As you may have heard, President Bush submitted a proposed federal budget to Congress last week for the next fiscal year. It seems he has finally noticed our $400 billion federal deficit, and as a result is slashing domestic spending like Sweeney Todd.

What does that mean for higher education in the U.S., the second most expensive place to attend college (after Australia)? We’ll discuss the cuts one at a time.

Today, the axe has fallen on loan forgiveness programs. That’s right, you’re going to be angry with your loans for longer than you thought.

What’s in the Budget: Last year, Congress created the College Cost Reduction and Access Act, to make it easier for students to deal with skyrocketing college costs. One component was the “Loan Forgiveness for Public Service Employees” program. If you enter the public service field after you graduate and stay in it for at least 10 years, the program will forgive the remaining balance of your student loans (though you do have to make payments during those 10 years).

It’s supposed to apply to anyone who started loan repayment after October 1, 2007. But with the U.S. leaking money like a sieve, the administration wants to push the eligibility date back two years, to October 2009.

What This Means for You: Essentially the government can’t afford this program right now. If you were counting on it to finance your education, you might want to delay your degree by a year or two, or seek alternate sources of funding. However, this isn’t the only loan forgiveness program out there–programs like the Peace Corps and Teach for America, which forgive a percentage of loans, should be unaffected.

Meanwhile, as Higher Ed Watch notes, the budget doesn’t say what will happen to people who are currently enrolled in the LFPSE program.

Next installment: Cuts in appropriations for minority-serving institutions.