Student loan interest rates soar due to Bush’s budget cut

Ashley Augello

President Bush has asked Congress to cut education spending for a second year in a row, this year by over $3 billion.

In his 2007 budget proposal, released Feb. 6, Bush called for the elimination of 42 federal education-related programs.

These changes are expected to affect the 60-plus percent of Villanova students currently receiving need-based assistance.

In December, Congress cut $12.7 billion in loan aid, which will force students and their parents to pay higher interest rates on their loans.

Congress has raised the interest rates on student loans so much that a student leaving college with $17,500 in loans will have to pay an additional $5,800 to get out of debt.

The heightened interest rate will increase the cost of higher education for American families by $8 billion.

Federal Stafford Loans have seen the most significant changes. Effective July 1, 2006, new loan amounts will go into effect. They are $3,500 for first-year students (up from $2,625), $4,500 for second-year students (up from $3,000) and $5,000 for both third- and fourth-year students.

Additional changes include a change from a current variable rate loan to a fixed rate loan. The new rates are effective as of July 1, 2006.

The Stafford loan borrowers (currently only parents of undergraduate students) will increase from 6.1 percent (variable) to 8.5 percent (fixed).

More than $1.7 million in Pell Grants were received by University undergraduate students for the 2005 school year.

Pell grants remain capped at $4,050 for the fourth straight year. According to the American Council on Education, they have gone from covering 84 percent of the cost of a public four-year college in 1972 to 34 percent today.

In spite of the recent changes, Villanova is committed to offering need based programs of aid and the University will continue to allocate a percentage of its budget for financial aid.

Currently over 77 percent of aid dollars for the University (excluding athletics) is budgeted for need based assistance.

The proposed budget cuts $440 million in Safe and Drug-Free School grants, $500 million in education technology state grants, $225 million for the Even Start literacy program, $280 million for Upward Bound programs for inner-city youths and a $150 million talent research program.

Bush wants to replace the 42 eliminated programs with $1.5 billion to hold high schools accountable for teaching and for providing intervention for non-performing students.

He also intends to give teachers $500 million in bonuses to improve test scores.

The remaining $300 million will be invested in high-end academics programs such as Advanced Placement (AP) and International Baccalaureate (IB) courses, and a math/science partnership program.

The AP and IB courses are speculated as programs that “disproportionately benefit wealthier schools and districts and upper middle-class families.”

The education budget is part of a $2.77 trillion plan that Bush sent to Congress on Feb. 6.

It shifts money to current White House priorities, under a theme of global competitiveness.

Refer to for more information on Bush’s education budget.