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Debt-ceiling bill forces cuts to education spending

Pell Grants for low-income college students will get a $17B boost—but other education programs face the prospect of steep budget reductions

A $900 billion increase in the national debt ceiling would be matched by cuts to agency budgets over the next 10 years, including cuts to education funding.

After weeks of political posturing, the agreement reached by lawmakers to raise the nation’s debt ceiling contains some good news for low-income college students—and bad news for other education stakeholders.

With just hours left before the national debt bumps against its cap, emergency bipartisan legislation to allow the government to borrow more money faces one final test in the Senate. Expected passage there sends the bill to President Barack Obama, averting a potentially disastrous, first-ever government default and making a down payment toward taming budget deficits.

The legislation, which easily passed the House on Aug. 1, is virtually assured to clear the Senate shortly after noon Aug. 2 by a bipartisan tally. The White House promises Obama will sign the measure into law.

The legislation pairs an increase in the government’s borrowing cap with promises of more than $2 trillion in budget cuts over the coming decade, including cuts to federal education spending. However, Pell Grants for low-income college students will receive $17 billion more in funding at no additional cost to taxpayers by eliminating the in-school interest subsidy on subsidized loans for graduate students.

That means graduate students would have to pay interest on their loans while still in school. The deal also eliminates the current student loan interest rate reduction for on-time loan payments. Together, these two changes are expected to generate $22 billion in savings, with $17 billion allocated for Pell Grants and the remaining $5 billion helping to reduce the deficit.

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