(MintPress) – As the Supreme Court of the United States was ruling on President Barack Obama’s health care overhaul legislation, Congress quietly passed a measure that prevented subsidized student loan interest rates from doubling. The agreement prevented the current 3.4 percent interest rate from jumping to 6.8 percent – a measure that would have cost the average borrower an extra $1,000 per academic year. However, what is widely being seen as a cost-effective extension also comes with expensive strings attached, as new rule changes will cost college students $18 billion over the next decade Critics argue that Congress used the legislation as a means of putting a percentage of the federal budget deficit on the backs of students.
A handful of changes expected this fall include limiting what loans are available to graduate students, eliminating the grace period for payback, lowering the income for an “automatic zero” on loan application forms and limiting the eligibility for the need-based Pell Grant.
Graduate students are taking an expensive hit as they will no longer have access to federally subsidized loans. Starting this year, graduate students will only have federal loan access to unsubsidized loans, which will come with a 6.8 percent interest rate. The legislation affects a demographic of students that has risen by 33 percent since 2000, as there are now 2.8 million graduate students in America.
Graduate students will also be expected to pay the interest of their loan while still in school. Prior to the rulings, the government subsidized interest rates for graduate students in school and for undergraduates for the first six months after graduation.
Joel Packer, executive director of the Committee for Education Funding, said that Congress is actually costing borrowers more money in the future by tweaking current laws. He noted that many will not even be aware of the new changes until they are in college, at which point it will be too late for most.
“In the last year, Congress has actually trimmed tens of billions of dollars in student aid,” Parker told National Public Radio (NPR). “So they’ve made a whole variety of changes. Overall, about $4.6 billion came out of students’ pockets to pay off the federal deficit.”
Summary of provisions
There are a handful of other alterations to the university landscape that accompany the frozen interest rates. One lowers the standard for the “automatic zero” clause, which set the bar which dictated how much families were expected to contribute based on their household income. While filling out the Free Application for Federal Student Aid (FAFSA) forms, families were given an Expected Family Contribution (EFC) amount; however, any family with an income less than $32,000 received an automatic zero for their EFC. After the weekend, the income limit to qualify for automatic zero is now set at $23,000, which will cut funding for many students, according to Minnesota Public Radio.
While it would seem that cutting funding for students who no longer qualify for automatic zero would increase applications for need-based grants, Congress targeted Pell Grants in their legislation as well. Starting this fall, the grants will be limited to 12 full-time semesters for students. In order to graduate with a bachelor’s degree in four year, students need eight full-time semesters to fulfill requirements, but many students take longer, cutting into their grant allotment should they choose to attend graduate school.
Getachew Kassa, legislative director for the U.S. Student Association, says college students are being unfairly targeted in Congress’ quest to lasso in a growing budget deficit.
“In the past year, we’ve had deals where students have basically been robbed. I think the real question to ask is at what point is this going to stop?” Kassa told NPR. “Because sooner or later — you take a little bit here, a little bit there — you have nothing else to take away from.”
Age-old question: Is it worth it?
The hit taken by many graduate students once again raises the question of the widespread benefits of graduate school versus hitting the job market with a bachelor’s degree. Forbes contributor Frances Bridges argues that graduate school is not cost-effective unless you continue toward a doctorate degree and opined that many students hope to use their graduate degree instead of their body of work to make them look more attractive to employers.
“The majority of my grad school friends who got a grad degree to be ‘more competitive’ in the job market ended up with the same jobs and the same salary they would’ve gotten without a graduate degree, and now they’re in debt,” Bridges wrote. “In my opinion that is thousands of dollars spent on a degree they didn’t need, when they could have been making money.”
But Bridges does not account for employer trends that essentially require a master’s degree to enter the field or receive significantly better compensation. By make a master’s degree more difficult to obtain, professions such as teaching, social work or psychology could see a reduction in available work force.
Other professions, such as engineers and those which require business degrees, stand to make nearly 40 percent more with a master’s degree than their counterparts with bachelor’s degrees. For law and public policy majors, 50 percent who earn a graduate degree experience a 107 percent earnings boost.
But some college administrators caution students when it comes to investing tens of thousands of dollars more by continuing their education. Kristin Williams, assistant provost for graduate enrollment at George Washington University, warns that holders of a graduate degree are not immune to unemployment. The Bureau of Labor Statistics says there is a 3.9 percent jobless rate for those with a master’s degree.
“Just because the statistics say unemployment is lower with a master’s doesn’t mean you won’t be unemployed,” Williams told the Washington Post.
Death by default?
As some students and recent graduates make tongue-in-cheek comments about how much debt they have accumulated just by being in school, student debt has become far more than a joke for some. Suicides related to student debt are on the rise, according to the Economic Hardship Reporting Project (EHRP). While no tangible figures have been released, suicides among those who have already defaulted on their repayment plans are noticeable. Of the students who began repayment in 2009, 8.8 percent have already defaulted. That compares to 7 percent in 2008.
C. Cryn Johanssen hosts the “All Education Matters” blog. In her report for EHRP, Johanssen explained how she encouraged people to express whether they had considered suicide as a way out of the student loan pressure.
“I was very actively looking into suicide until I got on anti-depressants. Now I have to take happy pills every day to keep the suicidal urges at a minimum level,” one unnamed poster wrote to her. “You are correct to ask the question. Many of the folks who are incredibly deep in law school debt will end up killing themselves. I think, in the next 1-3 years, we are going to see absolutely massive numbers of law school graduate suicides.”
The American Association of Suicidology (AAS) acknowledges the existence of higher rates of suicide with those who are dealing with financial hardships, including student loans among other forms of debt.
“There is a clear and direct relationship between rates of unemployment and suicide,” the AAS wrote in a report. “The peak rate of suicide in 1933 occurred one year after the total U.S. unemployment rate reached 25 [percent] of the labor force. Similar findings have been documented internationally. At the individual level, unemployed individuals have between two and four times the suicide rate of those employed.”