| Students destined to go deeper in
debt |
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How it works: The rates students pay for loans are
calculated one way, while the cost of providing those loans are
calculated with a different formula, says Zaglaniczny. In the past,
if there was a positive difference, lenders kept that amount as
profit.
Under the new law, lenders have to remit that amount
to the federal government, he says. Some of the money will go to
fund the new merit-based Pell
grants, while the rest is slated for deficit reduction. The
Congressional Budget Office estimates this move will recoup $14.3
billion between 2006 and 2010.
"That's a huge amount of money," Zaglaniczny says. "Basically,
what you have is students paying for the disparity."
But many feel the burden on students is already too heavy.
Students on a treadmill
"Every year tuition goes up eight or 9 percent and federal
aid doesn't keep up," says Chaisson. He works three jobs and
says that's typical at his small state school, where tuition alone
averages about $7,000 annually. He estimates he'll graduate with
about $13,000 in loan debt. "I owe more and more every day,"
he says, noting that his debt load looks light compared to other
students.
Several friends have been forced by lack of money to drop out or
go to school only part time. Chaisson wants to go to grad school
but worries about how his work hours are affecting his grades. "I'm
stuck between a rock and a hard place," he says.
As a student of economics, he also wonders about the big picture.
"We need an educated public, we need educated citizens if
we're going to have a strong economy," he says. "College
will only be accessible to the wealthiest of families."
Patricia Smith, director of federal policy analysis for the American
Association of State Colleges and Universities, agrees.
"Students work more, borrow more, do whatever it takes to
stay in school," she says. "The cost of tuition goes up,
but students just have to eat it."
Some contend that the money that comes in through the student loan
program should stay in that program, rather than help defray the
budget deficit. Higher education is "a very vulnerable area,"
says Ronald W. Johnson, director of financial aid at the University
of California, Los Angeles.
"There has to be some way of meeting our country's deficit,"
he says. "But taking these monies out of a program that was
to provide strength to the economy is sort of cutting off your nose
to spite your face."
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