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The first question people ask when they pay their taxes is, “Where is my money going? What is the government spending it on?”
Increasingly, the answer is not financial aid. Cutting education from budgets has become a big way for the federal and state governments to save money.
Education and Financial Aid Budget Cuts
· The new automatic zero. Congress recently cut the automatic zero in the expected family contribution. Prior to this year, families who made less than $30,000 per year were not expected to contribute financially to their student’s college education. Now it’s $20,000.
· End of the grace period. Students have to start paying back subsidized Stafford Loans taken out after of June of this year immediately upon graduation. For years, they could wait until six months after graduation.
· Pell Grants not keeping up with tuition hikes. Pell Grants now receive an annual adjustment tied to inflation. If inflation is 4%, the Pell Grant goes up 4%. Unfortunately, the cost of college rises at double the rate of inflation. This means the Pell Grant will consistently cover less and less of your college costs.
· State cuts to financial aid. Since 2008, 43 states have cut the funding they provide for college. This has led to less financial aid for students and less money for state schools, both of which increase your cost.
· End of the federal stimulus. For two years, the federal government provided educational stimulus money to help states cover budget shortfalls. That ended this year, meaning states could not provide schools with additional funding. The result? Colleges cost more but do less.
Politics and Financial Aid
Not surprisingly, financial aid has become a political football as politicians seek to cut debts while adequately funding education. And a new poll from the College Board says that’s exactly what voters expect them to do, although people have been more than a bit disappointed by their efforts.
The report, titled Swing State Education Survey, places education as the third most significant issue in this year’s election, just behind cutting government spending and far behind jobs. President Obama has spent much of the past few months linking job creation to a better educated work force. Unfortunately, cuts in government spending in order to balance the budget are making that nearly impossible.
These cuts affect financial aid, teacher-to-student ratios, guidance-counselor-to-student ratios, college choices and more. They are increasingly creating a system in which families have to turn to their own devices to get ready and pay for college. Some of these devices – more student loans, dipping into retirement savings, second mortgages – can be very expensive.
Fortunately, there is good news. A majority of voters in both political parties said they would agree to pay $200 more per year in taxes in order to improve education. People are willing to spend money to educate their children. Over 5 years, that $200 in taxes is $1,000. For half that, you can get great college prep and do something politicians can’t do –give your student a great chance to succeed at a price that won’t break your budget.
Learn more about how politics hurts financial – and how you can help yourself – in this video: Did You Know?
1. Throughout all the time I have been going to school, I've had to go Part time because I've had to work and pay for my classes and pay my bills. I could never qualify for Financial Aid because I don't have any kids and my parents are not on welfare and I'm not over 24 to count my income so they count my dad's income instead so for all the people who are counting on Financial Aid for books and classes, you can go part time and work. It's just going to take a little longer.
Comment By Ronnie - Jul 03, 2012 4:18 AM
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