Student Loans May Cost More in 2006; Students Urged to Consolidate Nowz
by Anne O'Dell
In addition to slashing funding for public health programs and completely cutting other programs such as renewable energy initiatives, the act will cut more than $12 billion from federal financial aid for college students. The reductions to student aid will include an increased 6.8 percent fixed rate on consolidated student loans.
This number differs drastically from previous provisions for students to take advantage of variable rates and consolidate their loans at a time when interest rates are lower. Because the act would not go into effect until July 1, 2006, students still have the opportunity to consolidate now at rates ranging from 4.75 to 5.375 percent.
“It is imperative that students take advantage of the favorable rates before the window of opportunity closes for good,” said the CEO of Law School Loans, Harrison Barnes. “This is a prime example how procrastination will literally cost people thousands of dollars.”
PLUS loans for the parents of college students will also switch to a higher, fixed interest rate. The bill calls for a fixed rate of 8.5 percent from the current variable rate of 6.1 percent.
Senate President Dick Cheney cut short his most recent diplomacy trip to the Middle East and Asia to cast the tie-breaking vote for one of the Bush administration’s favored bills.
As both House and Senate members rushed to pass bills before the holidays and the year’s end, diplomatic cooperation gave way to a heated partisan debate, which, in the House, saw representatives awake and orating into the wee hours of December 18, 2005.
“[The budget cut] is accomplished through added fees on students and increases of interest rates,” said Rep. Sheila Jackson-Lee (D-TX).
“Students borrowing money for college will pay thousands of dollars more on their student loans. This is in the face of college costs up over 7 percent this past year alone.”
In addition to expressing dismay at the potential effects on college students and their families, many members of Congress argued that the bill was “a sham” because it proposed reduced spending while simultaneously decreasing revenues.
House minority whip Rep. Steny Hoyer (D-MD) said from the floor, “[Republicans] come here cutting revenues. That is an honest policy, but you do not have the courage to cut the spending. You cut $50 billion, you say in this bill, but you then cut $56 billion in revenue. You don't have to be much of a math expert to know that that is a $6-billion addition to the deficit.”
Rep. John Spratt (D-NC) stated that since making student loans part of discretionary rather than mandatory spending would cripple funding for other discretionary educational programs, the $12.7-billion decrease in student loan funding was “a phony cut” that would leave other programs inadequately funded by around $2 billion.
“Budget Deficit Reduction Act? Is that Orwellian doublespeak?” asked Senate minority whip Sen. Harry Reid (D-NV)
“It increases the deficit of this country because of the tax cuts [Republicans] are giving to those who don't need them by some $50 billion over and above these cuts.”
Republicans who supported the bill have a very different view of its effect on student financial aid. Sen. Jon Kyl (R-AZ), who supported the Deficit Reduction Act, believes that the bill will have no impact on the actual benefits individuals receive.
He wrote in a recent National Ledger editorial, “The bill improves federal student loan programs by reducing lenders’ fees, raising borrowing limits, and expanding grant aid, while at the same time streamlining administration procedures to make the whole process easier for both parents and students.”
“It is not easy to limit or reduce funding for any program,” said Rep. Bob Goodlatte (R-VA), who favored the bill.
“But it is imperative that instead of cowering away from the problem, we take a stand and vote yes to reducing the deficit and vote yes to responsible spending.”
Other Congress members called the bill irresponsible, immoral, draconian, and even Dickensian.
“This might be called A Christmas Carol” said Rep. John Dingell (D-MI).
“The Republicans give tax cuts to every Ebenezer Scrooge and his friends, and they raise the costs to the Cratchit family and take medical care away from Tiny Tim.”
Medicare and Medicaid are two notable programs that also suffer budget cuts in the bill, which tightens restrictions on the admission of elderly patients to long-term-care programs and limits care available to low-income individuals suffering from AIDS.
The Deficit Reduction Act also contains provisions for the pharmaceutical industry that many Democrats and activists have called a gift to large drug companies.
In the final moments of discussion, the Senate voted that the House should approve certain amendments to the bill before it is given to President Bush for approval or veto.
If the House defeats the bill when it reconvenes in January, a joint conference committee will be charged with rewriting it. Many lobbyist groups and members of Congress are hoping to significantly alter or eliminate portions of the bill if goes back to the conference committee.
As the bill passed in the House previously by a margin of only two votes, speculation is still rife as to whether it will indeed become an act.