One of the bummer things about President Barack Obama’s proposed budget changes is the effect on student loan financing. In order to increase the amount of money available for grants, without increasing the federal deficit by very much, Obama is proposing changes to the way lenders are subsidized for making low interest student loans. This is one of the few items of disagreement I have with Obama’s economic policies.
The end to low interest student loans?
Right now, in order to encourage lenders to offer rock-bottom interest rates on student loans, the government hands out subsidies. Now, though, without these subsidies, lenders won’t be very likely to give out low interest student loans that make it possible for many middle class students to attend university. While increasing the amount of money available for grants is laudable, it only makes things worse for those families — like mine — who make too much to qualify for grants, but who don’t make enough to actually afford college without help.
Additionally, without federal subsidy protection, I foresee issues with getting approved for student loans. The credit and income requirements are likely to be strengthened as well. Unless Obama finds a way to provide grants for those who don’t qualify right now, we could see fewer middle class students able to afford college.
What do you think? Should the government continue to provide subsidies for low interest student loans?
image source: sxc.hu