Ball State University students under the Direct Loan Program will suffer a huge hit financially over the next five years if Congress approves a plan to cut student aid by about $14.3 billion.
And it won't be getting any better for students, either - not with rising tuition costs, war costs and recovery costs for Hurricanes Katrina and Rita, officials said.
"The federal government has run up this big deficit and is looking for ways to address that," Robert Zellers, director of financial aid at Ball State, said.
Congress is currently in budget reconciliation, where it is looking for ways to reduce the operating budget and decrease the federal deficit.
Also, Republicans are looking to enact almost $70 billion in tax cuts later this year.
The Senate on Nov. 3 voted to generate $36 billion in savings over the next five years by making the first cuts to mandatory programs since 1997, including about $9.6 billion in student aid.
The House of Representatives Education and Workforce Committee approved a bill to reduce the deficit by $54 billion, which eliminates about $14.3 billion in student aid. Reductions in student aid funding constitute about 30 percent of the House bill's cuts. A vote on this bill by the full House was postponed Thursday until sometime this week.
The legislation will soon be up for floor debate before senators and representatives begin a conference committee, where they will reconcile the two bills.
The Senate also approved a $2.7 billion plan to lower student loan processing fees and provide aid to students in hurricane zones.
Under the House bill, however, processing fees, which currently are at about 1.5 percent in interest, could soon reach 3 percent interest, Zellers said.
Both bills fail to increase the Pell Grant for low-income students, he said.
"The final bill will probably have pieces from both bodies," Zellers said. "My hope is that they will take what I think is the bad stuff out of the House bill and go with the Senate bill."
STUDENT CONCERNS
Zellers said he saw the legislation as yet another obstacle for students who depend on direct loans to get through college, especially with the average Ball State graduate's debt already sitting at $17,156.
According to Democrats, citing estimates by the Congressional Budget Office, an average student borrower who owes $17,500 could end up paying as much as $5,800 more in interest payments.
Junior Tricia Braun uses direct loans and said she was concerned about how the legislation would affect students who rely on them to get through school.
"It's not fair for students," Braun said. "I know it's hard to find a spot to cut the budget, but it would be nice if they could find one that doesn't affect students because we don't have stable jobs."
Zellers said both bills would eliminate subsidies to banks, credit unions, private lenders and student-loan-guarantee agencies, which would pass costs on to students who take out private loans or alternative loans on top of their federal Stafford loans.
The legislation also calls for a variable interest rate on consolidation instead of a fixed interest rate. This means students can no longer lock in their low rates at a time when interest rates are steadily on the rise, Zellers said.
Junior Chris Evans said he consolidated his loans from his freshman and sophomore years earlier this year and preferred having a fixed interest rate.
"Any time you can lock in a rate on a loan, it's better than having a variable rate," Evans said. "But if people need a loan, I don't think it's necessarily going to stop them from getting the loan. But in the long run, it will make it harder for them to pay it back; it makes it take longer."
Congress' legislation would also allow freshmen and sophomores to borrow more money. The borrowing limit for freshmen would increase from $2,625 to $3,500, while sophomores' borrowing limit would rise from $3,500 to $4,500, Zellers said. However, students would still have an overall limit of $23,000, he said.
"The bad part in the bill is it didn't raise the overall amount, so it just shifts the money," Zellers said.
TUITION AND SOLUTIONS
Ball State tuition rates over the past few years have steadily been increasing, from $5,950 during the 2003-04 academic year to $6,180 between 2004-05. The tuition rate is $6,478 this year, officials said.
Tom Morrison, vice president for business affairs and state relations, said students' loan debt has not been increasing as quickly as the tuition rate.
The Board of Trustees decides tuition rates in the spring, he said. Tuition has been on the rise in recent years because the state government also devotes its budget to such areas as state prisons, Medicare, Medicaid and K-12 education. Ball State's funding is based on the amount of money the state brings in with taxes, Morrison said.
"Based on our requirements and how much money they have available, we actually took a cut in appropriations over the last two years," Morrison said. "We lost $3 million in appropriations."
To cope with rising tuition and proposed cuts to student loan programs, Zellers said he encouraged students to seek scholarship aid. Students should also work on their personal money-management skills, he said.
"I would think students have to try to find ways to budget their money to make their money go farther," Zellers said. "Try to find ways to cut expenses, if at all possible, to save more money. But in the end, they may end up having to pay a little more to borrow the money they need to go to school."
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