The financial aid season is drawing near, and with it comes a flurry of questions and concerns about federal financial aid. There is no doubt that financial aid plays a huge role in funding the educations of the majority of U.S. college students. However, more changes for financial aid could be on the horizon.
Many have heard about the debates regarding the proposed “fiscal cliff” since President Obama’s re-election last month. Well, according to college experts, this plan could potentially put a damper on college financial aid. What the fiscal cliff will do in general is automatically cut spending on a variety of government-sponsored programs. Unfortunately for university students, this would include a large majority of financial aid sources.
There is a great deal of pressure for U.S. lawmakers to come to some agreement on the matter prior to the end of the year, given that any government action would affect financial aid applicants in January when the FAFSA submission process begins. How, specifically, will this affect college kids and their families? Well, without making an agreement now, the fiscal cliff will automatically go into effect in 2013 and cut student financial aid by 8.2%. This will slash financial aid, including Stafford Loans and Work Study, but the Pell Grant program would remain untouched (thankfully).
The guess at this point is that these cuts won’t simply mean reducing the amount of money per award, but would instead cut the number of awards given out instead, leaving students “out in the cold.” To put it in better perspective, this means even greater competition for the already highly coveted work study jobs at school, for example. FSEOG grants will be harder to come by and the Subsidized Stafford Loan interest rate, currently set at 3.4%, would double to the 6.8% rate it once was.
Not all students will feel the effects, however. Several schools, those in the Ivy League for instance, have no-loan financial aid policies already. This means that students are not permitted assistance from federal loans, and they are instead financially assisted by school-sponsored aid programs. At least in terms of student loans, those at schools such as Harvard and the University of Pennsylvania will hurt less. Federal funding might be cut to schools themselves too, which may lead to yet more tuition increases (as if we’ve not had enough of them).
The larger fear for college families is in how all of this could hinder the educational potential of so many students around the country. Those from lower income families rely quite heavily on financial aid to even attend college in the first place. Such cuts will in effect bar some kids from being able to advance educationally and professionally, as our country demands college degrees for higher-paying positions.
We’ll just have to wait and see for now, but it is clear that financial aid is in the balance. In the meantime, keep an eye on updates regarding the matter in the news. For more financial aid solutions, get in touch with Go Financial Aid today!