Congress To Cut Loans for Students
House Version of Bill Would Add $5,800 to the Average Student's Loans

By Emily Baneman
Spectator Staff Writer
November 28, 2005

As part of an effort to curb the national deficit, the U.S. Senate and House of Representatives recently made substantial cuts to federal student loan programs.

The House deficit reduction bill, which passed by a close vote of 217-215, reduces spending on federal student loan programs by $14.3 billion over the next five years. The Senate bill, which passed by a vote of 52-47, reduces student loan spending by $9.7 billion over the same period. The bills lower subsidies to private lenders that provide student loans and increase borrowing costs for students.
According to the United States Student Association, the House bill will cost the average student borrower an additional $5,800 in loan payments. On average, students currently borrow about $17,500 for college.
Both bills also reduce spending on entitlement programs and include changes to Medicaid, food stamps, farm subsidies, and other programs. However, the specifics of the bills differ substantially, and the House and Senate will have to compromise on a final version of the bill.
The House bill will decrease total spending by $50 billion, while the Senate bill will decrease spending by $36 billion. These are the first cuts to mandatory programs since 1997.

"What is most concerning is that Representatives are willing to use the income generated from student aid to pay the government's debt," Nate Walker, executive director of the National Tuition Endowment and TC '05, said in an e-mail. "Specific to New York, it's upsetting to think that two of New York's Representatives-Kuhl and Walsh-are willing to use students' debt to pay for the government's deficit. This is unethical."
Other student leaders also expressed concern about potential effects on the students who take out loans.

"I think the biggest effect would be that you can't refinance your loans at lower interest rates," said Izumi Devalier, CC '07 and CCSC vice president for policy and a member of Columbia's Financial Aid Reform Coalition. "People are going to graduate with more debt in the long run, and this will affect students' plans to go to graduate school."

According to Higher Education Washington's online news service, the Senate bill creates $19 billion in savings but redirects $8 billion of it toward new need-based grant programs and phases out origination fees. In the House bill, most of the $14 billion in savings will go toward deficit reduction, but some will also be used to increase loan limits and reduce origination fees.