When I saw a news headline in the
Los Angeles Times late last night discussing big changes in student financial aid proposed by the Bush administration, my heart just sunk. First there was the reduction in the amount of people who are eligible for Pell Grants, now this. It feels as if Bush is declaring war on the poor and higher education simultaneously.
Bush's proposal for higher ed. funding: increase Pell Grants by $500 over the next five years to a max of $4550 per year, BUT ... eliminate the Perkins Loan program completely and reduce funding for the Stafford and other GSL programs that are the cornerstone of paying for college for the majority of American college students. How could this impact college students? Read on for more ...
Change #1 - First, let's look at Pell Grants. Pell Grants are the best funding for low-income college students can have, because you don't have to pay it back. Isn't it great that Bush is increasing them? Not so fast ... here's more info from
the Daily Texan.
Unfortunately, the plan appears to be little more than cosmetic. Bush said he will not put more money into the Pell Grant program; rather, he will cut federal subsidies to lenders for student-loan programs.
In addition, much of the media stories touting Bush's plan to increase Pell Grants forget to mention the small fact that they there will be 80,000 less students to receive the higher grant levels. From the Daily Texan:
Also, in December, the administration changed the formula used to calculate Pell Grant awards, disqualifying more than 80,000 students and reducing aid for another 1.3 million. Meanwhile, students told researchers at UCLA that they would have to borrow more than ever to keep up with rising tuition and living costs.
Change #2 - Elimination of the Perkins Loans. Approx 673,000 students now receive Perkins loans. They are the best of all loans because they carry a fixed 5% rate of interest and they are financed directly by the govt. - not a third party lender. Eligible students can borrow up to $4000 per year. So, if your Perkins Loan is eliminated, you will have to make up the shortfall with a Stafford, because $500 extra from a Pell isn't going to do it.
Change #3 - Reduction of Fees/Guarantee Levels in Stafford Loans
Stafford and other GSLs make up the bulk of student financial aid. They are loans made by third party private lenders, but are guaranteed by the federal government. They are the least desirable kind of aid, because these loans have a variable interest rate that could go as high as 8.25%, depending on the economy. While the administration wants to raise the amounts college freshman and sophmores can borrow (which is good), the change in "fees paid" is what makes me the most nervous. Here is how the Bush administration is spinning this according to the LA Times:
To help pay for it all, Bush wants to shrink a range of subsidies that the government pays to banks to encourage them to make low-interest loans, and to the agencies that insure the loans for the lenders. The savings would pay for more than half of the financial aid overhaul, said Sally Stroup, assistant secretary for postsecondary education.
"We found several billions that we believe we can reduce without causing any disruption in the student loan program," she said. "Lenders will make a little less money, it's true."
Hmmm... Bush wants banks to make LESS profit. Call me skeptical. It turns out I'm not the only one that has misgivings about the administration's supposed altruism - here's the L.A. Times again:
But at least one idea, he said, may be a tougher sell -- a plan to make banks assume a higher risk that students will default on loans, lowering the financial exposure for the government. That could prompt some banks to reduce loans to high-risk students, such as community-college students whose post-graduation income is less certain, Dean said.
Let's be clear - banks are not interested in making less money. They'll just cull students from the loan rolls based upon supposed ability to repay. So, this could cut off funding to the same lowest income students that the increased Pell Grants are supposed to help. Could we even see loan decisions made upon the basis of majors? Engineering and business degrees - approved! Sociology and philosophy majors - eh ... not so much.
Personally, as a high-school dropout teenage mom of two kids more than 15 years ago, I would never have been able to afford college without financial aid. And it was my college education, a degree in sociology, that lifted my family from barely making it to a comfortable middle-class existence. It is a source of pride for me that I have paid back the federal govt. five-fold in federal taxes what they invested in me. I just hope that our future generation will have the same opportunity.
So, please don't let this issue slip through the cracks. Email and call your congressional representative and senators to make sure ALL Americans that want a higher education can afford it.