Part of the debt deal that’s been passed by the House includes specific language about cuts to loans for graduate education. Starting on July 1, 2012, graduate students (and this includes law and med students) will no longer have access to the subsidized loans once provided by the federal government.
Until now, graduate students could apply for a loan of up to $20,5000 a year from the federal government. Out of that amount, $8,500 came from a special, subsidized loan. This loan was one where the student did not have to pay interest while still in school ““ the government paid the interest until up to 6 months after the student’s graduation. Over the course of a degree, a student could get up to $65,500 of that subsidized loan. If a student hit that maximum, then according to CNN Money, they would now be paying $207 a month in interest over ten years ““ a substantial amount.
The cuts to the subsidized loan program are expected to save $18 billion over ten years (the number grows to 21.6 billion when the cuts to a credit for paying loans for 12 consecutive months are taken into account). According to ThinkProgress.Org, these cuts would save spending equivalent to the cost of three months in Afghanistan.
The cuts were pushed forward in an attempt to reduce the deficit and save Pell Grants, a $5,500 grant available to low income undergraduates. I absolutely believe that Pell Grants are crucial for allowing low income students to take advantage of educational opportunities that would otherwise be lost to them. However, the cuts in the subsidized loans seem like the wrong place to get the dough.
Tuition and fee increases at universities are happening across the board: graduate students as well as undergraduates have to somehow manage higher and higher bills for the education. More people are entering graduate school in the face of a dismal job market, and as a graduate degree is slowly replacing a bachelor’s as the degree necessary for a good job, more and more students are applying to and attending graduate programs. Basically, the need for affordable tuition and fees, and reasonable support for graduate students is exceptionally high right now. Cuts to funding for education will result in students being unable to afford and pursue their higher ed goals.
Legislators are quick to point out that there will be increases in the amount of debt a graduate student can take on, so as to ensure that students can pay the loans (and the accumulated interest) after they graduate. This is not a real solution for many people since it provides a short-term solution that in the end results in larger loan burdens for students.
ThinkProgress.Org says that the cuts will not affect low-income students, but that is simply untrue. They point to a program called IBR, Income-Based Repayment, which allows students with high debt to income ratios and/or who pursue public service, to have manageable loan payments based on their income instead of on their loan amount. After 25 years, any remaining debt will be forgiven. This is a good program for those who qualify, but it is based on future, not current income. Low income graduate students will still lose access to the subsidized loans, but if they continue to be low income even after finishing grad school, then they may be given a more manageable repayment plan. There is no cost cutting, and the debt burden remains extremely high ““ people will either pay it off, or be saddled with payments every month for 25 years.
So it looks like graduate students now have one more hurdle to face in completing their degrees. Med school and law school attrition rates are relatively low, but PhD programs see attrition rates of 40-50%. With the rising graduate student enrollment, the increases in cost, and the uncertainty about the completion of the PhD, it’s going to be really interesting (and terrifying) to see how these factors interact.