The Debt Ceiling and Student Debt: The Skinny
By Lauren Forbes
Heather Jarvis’ Blog features a breakdown of how the passage of the Budget Control Act of 2011 affects student loans.
The Act provides for:
- Elimination of the in-school loan interest subsidy for graduate and professional students beginning July 1, 2012.
- Elimination of Direct Loan “repayment incentives” (reduction in interest rates for on time payments) for new loans disbursed on or after July 1, 2012.
- Additional funding for the Pell Grant program for the next two fiscal years.
The elimination of the graduate and professional in-school interest subsidy and the direct loan repayment incentives are estimated by the Congressional Budget Office to produce a savings of $21.6 billion. $17 billion of that savings will go to shore up the Pell Grant program, and $4.6 billion will be used to reduce the deficit.
Funding for student aid could be subject to cuts again when the joint congressional committee seeks additional savings.
Farewell in-school interest subsidy on federal loans. We’ll miss you.
