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Wednesday, July 27, 2011

Boehner, Reid Debt Ceiling Plans Would Eliminate Subsidized Law Student Loans

Forbes, Debt Ceiling Plans Take Aim at Graduate Student Loans, by Janet Novack:

The competing deficit reduction/debt ceiling increase plans proposed by House Speaker John Boehner (R-Ohio) and Senate Majority Leader Harry Reid (D-NV) would both cut off subsidized Stafford student loans for graduate and professional students.

Currently, graduate and professional students can take out up to $20,500 a year in federal loans, and up to $8,500 of this amount can be in subsidized loans if they’re found to have financial need.  (Details here, at the government’s student aid web site.)  With the subsidized variety of loans, Uncle Sam pays the interest due while students are in school and during a six month “grace period” after they’ve left school and before repayment begins.  With the unsubsidized variety,  interest accrues while students study and during the grace period, adding to the amount they must pay back when they graduate.

Under both the Boehner and Reid plans, no new subsidized loans would be issued to graduate students after July 1, 2012.

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To me, this one is a winner. We have way too many lawyers in this land and we all know it. Let's subsidize engineering or math and computer science students or chemistry and biology majors so that we turn our society into one that reflects our needs.

It's amazing that 8 of the 9 top leaders in China have degrees in science or math or engineering and the differences between their backgrounds and our leaders' shows more and more every day.

Later when the number of lawyers is trimmed down, if we have the money to lend law school students, fine but we better be sure we have that money and that it is a field that needs subsidization.

Posted by: foggyworld | Jul 27, 2011 9:31:47 PM

Did you read the whole article Mr. foggyworld? The proposed legislation does not end subsidies just for law education. It eliminates subsidies for all "graduate" education, which would include your preferred "engineering or math and computer science students or chemistry and biology majors." While it may or may not be true that we have too many lawyers in the U.S., this type of legislation will ensure that our future lawyers--and our future "engineering or math and computer science students or chemistry and biology majors"--will come from the upper socio-economic strata of society. Only the upper strata will be able to finance their educations through the family finance company. I imagine the right wing thinks this kind of social Darwinism is a good thing. I disagree.

Posted by: Publius Novus | Jul 28, 2011 8:02:23 AM

This is such a small deficit item and it hurts students who are already looking at bleak job prospects and record high tuition. The subsidized interest only lasts for the time they're in school and the 6 month grace period, so we're talking about chump change to help ensure that students come from a more diverse financial background.

Posted by: ry | Jul 28, 2011 12:22:51 PM

This is a shame.

And some of us thought that servitude had become obsolete as a business model and, for all intents and purposes also illegal, and that a caste society was a thing of the past (albeit, through social mobility opportunities for the ambitious few).

The only way eliminating subsidized loans would make sense from an undergraduate student's perspective is if the size Pell grants for individual students is increased to cover the difference. Graduate and professional students, however, are not eligible for Pell grants, so either make these available to grad students to cover the difference ($8,5000) or don't touch subsidized loans.

Meanwhile the obnoxiously rich throw way their "hard earned" money on year-long vacations around the globe.

If today's Republicans weren't such a circus act, their very existence would be utterly insulting.

Posted by: Emanuel | Jul 28, 2011 12:41:06 PM

>Under both the Boehner and Reid plans...

It's a bi-partisan measure...

Posted by: bbay | Aug 3, 2011 5:37:19 AM

As a former med student myself, we avoided HEAL loans as much as possible and tried to stay within the Stafford envelope precisely because of the interest subsidy. That being the case, an extra few thousand dollars in interest that accrues during three or four years of graduate school really shouldn't be daunting, anyone graduating from medical school, law school or a PhD program still has a large loan balance as well as improved job prospects. The subsidized portion of the loan package was only $8,500 a year to start with, and given that student loan rates are fixed around 6% the increase is only about $500 a year. On the one hand people whine about a subsidy disappearing, on the other it is pretty much a rounding error compared to the overall cost of the program.

A better question would be why post-secondary tuition and fees are increasing at a rate far beyond inflation, necessitating larger and larger student loans. Given the political makeup of most of higher education it's harder to blame that one on Republicans, so I understand why it would be asked less often.

Posted by: Darren Duvall | Aug 3, 2011 6:22:52 AM

These are the kinds of tough choices that well be increasingly common over the next 5 years when you're trying to reduce a $1.5T debt. Get used to it.

FWIW, this effects mostly professional schools students since most STEM and Humanities grad students get significant stipends to offset much of the cost of grad education (for teaching and acting as low-cost research assistants). Daughter (in med school) will be hit by this change, but it's an extra $5K total on an expected graduating debt of $200K+. Less impact than yearly tuition changes.

Posted by: Soviet of Washington | Aug 3, 2011 8:14:30 AM