Correction appended.
Graduate students currently receiving federally subsidized Stafford loans will see an overall increase in the cost of their education starting next July. As part of the Budget Control Act passed by Congress in August, the federal government will no longer grant subsidized Stafford loans to graduate students, requiring them to pay an additional $392 out of their own pockets, according to Elizabeth Murphy, assistant director of financial aid.
The legislation eliminates the subsidy that covers the interest that accrues on the Stafford loans while the students are enrolled in school. When the change goes into effect in July, only unsubsidized Stafford loans, which accumulate interest at a rate of 6.8 percent, will be available to graduate students.
"We are certainly not happy about it," said Jim Tilton, director of financial aid.
But Tilton also said the change is not as severe as it may initially seem — under the current loan program, only $8,500 of the maximum $20,500 that graduate students can borrow per year can be subsidized. The remaining $12,000 accrues interest while the student is enrolled. As a direct result of this subsidy elimination, students receiving the maximum amount of Stafford loans during the 2012-13 academic year will owe $289 more than those receiving the maximum amount of subsidized Stafford loans during the current academic year. With the change in origination fee and the elimination of the repayment incentive and rebate program, the total cost difference for each student will be $392, Murphy said.
The Office of Financial Aid is increasing its efforts to communicate the change to graduate students.
Under the current circumstances, students who qualify to receive the maximum $20,500 in loans receive a net disbursement of $20,398 a year due to the origination fee and rebate program, according to Murphy. Once the changes of the Budget Control Act are implemented, students will receive $20,295 in their accounts, with $205 lost to origination fees.
To maximize the amount of funds available to students, Murphy said the Office of Financial Aid is looking into ways of shifting the cost of these fees onto the cost of attending the University. Graduate students who owe, for example, $35,000 to Brown each year and qualify for the maximum $20,500 in federal support must then obtain $14,500 from another source to fully fund their education. If the financial aid office proceeds with and implements its plan, the University would add $205 to the students' cost of attending Brown. As a result, the students would be able to obtain $14,705 from the other funding source, compensating for the loss to fees and maximizing the funds directly available to them, Murphy said.
"It's really about the amount of money they can receive," Tilton said. "They need the money up front to help them with their expenses related to school."
The Graduate School provides funding for all doctoral candidates for five years of study, and a funding method for sixth-year doctoral students was established in March. But master's candidates do not receive such support from the University, and their admission process is not need-blind, Weber said.
Approximately 200 master's students, who account for about 10 percent of the Grad School population, receive subsidized Stafford loans, wrote Peter Weber, dean of the Graduate School, in an email to The Herald. The cost of attendance will rise for these students next July, but Weber wrote that it is yet unclear if master's programs will increase their financial aid contributions to these students to compensate for the subsidy elimination.
The University will begin discussing its budget for the 2012-13 academic year next month, at which time the Grad School's response to this federal policy change will be considered. Graduate students will be represented in these discussions.
The Grad School currently provides $3.1 million to its master's programs for financial aid support, Weber wrote, and some programs may contribute more on top of that to aid its students.
According to Matteo Riondato GS, president of the Graduate Student Council, there has not been much talk in the graduate student community about this change.
For now, the Office of Financial Aid aims to inform graduate students about the policy change so that students are prepared when it goes into effect. "Our role is to help graduate students sort of manage the cost of Brown with whatever money they may get from the Graduate School," Tilton said.
"It is a year away, and I think we'll be well prepared here at Brown to help our students understand it and strategize on minimizing any impact it does have," Murphy said.
A previous version of this article incorrectly stated that the admissions process for master's students is need-aware. Though financial need is considered by the students' respective departments or programs for funding, it does not impact admission decisions. The Herald regrets the error.
