Release date: Aug. 9, 2005
Contact: Elaine Justice at 404-727-0643 or elaine.justice@emory.edu

Higher Education Act Legislation Sets Up Students
For More Debt, Says Emory's Padgett

As the reauthorization of the Higher Education Act makes its way through Congress this fall, financial aid directors such as Julia Padgett at Emory University are bracing for the fact that the new legislation is unlikely to provide any significant new relief for needy students.

"There is nothing new in the way of help for students that is coming with this legislation," says Padgett. "And existing programs are level funded at best." That's because the House education committee's directive was to trim around $12 billion from its overall budget, leaving no room for funding increases.

Although the legislation passed by the House so far is not calling for direct cuts to programs, "the cuts are in the form of indirect costs, including the amount that lenders have to pay in loan fees; these costs get passed along to students eventually," says Padgett.

For example, students who consolidate loans under the new legislation will have a choice between fixed and variable rates, but the interest rate is capped at 8.25 percent rather than the 6.8 percent that some were seeking.

Padgett does applaud the legislation for closing a legal loophole that allowed lenders to reap enormous profits in the form of government subsidies on student loans. "That should have happened long ago," she says.

So far, the proposed legislation doesn't end the campus-based Perkins Loan Program as was recommended earlier by the Bush administration, but neither is there any expansion of Perkins or other campus-based programs such as Federal Work-Study and Federal Supplemental Educational Opportunity Grants.

"Instead of increasing the allocation for these programs, funds will be shifted from schools that have a long history of participating in and relying on these campus-based programs to schools entering the programs for the first time," Padgett says. "This is good news for the schools that have waited so long for a share of this funding and bad news for those that see their aid resources decrease."

Of particular concern at Emory would be cuts in the Federal Work-Study funding. "Our students depend upon and use every penny of those funds. If there are cuts, the students have to look elsewhere, with loans being the most likely option."

Also not in the legislation is an increase in Stafford loan limits "that would have allowed students to borrow more at guaranteed lower interest rates, rather than max out at $18,500, and supplement with higher interest rate private loans," says Padgett. "There's nothing positive about that for students.

"We worry on the one hand about debt management and advise students not to borrow too heavily, but these proposed changes are setting them up for more debt," says Padgett. "Our efforts to look after these students will be tested."

Emory University is known for its demanding academics, outstanding undergraduate college of arts and sciences, highly ranked professional schools and state-of-the-art research facilities. For nearly two decades Emory has been named one of the country's top 25 national universities by U.S. News & World Report. In addition to its nine schools, the university encompasses The Carter Center, Yerkes National Primate Research Center and Emory Healthcare, the state's largest and most comprehensive health care system.

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