Does the debt deal really need to pick on grad students? Part 1
One story after another this year has been written about college graduates moving back in with mom and dad. These kids are drowning in student debt from Ivy League schools, which they thought offered the pass key to idyllic jobs that would allow them to live the good life. Instead, they graduated into the worst recession since their grandparents (and in some cases, great grandparents) were their age, and face the worst job market in decades.
What’s an overeducated liberal arts major to do? Well, many decided that graduate school is the answer! But just in case you or your kids had it in mind that one could find solace in more learning and more degrees, think again. Although the details of the newly passed Budget Control Act are still murky, the one part that is crystal clear: Congress wants to make it much more expensive for graduate students to borrow money to get their degrees. That’s right. Phds. MDs. JDs. MBAs. MAs. Whatever. You will all likely pay more.
If you—or your children—are about to head off to become a doctor, lawyer or get any sort of graduate degree, the $100,000 average debt load that many students currently take on will get even bigger soon, thanks to the new budget bill which President Obama signed into law yesterday. Although most of the details of the new cuts are still murky, there is one spelled out in vivid detail: Anyone in graduate school or thinking of going will be paying more money starting next summer.
The reason: Under the new deal, the government will no longer subsidize federal student loans (the popular Stafford student loan) for grad school. That means a typical borrower could pay an additional $7,000 in interest on federal student loan debt, estimates Mark Kantrowitz in this week’s Chronicle of Higher Education. That’s an extra $200 a month for some of the most indebted students, according to the Daily Kos.
Another loss: under current rules, all federal borrowers are entitled to a small interest rate deduction for timely payments. That’s been eliminated under the new agreement.
And it’s only going to get worse: By November 23, lawmakers will have to come up $2 trillion in budget cuts, which means that other financial aid programs and grants could get cut. Now, more than ever before, it’s time to be vigilant about financing your education.
Now, more than ever before, is the time to be vigilant about financing your education. Stay tuned—in the next blog post, I’ll spell out what you can do to keep your education costs down.