Past Budget and School Loan Issues

Issue Summaries for the 112th Congress

(View issue summaries for the current Congress.)

Student loan subsidies and the federal budget deficit
The White House and members of Congress have for months grappled with how best to tackle the deficit, reduce spending and raise revenue. The federal budget deficit currently stands at $14.3 trillion. The debt limit has been raised seven times since 2002. The debt limit must be raised or the U.S. will go into default. In 2010, President Obama established the bipartisan National Commission on Fiscal Responsibility to identify policies and make recommendations to improve the country's fiscal situation. The Commission's report, "The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform", included a recommendation to end the in-school subsidy on student loans. This recommendation could save $5 billion in 2015 and $43 billion through 2020.

The Gang of 6 (comprised of Senators Mark Warner, D-VA; Dick Durbin D-IL; Kent Conrad D-ND; Saxby Chambliss R-GA; Mike Crapo R-ID; and Tom Coburn R-OK) attempted to work out a compromise over debt and the recommendations from the National Commission on Fiscal Responsibility and Reform. The Gang of 6 fell apart when Sen Coburn walked away from the table.

In April, following the dissolution of the Gang, President Obama asked Vice President Biden to lead a bipartisan Deficit-Reduction Panel (Senators Max Baucus D-MT, Daniel Innouye D-HI, Jon Kyl R-AZ, and Representatives Jim Clyburn D-SC, Chris Van Hollen D-MD; and Eric Cantor R-VA). The Panel also failed to reach consensus could on revenue generation and spending cuts when Rep. Cantor and Sen. Kyl walked away from negotiations.

In early July 2011, the President began meeting with Congressional leaders to work out a compromise before the August 2 deadline.

Among the many options to cut discretionary spending is an end to the in-school interest subsidy on Federal Stafford loans for graduate and professional students. Graduate and professional students receiving subsidized Stafford loans are already required to pay a higher interest than undergraduates receiving subsidized Stafford loans (currently 6.8 percent vs. 4.5 percent). Eliminating the in-school interest subsidy would serve to make graduate education less accessible to already financially struggling graduate students. The elimination of the subsidy, according to the Congressional Budget Office, would save nearly $8.2 billion over five years but would result in the cost of an educations being more expensive for students. AVMA urges Congress to maintain the subsidized Federal Stafford loan for graduate and professional students. This student loan program is important in providing access to veterinary medical school.
AVMA Position: Support
Primary Contact: Gina Luke