GOP ax looms over subsidy for college loans

March 09, 1995|By Knight-Ridder News Service

WASHINGTON -- Rob Carter is a young Republican at Penn State University who was surprised to discover Republican budget cutters in Congress are focusing on him as much as they are on welfare and foreign aid.

House Republicans are considering large cuts in the government's 28-year-old college loan programs, reductions that could raise college education costs by thousands of dollars for millions of students.

"I know spending is out of control, but there has to be other places they can cut," said Mr. Carter, a senior who has $10,000 in federally subsidized loans.

The GOP proposal, currently under consideration by the House Economic and Educational Opportunity Committee, would eliminate federal subsidies that pay the interest on student loans while students are in college.

That program will cost the federal government $2.2 billion this year. Its elimination would help reduce the federal deficit and rein in government spending, supporters of the proposal contend.

It would also sharply increase the debt load of the more than 4.5 million U.S. college students who borrow money under the federal loan-subsidy program.

Nearly half of all college students take out loans to pay for their education. Last year, students around the country borrowed about $23 billion.

For a student who borrowed the maximum $17,125 over four years at 8 percent interest, the loss of the interest subsidy would add $3,685 to his or her borrowing costs, according to estimates by the American Council on Education, a Washington-based advocacy group.

For a typical graduate student who borrows the maximum $51,125 over eight years, the loss of the government subsidy would add $17,325 to the student's overall loan payments.

Under the plan being considered, once the federal subsidy is removed, students would have two choices: pay the interest on a monthly basis while they are in school or let the interest accumulate as part of the principal and begin repaying the loan after graduation.

"That additional debt would seriously limit educational access for low- and middle-income students," said C. Peter Magrath, president of the National Association of State Universities and Land Grant Colleges.

Students across the country agree and are worried about losing their subsidized loans, something President Clinton has said he would fight "every step of the way."

"There is no guarantee you'll get a job when you graduate, and piling that much additional debt on students is sending the wrong signal," said Mr. Carter, the Penn State student. "It's an incentive not to continue higher education."

Lara Fant, a senior at the University of St. Thomas in St. Paul, Minn., said she could not have attended that school without a subsidized loan.

"There's no way I could have come up with the money to pay tuition without those loans," said Ms. Fant, an accounting major who is financing her education with a combination of loans, scholarships, grants and money earned as a part-time bartender and bookkeeper.

Rich Templin, a communications graduate student at Florida State University, said his plans to get a doctorate degree could be shattered if the subsidized-loan program is scrapped. Already about $18,000 in debt and working three part-time jobs, Mr. Templin expects to rack up another $20,000 in loans by the time he completes studies.

If Congress abolishes subsidized loans, he said, "I'd have to leave school; I just wouldn't be able to make it."

Not all students are complaining.

Matt Heikes, chairman of the College Republicans at the University of Minnesota, said the House proposal simply asks students to assume their fair share of the pain required to erase the federal deficit and bring federal spending under control.

The proposal "would add to [students'] short-term debt," Mr. Heikes acknowledged, "but if we don't lower the deficit, the taxes we'd have to pay in the long run would far outweigh our additional [loan] costs."

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