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Obama’s 2014 budget proposal includes reforms of student aid programs

By Dylan Nguyen

April 15, 2013 12:15 a.m.

University of California students who depend on federal loans and grants may see changes to federal aid policies next year, in light of a new federal budget proposal.

President Barack Obama released his fiscal budget proposal for 2014 last week, which includes reforms for federal aid distribution and interest rates on student loans.

The proposed budget reflects the Obama administration’s focus on interest rates on loans to help students pay off their debts after college, said Nancy Coolidge, associate director of financial student support at the UC.

The proposed plan suggests ways to strengthen programs like the Pell Grant program, which gives students money based on their income, and Federal Work-Study jobs. If approved, the plan would allocate full funding for Pell Grants until 2016 and provide $150 million for work-study jobs.

“(We need) to equip more Americans with the skills they need to compete in the 21st century,” Obama said outside the White House after unveiling his budget. “And we’ll help more middle-class families afford the rising cost of college.”

In total, 10,096 UCLA students received some amount of Pell Grants for fall quarter 2012, according to the website of Federal Student Aid, a federal agency that manages all student aid.

Interest rates on Stafford loans, federal loans given to college students, are currently set to double from 3.4 to 6.8 percent on July 1, Coolidge said. If passed, the budget would essentially prevent the increase this year but would not guarantee a stable interest rate in future years, said Barmak Nassirian, an independent higher education analyst who formerly worked at a nonprofit organization that represents thousands of institutions, including colleges.

About 8,000 UCLA students depend on subsidized Stafford loans, which are loans only given to low-income students, and about 9,000 UCLA students depend on unsubsidized loans, according to Federal Student Aid.

Christopher Harrington, the spokesman for the UC’s office in Washington, D.C., said the University appreciates the President’s support for the Pell Grant program, and plans to continue to work with Congress and the administration for a long-term solution that also addresses student loan interest rates.

Critics of Obama’s budget proposal have said it only offers a short-term solution regarding the student loan interest rates.

“(The administration) is unnecessarily boxing themselves in by rushing to prevent the doubling rate of 3.4 percent,” Nassirian said. “Over the long haul, an intelligent start would be to have an adult conversation about this.”

Instead of Congress setting the rate each year, Obama’s budget plan would use the government’s cost of borrowing to set student loan interest rates, Nassirian said.

Although interest rates for student loans would be lower than the current 3.4 percent if the budget passes, the plan does not have a cap to stop relatively high interest rates in the future. If interest rates are set to the market, data show the rates will go up in the coming years, according to the Congressional Budget Office.

The UC might support long-term solutions, including a strict cap on how much interest rates can fluctuate in a given year, Coolidge said.

Vincent Hennerty, the higher education campaign coordinator for CALPIRG and a fourth-year anthropology student, said he is concerned that Obama’s budget proposal would only help current students, but would not help future college students because there would be no cap on student loan interest rates.

CALPIRG, a student activist group that advocates on issues including UC funding and student loans, is currently trying to inform students about the pending changes for student loan interest rates. Last week, the California Public Interest Research Group held an event about student loan interest rates following the release of Obama’s proposed budget, Hennerty said.

“I am not going to feel this as much as future students, but that is why I care,” Hennerty said. “We want (lawmakers) to fix it now.”

The proposed federal budget also proposes to permanently extend the American Opportunity Tax Credit, which allows tax deductions for up to $2,500 in college expenses to help families pay for college, according to Daily Bruin archives.

Christopher Lemarr, a second-year political science student, said he qualifies for the American Opportunity Tax Credit program. He said he appreciates Obama’s efforts to reach a bipartisan effort with Republicans.

Coolidge said she does not expect Obama’s budget to pass Congress in its original state because provisions in the proposal, like higher taxes, might be controversial in Congress and could stall budget negotiations.

“There will be push-back from those (who oppose other budget measures),” Coolidge said. “The President’s budget may be the best offer that college students are likely to have this round.”

Although lawmakers are coming closer to addressing the issue of college affordability, students should not be surprised if nothing major is passed soon, Coolidge said. She added that it is more realistic to expect only incremental changes in the final version of the budget if it passes.

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Dylan Nguyen
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