My son, Mike, after three years of college, is now $20,000 in debt for student loans. This despite the fact that we have been sufficiently indigent so as to qualify for “free” money: state and federal grants.

But before free money is used to pay such things as tuition, first the university taps the borrowed money, such as Stafford loans. Soon, the student – who will be required to begin repaying the loan six months after he or she graduates – has incurred so much debt that it will be years before earned income starts to break even with what it cost the kid to go to college.

In recent months, there have been a number of news stories concerning conflict of interest in loan “steering” on the part of some colleges that “direct” student borrowers to some lenders, but not others. As a federal investigation into the questionable practice continues, a proposal now afloat in Washington would, if passed, delete about $19-billion in federal subsidies to banks that issue government-backed (subsidized) student loans, $1-billion of which would go toward reducing the federal deficit.

The bulk of the money saved, though, would be poured into student benefits. Passed by the house, the measure would, by 2011, raise the maximum school year federal Pell grant from $4,310 to $5,200. Pell grants go to poor students like my son, and don’t have to be repaid. If the Senate vote follows the House (no sure thing), the interest rate on federally subsidized loans for low-income and middle-class students would be cut in half, dropping from 6.8 percent to 3.4 percent over five years. The House has tried to push through such a cut before, but the Senate balked.

House Democrats may have better luck this time. The money saved on subsidized loans is part of a must-pass bill needed to meet spending targets in the federal budget. By linking the student assistance to the budget legislation, Democrats are ensuring that the student loan legislation can’t be derailed by a minority of Republicans in the Senate. Predictably, House Republicans accuse Democrats of exploiting the budget process. The Bush administration also opposes the overhaul, saying it fails to target the “neediest” students.

Meantime, my son, who is interested in a career in law enforcement, is heartened by a provision that would “forgive” $5,000 of his debt if he enters a public service career. Other provisions include giving $4,000 a year in scholarships to students who agree to teach hard to staff subjects like math in underprivileged schools, and, here’s the biggie: The bill caps annual loan repayments at a percentage of a student’s income.

Breathing a sigh of hopeful relief, Mike thinks if all this goes through, he might just be able to both repay his student loans – and buy groceries.

Carol Bogart is a freelance writer/editor. Read her articles at and her blog at Contact her at  

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