Today,
by a 216 to 214 vote mainly on party lines, the U.S. House of
Representatives voted to cut a net $12 billion from the student loan
programs as a part of the budget reconciliation bill, the largest cut
to these programs in their history. The student aid cuts represent the
lion share of the finalized budget cuts – just over 30 percent. The
student aid cuts will directly affect over 124,000 New Jersey student
borrowers and their families as early as July 1, whose average debt
load already totals over $17,000.
“Today,
the House of Representatives completed the largest raid on student aid
in history,” said Doug O’Malley, NJPIRG Field Director. “At a time when
college costs continue to rise and students are going deeper into a
financial hole, Congress has mistakenly decided to use students and
families to pay for other priorities.”
Both
Rep. Frank LoBiondo (R-2) and Rep. Jim Saxton (R-3), considered to be
swing votes on the issue, voted for the budget, providing the margin of
victory to pass the budget. Four moderate Republicans like Rep. Rob
Simmons (R-CT) reversed their vote from December, joining Congressman
Chris Smith (R-4) and 8 other moderate Republicans across the country
in opposing these unprecedented cuts to student aid.
Rather
than cutting lender subsidies, the bill gets most of its ‘savings’ by
continuing the practice of forcing student and parent borrowers to pay
excessive interest rates on their loans and by increasing interest
rates for parent borrowers. These cuts will pay for tax cuts for some
of the wealthiest Americans. In the same budget bill that authorized
these student loan cuts, Congress also called for up to $70 billion in
tax cuts that will be finalized this spring.
“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.”
Nearly 70 percent of the bill’s total student loan cuts of over $19 billion come from students and families. The bill cuts:
•
$12 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 keeping this money in higher education and using it to
pay for additional need-based grant aid or lower student loan interest
rates.
• Approximately $2 billion by increasing the parent loan interest rate from 7.9% to 8.5%.
“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.
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.
Other changes to the student loan programs included in this bill that could have a significant impact on borrowers are:
•
$2.2 billion in cuts to critical student loan delivery funds used to
administer the federal student aid programs. Without these funds, the
administration of federal student aid is in jeopardy.
• $1.4 billion in revenue generated by a new mandatory 1% insurance fee
levied on guarantee agencies for all loans. Lenders could potentially
pass on this cut directly to student borrowers.
“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.”
Student
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.’ [Data from Postsecondary OPPORTUNITY research]
“The
bottom line is cuts to student loans are cuts to education,” Dobbs
concluded. “This is a raid on college students and their parents. The
votes of Rep. LoBiondo and Rep. Saxton could have protected students
and their families, but instead New Jersey students and families will
be forced to pay more to get a higher education.”
30-30-30-30
Complete Vote Chart For New Jersey Congressional Delegation On Budget Reconciliation Bill:
Rep. Rob Andrews (D-1): No
Rep. Frank LoBiondo (R-2): Yes
Rep. Jim Saxton (R-3): Yes
Rep. Chris Smith (R-4): No
Rep. Scott Garrett (R-5): Yes
Rep. Frank Pallone (D-6): No
Rep. Mike Ferguson (R-7): Yes
Rep. Bill Pascrell (D-8): No
Rep. Steve Rothman (D-9): No
Rep. Donald Payne (D-10): No
Rep. Rodney Frelinghuysen (R-11): Yes
Rep. Rush Holt (D-12): No
13th Congressional District: Absent
