The U.S. Senate and House of Representatives will attempt to reconcile their two versions of a budget bill this month that if signed into law will likely result in some of the largest cuts to college student aid programs ever.
The House version of the bill, H.R. 4121, which passed by just two votes Nov. 18, includes $14.3 billion in cuts to federal financial assistance to college students over five years.
The House version would also reverse a previous law that caps the interest rates for student loans at 6.8 percent, increasing the cap to 8.25 percent. It would also increase the cap on parent loans from 7.9 percent to 9 percent. For a graduating college student with the average debt load of $17,500, the changes would increase the cost of paying off loans by $5,800 in interest and fees.
Additionally, the bill would raise taxes on student loans, raise interest rates on consolidation loans and reduce subsidies paid to student lenders, totaling $20.5 billion in cuts over a 10-year period, according to estimates by the Congressional Budget Office.
The Senate version, S.B. 1932, passed by five votes Nov. 3 and includes $9.7 billion in cuts to student aid and loan programs. The Senate version decreases the amount of the Federal Pell Grant students would be eligible to receive from 2006 to 2011.
While the final proposed cuts to federal student aid will not be known until near the end of the year, it is highly likely that federal assistance to college students will take an unprecedented funding cut when the dust settles.
However, ensuring passage of the final bill may be more complicated than supporters originally anticipated. Both bills won passage from support by the Republican majorities in both houses of congress – the House version did not receive a single Democrat vote – but many Republicans seem uneasy about some of the proposed cuts as well.
Oregon Sen. Gordon Smith, who voted for the Senate bill, said Nov. 30 that he would oppose the final version of the bill if it included proposed cuts to Medicaid and food stamp programs included in the House version.