The “In-School Interest Subsidy,” Pretty Much Already Gone

Back in December College Guide had a piece about the Deficit-Reduction Panel’s plan to end the in-school interest subsidy on graduate student loans.

The elimination of the subsidy, which provides taxpayer money to cover to cover the interest on certain federal student loans while the borrowers are in college, would save as much as $8.2 billion over five years, according to the Congressional Budget Office. It would also make the cost of an education more expensive for students.

The particular budget cutting measure has come up before but the subsidy remains. This time it’s probably going to happen, however, according to a piece by Stephen Burd at the New America Foundation. As he explains:

The question no longer seems to be whether this popular benefit for financially needy students will be eliminated but how the money saved from doing so will be spent. Will it go to shoring up the Pell Grant program, as President Obama has proposed, or to deficit reduction, as House Republican budget cutters are advocating?

Because apparently personal, graduate student, deficit reduction isn’t an option.

This question is coming to a head as the White House and Congress seek to come to agreement on a deficit-reduction package that could potentially be passed in tandem with an increase in the national debt ceiling. As we reported on Friday, House Budget Committee Chairman Paul Ryan (R-WI) told reporters last week that ending the in-school interest subsidy for graduate students is “on the menu” of proposals being considered in these budget talks.

It’s difficult to believe, however, that that Obama administration would agree to include this in the deficit-reduction package, considering how pivotal this proposal is to the president’s plan for maintaining the maximum Pell Grant at its current level of $5,550.

Right, because if Republicans and Democrats are already arguing about how they’re going to spend the money, whether or not they’re going to take the money isn’t really up for debate anymore.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer