Higher Education News

TRENTON– Students and professors from across New Jersey gathered today to urge New Jersey Congressmen – especially Rep. Jim Saxton (R-3) and Rep. Frank LoBiondo (R-4) – to vote against the federal budget bill tomorrow that makes the largest cut in student aid in history – over $12.7 billion directly from student loan programs. If passed, the loan rates for over 124,000 New Jersey student borrowers could increase as early as July 1.

“Our students will be financially squeezed by these proposed cuts,” said Patrick Hossay, a Richard Stockton College government professor. “This move will only discourage eligible students from the middle and lower middle classes to attend to begin with and will be a huge financial obstacle for graduates.”

Both representatives voted for the budget cuts during an all-night voting session on December 19 that was decided by a razor-tight margin – the budget only passed by six votes. Since then, other moderate Republicans like Rep. Rob Simmons (R-CT) have come out and publicly reversed their votes, and joined Congressman Chris Smith (R-4) in opposing these drastic cuts.

“As the cost of higher education skyrockets, students are increasingly relying on work and loans to pay tuition bills. Millions of student borrowers struggle with student loan repayment each year; an estimated 39 percent of recent college graduates have unmanageable monthly loan payments,” said Kristin Dobbs, a NJPIRG student organizer.

If these student aid cuts pass tomorrow, New Jersey students and their families will see the impacts as early as July. Lenders already have been sending out notices warning students of the upcoming increases. Starting on July 1, the interest rates on Stafford loans, used by more than 7 million students a year, will be raised to a fixed 6.8 percent from a variable rate that is capped this year at 5.3 percent. The 800,000 parent borrowers who use federal PLUS loans will see rates increase to 8.5 from 7.9 percent.

“We’ve got to push back,” said Amiel Nicado, the Student Government Treasurer at Rutgers-Livingston where tuition has increased by 36% since the 2000-2001 school year. “A college degree must remain affordable and accessible for families and students. Meanwhile, handouts to the private lending industry could be recycled to create better grant and aid funding.”

The bill generates at least 70% of its savings by making loans more expensive for borrowers: approximately $15 billion out of the $21 billion in total cuts. Specifically the bill generates:

• Almost $13 billion from excessive subsidy payments that student and parent borrowers make to lenders. This bill uses this money to pay for new tax cuts rather than sending it back to students through additional need-based grant aid or lower interest rates.

• Approximately $2 billion by increasing the parent loan interest rate from 7.9% to 8.5%.

This debt has many consequences. It stops thousands of qualified students every year from attending college in the first place. It causes students to work more and study less while in school – nearly half of full time students work 25 hours or more every week. Right now, even with campus jobs, family contributions and federal aid, students still come up short with over $3,900 in what is euphemistically called ‘unmet need.’ For low-income students, it’s worse – over $4,900 of ‘unmet need.’

Tomorrow, Congress will vote on the federal budget reconciliation act, which proposes over $39 billion in funding cuts. Over $12.7 billion – over 31% of the cuts – will come directly from student loan programs. The cuts are staggering – there are easily the largest cuts in student aid in history when the average debt load for college graduates is over $17,000.

“The bottom line is cuts to student loans are cuts to education,” Dobbs concluded. “This is a raid on college students and their parents. We need Rep. LoBiondo and Rep. Saxton to protect students and their families and vote against this budget bill.”

Click here to download a fact sheet on the student loan cuts.