Sequestration: College Edition. A sick game of musical chairs?
The much dreaded sequester is upon us, and while it may take a while for the effects to be felt, they are certainly in the pipeline. For a concise synopsis of the sequester’s history, see the American Council on Education’s article. Let’s cut to the meat and potatoes:
How will this sequester affect student aid and loans for college?
First of all, it’s important to note what will remain unchanged for the 2013-14 year. Most entitlement programs will not be cut. The Pell Grant program, which provides $35 billion annually in need-based grants, will not undergo cuts for the 2013-14 year, so if you were awarded a Pell Grant for next year, you can breathe a sigh of relief. The 2014-15 year remains up in the air, but lawmakers claim that no cuts will be made for that year either.
So what programs will undergo the mandatory 5.1% cuts for discretionary-funded programs? Here comes the list of acronyms: SEOG, FWS, TRIO, GEAR UP, GANN will see their budget slashed about 5%. What is 5%, you may ask. For FWS, the Federal Work-Study programs, 5% amounts to about $30 million in funding.
With all the trillions and billions of dollars swirling around, what’s a couple of million here or there?
To help ground these numbers, the Student Aid Alliance estimates that new fees, fewer work-study hours, and reduced grants could increase college costs by as much as $765 per year. Over four years, that amounts to $3,504 that students will either need to pay or borrow, not including existing loans.
To further our uncertainty, the 3.4% interest rate for direct unsubsidized loans for undergraduates expires June 30, 2013, with no indication as to whether the interest rate will remain fixed for the 2013-14 year, or increase. We do know, however, that the loan origination fees will increase slightly from 1% to 1.051% for Stafford loans and from 4% to 4.204% for PLUS loans.
What are the takeaways to all of this?
If finances didn’t play a significant role in determining your undergraduate experience, it probably does, or should, now. You can count on the tuition rates continuing to rise throughout your college experience (average tuition increase from 2011-12 to 2012-13 year was 2.8% for private colleges and 3.4% for public colleges) and the available scholarship and grant funds continuing to decrease. More and more of the college burden will fall on the student, and many difficult decisions will need to be made. Do you choose that perfect college if it means taking on a massive debt, or that less-than-perfect college offering the larger scholarship? Do you participate in that extracurricular that zeroes in on your interests, or do you get a job to try and take the edge off of loan payments when you graduate? Do you forgo expensive housing and meal plans close to the action in favor of more modest dwelling and table fare off campus?
On a brighter note, don’t assume that, because the funding is less than last year, you can’t still get help paying for college. Colleges will always be incentivizing attractive students to their institution with scholarship money. Fill out the FAFSA, check out the financial aid page on your college’s website for relevant scholarships, and don’t forget websites like FastWeb and MeritAid that can do much of the work for you. Lastly, make sure you’re the most competitive candidate you can be. You’ll want your GPA and test scores at a range that brings scholarship money within reach.
Don’t let the news get you down. Opportunities are still out there, and thousands of colleges in the United States would love for you to attend their institution. Do your best to make yourself as competitive an applicant as possible, keep an eye out for potential scholarships or grants, and start talking now with your family, friends, college adviser, and tutor about financing your college dreams.