Subsidized Loans: A Relic of Our Past?

By Julia Skinner on August 5, 2011 • ( 27 Comments )

The other day, when I found out that graduate student aid had been heavily hit by the budget deal struck by Congress, the only thing I could think to tweet as I shared a link on the topic was “you’ve let students down.” The tweet came somewhat out of fear for my own financial future, but mostly for that of my fellow students. I am fortunate in that I have an assistantship and am pursuing a PhD (which can, potentially, open doors to new funding sources than I could access during my MLS, although I doubt people will be banging down my door and hurling money at me.) However, having just completed that degree, I remember what a struggle it was to track down funding outside of student loans and what a blessing subsidized loans and deferred payments were for me. It made it possible for me to go to school, and I suspect the same is true for many HLS readers. With that in mind, I thought I would devote my post to talking about the changes in student loans, the little bit of sense I can make of it, and how it might impact graduate education.

My Story:
Like nearly every MLS student I’ve talked to, I relied on the maximum amount of Federal loans I was eligible for to pay my tuition, fees, and living expenses. I also had a part time job driving buses, and for a while another job at a library. At a certain point, I was ill and unable to work, and relied solely on my loan money and on my EBT card (food stamps.)  I don’t know what I would have done without the loans! I owe a pretty penny now, but I got a great education and am on the path to doing some really awesome work in my PhD and beyond. Because I’m (mostly) done relying on student loans (save for a bit I’m taking out to settle in FL) the loss of subsidized loans won’t impact me as much as it might impact others, in the sense that half the loans I have are subsidized already. That being said, once they start accruing interest that could hurt me in a pretty big way. But, before I have too severe of a panic attack about my potentially bleak financial future, let me go over the nuts and bolts of the proposed changes.

 

The Word on The Street (where ‘The Street’ is published news sources):
A word of warning: I am not an economist. So, as you read this, remember it’s from a layman’s perspective and thus may lack the nuanced understanding of economic policy held by those who interpret these things for a living. Here is what I understand to be going on:

Student loans will still exist, but the subsidized ones won’t be available for grad students. Pell grants are still available to undergrads (which is good news for my partner, who’s finishing up his AA at the moment!) So, what this means is that students will have to pay interest on the loans while they are in school, which means students will owe a larger amount of money (subsidized loans don’t accrue interest while you’re still in school.)  Some of the incentives for paying on time will also be eliminated as well, which means that (again) students will have to pay more, because they won’t get whatever reductions they are currently receiving.

These changes go into effect after this school year is finished (July 1, 2012, to be exact) and only impacts loans taken out after that time. So, if you currently have subsidized loans, those will stay subsidized, but your new loans for next school year will all begin accruing interest immediately. If you are receiving incentives for making payments on time, those would presumably end at the same time.

While I’m sure there is some fine print that will become clearer in the future, this brings a few major issues to my mind immediately. The first is the added financial burden placed on grad students to attend school. We aren’t known for our high rolling lifestyles in the first place, and with very few exceptions I suspect this deal will force students to be on an even tighter budget. Most likely, a number of students will have to drop out of programs (in LIS or otherwise) and take lower paying and/or less fulfilling jobs out of necessity. I can’t imagine how I would have cut back any further, especially in the second year or so of my MLS when I relied so heavily on public assistance! Additionally, some graduate students have families and all of us are in intensive courses of study (including the folks in this article) that prevent us from picking up extra hours at work to start paying our loans down. This could translate to higher payments after graduation, or a longer repayment period, both of which negatively impact our futures.

I understand that graduate students are very privileged because we are educated and have better job prospects (potentially) than our non degree-holding counterparts, but that amount of social capital does not necessarily translate to tangible wealth. I also know that there are any number of social programs that need funding just as much as education. I’d like to keep my political sentiments off HLS, but suffice it to say that I feel we could have made cuts/revenue increases in places that would impact people with more expendable income.

There is also a tad of backlash against students themselves, as in this Moody’s report, where students are told to choose fields that are in demand and finish quickly. True, this helps limit the amount of debt a student has, but this mentality also has the effect of devaluing higher ed. If I were hoping to go to school solely to get a job, I would have chosen a trade school (which is another form of education that should be both validated and encouraged, but that’s a different discussion for a different time.) I chose a liberal arts curriculum because I wanted to push myself to learn about subjects outside my major area and to gain a broader perspective that can be applied to my work. I also chose it because *I like learning!*

Learning new information, researching, and sharing knowledge are things that get me really excited and are, in my humble opinion, part of what makes our world delightful to be in. Rather than telling me that learning for its own sake is wrong, maybe the focus should be turned back to lenders and the terms of student loans, which are often severe (I just did my exit counseling for my MLS–It was incredibly disheartening.) I’m not saying we should send an angry mob out after lenders–after all, without them, we wouldn’t be lent the money to finance our education in the first place. I just feel that education should be a priority in this country, and that the importance of learning, sharing, and discovery should be paramount to our experience as students. Instead of telling students to hurry up, why don’t we find ways to fund subsidies and scholarships that will allow more people to attend school?

Fellow students: how do you think this will affect you? Do you have solutions or ideas to share? Additional resources?

Categories: Finances

Tagged as: experiences, graduate student, Julia, student loans, subsidized loans