Washington Week . Student Voices

U. Maryland system examines student loan caps
By Jeremy Hsieh
The Diamondback (U. Maryland)
08/06/2004

(U-WIRE) COLLEGE PARK, Md. — The amount of money students can borrow through the university could be capped as part of a far-reaching plan to reduce students' reliance on loans and debt upon graduation.

The University System of Maryland's 17-member Financial Aid Task Force, formed in the spring, informally discussed loan caps as a means of controlling student debt at all state higher education institutions at their meeting July 28.

The discussion was fueled by concern that students are using loans as life support rather than as a crutch to fund their education following several dramatic tuition hikes in recent years.

"When a needy student receives a financial aid package coming from the university ... there is a general consensus ... that loans should only constitute a part of the total package," said State Treasurer Nancy Kopp, who chairs the task force.

The implication is that students will have to either find more money on their own, or the university system will have to provide more grants and scholarships.

Changes to loan policy would heavily impact students and potential students from middle-class households. Students from low-income families are more likely to qualify for a combination of need-based grants, scholarships and loans.

University President Dan Mote, who is a task force member, said potential loan caps could also curb students' tendency to borrow the maximum amount they are eligible for, even if they don't necessarily need all the money.

"It's a snake that turns around and bites them because they realize they have to pay it back," Mote said.

Higher education officials are also concerned students' borrowing behavior can limit their options upon graduation.

"It's not good to have debt level as high as they are," Mote said. "It restricts what they can do, it restricts their studies, whether or not they go to grad school, if they can buy a house — it's bad in a lot of ways for America."

Kopp echoed Mote's concerns about debt limiting graduates' options.

"For instance, if a student felt they could not afford to be doctors in rural areas or in the city or public defenders or teachers because they wouldn't earn enough to pay off massive debt, that would be very adverse to the public interest," she said.

Students expressed confusion about how limiting student loans could benefit them.

Senior mechanical engineering major Jimmy Lindsey will take out the maximum amount in unsubsidized Stafford loans to the tune of $5,500 this year to help pay for school, in addition to working 15 hours a week during the school year and full-time over the summer.

"I get the check in the mail and it pays off my tuition, and that's about it," Lindsey said. "Everything else, I have to do on my own; all that extra stuff."

Task force members stressed the proposal's preliminary state and need for research into the issue.

"It's an important idea to throw out, but there's been no real work done on it, looking at key issues like who's eligible for it," Mote said.

Discussion of loan caps follows the implementation of the Maryland Pathways program at this university, which targets students from low-income households for financial assistance from the university. The program, new for this fall, is expected to help about 500 incoming freshmen in a class of about 4,000 to reduce or eliminate their debt.

The task force will meet again at Aug. 18 at the Treasury Building in Annapolis, Md. While the meeting agenda has yet to be drawn up, it is very likely the loan caps will be discussed.

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