As graduating students finalize plans to continue their educations at graduate schools or enter the work force, they may be saddled with some surprise expenses. A recent Bush Administration proposal will make it harder for students to pay off their educational loans. The proposal, which the administration expects would trim $1.3 billion off of a projected $100 billion budget deficit, would keep millions of new graduates from consolidating their loans at fixed low interest rates.
Under current regulations, which date back to 1986, a student can consolidate his or her loans with various interest rates averaged to the nearest dollar and fixed, despite economic flux. Interest rates are capped at 8.25 percent a month, and the student can pay off the loans over a period of 30 years.
The Bush plan would still allow students to consolidate their debt, but only at variable interest rates, a change the current administration hopes would make consolidation much less appealing, saving the government billions of dollars in subsidies.
According to Winston Vaughan, Board Chair of Ohio Public Interest Research Group (PIRG), the Bush plan comes at a time when students are amassing higher amounts of debt for their educations.
“Right now, students already have to borrow more,” Vaughan said. According to a recent PIRG study, “64 percent of students have to graduate with some sort of debt, like federal loans. Of that, 39 percent are graduating with unmanageable debt.” PIRG defines debt as “unmanageable” when it requires payments of eight percent or more of one’s monthly income.
The report, called “The Burden of Borrowing,” also found that debt from educational loans falls disproportionately on the shoulders of minority students. 55 percent of African Americans and 58 percent of Hispanics graduate with unmanageable debt.
Asked why so many more students were graduating in debt, Vaughan said part of the problem is that grants no longer cover the majority of a higher education. “College is much more expensive. In 1975-76, the average Pell Grant covered 84 percent of tuition [at a public institution]. Now it only covers 39 percent,” he said.
Large amounts of debt aren’t the only result of higher education’s higher price tag. Another PIRG report, “At What Cost?” found that students are shouldering larger workloads than in years past. According to PIRG, 46 percent of all full-time working students work 25 or more hours per week. Of those students, 42 percent reported that working hurt their grades, 53 percent said that their work limited their class schedule and thirty-eight percent said that it limited their class choice.

Oberlin’s Director of Financial Aid, Robert Reddy, said the Bush proposal could have a dramatic effect of student debt, particularly because the current financial climate makes consolidating loans at a fixed rate a big money-saver. “Right now, with interest rates low, that’s not good for students,” Reddy said. “The aid community is very concerned. This is not an idea we’re in favor of.”

Reddy stressed that, whatever action the government takes, Oberlin’s approach to financial aid will remain the same. “Oberlin has been committed to meeting 100 percent need despite the fact that the Federal Government hasn’t kept up. We basically fund the difference.”

Oberlin’s financial aid budget for the 2002-03 academic year is $35 million, up from $33 million for the current year.