Despite passing debt ceiling legislation on Aug. 2, just before the government would have defaulted on its debt, the debt issue has only begun to be resolved – with another similar debate likely to occur in 2013. While the signing of the bill will certainly have an effect on the economy, a closer look at the bill reveals the effects it will have on students. The bill, a short-term solution, will financially affect graduate students applying for certain federal loans.
According to the debt ceiling compromise bill, starting July 1, 2012 graduate students with federal subsidized loans will have to pay interest on the loans while in school. Currently, students begin paying interest once they have graduated. Additionally, the compromise eliminates on-time repayment incentives for all student loans. For undergraduate students, Pell Grants will receive a $17 billion increase for low-income students. This increased funding will come from the money cut from the subsidized loan programs.
With such changes in the debt ceiling compromise, it’s quite clear that this issue directly affects college students.
David Bailey, a junior majoring in finance and entrepreneurship, has been following the news on the debt ceiling closely. And due to the number of phone calls he’s been getting from people his own age asking about the economy, he said that he thinks students have taken an interest in the debt ceiling debate more than any other recent issue.
Bailey described the compromise as “a little Band-Aid to keep us going until the next time we need another Band-Aid.”
“This is a temporary fix for a much bigger problem that is just multitudes and multitudes and multitudes greater than this little deal that they passed,” he said.
In order to reach the compromise, the bill includes several government spending cuts proposed by the Republicans, and it calls for cuts of more than $900 billion from programs, government agencies and daily spending. This, however, also allows the debt ceiling to increase by $2.4 trillion total.
President Obama spoke on Aug. 2 on the debt compromise, laying out the next steps for restoring the economy and solving the debt issue.
“We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession,” Obama said. “We can’t make it tougher for young people to go to college, or ask seniors to pay more for health care …Everyone is going to have to chip in. It’s only fair. That’s the principle I’ll be fighting for during the next phase of this process.”
Bailey said he believes students need to stay concerned and informed on the debt issue because they’re part of the generation that will have to pay the bill – and because the debate is far from over.
“The debt deal that was reached is only a very, very small amount in comparison to our total debt and the quickness at which our debt and our deficit is growing, and so we’re not talking about reducing the debt,” Bailey said. “All we’re talking about is slowing it down.
“If we keep borrowing, the dollar won’t be worth anything, and we’ll have economic implications that are just so bad and dire,” Bailey said. “It would make the Great Depression look not bad at all.”
