Senate modifies GOP loan cuts

Students will have to begin repaying their student loans shortly after graduation if the Senate passes the Republican Reconciliation Proposal, which was released yesterday. Currently, students have a six-month grace period to pay interest on their loans. This period would be cut to four months under the proposal. The plan would cut $10 billion from the national budget, reducing the deficit by $1.2 billion. The proposal also requires institutions to pay a 2 percent tax on the total volume of their student loans. This would cost the University $1.5 million a year, according to Carol Scheman, vice president for government, community, and public affairs. University officials are not certain where they are going to get the funds for the tax, Scheman said. But she added that she is certain the financial aid budget would be affected. The proposed budget would generate $4.4 billion from the new tax to the universities. While institutions will be hit the most by this proposal, banks and guaranty agencies will absorb minor adjustments, totaling $2.3 billion. The proposal also increases the interest of Parent Loans for Undergraduate Students from 3.1 percent to 4 percent. Student Financial Services Director Bill Schilling said he does not think the proposed interest increase will affect the number of students matriculating to the University. "The increase in the parent loans will make them a little more expensive, but I don't think it will have an impact on students decisions to attend college," he said. But the combination of loan, scholarship, grant and work-study money given to each student will change, Scheman said. "There's simply no way that it won't have an effect on what we do with financial aid," she added. "The question is how we will deal with it." According to Schilling, the terms of the proposal are not as harsh as the the House of Representative's original budget proposal. The in-school interest program that subsidizes interest for graduate students with loans will not be cut from the budget -- as had been suggested in the House plan. Still, Senate Democrats have argued against the Republicans cuts. "The highly successful direct loan program which has brought healthy competition, lower costs and better service for students is halted in its tracks," Sen. Edward Kennedy, D-Mass., said in a statement last night. Scheman is skeptical that the Senate will vote down the proposal. "I believe that if this is a straight party vote, it will pass," Scheman said.

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