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Federal Deficit May Curb Student Loan Reform

Even as Obama gave his first press conference as President-Elect today calling on Congress to pass an economic stimulus package in the next few months, the National Association of Student Financial Aid Administrators reports that the huge budget deficit might prevent him from doing too much about the sky-rocketing costs of higher education.

NASFAA was reporting on a seminar given by Stan Collender, a budget and education expert. The article notes that the deficit will be a primary concern for the new administration, and “The education budget will be a prime target for reducing spending because it is the largest domestic expenditure.” 

According to Collender, the grim budget situation could affect higher education in the following ways:


  • Increasing student loan and credit card defaults due to unemployment 
  • Rising default rates could drive up the cost of the federal loan programs 
  • Declining home equity will make it harder for families to borrow to pay for college 
  • Colleges’ access to cash will be limited making it harder to provide financial aid

On a related and equally depressing note, the New York Times is reporting that unemployment is rising – 240,000 more jobs were lost in the month of October.

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