• August 2, 2014

Stalemate Over Federal Debt Ceiling Leaves Student-Aid Funds in Limbo

The stalemate in Congress over raising the nation's debt ceiling leaves the federal student-aid programs in limbo, with only days remaining before the August 2 deadline for increasing the country's borrowing limit. If lawmakers fail to reach agreement by then, the government could default on its debt and become unable to pay out benefits like Pell Grants and student loans.

Congress has been divided over how to raise the debt ceiling for weeks, with Republicans in the House of Representatives insisting that any new borrowing be offset by spending cuts, and Senate Democrats resisting reductions to benefits programs like Medicare and Social Security.

But the two sides aren't far apart when it comes to student aid: The bill crafted by the House's Republican leaders would end the in-school interest subsidy on student loans to graduate students and provide $17-billion for Pell Grants; the Senate's proposal would also end the interest subsidy for graduate students, and provide $18-billion for Pell Grants. (The House bill would also do away with the interest-rate reduction for on-time loan repayment.)

An expected vote on the House plan was put off on Thursday evening, however, as leaders scurried to win support from fiscal conservatives in their own party who oppose it. Some of that opposition may stem from anger over the bill's inclusion of supplemental spending for Pell Grants. The Hill, a newspaper covering Congress, reported that the Pell funds angered some conservative House freshmen who believe they were elected to cut spending, not increase it.

Even if the measure had won approval in the House on Thursday, Democrats in the Senate were poised to block it. The Senate majority leader, Harry M. Reid, of Nevada, has said he plans to revise the House bill, pass it, and send it back for another vote.

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