How Could the Debt Ceiling Affect US Education?

The debt ceiling deal made by Congress earlier this month preserved the federal Pell Grant program and avoided disaster in higher education institutions across the country, for now. However, the deal demands a high price from grad students, and leaves room for more spending cuts in education in the future.

By Mercy McKee

The Pell Grant Saved, the Grad Student Paid

Since taking office, President Obama has developed several programs and policies aimed at improving the U.S. education system, including increasing the Pell Grant by $819 to a maximum award of $5,550. The debt deal, recognizing the importance of education for American economic growth and competitiveness, and the role that Pell Grants play in giving low-income students the opportunity to go to college, specifically includes funding to protect the President's investment in the Pell Grant program with no additional cost to taxpayers. That's the good news.

The bad news is that it will cost graduate students an estimated $18 billion over the next ten years. Beginning July 1, 2012, a federal subsidy program, which covers interest payments on federal graduate student loans while students are in school and for six months after, will end. This means that grad students will be responsible for their loan and interest payments while they are in school - not an easy task while engaged in rigorous academic studies.

An Uncertain Future Still Ahead

The deal also calls for the formation of a bipartisan committee that would come up with legislation by November of this year that would identify an additional $1.5 trillion in deficit reduction. If the committee fails to ensure at least $1.2 trillion in deficit reduction, an automatic sequester, an enforcement mechanism built into the deal, will trigger spending reductions in 2013. As an incentive for the committee to reach a bipartisan agreement, these triggered reductions will be split 50/50 between defense and domestic discretionary spending, with Social Security, Medicaid, low-income programs, unemployment insurance and civilian and military retirement being exempt. This puts critical infrastructure and education programs at risk. In the event of a sequester, federally-funded financial aid programs, such as Perkins loans, TRIO programs and the Supplemental Educational Opportunity Grant, could face spending cuts. Additionally, the National Endowment for the Arts, the National Endowment for the Humanities and the National Science Foundation are also at risk from cuts if there is a sequester on discretionary spending.

Increasing the Pell Grant award isn't the only thing President Obama has done for U.S. education. Read about his round table event that secured nearly $70 million from businesses for education.

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