While there are several positive goals in the Republicans' new agenda, there are serious concerns over proposals being advanced to reduce significantly campus-based student aid and to eliminate the in-school interest benefits from the federal student loan programs. The cumulative effect of these changes could amount to a loss of more than $15 billion over the next five years for needy college students nationwide. For Emory alone, the loss of campus-based programs would amount to roughly $3 million per year, not counting benefits to current employers of work-study students who pay salaries at a discount of 70 percent.
The proposals currently being discussed include the elimination of the student's in-school interest benefits, meaning student loans would accrue interest from the point of disbursement instead of being interest-free until the student leaves school. Proposals also including eliminating the annual allocation of Supplemental Educational Opportunity Grant (SEOG), Student Incentive Grant (SSIG), Work-Study and Perkins Loan. There is also some discussion on recapturing the federal share of Perkins Loan collections, and of enacting a rescission of FY-95 student aid funding, which is scheduled to be awarded to students for academic year 1995-96. In addition, the administration is considering reallocating some of the current Pell Grant dollars, moving them to the Department of Labor to create a new job training program that would help to provide financial support to students enrolled in short-term vocational programs. Emory students currently receive $1.5 million in Pell Grant dollars.
A major provision of the Republican party's Contract with America would increase substantially the cost of student borrowing, adding dramatically to the average student's debt burden. The plan would eliminate the in-school interest subsidy on guaranteed student loans now paid by the federal government. Although students would be able to defer payment of interest until they leave school, the additional interest would be added to their loan principal.
For example, a four-year undergraduate student who borrowed the maximum currently available through the subsidized Stafford program would amass $17,125 by graduation. The interest that would accrue on these loans during the borrower's four years of school would be $3,407, or an increase in debt of 20 percent.
Graduate and professional students would be hit even harder. A medical student who borrowed the full subsidized Stafford amount for four years of undergraduate and four years of professional education would graduate with $51,125 of debt. The interest that accrued during the eight years of school and six months of grace would amount to $17,325 or 33.9 percent of the total amount borrowed. In the absence of the interest subsidy, this student would then owe $68,450, not $51,125.
The subsidies are the fourth largest item on the list of proposed cuts outlined in the contract. Republicans estimate that eliminating the subsidy would save $9.6 billion over five years. The same proposal also appeared in a memo from White House Budget Office Director Alice Rivlin in October. With both Republicans and prominent Democrats in support of eliminating the in-school interest subsidy, chances for some sort of modification seem likely.
Budget hearings are currently being conducted regarding the federal role in funding postsecondary education. A target budget reconciliation bill is planned for May, and could include elimination of campus-based programs and in-school interest subsidy.
Schools and Washington-based higher education associations are launching a national communications campaign to inform the public of what is being proposed and how to communicate their concerns to their elected officials. The goal is not to be argumentative or confrontational with the new Congressional majority, but rather to demonstrate to them why it is essential for the federal government to at least maintain current levels of student financial aid funding and to keep education as a national priority.
What should Emory's action plan be in response?
1) Communicate with students about the proposals, encouraging action on their part, as appropriate. My office will be disseminating information via the SGA, Emory Wheel and various student e-mail networks.
2) Provide information to elected officials about the positive impact of federal funding for our students.
3) All of us need to be thinking about the impact of total loss of campus-based and Pell Grant dollars (roughly $4.5 million). Although some rescissions are possible for 1995-96, it is more likely that these cuts, if made, will affect 1996-97.
Anne Sturtevant is director of financial aid.