Special to the Daily Sundial
On Feb. 1, Congress passed a budget that cut subsidies to student loans, as well as making changes to Medicare and Medicaid, child support programs and welfare. While the cuts are hardly sufficient, students should celebrate, given that these cuts represent the first few halting steps toward fiscal sanity in Washington.
The steps are indeed halting. The new budget cuts $39 billion in spending from the federal budget over the next five years. This is compared to the $1.4 trillion of our money that the feds are expected to spend over that time period.
For those of you who are not good with numbers, let me say this: the first number is very, very small compared to the second one. It is like me putting two pennies into my bank account and proclaiming loudly that I am saving for the future. In fact, that would be an improvement on my current bank statement, which is disappointingly empty.
Clearly, the spending cuts are not nearly sufficient. They do not come close to ending the $337 billion budget deficit that currently drenches our national books in red ink. Even this minor adjustment barely passed. The budget bill squeaked by in the House by a 216-214 vote.
But you have to start somewhere, and Congress picked from a variety of sources to save money.Congress allowed states to charge higher premiums and deductibles from patients in the Medicaid program. They also chose to cut funding for child-support enforcement programs and extend the 1996 welfare reform bill.
What is more important to students like us is that $12 billion in savings came from reductions in student loan subsidies. Before, federal Stafford loans were issued at an interest rate of 5.3 percent. The current budget raises that rate to 6.8 percent.
No doubt there are many who will be unhappy with this. The professional education lobbyists will no doubt be publicly wringing their hands about how we are “abandoning” students and “depriving them of a future” or perhaps “throwing them headfirst down a mine shaft filled with starving piranhas.”
Students, however, shouldn’t worry. While the interest rate increase is significant, it is still far below that offered through private banks. Stafford loans, if you qualify for them, are still a real bargain, even at the higher interest rate. Congress also raised the maximum loan amount available to $3,500 for firstyear students and $4,500 for second-year students. This will make the more expensive universities much more accessible for lower income students.
Also, Congress established an additional $3.7 million in new grants for low-income students. That translates into free money for those who need it the most.
Putting all these reasons aside, there is still an important reason that we as students should encourage Congress to continue cutting spending. We are all earning higher degrees, which will allow us to be better compensated for our work in the long run compared to those of our fellows without college degrees.
Increased compensation, however, means increased taxes. Our progressive tax system insures that the more money you and I make in the future will force us to pay a larger and larger share of the tax burden.
Our current budget deficits are unsustainable. If Congress does not reign in spending, the only alternative is tax increases. Those tax increases are going to start coming into effect right around the time when we are graduating and getting our careers going. And don’t be fooled into thinking they will only tax the super-rich. No, the largest pool of taxable citizens are current college students: us, future members of the middle class.
So sit back and enjoy your latte from the Freudian Sip. But at the same time, keep a close eye on the budget battles that are taking place in Congress. Without a doubt, it is something that is going to be vitally important to your future as college graduates, and as citizens of the United States.
Sean Paroski can be reached at email@example.com.