Deficit reduction will cost students

Federal plans to cut the nation's budget deficit could drive up student debt in Utah, adding an average of $1,360 in loan debt for university and college students already facing higher tuition and diminishing education grants.

The U.S. House of Representatives passed a revised Deficit Reduction Act on Wednesday that will cut $12.7 billion from federal student loan programs as part of a five-year, $39 billion savings plan. Most of the $12.7 billion cut will stem from locking student loans into a fixed interest rate, said Dave Feitz, associate executive director of the Utah Higher Education Assistance Authority.

A 6.8 percent fixed rate would replace the current 5.3 percent variable rate students are now eligible for on Stafford Loans. With the average Utah student debt for a four-year degree pegged at about $15,000, Feitz said students could expect to pay close to an extra $1,360 over the 10-year life of a loan.

"Sure, the monthly payment isn't that much different, but over the life of the loan it costs students a significant amount of money," he said. "It makes the student loans more expensive for students, which we think is the wrong approach at a time when the nation needs to be investing in higher education."

While that 6.8 percent rate may look really good if interest rates surge, Feitz said state higher education officials consider the law bad policy because it "creates winners and losers, depending on what's happening with the economy."

The fixed loan rate, which would become effective July 1, couldn't come at a worse time, said John Curl, director of financial aid at the University of Utah. With increasing tuition rates and cost of living, students are already struggling to pay for education.

"There hasn't been an investment in this program to begin with and then for the majority of the deficit to be reduced by student aid, that's disheartening," Curl said.

Supporters of the bill say the measure stabilizes the student loan system and offers incentives for students, like higher loan limits and lower student fees. In addition, the law increases grant aid for math and science students.

"These reforms will result in a stronger student aid system for students and taxpayers. We can expand college access for low- and middle-income students while simultaneously generating savings for all American taxpayers by reducing program waste and inefficiency, and giving the programs a strong financial footing for future generations of students," states a November letter from the U.S. House Committee on Education and the Workforce.