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Money

The www.FedPrimeRate.com Personal Finance Blog and Magazine

Tuesday, October 04, 2005

Higher Education Act May Be Subject to the Biggest Cuts In the History of the Program

12.5 billion! That's how much Congress wants to cut from current Federal Student Aid programs. These federal aid cuts would make it much more expensive to borrow money for college, and would translate to a lot more student loan debt for students who have no choice but to seek financial help in order to get a college degree. Is this a good idea considering the fact that personal debt in America is out of control? I don't think so. If the Higher Education Act changes are passed in their current form, many future college graduates will face student loan debts that are even more oppressive than those faced by today's graduates. These future graduates will need to take home some healthy paychecks in order to make ends meet. But how will these graduates be able to secure those high paying jobs when more and more companies are outsourcing to countries like India and China? In my opinion, it's a recipe for disaster; better push your kids to become doctors, lawyers, or get a PhD in their chosen field, or else they might just find themselves in a very bad situation: a bachelors degree, lots of student loan debt and unemployed (or underemployed.)

The numbers speak volumes: By the end of 2005, The United States will graduate 70,000 engineers; India will produce 350,000 and China will churn out a whopping 600,00!

Below are some more details related to changes to the Higher Education Act from a recent StudentLoanConsolidator.com press release*:

Both houses of Congress spent a fair portion of the summer designing revisions to the Higher Education Act of 1965 (last reauthorized in 1998) which, if passed, would make significant changes to federal financial aid programs. Some of the proposed changes include:

  • Penalizing graduates with higher interest rates if graduates choose a fixed rate consolidation over a variable rate consolidation

  • Stafford Loan interest rate increases from the current 5.3% to 6.8%

  • Reduction of $5 billion - $12 billion in funds from higher education funding

  • Elimination of spousal consolidation, which allowed married couples to consolidate their loans together

  • Preventing graduates who opt for income contingent repayment plans from consolidating their loans.
Not all of the proposed changes will be ratified in the final passage of the Higher Education Act Reauthorization of 2005, tentatively titled the College Access and Opportunity Act of 2005. However, there are enough changes to the student loan consolidation program in the House and Senate committee drafts to warrant concern for any recent graduate with federal student loans.

If you don't like the way things are going with the proposed changes to the Higher Education Act, click here to contact your Senator or Member of Congress.


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