POLITICS APRIL 27, 2012
-
Read Later
READ LATERAvailable only to subscribers. SUBSCRIBE TODAY
-
Listen
ARTICLE AUDIO
- Font Size
When Representative Paul Ryan released his proposed federal budget for 2013, among the first provisions to attract the attention of critics was its choice not to renew the current interest rate of loans for low-income college students. Democrats quickly seized the issue, publicizing the staggering fact that Americans currently have $1 trillion in student debt and politicizing the loan rates in question: 3.4 percent (the government’s current subsidized interest rate for Stafford loans, which were established in 2007 and will expire in July if not renewed) versus 6.8 percent (the unsubsidized interest rate to which the Ryan budget proposed returning those loans). The Obama administration even made a push to rally the masses through a Twitter campaign, using the hashtag #DontDoubleMyRate.
The effort, it should be said, has largely been successful. Not only has Mitt Romney (in what many consider an early attempt to moderate his image for the general election) already come out in favor of the lower interest rates for students—congressional Republicans have conceded the issue as well. But what got lost in this high-volume debate was the question of whether the proposed rise in loan rates even counts as the most significant higher education funding issue this budget season. There’s good reason to think it doesn’t.
In addition to its proposed changes to Stafford loans, the Ryan budget also slashes Pell Grant funding. Established through the 1965 Higher Education Act, need-based Pell Grants are the federal government’s flagship program in helping low-income students gain access to higher education.
Under Ryan’s plan, the maximum Pell Grant award would remain the same as it is now at $5,550 per year, but the eligibility requirements would change so that fewer people would qualify. (He didn’t specify the income limit for eligibility.) And where Obama has increased the maximum Pell grant during his presidency (and proposes to have it rise with the Consumer Price Index for 2013), Ryan calls for the award’s amount to remain stagnant. In other words, under Ryan’s plan, Pell Grants would not keep up with the pace of inflation, and would be worth less in each successive year. Given that college prices will likely continue to rise, this means that needy students will become ever more reliant on loans to pay for their education.
The students who qualify for Pell Grants, of course, are largely the same students who would qualify for subsidized student loans. But there’s a strong argument to be made that decreases in Pell Grant funding would be even more detrimental than the since-rescinded rise in student loan rates. According to the Obama administration, the elimination of subsidized loans would affect more than 7.4 million students and add an average of $1,000 to their education debt. While $1,000 is nothing to scoff at, that’s only a “marginal increase” in what students currently owe, according to Jason Delisle, the director of the Federal Education Budget Project at the New America Foundation. According to a recent blog post by Delisle, a Stafford loan recipient who borrowed at the 3.4 percent interest rate, rather than the unsubsidized 6.8 percent rate—assuming he borrows the $5,550 maximum allowable amount as a third- or fourth-year student—would save a total of only $9 each month.
But the gradual decrease in the maximum Pell Grant award—and the subsequent rise in loan debt—that the Ryan budget puts in motion could eventually amount to much more than $1000 per student. Similarly, whoever is forced out of the Pell Grant program entirely due to the change in eligibility requirements will have to make up the difference (the average Pell Grant award is $3,711) by taking out larger public and private loans. “Pell grants are such a critical program for helping low income students to overcoming barriers to higher education,” says Stephen Burd, a senior policy analyst at Education Sector. “It’s a program that has always had bipartisan support and it’s too important to just deal with in these type of budget crises.”
Of course, this is not to say that the Obama administration’s higher education budget proposals are without fault. As it is, the government’s current plan depends on stimulus money that is set to expire. The surge of stimulus funding has allowed the White House to portray Ryan’s cuts as especially drastic—but it has also obscured the fact that the President is relying on emergency funding to maintain the status quo going forward.
Given Washington’s concerns about the national deficit, the government is bound to make cuts to the federal budget, and it’s only fair for lawmakers to set their priorities when it comes to higher education policy. But if lawmakers are truly concerned about rising levels of student debt, they should not be exclusively focused on the impacts of eliminating subsidized loans: They should be fighting to save Pell Grants, the only program that helps low-income students avoid loans entirely.
Perry Stein is an intern at The New Republic.
