Graduate students will potentially pay hundreds or even thousands of dollars more for school due to a last-minute addition to the mid-summer deal to raise the debt ceiling.
As a part of the Budget Control Act cut in late July, Congress agreed to scrap subsidized federal loans—which do not accrue interest while a student is in school—for all graduate students starting July 2012. Graduate and professional students can currently take out up to $20,500 per year in federal loans, including up to $8,500 in subsidized loans if a student meets financial need requirements. Students do not have to pay interest on subsidized loans until six months after leaving school.
About $17 billion of the $22 billion saved from the cut will be used to provide funding to the Pell Grant program, which gives up to $5,500 per year to lower income undergraduate students, though that program still needs about $1.3 billion to maintain current levels. Pell Grants provide funding to about 8 million low-income students. The rest of the savings will go toward deficit reduction.
Federally subsidized loans for undergraduates will be left untouched.
A graduate student who borrows the maximum of $65,500 per year will owe $207 per month in interest payments. However, since most graduate-level programs at the University of South Florida St. Petersburg take two years to complete, most students who are eligible for subsidized loans will receive about $17,000 worth and pay about $54 per month in interest by the fourth semester.
That means the average USFSP graduate student who begins school after July and takes four semesters to graduate will pay about $807 more in interest while in school. That figure increases to $1,211 for four and a half semesters, and $1,694 for five semesters.
If the recent downgrade of the U.S.’s credit rating raises interest rates on federal student loans, as many financial experts believe it will, graduate students could owe even more.
Over half of all graduate students receive federal financial aid, according to FinAid, an organization that compiles data about financial aid. However, a study released by the U.S. Department of Education in July found that more graduate students are relying in federal aid, and that figure is expected to grow rapidly.
Congress also cut a special credit for both undergraduates and graduates who make 12 months of on-time financial aid payments. All students who receive federal financial aid pay 1 percent of their loan as an origination fee, but they get half of that amount back if they make their first 12 payments on time. That credit will be eliminated along with subsidized loans for graduate students on July 1, 2012.
The cuts will save taxpayers roughly $26.3 billion by 2021.
The debt deal cut a total of $2.1 trillion from the federal budget over the next 10 years. Meanwhile, the U.S. spends about $300 million per day on the war in Afghanistan, or $27 billion over three months. That money could be better spent on education.
With unemployment remaining steady at 9.2 percent, and with this year’s average 6.5 percent rise in tuition, graduate students need all of the help they can get.
