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Congress eyes student loan programs to pay for Katrina
Scripps Howard News Service


October 21, 2005

WASHINGTON - On top of high gasoline prices and heating bills, you may be able to blame Hurricane Katrina for making parents and students shoulder an even larger share of college costs.

Legislation working its way through Congress would offset Katrina recovery and Gulf Coast reconstruction with $50 billion in spending reductions, including higher-education cuts of anywhere from $7 billion to $12 billion, largely from student loan programs.

Wallet Watch

A federal squeeze on student loans isn't the only Washington worry for parents and students.

The president's tax-reform commission this week voted for two options - a simplified income tax and a consumption tax - that each does away with the range of Hope tax credits, Lifelong Learning credits and other higher-education tax breaks along with Coverdell and 529 college savings plans, named after their section of the tax code.

Instead, the panel is likely to recommend replacing them with all-purpose Save for Family accounts that would let individuals save up to $10,000 a year in after-tax dollars for tax-free withdrawal for tuition and other approved uses.

Congressional watchdogs at the GAO make a good case that taxpayers are losing out on education credits and deductions that could cut their income tax bills by $500 apiece, but researchers said their information was too limited to say what would help make better use of $56 billion a year in education tax breaks.

Congress won't act on the panel's suggestions until the Bush administration decides which, if any, ideas to propose in the president's budget early next year. Still, you should keep an eye on any education tax changes, and so should any tax or personal finance professionals you use.

"Many of America's students and families find themselves struggling with college debt and affordability, yet the budget process asks that students already in a financial hole dig deeper," said Jasmine Harris of the United States Student Association. The group organized this week's "stop-the-raid-on-student-aid" protests on Capitol Hill and campuses around the country.

Even though the typical graduate already faces $15,500 in college debt, lawmakers look to cut federal subsidies to lenders and raise fees and interest rates on student loans - changes that could add more than $5,800 to the cost of repayment.

Congressional cutbacks are being proposed in the wake of the College Board's yearly report on college financing. The non-profit board, best known for SAT tests, found that, even though tuition increases moderated the last year, they rose twice as fast as inflation at the same time outstanding student aid soared to a whopping $129 billion.

Tuition and fees at four-year public colleges, for instance, rose 7.1 percent over the year, with tuition averaging $5,491 for the 2005-2006 school year. Colorado blazed the way with a 17 percent increase to $4,260 this fall, followed by Kentucky at 14 percent and Michigan at 12 percent. Pennsylvania was priciest at $8,410, followed by New Jersey at $8,180 for four-year public colleges.

Rep. John Boehner, R-Ohio, chairman of the House Education and Workforce Committee, suggested slowed tuition increases may be due to "increased scrutiny Congress and the American public have paid to college costs."

He added that "colleges and universities cannot sit idly by and expect taxpayers to pick up the tab for skyrocketing tuition at every turn."

Besides increasing the student loan burden, the higher-education bill his committee is crafting would require colleges that raise tuition more than the inflation rate to provide detailed expense reports on the reasons for the increase.

As Congress looks to tighten federal purse strings, state and local governments are tightening up, too, so that revenues that public colleges and universities derive from state and local taxes fell to 64 percent last year, down from 71 percent in 1991.

Education Secretary Margaret Spellings, whose oldest daughter just left for private college, knows firsthand, "It's really amazing how much higher education costs."

But Spellings doesn't believe "economics ought to be a barrier to a qualified kid getting a college education," so she convened a bipartisan Commission on the Future of Higher Education this week to ensure that "we are investing wisely and well."

Meantime, a consortium of 50 private groups will hold a higher-education summit Nov. 2 in Washington to consider ways to get a handle on rising tuition costs.

James Boyle, founder of, blames schools as well as state and federal policymakers who give short shrift to higher education's importance in driving the economy. "To do otherwise is simply to pass the buck - the big bucks - onto families," he says.

Fatima Mohsin is a junior at University of California-Berkeley, where in-state undergraduate tuition runs $3,717, a relative bargain compared to the average $5,491 public and $21,235 private college tuition the College Board found.

Still, Mohsin joined the "raid-on-aid" protest against Congress' attempt "to balance the budget on our backs. Creating more debt for students is the wrong way to go."


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