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Students hit hard by debt ceiling agreement

by Adam Russett on August 3, 2011

For the good part of two months, Americans have been glued to the debate about the debt ceiling, watching as politicians drafted and scrapped plan after plan in an attempt to negotiation. There had to be big cuts somewhere and most Americans wanted a balance between a tightening of the belt and new taxes that could increase revenue, according to a Gallup poll.

Some of the biggest concerns centered around Medicare, Social Security and healthcare spending in general, as the country faces an aging population that will cost more and more to support in the coming years. This was a chance for parties to come together and make tough decisions.

But neither Republicans nor Democrats stepped up to the plate. Instead, they agreed to $1.1 trillion in cuts and the formation of a committee that would work on debt agreements in the future.

So what groups do these cuts affect? One recently highlighted by is grad students. While the wealthiest Americans still pay the same tax rate, young Americans who are planning to go to grad school and have to take out loans to do will now start seeing the interest rate for their borrowing start going up immediately.

The news provider reports that students don't have to pay the loans during grad school, but the amount borrowed will still rise due to interest. Essentially, they will be paying several thousand more dollars each year. The changes are expected to occur in 2012.

The Congressional Budget Office estimates that the savings will amount to $21.6 billion over the next 10 years and help keep the Pell Grant system sustainable, which awards scholarships to students who need financial assistance, according to the website.

Of course, some analysts are wondering if the move was worth it. President Obama engendered a newfound passion among young people during election season and isolating this valuable voter base may an unintended consequence that arises in the 2012 elections. 

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