The new national budget for the 2012 fiscal year, put forward by President Obama on Feb. 14, includes a number of heavily debated proposals with important implications for college students.
Undergraduate students who benefit from the Pell Grant or the Perkins Loan Program –– especially those who hope to take classes over the summer–– may notice some changes, and those attending or anticipating graduate school will also see shifts.
Changes to the Federal Pell Grant
The president’s proposed alterations to the Federal Pell Grant have caused some of the choppiest waves in Washington, as he moves to simultaneously expand and limit the grant, which unlike a loan, does not have to be repaid. Obama is proposing retraction of the grant’s year-round policy, which would eliminate its effectiveness for summer school. Currently, the Pell Grant is offered twice a year, and can therefore be used to pay for the summer term, a policy which was enacted in 2008 to accelerate students through college, reducing their overall financial burden. The presidential administration is now arguing that the year-round grants do little to help students earn their degrees faster and are therefore inefficient.
The flip side of this several million dollar coin is that the government will be able to offer over 9.6 million students the maximum $5,500 Pell Grant, rather than cutting that amount by several hundred dollars as the House of Representatives has suggested. The U.S. Department of Education envisions this strategy of cutting the two Pells to lead to savings of an estimated $7.6 billion over the next two fiscal years, according to their website.
Proposed budget aids eductation
At its core, Obama’s budget does not cut financial aid and actually protects the growth of education in the U.S. Biola’s vice president for enrollment management, Greg Vaughan, supports this philosophy.
“Reducing accessibility to higher education jeopardizes the future of our country,” Vaughn said. “Education is essential for the success and well-being of individuals and fuels our nation’s ability to compete at every level in the world marketplace.”
Michael Pierce, vice president of business and financial affairs at Biola, expressed a similar sentiment.
“There’s a general feeling that if you provide money to students for education that you will have a much better educated work force,” Pierce said. “And that the work force will then get good paying jobs and then ultimately will pay taxes and contribute to the future growth of the economy.”
New budget affects loans and interest
The Pell Grant isn’t the only facet of financial aid to undergo modifications in the new budget proposal. President Obama has also included a new plan that would cut out the in-school interest subsidy for graduate and professional student loans. For current students, interest does not begin accumulating on their loans until after graduation, once they are out of school and into their careers. Under the new budget, however, interest would start stacking up from day one of enrollment, though it would still not have to be paid until post-graduation.
This strategy may seem daunting and unfair to Biola students going through or considering grad school, especially since the additional debt accumulated after pursuing a graduate degree typically ranges from $30,000 to $120,000, as reported by FinAid.org. However, the USDE expects the new plan to save the U.S. an estimated $2.2 billion in the 2012 fiscal year and $33 billion over the next 10 years.
Obama has also outlined an expansion of the Perkins Loan Program, which presently offers aid to students with severe financial need at a low interest rate of 5 percent, estimated to save the feds approximately $8.6 billion over the next decade. The proposed changes would support Perkins Loans at thousands of additional higher education institutions, possibly reaching up to three million students, while raising the interest rate to 6.8 percent.
Budget still pending Congressional approval
The budget proposals of both the president and the House are vying for approval, with both Republicans and Democrats continuing to weigh options for compromise.
“Because many issues that affect students are decided in the federal and state legislative branches of government, it’s important that all students familiarize themselves with the issues and exercise their right to vote,” Pierce said.
