By Silas Allen
STILLWATER, Okla. —
Some graduate students can expect to see changes in their financial aid packages following a federal bill that raises the nation’s debt ceiling while cutting federal spending over the next decade.
The deal eliminates federally-subsidized Federal Direct Stafford loans for graduate and professional students, as well as loan payment incentives, beginning July 1, 2012.
In the past, when a student borrowed under the Federal Direct Loan Program, the student was responsible for repaying the principal amount, while the federal government paid the interest. With the change outlined in the bill, graduate and professional students will be responsible for paying both the principal amount and the interest.
During the 2010-11 academic year, 1,647 Oklahoma State University students received federally-subsidized loans to cover the costs of enrollment in graduate programs and also in professional programs in OSU’s School of Veterinary Medicine.
Those students borrowed more than $11.8 million during the most recent academic year, said OSU Financial Aid Director Charles Bruce. Those loans carried an interest rate of 6.8 percent, bringing the subsidized amount to $805,529, Bruce said.
President Barack Obama signed the bill Tuesday, capping a lengthy legislative battle that threatened to prevent Congress from extending the nation’s borrowing authority, potentially throwing the federal government into default. The bill represents a compromise that raises the national debt ceiling while cutting more than $2 trillion from the federal budget over the next decade.
Federally-subsidized student loans have been a point of contention throughout the debt ceiling debate. Last month, House Majority Leader Eric Cantor, R-Va., suggested both undergraduate and graduate students be responsible for paying the interest on those loans.
Cantor’s recommendation wasn’t the first of its kind. In December, the National Commission on Fiscal Responsibility and Reform released a report titled “The Moment of Truth” that outlined a number of cost-saving measures and made recommendations for programs to cut.
In the report, the Obama-appointed commission proposed the elimination of all subsidies in federal student loan programs. The commission’s report says the elimination of those subsidies would save the federal government $5 billion in 2015 and $43 billion through 2020.
Click here for more on how Sen. Jim Inhofe, Sen. Tom Coburn and Rep. Frank Lucas voted on the measure.