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Looming U.S. Debt Ceiling Limit Presents Concerns for Higher Ed

Higher education is bracing as the nation's debt ceiling nears its limit, The Hill reported.Justin DraegerJustin Draeger

Republicans and President Biden have been in negotiations for weeks over the matter. If no deal is made, the U.S. is expected to default by the beginning of June, affecting markets and possibly the global economy. And if the U.S. defaults, colleges and universities would lose significant federal funding and students may lose access to aid.

“Unfortunately, in the last several years, colleges and universities and financial aid offices have gotten used to a political game of chicken in Washington, D.C., and the potential for federal shutdowns, but this one is just a little bit different,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

Colleges are hoping that a potential default would be short and have a limited effect on students, given that aid is mostly distributed in the fall or winter. However, even a few weeks of crisis could affect students.

“For individual students who don’t receive their student aid disbursements, the difference between a couple of days and a couple of weeks can be huge because federal student aid just doesn’t cover tuition fees at an institution,” Draeger said. “It also covers things like rent and other costs of living, like insurance or transportation and food.”

A long-term default could threaten teachers’ jobs amid a preexisting shortage, said Randi Weingarten, president of the American Federation of Teachers.

And experts are not confident that higher ed will be a funding priority in the case of a longer default.

“We know basically how we think the Treasury will respond to a default,” said Jon Fansmith, senior vice president of government relations for the American Council on Education. “They will prioritize making interest payments first and then trying to make payments to really high-priority issues like national security and Social Security and the large entitlement programs. And after you fund those things, there really won’t be a lot of additional revenue available to allocate.”

To address such issues, schools could shift resources to help low-income students remain enrolled, Fansmith said. 

The concessions Republicans are looking to get from Biden to raise the debt ceiling are also notable.

“If you just look at the Republican demands, you see the cutting of access to Head Start for 200,000 children and access to child care for 100,000 children,” Weingarten said. “You see the reduction of Pell Grants that could affect about 6.6 million kids.”


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