July 25 is Save Pell Day.
Mark Kantrowitz predicts dire consequences, including colleges forced to close and students rioting:
The game of chicken being played out in Washington, DC, may have serious consequences for student financial aid as well as the rest of the economy….
Instead of defaulting on the debt, the White House would need to decide which among the other expenses must be cut….
In such an environment, spending on student financial aid would almost certainly be eliminated. Student financial aid is not one of the top spending priorities according to internal rankings by the Office of Management and Budget. It isn’t even in the top 10. Effectively this means that the Federal Pell Grant program and the federal education loan programs, which together represent more than $150 billion a year, would be suspended. This would force millions of students to drop out of college because they could not afford to pay for college without student aid. This, in turn, would force most colleges to lay off faculty and staff. Many colleges would have to close. The only alternative would involve doubling tuition rates, guaranteeing nationwide tuition riots.…
During the ongoing debt negotiations, one side proposed eliminating the subsidized interest on federal student loans. Currently, the federal government pays the interest on subsidized Stafford loans during the in-school and grace periods. Both parties have already proposed eliminating the subsidized interest on loans to graduate and professional students. The new proposal would eliminate the subsidized interest for undergraduate students as well, saving the federal government an additional $4.3 billion a year.
According to Kantrowitz, eliminating the subsidized interest benefits would increase the amount of debt at graduation by about 8%. That’s not good, especially for students graduating with poor prospects for well-paying jobs.
Cuts in federal financial aid spending will likely curtail the administration’s overriding objective of enrolling more students in college, which might not be a bad thing. Fixing the problem of high school graduates unprepared for college-level work should take priority over the goal of higher education for everyone.
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