The Oakland Post

Debt plan is a glass ceiling for students

By Raymond Andre
Posted: Tuesday, August 30th, 2011 at 8:20 pm | Last Updated: Tuesday, August 30th, 2011 at 8:20 pm Comments Print This Email This Tweet This Delicious

Congress recently signed legislation that would raise the nation’s debt ceiling. But there are unintended consequences of the tied discretionary spending cuts that are a bit more elusive and not yet fully understood.  An area that received relatively few cuts but still will likely feel the impact of the country’s changing monetary philosophy: college financial aid.

Early versions of the debt bill in both the House of Representatives and Senate had provisions that would entirely eliminate subsidized student loans, which would hindered the thousands of students that receive financial aid from the government.

As the law passed, undergraduate loans and assistance, as well as the Pell Grant, which the law provides funding for until  the 2013 fiscal year, remained intact.  Graduate student subsidized loans however, will soon be eliminated meaning that those students that incur the most debt will now face earlier and greater difficulties during the repayment life of their loan.  Grad students will also lose on-time repayment incentives that normally award students interest abatements of .5 percent for direct debit payment of loans and .25 percent for consecutive on-time payments.

These federal changes are added to the already increased financial burden that students experience with continually rising tuition rates, seven percent for Oakland University’s fall 2011 semester.

This is a burden that will affect students post-completion of professional or graduate schooling, though, Cindy Hermsen, OU’s Financial Aid Director said.

“Students will still be eligible to borrow at the same limits, just no longer as subsidized, or interest free, loans,”  she said.  “Because the ability to borrow still exists, OU does not plan to offer supplemental loans.”

A total of 15,000 OU graduate students received $24 million in financial aid, $10 million of that amount coming from the soon-to-be eliminated federal subsidized student loan for graduates.

Hermsen expressed concern about the Congressional deficit reduction committee’s potential targeting of undergraduate subsidized student loans as well as work-study programs that help employee students while they attend college.

“They’ll be looking at all sectors of public spending, which means that they might look at additional reductions to financial aid,” she said.”I think that Congress really needs to consider that it would be taking money away from the most needy, they’ll have to decide if that’s really what is best for the country.”

A strong maintenance of need-based financial aid programs is necessary, the financial aid director said.

Elisa Malile, Vice President of the OU Student Congress, said that she and the OUSC are concerned for all students following Congress’ decision to eliminate the subsidized loan for graduate students.

“Of course OUSC is concerned about higher education cuts,”  Malile wrote in an email. “I personally feel like government shouldn’t cut any programs, they should stop giving tax breaks to corporations.”

A 2009 U.S. Department of Education study which sampled the level of dependency on student financial aid from July 2007 to June 2008 found that 74 percent 14 thousand graduate students, representative of three million students enrolled in U.S. graduate schools.  The average amount borrowed by the sampled students was $17,600.

According to records from OU’s Office of Institutional Research, of the 18,920 students enrolled during the fall semester, 3,645 students were enrolled in graduate programs.  During the  2008-2009 school year, 13,216 students at OU, including undergraduates, received financial aid.

Prior to changes in the debt deal, OU has offered assistantships, fellowships and scholarships to graduate students as additional, merit-based means of tuition assistance. The awards are limited and carry several requirements, such as permanent U.S. residency and non-default loan status with Michigan’s King-Chavez-Parks Future Faculty Fellowship Program.

OU’s Financial Aid director is confident that, despite changes, she expects graduate enrollment will remain strong, though she expects the number of graduate students defaulting on loan payments may rise.

“We will continue to educate students on loans  on limits, repayment options and advise students to only borrow what is necessary,” she said.

As of the winter 2011 semester, OU had 3,503 students enrolled in graduate programs.  Federal subsidized student loans for graduate students will be eliminated July 1, 2012.