Let's discuss the Deficit Reduction Act of 2005, which President Bush signed into law three months ago. Among the programs adjusted by the act to reduce federal spending are Medicare, Medicaid and federal student-loan programs, which alone account for 70 percent of the total cuts approximately $12 billion.
Changes include elimination of funding for student financial-assistance programs, a requirement that lenders pay a 1 percent interest premium to the government, and an increase in the interest rate on parent and student loans from 7.9 to 8.5 percent. The last change is the most divisive, as it adds nearly $5,000 to the average borrower's debt over the lifetime of the loan.
In a statement on his Web site, U.S. Rep. Charlie Gonzalez (D-Texas), argues that Republicans are to blame for ushering the cuts through. "This single-biggest cut in the history of student-loan programs will be borne by working-class and middle-class students and their parents," he writes. "At a time when many families are worried about job security, the Republican-controlled Congress is adding to their financial concerns."
In fact, the voting rolls on the bill in both houses illustrate a nearly perfect party split. (Interestingly, California, New York and Texas have the highest numbers of borrowers affected by the plan, but only one state's senators voted in favor of the changes. Can you guess which?)
In April, Democrats made a stab at their own changes by proposing reforms to the Higher Education Act of 1965. Both bills, one per chamber, would cut the rate on subsidized student loans from 6.8 to 3.4 percent, and parent, or PLUS, loans to 4.25 percent.
Adding to the clamor for student loan re-reforms is studentaidaction.com, a branch of the State PIRGs' Higher Education Project, which offers information on "The Raid on Student Aid" and suggestions for groups wishing to take action in support of House Reform 5150, the aforementioned HEA reform, and its twin, Senate Bill 2573.
Student Debt Alert, another grassroots reform group, features a Student Loan Debt Clock on its Web site. It calculates the total debt, minus interest, of all parents and students, past and present, currently paying off loans at $418 billion and counting. Factor in the current interest rate, as well as the new rates that take effect July 1, and that total climbs even higher.
President Bush weighed in on the subject when he signed the act in February. Referring to the savings, he offered, "With that money, we will save taxpayers $12 billion because we intend to increase student aid by 10 additional billion dollars. What I'm telling you is, the students are getting the money, and we're making the program a lot more efficient for the taxpayers."
That "10 additional billion dollars" may refer to the $100 increase to the Pell grant program proposed in the 2006 budget, increasing the maximum award to $4,150. According to a 2003 report by the American Council on Education, the highest value of the award historically, adjusted for inflation, was $4,541 in 1975-76. So it's OK if you can't afford your education, as long as you can find a flux capacitor and top out your DeLorean at 88 mph.
What options, then, are left to the students and parents who can't afford the dramatically rising costs of tuition at both public and private universities, or the 30-somethings who only glimpsed the promise of a world without loan payments before the interest-rate hike added $5K more to their burden? Scholarships from various organizations and companies still abound and, last I heard, you only need one kidney. Just how badly do you want to go to college?
Aaron Block is a freelance writer in San Antonio, Texas.