If Congress passes a new Bush Administration proposal, Cornellians and other college students nationwide may soon be able to take out up to $7,500 more in federal loans.
The plan is part of the Administration’s 2008 budget, which was proposed Feb. 6, and comes in the wake of past and ongoing efforts to slash Educational Opportunity Grants and Perkins Loans.
Under the proposal, the current loan limit of $23,000 would increase to $30,500 for financially dependent undergraduates relying on federally subsidized Stafford loans, a need-based student loan on which the federal government pays the interest.
Undergraduates with both subsidized and unsubsidized Stafford loans would receive an increase from $46,000 to $53,500. Graduate students seeking governmental aid would be able to borrow up to the increased maximum of $73,000 in subsidized loans and up to $156,000 in total loans.
The budget also calls for an increase from $2,000 to $7,500 in the annual subsidized borrowing limits for undergraduate juniors and seniors, who were excluded from Congress’ decision last year to raise the annual loan limits.
The National Association of Student Financial Aid Administrators reported that the Bush Administration is pushing for the elimination of certain financial aid programs to offset costs of the proposed increases.
Some programs being considered for elimination are the Federal Supplemental Educational Opportunity Grants program, which are grants for students with low expected family contributions, as well as the Perkins Loans.
As outlined in the budget report, “savings from these reforms will allow the Administration to increase grant and loan aid in a better targeted, fiscally responsible manner.”
Opponents argue that an increase in loans will result in students’ shouldering greater debt. Tammy Moyer, a Cornell student loan account representative, is skeptical about the government’s proposal to lend students money that she says they will have difficulty reimbursing.
“A lot of these students have no idea what kind of debt load they will have when they graduate. They are not thinking about the fact that they will have to repay this money after graduation, and a lot of students are not financially able to repay them and end up in default. This, in turn, has a long-term effect on their credit,” she said.
Luke Swarthout, a higher education associate for the State Public Interest Research Groups, told the Chronicle of Higher Education that all loan limit increase proposals should be paired with those that concurrently protect students from accumulating too much debt.
Proponents of the increase in loan limits contend that students have had to rely on private lenders to fill the void between continually rising college tuitions and stagnant federal borrowing limits.
Kristin Thoman, accounts coordinator for the Cornell Supplemental Loan Program, said that federal loan money offers more versatility for the borrower than the non-federal or private student loans in terms of rates and deferments.
“Many students and families are limited financially, so I am for more federal loan money to be available to students,” she said.
Moyer and Thoman said that student borrowers need to be better educated about their loan responsibilities before the money is lent.
“Maybe anyone who wishes to borrow student loan money should be required to take and pass a class,” Moyer said.
Despite having to deal with the burden of debt upon graduation, Thoman said, federal loans allow students with limited means to receive an education.
“I have been told by many former students that they were grateful they were granted the loans they had so they were able to attend Cornell,” Thoman said.