US: Pell saved, but graduate students suffer

The preservation of a federal loan programme for low-income undergraduate college students earlier this month provided an unexpected last-minute boon for higher education in the United States. But the decision to save Pell grants, hammered out as part of the debt reduction deal, came at the expense of hundreds of millions of dollars in federal subsidies and loans for graduate students around the country.

Educators welcomed the news. The preservation of the programme, however, also cast a grim light on a growing funding crisis in the higher education sector.

The drastic cutbacks in federal and state funding has hit higher education hard - harder, in fact, than at any time in recent history. Teachers and experts say the long-term consequences for education will be significant.

Already, financial aid programmes are increasingly in jeopardy; long-standing aid programmes like Pell face an uncertain future, and tuition hikes at state universities from California to New Hampshire could foretell significant demographic shifts in the country's student population.

The effects are already being felt. A federal subsidy that helps graduate students was eliminated to allow for the $17 billion increase in Pell grant funding. For taxpayers, the savings will come to $21.6 billion over the next decade.

Cutting the graduate student loan subsidy programme would cause less harm than eliminating or reducing Pell grants, said Michelle Ash Cooper, president of the Institute for Higher Education Policy (IHEP).

Nearly 70% of the high school graduating class of 2010 were enrolled in college last October, compared to 61.7% in 2001, according to the Bureau of Labor Statistics. More adults are also enrolling in college, said Cooper, probably because of the poor job market.

The boom in undergraduate college enrollment means finding secure sources of funding for undergraduate students is more important than ever.

"We need to make sure we can get them into college so they can participate in the economy in the long term," said Cooper.

Despite the debt deal, the Pell grant programme is by no means secure. Cutting federal loans for graduate students was only enough to preserve the programme for another two years, through the 2013-14 school year. The programme also needs an additional $1.3 billion boost in the appropriations process in the autumn to maintain the $5,500 maximum grant.

The government was set to reduce the maximum Pell grant amount by 45% in the 2012-13 year. But in 2009, as part of the economic stimulus bill, Obama managed to secure an increase in Pell funding by $819 per student.

Funding for other student aid programmes, such as Federal Work-Study, GEAR UP, and Perkins, as well as university research and the National Institutes of Health (NIH) also needs to be approved later this year.

But preserving funding will be difficult. The debt-ceiling bill limits the total spending level to $1.043 trillion in the fiscal year 2012, $7 billion below last year's levels.

In the 1970s, when the Pell programme began, the grant covered about 75% of college costs. Today, it covers just one third of costs. As college tuition continues to rise, low-income students might be left behind, and the demographics of college enrollment will favour the wealthy, said Cooper.

"This is a very serious picture, one that we should not take lightly," she said. "We would have more wealthy students going to college, and there will be more of a class-based entitlement."

Add to that, the cut in graduate school aid will affect about 1.5 million students, said Tony Pals, a spokesperson for the National Association of Independent Colleges and Universities (NAICU).

"We understand the critical importance of reducing the federal deficit, but the nation's budget should not be balanced on the backs of students," Pals told University World News.

Starting in July next year, graduate students who receive federal subsidies will accrue interest on those loans while they are still in college. Currently, students are only charged interest on these loans starting six months after they graduate.

Graduate students with financial aid will also no longer benefit from a rewards system. Previously, students who made their payments on time for the first year after graduating were reimbursed a portion of their loan fees. In the new debt deal, this preference is removed.

These changes could significantly increase tuition costs for graduate students.

"The bottom line is it will be more expensive to attend graduate school, at a time when student loan debt is already growing," said Pals. "It's going to deter some students from continuing their education, to their economic detriment and the nation's."

This year, many states across the country, facing huge budget deficits, have cut aid to public colleges, which has led these institutions to raise tuition for the upcoming academic year.

California, for instance, raised tuition by about 12% at its public universities and community colleges. The increase is in addition to the 10% tuition hike already approved last semester.

Administrators say they sympathise with learners, but with a budget shortfall looming for the second year in a row, contend they have no choice but to lay the increased costs with incoming students.

The situation for private, non-profit universities is less dire. Tuition and fees increased an average of 4.6% for the 2011-12 school year, beating inflation, according to a survey conducted by the NAICU.

Obama has made it part of his mission to make college affordable and increase the graduation rate by 2020, and preserving Pell funding is central to his goals. But the looming presidential elections will no doubt focus on yet more cuts to federal spending, and candidates from both parties will be under pressure to show their zeal to balance the budget.

More cuts to education are likely to be in the offing.