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Federal Budget: Here a Cut, There a Cut

     Boehner gave him a straightforward reply: Tim, we didnt. He explained that the budget-reduction measure signed by Bush would expand benefits for students, higher loan limits, lower origination fees, and yet reform the program and take $12.7 billion from those private lenders who run the program. But Russert continued to hammer him: But many Americans who see these headlines, Congressman, say, well, why tinker with student loans, why tinker with Medicare And again, why would you go after student loans .

     Likewise, USA Todays Sandra Block wrote in the February 3 edition that the bill cut $12 billion from student loan programs. Student groups say that will raise borrowing costs just as more students are struggling to pay for college.

     The overall savings over five years equal about $12.7 billion, and some of it comes from reducing administrative costs and subsidies to private lenders something the left or the media would be excited about if it were oil companies whose subsidies were reduced. But the adjustments dont change the fact that the program is still growing. In other words, were not going to spend less than were spending now, said Heritage Foundation budget analyst Brian Riedl.

     The budget-reduction bill is actually a series of technical corrections for higher education, said Kirk Johnson, another Heritage analyst who has studied the bill for the Center for Data Analysis. None of this is in fact going to affect access to these loans very much, Johnson said. Media coverage of cuts to politically popular programs is totally overblown, Johnson said, but it makes for a really nice sound bite if you want to bludgeon your opponent politically.

     In fact, in many cases students will be able to borrow more money. Loan limits have been increased by about $1,000 beginning in 2007, Riedl said.

     Still, ABCs John Yang implied that students might not be able to afford education, ultimately affecting the course of their futures.

     President Bush says the global economy means that the United States has to have an educated workforce in order to stay competitive. But this week, Mr. Bush and the Republican Congress made college a little bit more expensive for millions of students, Yang said on the February 11 World News Tonight. Yang used the example of a college student who would leave college with student loan debt, and Yang declared that that would put his goal of a graduate degree and his future in jeopardy.

     That might be news to the other students across the country who have completed graduate degrees with the help of loans and have gone on to successful employment.

     The contention that students wont be able to afford education because of the changes is flat wrong, added Heritages Johnson.

     But Yangs report continued to sound alarms: For Sweeten and millions of others, paying back those loans got more expensive this week when President Bush signed a new budget-cutting law. While it makes more money available to more students, it also raises interest rates on some loans by as much as two percentage points. Thats on top of rising college costs, up 46 percent over the last five years.

     His story left out two important facts. First, it wasnt Mr. Bush and the Republican Congress who pushed for the interest rate increase Yang mentioned. The rate increase actually resulted from setting a fixed rate rather than a variable one, which is allowed to follow market fluctuations. Johnson said the government should not be setting prices for loans and that It certainly is more Democrats in Congress who want to keep these fixed rates. In his Meet the Press appearance, Boehner agreed, saying he wanted to go with a variable rate over the next five years, but it was Sen. Ted Kennedy, Congressman George Miller and others, all the student groups, who insisted on having a fixed rate.

     Second, the rising college costs Yang mentioned may be an effect, rather than a cause, of students being able to borrow more money. Higher student aid generally leads to higher tuition, leaving the student no better off, Riedl said. He added that universities tend to charge as much as they can get, meaning the aid subsidizes universities rather than students.