If you were a politician looking to raise a paltry sum of money to make it look like you’re serious about balancing the budget, there are a number of places you might look. Wasteful farm subsidies, defense spending, and tax loopholes might all be on the table. But apparently Congress has decided that the best way to cut spending is to sock it to grad students using federal loans to pay for college.
Seriously. The Bucks Blog reports that grad students will no longer be able to receive subsidized federal student loans; these are loans that waive interest charges while students are enrolled in school. When this goes into effect, interest will begin accruing immediately. And undergraduate borrowers will also lose the interest rate discount for making on-time payments.
The plan is to use these cuts to preserve the Pell Grant program, which theoretically increases college access for low-income students — although the question of whether Pell Grants accomplish this noble mission is far more open than most people would like you to think.
There is much nashing of teeth in the blogosphere over these cuts in subsidies for graduate student loans, but here’s the reality: The federal student loan program is broken and has been for a long time. These changes might make it ever so slightly more broken, but the real battles on college funding in the U.S. were already lost a long time ago. A federal education policy that encourages students to borrow huge amounts of money using loans that can’t be discharged in bankruptcy and that end up in default at a higher rate than subprime mortgages is bad for students and it’s bad for the country.
If there’s a silver lining here, it’s this: Financial aid shills will no longer be able to tout the always over-hyped benefits of “subsidized graduate loans,” and perhaps that will encourage people to make more prudent decisions about educational debt.