Worcester Students May Carry the Budget Cut Burden
WASHINGTON, Dec. 13 – In the spring of 2001, Willimantic, Conn., high school senior Chris Marot knew he wanted to attend the College of the Holy Cross, but there was a problem: he had no way of financing his education.
At the time, the most viable alternative seemed to be to enroll at the University of Connecticut, which was less expensive and closer to his hometown. Mr. Marot said he had his heart set on Holy Cross but saw the reality of the situation.
“I knew I wouldn’t be able to afford Holy Cross,” he said.
But after finally being given enough financial aid to attend his first choice, Mr. Marot enrolled at Holy Cross.
It’s taken some creative financing – he said he paid the balance of last semester’s tuition from the money he made house painting over the summer – but in May, Mr. Marot is set to graduate from Holy Cross with a degree in history.
But for many other students, the financial burden of an education may only be getting heavier. Congress has proposed to cut several billion dollars from the federal student loan program in the coming months.
Last month, the House narrowly passed its version of the budget reconciliation bill, one of the main items on President Bush’s legislative agenda. The bill would cut approximately $50 billion in total spending, including $14.3 billion in federal student loan subsidies over the next five years.
The Senate bill, also passed last month, proposes to cut $35 billion in total spending, including $9 billion from the student loan program.
Reduced subsidies for lenders means that borrowers – the students – would absorb most of the burden in the long run. Since banks and other lenders will need a way to maintain their profits, student loan incentive programs may be discontinued, the loan terms may be much less appealing and higher-interest rates may become the norm.
According to the State Public Interest Research Groups’ Higher Education Project , the average federal student loan is about $17,500. A student who borrows this amount, under the new legislation, could pay up to $5,800 more in interest than he or she now pays over the life of the loan.
“In many cases, that’s tacking on a year or two to the loan,” said Luke Swarthout, the higher-education associate for the State Public Interest Research Groups – a citizen run, public-interest organization. “Students will experience these legislative changes in the years after graduation when they’re forced to make choices like starting a family or buying a home. It’s those economic and social consequences that make this bill outrageous.”
The bill passed by two votes in the House, 217-215. Every voting Democrat and 14 Republicans opposed the bill.
Opponents contended that the student loan cuts would force students to carry the burden through increased interest rates and various fees on their loans and would leave many students hard-pressed to afford an education.
“I’m horrified by what the Republicans are trying to do,” said Rep. James P. McGovern, D-Worcester. “These cuts are unacceptable. One of the keys to our economic viability is a well-educated work force. We should be making it easier for people to get an education, not harder.”
“If I had to choose one plan, I’d pick the Senate’s,” said Eileen O’ Leary, co-chairwoman of the government relations committee of the Massachusetts Association of Student Financial Aid Administrators . “Although the Senate bill does make changes that can cost students more money, most of the money comes out of bank and lender profits, which I’m not opposed to. The Senate bill isn’t perfect, but it’s a better option.”
The government offers three main student loans – the Perkins Loan, which has a 5 percent interest rate and is based exclusively on need; the Stafford Loan, a popular, variable-interest loan that may not exceed 8.25 percent and currently is at 4.7 percent; and the Parent Loan for Undergraduate Students, a higher-interest loan offered to parents of dependent undergraduates.
The Senate bill proposes a fixed interest rate of 6.8 percent for Stafford loans. The House bill proposes an 8.25 percent cap for students and 9 percent for parents
Unlike the House bill, the Senate bill would increase funds for Pell Grants, a form of federal aid that does not need to be paid back. Pell Grants are typically awarded to students whose families earn $20,000 a year or less.
According to Sen. Edward M. Kennedy, D-Mass, the Senate bill would bring about $120 million in additional Pell Grants to Massachusetts students over the next five years.
Lenders are particularly concerned that the Senate budget proposal would reduce federal subsidies paid to them even more steeply than the House bill would . Some lenders estimate a loss of as much as $15 billion over the next five years.
“The bill could lead to major changes in marketing patterns,” said John Dean, a representative of the Consumer Bankers Association. “Some smaller lenders may find it difficult to survive in the marketplace and major lenders may not market to community colleges or to institutions with students who are at a higher risk for default.”
The Republican leadership is pushing to work out the differences between the House and Senate bills before Christmas, although a complete resolution may not be reached until early in the new year.
