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Deficit-reduction plan could bring cuts to college financial aid

A graduation cap surrounded by dollars represents the costs of education.

Steve Chiotakis: As debt talks go on, one target for cuts is federal student aid.

From the Marketplace Education Desk at WYPR in Baltimore, Amy Scott reports.


Amy Scott: One plan in the Senate calls for $70 billion in cuts in health, labor and education spending over 10 years. Financial aid expert Mark Kantrowitz says cutting student loan programs would be short-sighted. Even with defaults, he says the government makes a profit on student loans.

Mark Kantrowitz: The government earns anywhere from 10 to 20 cents on the dollar for every dollar lent, so while it may reduce the national debt, in the long run, it means less money coming into the federal government.

But others aren't so sure the government should be in the business of lending money to students. Neal McCluskey is an education analyst with the Cato Institute. He says student aid programs are supposed to make college more affordable.

Neal McCluskey: But there's very good reason to believe that the more the federal government puts into aid, the higher colleges raise prices.

McCluskey says any deal will likely include cuts to the Pell Grant program, which helps low-income students pay for college.

I'm Amy Scott for Marketplace.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.
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Here in Indiana, college costs have escalated, in some cases, as much as 14% above the rate of inflation and make no fiscal sense.
Last year, universities got their hands slapped by the legislature and were forced to scale back their requests for money, but I wonder how much the cost of attending college is impacted, for example, by a local university that recently raised its tuition rates while giving its president a 20% raise, to $439,000 a year!
Who else among us gets a 20% raise or any raise at all if we should be lucky enough to have a job? How many students could be educated a year with that obscene amount of money, and what could a university president actually do to justify that kind of salary?
Time to put pressure on boards of trustees to scale back!
In the meantime, if you want to donate to an educational institution that actually educates people of all ages for gainful occupations at a more than reasonable cost, give to Ivy Tech Community College. It seldom raises rates, but does a heck of a job with few resources and little appreciation!

I assumed it was economic dogma, but in any case, I'll elucidate a principle: anything subsidized becomes more expensive. College is no exception and tuition rate increases are of course due in large part to cheap loans.

Another reason the government should stay out of the loan business is that it does not vet loans like a private company would. A private bank would assess the ability to repay the loan, based in part upon marketability of the major and test scores of the student. This would end the practice of students getting into debt getting degrees which don't lead to employment.

University of California (UC) tuition, fee increases are an insult. Californians face mortgage defaults, 12% unemployment, pay reductions, loss of unemployment benefits. No layoff or wage reductions for UC Chancellors, Vice Chancellors, Faculty during greatest recession of modern times.
There is no good reason to raise tuition, fees when wage concessions are available. UC wages must reflect California's ability to pay, not what others are paid. If wages better elsewhere, chancellors, vice chancellors, tenured, non tenured faculty, UCOP apply for the positions. If wages determine commitment to UC Berkeley, leave for better paying position. The sky above the 10 campuses will not fall.
Pitch in for all Democrats, Republicans UC
No furloughs. UCOP 18% reduction salaries & $50 million cut.
Chancellors’ Vice-Chancellors’, 18% cut. Tenured faculty 15% trim.
Non-Tenured, 10% reduction. Academic Senate, Council remove 100% costs salaries.
It is especially galling to continue to generously compensate chancellors, vice-chancellors, faculty while Californians are making financial sacrifices and faculty, chancellor, vice-chancellor turnover is one of the lowest of public universities.
The message that President Yudof, UC Board of Regent Chair Lansing, UC Berkeley Birgeneau are sending is that they have more concern for generously paid chancellors, faculty. The few at the top need to get a grip on economic reality and fairness.
The California Legislature needs a Bill to oversee higher education salaries, tuition.

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