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Many upperclassmen, in the midst of preparing applications for graduate school and locating funding to pursue their master’s degrees, will be faced with a new challenge this upcoming year: the lack of interest-free loans.
The Budget Control Act of 2011, enacted by President Barack Obama this summer to bring the debt ceiling crisis to a close, included a provision that ended federally funded subsidized loans for graduate students.
Projected to save the federal government more than $20 billion over the next 10 years, the new law will affect students who enroll in graduate school after July 1, 2012 and leaves many worried about funding their post-secondary education.
“This change is kind of scary,” said senior Carlos Mendoza, a Christianity and sociology major who is currently applying for graduate school in theology.
In the past, the federal government covered the interest on the principal of subsidized loans for graduate students during their time at post-secondary institutions as well as for the first six months after their graduation. This allowed recent graduates, who were allowed to borrow up to $8,500 in subsidized loans and $12,000 in unsubsidized loans, time to locate jobs.
Next year’s graduate school students are still allowed to borrow a total of $20,500 per year, but the loans will begin accruing interest at the rate of 6.8 percent as soon as they are taken out, according to the U.S. Department of Education.
If the maximum amount of funds a graduate student can receive through federal loan programs starts accruing at that interest rate, a student will owe approximately $74,500 upon graduation. That is nearly $14,000 more than he or she would have owed with a traditional $8,500 subsidized loan.
Debora Burnett, director of financial aid operations, said the average cost of graduate programs at the University is $30,000, with the MBA program having the maximum tuition of $39,000. While graduates will be ineligible for subsidized loans starting next year, the graduate programs are now awarding scholarships based on GMAT or GRE scores. These scholarships are automatically awarded upon admission to the program. The Graduate School has also started awarding alumni scholarships for University graduates, a move that may alleviate some of the new financial pain.
The federal government’s move comes at a time of increasing enrollment in graduate school programs. The number of students pursuing post-secondary education has increased 57 percent since 1988 even as the average price for tuition has jumped to $30,000 from $8,000 per year, according to the Chronicle of Higher Education.
“I need that education,” said senior David Kabiru, a physics major applying to the University of Vanderbilt to study Loan Forgiveness, which can forgive part or, in some cases, the entire unpaid loan amounts. In order to be eligible for Loan Forgiveness, a graduate has to perform volunteer work, military service, teach or practice medicine.
Graduates’ ineligibility for subsidized loans is one of many cuts the government has made to cope with national debt, but not all students approve of this action.
“Education is very important, and I would like it better if they cut from something else,” said senior Grace Parmar, who is majoring in biblical languages and applying to the University of Pennsylvania to study social policy. “This could be very detrimental in the long run.”