What have you always wondered about the economy? Tell us

Federal student loan funding could be cut

Amy Scott Dec 15, 2011

Jeremy Hobson: Well Congress is still working on a $1 trillion spending bill ahead of a midnight deadline tomorrow. And it appears federal student aid programs are on the chopping block.

From the Marketplace education desk at WYPR in Baltimore, Amy Scott reports.

Amy Scott: When college students take out loans subsidized by the federal government, Uncle Sam pays the interest for the first six months after they graduate.

Terry Hartle is with the American Council on Education. He says Congress is expected to end that grace period.

Terry Hartle: The good news is that the cuts that we are looking at are far less than almost every observer predicted four or five months ago.

The savings on interest payments will help pay for federal grants to low-income student under the Pell program. But Hartle expects cuts there too. He says students will only be eligible for grants for six years instead of the current nine. And they’ll have to have a high school diploma or an equivalent.

Mark Kantrowitz with Finaid.org says those students are more likely to graduate.

Mark Kantrowitz: If the goal of spending federal money is to produce college graduates, you’d want to focus that funding on the students where it’s going to make a difference.

But Congress may also make it harder to qualify for the maximum Pell grant, about $5,500 a year. And that could price more low-income families out of a college education.

I’m Amy Scott for Marketplace.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.