Will Student Loans be Caught in the Crosshairs of National Budget Cuts?

The future of the country has been under attack by this past decade's ballooning debt.

Our national debt's most recent assault is aimed at college students, now forced to swallow massive school expenses, even before entering the struggling work force. Some argue the bills may get even harder to pay yet, thanks to the Budget Control Act of 2011 passed in early August and the requirement to slash $2 trillion in national debt. 

According to a detailed breakdown by the New York Daily News, a serious potential impact on federally funded student loans is predicted. While they speculate as of July 1, 2012, Pell grants are fortunately increasing, graduate students will no longer be eligible for subsidized loans like Stafford loans.

Undergrads will be affected by a tough need-based criteria for subsidized loans, and repay incentives may take a serious hit as well.

While the Daily News speculates a harsh impact on college students’ federally funded financial aid, Brooklyn College’s Director of Financial Aid Ahad Farhang suggests this is a nowhere near a forgone conclusion, since the Act’s appointed Super Congess is still working out how to make the final cuts.

“Although the act has been passed by Congress and signed into law by the President, the joint committee has yet to determine which programs will be affected,” said Farhang.

Farhang also goes on to explain, he does not expect interest rates for Stafford Subsidized loans to increase, although it’s totally possible the current Federal Direct Loan cap of 8.25 percent could be reached by an increase of 1.45. For Brooklyn College at least, unsubsidized loans could hypothetically replace the subsidized loans if they were to become unavailable.

He also adds undergraduates would also face problems if Stafford loans get slimmed down, but Farhang remains skeptical.

“Yes, it will affect them, if they slimmed it down, but I don’t think it is the best practice or it is not likely to happen,” said Farhang. “On the contrary, I believe that Stafford loans will play a huge role in federal financial aid programs.”

However it’s thin optimism to say all of this is good news for college students, especially since 85 percent of Brooklyn College’s student body with history of loan problems resorts to the school’s in-house deferment program.

Other students like Bed-Stuy local Assita Calhoun, 43, are already struggling from the new changes to the federal budget. Calhoun, a single mother of three who works full-time for Creative Bath, is pursuing a bachelor’s in accounting at Empire State College and as of this past summer, she was only a year away from completing her hard work.

Unfortunately, the federal funding portion of her scholarship will not be available during her final semester next spring as she will have maxed out her eligibility for Pell Grants.

“I nearly passed out because that’s my last semester in order to graduate. I didn’t know what to do. I called FAFSA (Free Application for Student Aid), I called New York City Tax Department, and they all told me the same thing,” Calhoun said. “I was devastated because I put [college] off for a long time.”

While finishing up her remaining funded fall semester, Calhoun is scrambling to find ways to pay the $4,000 she will owe for the last semester, including applying for more scholarships, and while she’s trying to keep a good attitude, progress is slow.

“I'm not taking out any more loans, because that's another burden, and with the job market, I don't want to have to worry about paying it back,” Calhoun said. “If I cannot get a scholarship or afford to pay for school on my own, then I won't go.”

In the end, Calhoun felt victimized by Congress’ decision and the country’s overall neglect for its students.

“In a capitalist society, all that Congress is concerned about is money and power. But what about human capital?” Calhoun asked. “How are you going to capitalize on everything, but not invest in your human capital, and human capital starts with education.”