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Sequester may lower university funding

By Amanda Hancock
On March 19, 2013

A series of automatic cuts went into effect across the federal budget as of early March and those cuts may trickle down to Miami University.

The sequester, which kicked in March 1 after Congress could not agree on a budget to reduce the federal deficit, may cut federal subsidies to universities including Miami, according to university officials.

Claire Wagner, director of university communications, said it is easy to think that the actions of politicians in Washington have little impact on the lives of students in southwest Ohio.

"The impact of the sequestration on several areas of university life is a living lesson in political economics," Wagner said.

Miami was scheduled to receive nearly $2.4 million a year in federal subsidies on its $105 million in Build America Bonds, but the sequester may shrink that by about $180,000 a year. University officials are hoping for a resolution by the time the next bond payment is due in September, Wagner said.

According to Brent Shock, director of student financial assistance, if budget items are not passed to end the sequester, Miami would lose money allocated for financial aid. Areas like Pell Grant, Supplemental Education Opportunity Grant, College Work Study Program and loans would be affected.

Although Pell Grant will not be impacted for the current school year or the 2013-2014 year, anything beyond that would likely be impacted.

A fewer number of students will receive Supplemental Education Opportunity Grant (SEOG) and College Work Study Program (CWSP) based on the sequester, Shock said.

"Nationwide, about $86 million will have to be cut from these programs and I expect that we will be notified later this spring about the reductions required for our 2013-14 allocation," he said.

Shock estimates Miami will lose just over $24,000 from the original amount allocated. 

"When you combine this with our required 25 percent match, the effect is that 42 fewer students will receive SEOG for 2013-14 than we originally thought," he said.

Miami will lose just under $30,000 of the CWSP allocation, Shock estimates, which comes out to approximately 15 fewer students receiving CWSP.

Loan origination costs for subsidized and student borrowed will increase anywhere from less than one percent to approximately 1.05 percent. The average increase in cost to a student for origination fees will amount to about $2.50, according to Shock.

Additionally, PLUS loans, which are loans parents borrow for educational costs for their children, will increase from 4 percent to 4.20 percent.

"I estimate that this will cost the typical borrower about $51.00 in additional origination fees," Brock said.

Wagner said this all presents another lesson in reverse.

"In how a small change for an individual, such as an extra $2.50 in school loan origination fees, when multiplied by all students with loans, can have a significant impact on a national level," Wagner said.

Professor of Economics, James Brock, said only time will tell how that lesson unfolds. It all depends on if and when budget items are passed to end the sequester.

"There are a lot of decisions to be made and they will filter down a few layers before the effects get to Miami," Brock said.

Brock said 40 percent of the federal budget was not affected by the cuts and many federal programs such as social security are excluded. Cuts are scheduled to take place over the next ten years.

"I don't think anyone knows how it will play out quite yet," Brock said.

Although the sequester is a main topic in the headlines, Brock said Miami students should not be worried about the minor changes to financial aid.

"It's not as catastrophic as you might think for some of the news outlets are saying," Brock said. "Students should just keep doing what they're doing."

Junior Caitlin McCoy is keeping up-to-date on the sequester, but hopes for the best.

"I just expect everything to be resolved before we face any changes and I don't think they will be that dramatic," she said.

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