Alexa Marrero, spokeswoman for the House Education and the Workforce Committee, said the House bill would increase student loan benefits. For example, she said, it would preserve the Stafford Loans’ variable interest rate, which should be to the advantage of the borrower over the long term.
Ms. Marrero also said that the bill would allow students to take out larger loans and pay reduced fees.
“The bill is actually reforming the student loan program,” she said. “We’re trying to improve opportunities for students, and we are demanding a greater efficiency from the programs. In the short term, students see an increase in the loan limits, and they can watch their fees go down. In the long term, students should know that [the government’s] investment in higher education is going to continue to rise.”
As for the $5,800 more in interest the average student is expected to pay on a loan, she said: “That number is misleading. There isn’t really a way to peg a number on what a student will pay overall because there are so many different factors involved. Opponents of the program have put forth misleading information and inaccurate descriptions of what the new program is intended to do.”
Some contend that the government is dumping its financial burden from the Iraq war and hurricane relief on the backs of lower- and middle-class students.
“Cutting student loans is a short-sided policy,” Mr. Swarthout of the State Public Interest Research Groups said. “I think there is a perception [in Congress] that they can cut these programs and there won’t be political consequences when it comes time to vote.”
In addition to cutting federal money for student loans, the Senate and House bills would dip into such programs as health care and food stamps.
“The bottom line is, we’re going to have tax cuts that will benefit the wealthy in this country,” Mr. McGovern said. “The rich and the oil companies are not sacrificing anything. By cutting student loans and food stamps and home heating oil and Medicaid, you’re not making America stronger, you are making it weaker.”
With several colleges in the Worcester area, many local students would be likely to feel the financial strain from the student aid cuts.
At Assumption College, 1,687 students, or about 80 percent of the student population, received federal aid in the past year, according to Karen Puntillo, the school’s financial aid director. The figure is even higher at Clark University, where about 90 percent of the student body receives some form of federal aid.
Alyssa Sunkin, a junior at Clark, said that the increased cost of education and the threat of increasing loan costs have deterred her from applying to graduate school.
The editor-in-chief of The Scarlet, Clark’s student newspaper, Ms. Sunkin plans on becoming a journalist but fears that an entry-level salary will not allow her to comfortably pay off her loans.
“I don’t expect to be making 50, 60, 70 thousand dollars right away,” she said. “If the loans increase, it’s going to be a tremendous strain on me and my family. A lot of my friends here are relying on their loans to stay at the university. College should be an institution that all people can attend, not just people that can afford it.”
At Worcester Polytechnic Institute 1,621 of the 2,806 students (58 percent) receive some form of federal aid.
At Holy Cross, 43 percent of the approximately 2,700 students receive federal aid, according to Lynne Myers, Holy Cross’ financial aid director.
” Students that receive financial aid are concerned,” Ms. Myers said. “The reality is that things like tuition and room and board are going up and financial aid is, at best, staying the same.”
Craig Lowell, a senior at Holy Cross, uses a $2,000 Stafford loan to help finance his education. With the potential rise in student loan costs, Lowell said, many students may not be able to attend the colleges they’d like to.
“Even before the increase, I’ve had friends who weren’t able to go to the college they wanted to because they didn’t get enough financial aid,” he said. “As a college student, you’re always strapped for money.”
At Worcester State College 2,004 students, or 37 percent of the 5,471 enrolled during the 2005 fall semester, received federal aid.
“For us, we have a large number of students who wouldn’t be able to go to college if they didn’t have financial aid,” said Worcester State College financial aid director Kaine Thompson. “The school is taking on more and more in scholarship aid because of such a great need.”
She added: “Most jobs require you to have at least a bachelor’s degree these days. [The government] is cutting people’s ability to give back to the economy.”
Student Debt Alert is a project of the State Public Interest Research Groups. On its Web site, www.studentalert.org , students have initiated a campaign addressing problems with student loan debt.
In the Web site’s “Student Debt Yearbook,” students from colleges across the country express their concern over their mounting debts. Jody (she didn’t give her full name), a prospective graduate of the University of Massachusetts Amherst’s class of 2008, writes that she expects her total loan debt will exceed $110,000.
“It is a raw deal,” she wrote in the on-line yearbook. “There’s no way that you can possible start out on a good foot when you are way over your head in debt.”
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