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Budget ax may come down on Pell Grants, graduate student loans

President Barack Obama unveiled his $3.7 trillion budget for 2012 on Monday that will make “painful cuts” to many domestic programs, including eliminating subsidies for graduate student loans and Pell Grants for students enrolled in summer courses.

The budget proposes a five-year freeze in domestic discretionary spending — a fiscal category including programs such as education and defense but excluding entitlement programs like Medicare, Medicaid and Social Security. The president said the freeze will save nearly $400 billion over the next decade.

“This budget freeze will mean cutting things that I care deeply about,” Obama said. “But if we’re going to walk the walk when it comes to fiscal discipline, these kinds of cuts will be necessary.”

Some of those cuts are likely to hit college students hard.

The proposed budget will eliminate the year-round Pell Grant program, in which students receive a separate grant for enrolling in summer courses.

“We’ve seen a historic increase in demand for the financial aid and Pell Grant program,” said Arne Duncan, United States Secretary of Education, in a conference call Monday.

The federal government awarded 6 million grants in 2008. That number increased by 50 percent to 9 million grants in 2009, resulting in a $20 billion hole in the Pell Grant program, Duncan said.

While he acknowledges the cuts are “painful,” Duncan said they were necessary to keep the Pell Grant maximum award from decreasing for the first time since 2007.

“These grants are an economic lifeline for (students),” he said. “We must support them so they can graduate from college, so they can succeed in a knowledge-based society.”

The Office of Enrollment Services at Ohio State said about 2,380 students received a total of $13.6 million in Pell Grants for all four quarters last academic year. The office said at OSU’s main campus, each student, under the new proposals, will lose on average about $1,425, for a total estimated loss of about $3.4 million.

Diane Stemper, director of Student Financial Aid in the office, said although the university is “committed to helping our students any way we can,” her office has financial restrictions of its own.

“We’ll look at how we can make it up, but at the same time we don’t have unlimited revenues,” Stemper said.

The maximum Pell Grant award is $5,550 for the academic year. Students enrolled in summer courses may receive additional Pell Grant awards. Stemper said the Obama administration had considered reducing the maximum Pell Grant award to $4,000 while keeping the summer program.

“That would have affected students across the board,” Stemper said. “While no cuts are good cuts, these cuts would affect us to a lesser degree.”

Matt Teeters, a fourth-year in environmental policy and management, said reducing Pell Grants in the summer would affect the timely completion of his bachelor’s degree.

“I’ll have to plan to shoehorn a few more classes in future quarters,” Teeters said. “Especially getting math and chemistry out of the way before the change to semesters.”

Another proposed cut in the president’s budget was to eliminate subsidies for federal graduate student loans, meaning graduate students receiving federal loans would begin collecting interest upon disbursement.

“Those two (cuts) will save us about $10 billion a year,” Duncan said.

Stemper and the financial aid office did not provide any numbers in regards to graduate student loans, but she said students will be on their own with graduate interest rates.

“We can’t replace the interest subsidy on loans for our graduates,” Stemper said.

But the president’s budget isn’t all slash and burn.

The savings from these cuts, and many others, including $78 billion in cuts to the Pentagon and $2.5 billion from heating-assistance for low-income families, will allow Obama to work toward his goal of investing in a modern economy.

In keeping to promises made in last month’s State of the Union, titled “Win the Future,” Obama’s budget calls for an overall spending increase in education, infrastructure and clean energy research, while cutting or freezing many other domestic programs.

“In order to win the future, we must invest in education,” Duncan said.

The overall budget for the Department of Education will increase by $2 billion, with a majority of the spending in K-12 reform.

The rest of this year’s budget, which runs through September, is projected to add a record $1.6 trillion to the deficit. The budget Obama proposed Monday will be short about $1.1 trillion.

The much-anticipated budget was released at a technology middle school in Maryland, symbolizing the president’s priority for investing in education and 21st century technology to “win the future.”

Congress is expected to vote on the president’s budget in March.

Thomas Bradley contributed to this story.

 

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