Boehner and Reid agree that poor students should pay more

The finale of the debt-ceiling theatre is nearing, and it is shaping up to be an exciting one. With this self-imposed disaster looming, two plans have moved ahead as front-runners in the negotiations. The two plans — proposed by Harry Reid and John Boehner — cut a basically identical amount of spending, with the exception that Reid’s plan includes caps on spending for the wars in Iraq and Afghanistan. Without those caps, the Reid and Boehner plans reduce the deficit over the next decade by $927 billion and $917 billion respectively. Reid’s war-spending caps net his plan an additional $1.277 trillion in deficit reductions that Boehner’s does not, but the significance of this is disputed as the wars are already winding down.

Despite their disagreements in some areas, both Reid and Boehner have come to agree that poor students need to pay more. Senator Reid’s plan calls for the elimination of the interest subsidy for loans taken out by low-income graduate and professional students. Representative Boehner’s plan calls for the exact same thing. They likely got the idea from none other than President Obama who proposed eliminating the subsidy earlier this year. With Boehner, Reid, and Obama on board, increasing the burden on poor students is shaping up to be quite a bipartisan success.

As someone who presently receives the subsidy, I have a good idea what the elimination of it will mean for poor students. Under current law, graduate and professional students who are sufficiently needy are able to access up to $8,500 per year in subsidized Stafford Loans. What makes the loans subsidized is that the federal government pays for the interest that accrues on the loan while the student is in school. After graduation and a six-month grace period, the student is then responsible for paying off the principle and any interest that accrues from that point.

For a student who takes out the full $8,500 for three years — as poor law students likely do — the elimination of this subsidy will cost them slightly more than $3600 during the time that they attend the school. Upon graduation, their higher debt total will lengthen the amount of time it takes for them to pay off their loans. That delay will then cost them more as interest will continue to accrue. Just how much more it will cost them depends on how quickly their income after graduation allows them to pay off their loans. While it will vary by case, for many students, it is likely thousands more will have to be paid in additional interest on top of the extra $3600+ that the subsidy used to cover.

While there are cuts that would be worse than this — like cuts to Medicaid or SNAP — this is still contrary to any reasonable picture of distributive justice. With the elimination of this subsidy, poor students are being told that they must pay money that they do not have in order to decrease a deficit which they did not cause. What caused this deficit that we are now having to close? In short, it was three things: the Bush-Obama tax cuts, the two wars, and the Great Recession. The tax cuts primarily benefited the wealthiest individuals in this country; the wars — one of which was perpetrated through outright lies — benefited few except war contractors; and, the Great Recession created enormous pain for almost everyone except the very bankers who caused it.

No one could seriously maintain that the logical remedy for a problem generated by those causes is to take money from poor people. At most, one might try to argue for some sort of shared sacrifice. We might say that we should let bygones be bygones, and stop pointing fingers at the classes and groups of people who have put us in the situation we are in. On this kind of line, we would remark that this is a problem for the entire country, and we all need to sacrifice in order to solve it. But, we are not even doing that.

The leaders on both sides have decided that we will fix our problems exclusively on the backs of poor people, old people, and sick people. The extremely rich financiers — who both caused our present predicament and have plenty of money to contribute to fixing it — are going to be spared completely. Asking them to pay a single dollar to improve our fiscal situation has been taken completely off the table.