WASHINGTON (via CNNMoney) — Some students will start owing more on their loans while they’re in school under a last-minute debt ceiling deal to keep the country out of default and reduce deficits by at least $2.1 trillion over a decade.
As part of the savings to trim the deficits, Congress would scrap a special kind of federal loan for graduate students. So-called subsidized student loans don’t charge students any interest on the principal of student loans until six months after students graduated. Congress would also nix a special credit for all students who make 12 months of on-time loan payments.
The changes would take place July 1, 2012. For taxpayers, the savings taken from the pockets of students will total $21.6 billion over the next ten years, according to the Congressional Budget Office. For graduate students who qualify for the maximum amount of subsidized loans, it could tack several thousand dollars to the cost of going to school.
The idea for the cuts originally came from the Republican-controlled House, but even Senate Majority Leader Harry Reid proposed cutting the graduate school subsidized loans in budget talks last week. The money saved by the student loan cuts would help pay to keep Pell Grants, which so far are maintained at a maximum grant of $5,500 a year for some 8 million poor students.
Of the $22 billion saved, $17 billion will go to fund Pell Grants, which only leaves that program $1.3 billion short, said student aid groups. That’s why most groups can live with the cuts to graduate student loans.
The rest of the savings goes to deficit reduction.