Proposed budget would cut loans
That HUB refund check may have just gotten a little smaller. On February 6, President George W. Bush presented Congress with the White House’s proposal for the fiscal year 2007 budget. If the budget passes, there will be significant reductions in funding for popular education programs directly affecting college students.
The budget cuts target the Perkins Loan and other need-based programs.
“The Perkins loan program has been under review for a while. Last year Congress proposed the elimination of the entire program, not just the annual receipt of the federal capital contribution which colleges receive,” stated Linda Anderson, director of Enrollment Services at Carnegie Mellon. A popular education financing method among Carnegie Mellon students, the Perkins Loan provides a low interest rate lending option. If approved, the President’s proposed budget would eliminate the loan.
“Congress has shown that it intends to continue the Perkins Loan program ... by including it in its reauthorization of the Higher Ed amendment in both House and Senate bills,” Anderson stated. At Carnegie Mellon there are roughly 1000 students whose loans could be at risk. This is the second year in a row that the White House has asked Congress to cut Perkins from the budget.
“[I am] not concerned about the loss of the entire fund,” Anderson stated. “If Congress were to eliminate this entire [Perkins] program ... requiring the recall of funding from colleges over a specified period of time, this would impact us.” In this case, Carnegie Mellon would provide new lending opportunities.
Pell Grants remain unchanged with the maximum set at $4050. The Chronicle of Higher Education reports this was the fifth year the grant maximum has remained at this level. At Carnegie Mellon, an estimated 500 students receive Pell Grants annually.
Bush’s budget funds the Federal Work-Study program at the previous year’s level. As part of the Federal Work-Study program, the government pays up to 100 percent of a student’s work income. The program allows employers to hire students while keeping overhead low.
Other need-based programs, though, are also facing reductions.
“Bush’s proposal would also terminate the Leveraging Educational Assistance Partnerships program,” according to The Chronicle. The $65 million LEAP program parallels funding, dollar for dollar, based on state contributions to low-income level recipients.
The proposed budget also reduces funding for two of three major TRIO programs. Created from the 1964 Economic Opportunity Act, the TRIO program serves students pursuing higher education. Upon its establishment, Congress legislated that two-thirds of people served by TRIO programs must come from low income families.
Seeking to close the Congressional Budget Office’s estimated $270 billion budget deficit, the Bush administration’s budgetary reasoning relies on the recently established Program Assessment Rating Tool (PART). The Office of Management and Budget and federal agencies use the PART program to assess performance of over 800 federal programs.
For example, PART gives the Perkins program a rating of “ineffective,” citing the program as “redundant and duplicative, given the broad availability of need-based, subsidized, relatively low-interest loans through the ... Federal Family Education Loans and Ford Direct Student Loans.”
There are also budget proposals that affect students without relying on cuts. To reflect the latest White House initiatives, the proposed budget increases spending in areas of mathematics and science.
The budget proposes an eight percent increase in the National Science Foundation’s (NSF) budget to $6.02 billion. While funding has increased for the NSF, other programs are experiencing no change.
The National Institutes of Health (NIH), self-described on its website as “the primary Federal agency for conducting and supporting medical research,” has its budget remaining at $28.59 billion.
While the sciences are being bolstered, arts and humanities face budget reductions. The budget reduces Arts in Education by $35 million, while funding the National Endowment for the Humanities and the National Endowment for the Arts at $141 million and $125 million, respectively. The funding levels of these two National Endowment programs show no increase over the previous year’s level.
If this budget is adopted as proposed, some lending programs would be eliminated or changed, and educational financing issues grow more complex for Carnegie Mellon students.
“Carnegie Mellon is fortunate to have students whose default rates are the lowest in the nation,” Anderson stated. “[Carnegie Mellon has] or would create financing partnerships which would give our students the best borrower benefits and APRs.”
The budget proposes some new financing opportunities. The budget would create Academic Competitiveness grants. These grants have a math and science preference and could combine with new grant programs for students who meet Pell Grant requirements.
“This is good news,” Anderson said.
Either budgeted or interest-rate-based changes in the lending environment can be confusing for students. Some students are taking action to secure their financial standing.
“I searched [loan consolidation] out on my own after seeing it mentioned on the news, and the change was as simple as filling out a form on their website,” said Matt Yeager, a senior in electrical and computer engineering.
“Students who meet minimum borrowing requirements and have these current variable Stafford interest rates should consider consolidating before July 1, 2006,” Anderson said.