Government Student Loans Should be Displaced by Grant Programs

Government Student Loans Should be Displaced by Grant Programs Credit: zimmytws / Shutterstock.com[/caption]

Students may have to come to terms with the doubled interest rate on direct federal subsidized loans. The increase occurred on the first of July due to Congressional inaction. But if policymakers won’t act on the interest rates, grants should be expanded to alleviate the extra economic burden.

Grants are awarded monies that do not have to be paid back. This is a much better solution to paying the costs of college than student loans, but resources remain scarce.

The federal Pell Grant program is based on the income status of applicants. One has to apply through the Free Application for Federal Student Aid (FAFSA), but awards are limited to $5,550 max per year. The amount also depends on the cost of the college’s tuition.

The New America Foundation suggested that colleges step up to match the federal grant funds. Low-income students who pay $10,000 or more in tuition would receive matching funds from the college based on their Pell Grant award. Overall aid is bolstered, if colleges are willing to participate.

The Foundation goes as far as suggesting that colleges should not be eligible to have its students receive Pell Grant awards if it refuses to match funds. This is action Congress is not likely to take and would probably have to be initiated from the Department of Education.

The University of California (UC) system has already taken on the expansion of grant awards. It created the Blue and Gold program which covers the entire tuition cost for students with familial income under $80,000 a year.

Graduates from the UC system, on average, are in a much better position with debt burdens than graduates around the country.

The UC approach may seem aggressive, but having campuses play a larger role in providing student assistance puts less burden on the government. Tuition is effectively brought down and the campus ends up paying itself.

Perhaps government should be less involved in education policy and guaranteed federal student loans do more harm than good. Getting the college itself to provide more for its students in the form of grants could be a viable solution to the dependency on loans and the interest rate spike.