House Budget Cuts College Aid

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Heather Boushey
Sun-Sentinel, November 14, 2005

The House budget coming back up for a vote this week (following a contentious session and postponement on Thursday) contains a proposal to cut $14.3 billion from federal student aid programs over the next five years.

Given that a college degree is the surest route to  alibecoming, and remaining, middle-class taxpayers, it would seem Congress ought to be trying to make college more affordable, not less.

As college has become more important, the federal government has shifted the costs toward students. Loans now comprise a staggering one-half of financial aid packages, up from one-fifth in the 1970s.

The average indebted graduating senior owed $17,600 last year, one-third more debt than in the late 1980s.

High debt is the result of rapidly increasing college costs and policy choices that have made more loans -- but not grant aid -- available to students.

At the same time, college costs, after inflation, have more than doubled in a generation.

In 1981, a student could pay for two-thirds of their education by working a summer job for minimum wage. Now, a student would have to work full-time for one year to afford a single year at a four-year public university.

The burden of loans falls heaviest on students with fewer family resources.  Lower-income students are more likely to take out loans, and when they do, to take on more debt compared to their wealthier peers. And their parents are less likely to help them pay off the loans later on.

The 1992 Higher Education Act was supposed to address higher college costs, but unfortunately, it resulted in more reliance on high-cost student loans. It raised the cost of borrowing by expanding access to unsubsidized loans, which accrue interest while the student is in school.

Now, less than half of all loans are subsidized, whereas in the late 1980s, the federal government subsidized most student loans by paying the interest until graduation.

The House's vote reflects a shortsighted choice to balance the budget by slashing student aid, rather than rescinding tax cuts to the wealthiest Americans.

Graduates should be taxed after they get a good-paying job, instead of making them pay upfront, when many have the least resources available.

Since most college students already work at least part-time, they will either look to nonfederal loans or credit cards to finance their education, both of which generally have far higher interest rates than federal loans.

Instead of looking to balance the budget on the backs of college students, Congress should take a different tack. Increasing the availability of grants and expanding low-interest, subsidized loans would be first steps toward expanding access to college for more than just the children of the wealthiest families.


Heather Boushey is an economist at the Center for Economic and Policy Research in Washington, DC.