The Paul Ryan Higher Education Cuts That No One Is Talking About

by Perry Stein | April 27, 2012

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.

Source URL: http://www.newrepublic.com//article/politics/102987/pell-college-obama-budget-student-debt-loans