Graduate students may face added financial burden in debt ceiling deal

Derek Remsburg/Staff
Graduate student Charlie Eaton, financial secretary for UAW Local 2865, expressed displeasure at the imminent elimination of subsidies for Stafford loan interest.

Graduate student Megan Wachspress will begin her first year at Yale Law School next fall with a load of textbooks, materials and the added burden of increased interest payments for the federal student loans she has taken out to pay for her education.

With the interest subsidy for the federally subsidized Stafford graduate loan program cut as a part of the federal government’s recent decision to raise the national debt ceiling, Wachspress and some of her fellow graduate and professional students will face continued struggles to fund their education.

“It’s the government saying ‘congratulations, you are going to be spending up to $10,000 to borrow money to complete an education,’” Wachspress, who also serves as a campus recording secretary of the United Auto Workers Local 2865 — a union which represents nearly 12,000 graduate student instructors, readers and tutors in the UC — said. “It is not just a cut in funding — it’s asking graduate students to pay more fees to the U.S. government by increasing interest payments.”

In addition to the elimination of interest subsidies that will take effect in July 2012, the bill — the Budget Control Act of 2011 — also cuts a credit given to students who make loan payments on time.

“One of the frustrating things for me was that this wasn’t done in consideration as to how we fund higher education for grad students,” said David Louk, a graduate student at UC Berkeley. “This was done as a last-minute negotiation to cut a deal in Washington.”

At the cost of eliminating the interest subsidy for graduate students, an additional $17 billion was given to the Pell Grant program, which provides undergraduate students with federal financial aid, in order to maintain its maximum award amount of $5,550. Louk said the two do not have to be mutually exclusive.

“The way it was framed by Republicans and Democrats in the House and Senate … was that they would cover the increasing burden of Pell Grants but eliminate payback that graduate students get if they repay loans for the first couple months,” he said. “They were primarily concerned about Pell Grants and did not push back against the cutting of subsidized interest for grad students at the risk of losing Pell Grants.”

To make up for the fact that graduate students will have to choose between paying interest on their loans or letting it accumulate while they are still in school, the amount that students can borrow in federal Stafford loans per year will be raised, according to an analysis by the Congressional Budget Office.

Charlie Eaton, a UC Berkeley graduate student and financial secretary for the union, said the cuts only make graduate students throughout the UC more financially insecure. He added that the union is speaking with members systemwide on how they will respond to this issue, although no plans have been finalized yet.

“It makes me angry because we are seeing graduate students and working people pay for the budget crisis that banks and corporations caused,” Eaton said. “We should be making those folks pay to expand UC and provide equity to everybody.”

According to Carolyn Henrich, legislative director for the UC’s Federal Government Relations office in Washington, D.C., preliminary data for the 2010-2011 school year so far show that 16,561 graduate students borrowed $123.6 million in subsidized Stafford loans.

“The interest rate is going to go up on Stafford loans — it’s now 3.4 percent, but it will go up to 6.8 percent,” Henrich said. “So (graduate students) will be paying more for the cost of loans.”

Daniel Simmons, chair of the UC systemwide Academic Senate, said the recent decision may have been facilitated by the federal government, but some of the blame lies with the state as well.

“The university tries to do its best in helping low-income students in making higher education available even though the state isn’t doing much to help us out,” Simmons said. “It’s an inevitability — a loss of any program that mitigates funding of education makes it harder and harder for students to pay.”

Regardless of where the blame lies, Henrich said she is not optimistic for the future because she feels there will be more cuts to financial aid in the midst of competing political interests in Washington, D.C.

“There will be more cuts to student aid,” she said. “The economic situation is pretty grim, but we are hopeful that the economy will turn around and the federal government will keep education and research going — one of UC’s overall priorities.”

A previous version of this article incorrectly stated that graduate student Megan Wachspress will be starting at the UC Berkeley School of Law in fall 2011. In fact, Wachspress will be starting at Yale Law School in fall 2012.