8 comments
We can continue to subsidize the higher education industry, as we subsidize the textile industry, but it will eventually die a slow but certain death. This is no longer the 1960s, or 1970s, or 1980s, or 1990s, when any degree from any middling college or university would be a ticket to a good job. Of course, we can, and probably will, live in denial, and continue to waste large amounts of our limited (and rapidly depleting) resources (grants, subsidized loans, new and expanded campuses, more athletic facilities to benefit ESPN, etc.). That's become the American way, most evident with regard to maintaining the American Empire, the one area where even Obama (a fan of the Kagan article on the subject in TNR) and Marco Rubio (see his speech earlier this week at the Brookings Institute) are in agreement. Or, with regard to higher education, we could face the challenge and reform it, make higher education conform to the demands of today's America and today's economy. And it would be a challenge, with all the entrenched interests demanding that they be protected from the war on higher education.
- rayward
April 27, 2012 at 7:02am
my wife is a nurse and while she was in school many of her classmates had pell grants and most of them have passed and gone on to become full time nurses making in the $40,000 and higher range (some much higher). Without the grants a number of them would have had to drop out and remain in dead end jobs in retail or the like. ray, what the hell are you talking about? Rapidly depleting resources? Don't be ridiculous, expending resources on higher education barely depletes anything and the rewards far outweigh the costs. I guess Einstein should never have wasted the ink to write down his formulas because ink is a depletable resource..or something. A state college education is still very affordable for the majority of Americans, a community college one even moreso, but Pell grants are still absolutely necessary because the students still have to eat and live. Yes, I agree there is a lot of featherbedding and reforms are needed, but to equate the system with the Textile one to be outsourced to Asia I just don't get.
- blackton
April 27, 2012 at 10:08am
Students that are majoring in something that society needs, such as engineering, will have no problem paying their student loans because the free market will pay them a salary that will make it possible. Students majoring in something society can do without, such as another humanities major, likely will not. Their education expense will dog them for a decade, at which point the taxpayer will pick up bill. The government first needs to really think hard about loaning someone more than a half a year of salary (when they graduate) for school. There is no benefit to society or to an individual for them to ring up $50,000 in debt to finance an art degree. What a waste of money for all parties involved. The real solution here is to charge an interest rate that reflects the real cost of college INCLUDING defaults. If you include defaults in the picture, the the cost for student loans today is twice what we're charging the students.
- seattleeng
April 27, 2012 at 10:09am
When I was in college 40 years ago I took several political science courses because I found the subject fun; and to be honest, to pad my GPA, as competing for an A against political science majors was like playing football against 12 year olds (8 year olds in my case). One day before starting his lecture, the political science teacher observed that only in a nation as wealthy as the United States could so many major in political science. His observation was totally accurate then but would be only half accurate today.
- rayward
April 27, 2012 at 12:24pm
seattle, whose to say what society needs? You say we only need nuts and bolts, to fix what's already here; what about the visionaries? Really creative people, people who create beauty, people who fix things you don't see, like hurt pigeons; we count too.
- Sophia
April 27, 2012 at 2:26pm
Congressman: "How does funding the humanities contribute to national defense?" Witness: "By preserving us as a nation worth defending" The actual exchange was about particle physics (the testifying witness was a Nobel laureate in physics) but the point applies even more to the humanities. I'm an applied mathematician, trained in physics, working on real-world applications in defense and energy and medicine, but even a hardnosed practical type like me can see the value in humanities education. I'd like to see every citizen aware of literature and history, philosophy and art.
- krlong014
April 27, 2012 at 3:22pm
Sophia: "Really creative people, people who create beauty, people who fix things you don't see, like hurt pigeons; we count too." I am not sure education can really solve this problem. Probably it calls for genetic engineering. Sending the moonbat signal out into the night sky for Monsanto (the world's most admired and ethical corporation) to come to the rescue.
- skahn
April 27, 2012 at 5:06pm
As far as I know, the average return to society on public investment in education is around 4% (I'm not sure of period of time involved, but I'm guessing around 20-25 years). That investment can take several forms of course, from funding scientific research to enabling more people to complete a degree to creating an after-school program for young kids with working parent or parents. If we try to try to hack education into a shape that "conforms to the demands of today's America and today's economy," as ray puts it, we will destroy a lot of education in the process. I have a lot of respect for engineering and it's a beautiful thing, but it's not an end in itself. We can stare at a Roman aqueduct still standing after nearly 2000 years but we need to know something more to admire it.
- ironyroad
April 27, 2012 at 9:42pm