Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Christine Benz and Adam Zoll | 03-08-2013 02:00 PM

Keep Up With Your College-Savings Homework

Families of future and current college students should be mindful of the effects of sequestration, a university's 'Scorecard,' their own savings projections, and their future debt loads.

Christine Benz: Hi. I’m Christine Benz for Morningstar.com. One of the less discussed aspects of sequestration is its impact on the college-funding landscape. Here to discuss that and other news items in the world of college funding is Adam Zoll. He is assistant site editor for Morningstar.com. Adam, thank you so much for being here.

Adam Zoll: Happy to be here.

Benz: So, let's discuss at the outset what is going on with sequestration, and how does it affect people who are paying for college currently?

Zoll: Well, the sequestration, as you'll recall, is the $85 billion in federal spending cuts that went into effect earlier this month, part of a larger plan to cut Federal spending over the next decade. The near-term impacts of sequestration on higher education funding, and financial aid in particular, are not that great for the current school year. In fact, they're not affected at all.

But in the coming school year, the primary effects will be felt in the area of Work Study, and also for the Federal Supplemental Educational Opportunity Grant, which is a grant that benefits undergraduate students from low-income families. There is about $86 million worth of cuts to those two programs in particular.

Benz: It doesn't sound large. I mean, it's a big number, but it doesn't sound huge.

Zoll: It doesn't sound huge, but Secretary of Education Arne Duncan has estimated this could affect as many as 70,000 students who are reliant on these programs. It's not a real broad effect when you look at the overall student population, but it's still going to have a meaningful impact on some people who rely on financial aid.

Pell Grants, which are a much larger program, are unaffected in the coming school year. However, they could be affected by sequestration cuts the following year. So for the 2014-15 academic year, Pell Grants could also fall under sequestration.

Benz: So, stay plugged in if you are a parent or someone else paying, or if you're student paying for school using one of these means, you need to stay plugged in to how that could affect your overall package.

Zoll: Exactly. Financially, if this is a significant portion of your college-funding plans either in the near future or even down the road, you definitely want to pay attention to what's happening with these sequestration cuts.

Another area that's going to be affected, though it's a rather minimal effect, is that there is going to be a modest increase in origination fees for student loans. So, if you think that that's part of your plan as well, you could be paying a few dollars more for those origination fees.

Benz: So, that would be for the federally subsidized student loans?

Zoll: That's for all student loans.

Benz: All student loans.

Zoll: Those are student loans and also the Parent PLUS loans; so that affects them all.

Read Full Transcript
{1}
{1}
{2}
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
{1}
{5}
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article
    Username: