House Republicans Pass Budget That Would Raise Student Loan Rates

Students and parents will pay higher interest on college loans starting this July if President Bush signs into law new budget legislation passed by the House of Representatives yesterday.

But students majoring in math, science and certain foreign languages, as well as undergraduates from “rigorous” high schools, may also be eligible for new federal grants of up to $4,000 provided by the same bill.

Harvard students will be less affected by these measures than students at public universities and smaller colleges because Harvard offers students substantial financial aid apart from federal grants and loans, Harvard’s director of federal and state relations, Suzanne Day, said.

Day said that Bush has expressed support for the legislation and is expected to sign it into law.

Harvard students with federal loans will be affected by the new measure if it is signed into law and will face interest rate increases of over 2 percent starting July 1.

According to the Harvard College Financial Aid Office website, approximately 49 percent of Harvard students graduate with some loan debt. The median debt for the Class of 2005 was $6,400, according to the website.

The interest rates will rise to a fixed rate of 6.8 percent for student loans and 8.5 percent for loans to parents, Day said.

Interest rates for the 2005-2006 year were 4.7 percent for students and 6.1 percent for parents, according to the College’s financial aid website.

The legislation has sparked protest from higher education advocacy groups because student loan programs face a net cut of approximately $12 billion, which accounts for nearly a third of the $39 billion reduction in federal spending.

Luke Swarthout, a higher education associate for the State Public Interest Research Group, which lobbied strongly against the legislation, called the bill “the largest raid on student aid in history.”

According to Swarthout, the measures increase the financial burden on students and families trying to finance college educations in order to pay for tax cuts for wealthy Americans.

“It’s incredibly misguided policy,” he said.

But Republicans have argued that the cuts are a necessary part of responsible governance and that many of the programs cut were outdated and inefficient.

“The Deficit Reduction Act seeks to curb the unsustainable growth rate of mandatory programs that are set to consume 62 percent of our total federal budget in the next decade if left unchecked,” said Rep. Adam H. Putnam, R—Fla, according to the Associated Press.

Reiterating the views of many in the higher education community, Day, the Harvard official, said in an interview last month that money cut from certain aspects of the student loan program should have gone to fund education initiatives—not toward deficit reduction or other measures such as tax cuts.

“We believe those dollars are better reinvested in higher education and making college more affordable and accessible for all students,” Day said.

This perceived loss for higher education comes a day after the announcement of initiatives to increase American scientific competitiveness in Bush’s State of the Union address—an announcement that higher education advocates praised.

“We’re disappointed that the Congress has voted to take significant resources out of the student loan program, particularly when there is increasing recognition of the connection between higher education and our nation’s global competitiveness,” said Association of American Universities spokesman Barry Toiv ’77-’78.

In total, the legislation cuts over $20 billion from student loan programs, but it also provides $8 billion for new programs that will benefit some students, Day said.

Starting in 2007, federal loan limits increase from $2,625 to $3,500 for college freshmen and from $3,500 to $4,500 for sophomores.

The measures also include the creation of new Science and Mathematics Access to Retain Talent (SMART) Grants for students majoring in “science, math, technology, engineering, or a foreign language determined to be critical to the national security of the United States,” according to the legislation.

Juniors and seniors in these fields already eligible for the need-based federal Pell grants could receive additional grants of $4,000.

The legislation also creates new grants of up to $1,300 for needy college freshman and sophomores who completed a “rigorous secondary school program of study,” according to The New York Times.

According to the legislation, funding for these grants could be available for the 2006-2007 academic year, Day said. But the implementation of the new measures will be complicated, she added, since the Department of Education must create guidelines such as specifying which languages should be considered critical to national security or what elements of a school’s curriculum makes it rigorous.

Day said that the creation of federal grants targeted to certain students represents a new and potentially troublesome direction in federal education funding, especially because funding for the Pell grants available to all eligible needy students has remained flat over the past few years.

“If the trend is to fund programs with a more specialized focus, that could undermine overall access,” Day said.

The legislation passed by 216 to 214 in the House yesterday afternoon, in a narrow and primarily partisan vote, with Republicans supporting the bill and Democrats opposing it.

—Staff writer Lois E. Beckett can be reached at lbeckett@fas.harvard.edu