to Student Aid in History
The Senate is scheduled to vote on the budget reconciliation conference report Wednesday morning. The House voted early Monday morning to pass reconciliation by a vote of 212 to 206. The budget bill includes $12.7 billion in cuts to the student loan program, both the largest cut in the history of the loan programs and the largest single cut in the legislation. The bill derives approximately 70% of its savings from higher loan interest rates for borrowers and redirecting excessive student and parent payments to private lenders. While Congress directs several billion dollars to pay for grant aid and some student borrower benefits, the bulk of the cuts will be sent out of the program to pay for tax cuts for the wealthiest Americans.
The bill generates at least 70% of its savings by making loans more expensive for borrowers: approximately $15 billion out of the $21 billion in total cuts. Specifically the bill generates:
* Almost $13 billion from excessive subsidy payments that student and parent borrowers make to lenders. This bill uses this money to pay for new tax cuts rather than sending it back to students through additional need-based grant aid or lower interest rates.
* Approximately $2 billion by increasing the parent loan interest rate from 7.9% to 8.5%.
Two other cuts that won’t necessarily come from students but could have a significant impact on borrowers are:
* $2.2 billion in cuts to critical student loan delivery funds used to administer the federal student aid programs. Without these funds the administration of the federal student aid programs is in jeopardy.
* $1.4 billion by charging guarantee agencies collect a 1% insurance fee on all loans. Lenders could potentially pass on this cut directly to student borrowers.
The hit on students and parents are part of a larger package of more than $40 billion in cuts to federal programs like student loans, Medicaid and food stamps. A corresponding package of $50 to $70 billion in new tax cuts for some of the wealthiest Americans will be voted on early in 2006.
The budget measure will direct a small portion of the student loan cuts back to students. The bill spends $3.7 billion on grants for students majoring in math, science and foreign languages. In addition, the bill will gradually lower charges for some students, known as origination fees, over the next five years. Finally the bill retains 6.8% as the cap on student interest rates, a measure that will help protect students as interest rates continue to rise.
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posted by Hans Riemer at 10:32 AM
4 Comments:
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"the bulk of the cuts will be sent out of the program to pay for tax cuts for the wealthiest Americans."
You cannot be serious. Where do I start? Tax cuts only benefit those that pay taxes. Since 97% of individual tax revenue comes from the top 50% of wage earners, tax cuts will disproportionately benefit them as they pay almost all of the taxes.
When Bush cut taxes, he gave an incentive for people to invest in new business opportunities. Individual and Business revenues have since increased along with the tax revenue collected by the Government despite the lower tax rate. In no way was this cut designed to pay for these tax cuts. You may verify these facts on CBO.gov.
Maybe the government decided to no longer make loans at below the market rate? Would you lend to John Smith at 3% when the current rates are 6%. Would you consider John’s credit history/rating in your decision to set the rate?
While I am in favor of helping students get aid to help them go through college, this is not the Governments role. Increased government aid to students has caused the increased demand which in turn has elevated the cost of going to college.
If you would like to see tuition come down, have the government stop injecting easy money via low rates into the system. No doubt this will make it harder for one to attend a university but it will reduce university revenue which will force them to lower their cost of tuition.
The government's role is not to provide for your education.
If students are the future of this country shouldn't they have all the help they can get in getting an education in colledge? I think its wrong to take money away from kids who's families aren't rich enough to pay them thru college.
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