On Tuesday, Obama signed the Budget Control Act of 2011, which raised the national debt ceiling by $900 billion. The legislation also put in place procedures to cut the deficit by nearly $1 trillion over the next few years, potentially including further education cuts. With all of these changes being made to the national budget, many students are wondering how education has been affected NOW. You can find the answers to this below…
- Pell Grants – Last week we posted a blog about Save Pell Day which discussed a petition to keep Pell funding in the national budget, and Tuesday’s legislation does just that – Pell grants are safe for the 2012 and 2013 fiscal years. The bill includes $17 billion in funds for the two years which will fund awards that are close to the current max of $5,500 per student per semester.
- Grad Loan Subsidies – Additionally, cuts have been made to other programs, including subsidized graduate loans. The bill eliminates the in-school subsidy for graduate and professional students, to begin July 1, 2012.
- Loan Repayment Incentives – Extra repayment incentives will also be cut beginning next fiscal year. This includes the auto-debit and interest rebate incentives. As of July 1, 2012, new loans will be ineligible for an interest rate reduction for making automatic payments, and the interest rebate which applies to direct loan origination fees will be eliminated.
Overall, these changes will provide a net total of 4.6 billion in deficit reduction ($21.6 billion reduced, $17 of that redirected to the Pell Grant). It seems that student loans (and Pell Grants) are safe, for now. What this bill does not touch upon is what future cuts will be made. There is still cutting to do to remove the deficit, and while programs are currently safe, we’ll all have to keep an eye out for further changes throughout the year.
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