Copyright 1982 According to the proposed regulations, which were published in the Federal Register on Jan. 7 and would take effect at the beginning of the 1982-83 school year, new funds would be cut off to postsecondary institutions where 25 percent or more of the students participating in the National Direct Student Loan program have defaulted on their loans.
The new rules would also penalize schools with student default rates of more than 10 percent on the direct loans. These schools’ funds would be cut by the amount that they should have collected from the students but failed to.
As of June 1980 there were 3,274 schools distributing the National Direct Student Loans, 1,700 of which had student default rates over 10 percent. Of those, 800 had default rates in excess of 25 percent, according to the Education Department.
Secretary of Education Terrel H. Bell said student defaults on the direct loans “represent more than $834 million that could have been helping thousands of needy students if schools and former borrowers had acted responsibly.”
Weeks before President Reagan’s 1983 budget is scheduled to be unveiled before the Congress, members of the House and Senate Budget Committees last week predicted that new budget cuts would be difficult to win.
At a joint retreat held in Arkansas last week by the two committees, Representative Delbert L. Latta, the Republican of Ohio who was a sponsor of the budget “reconciliation” bill last summer, characterized the mood of his colleagues this way: “The honeymoon is over.”
Likewise, Senator Pete V. Domenici, Republican of New Mexico and chairman of the Senate Budget Committee, predicted that if the President runs into trouble in persuading Congress to cut the budget again this year, the Senator might be willing to work with Democrats on an alternative budget.
“Even if it differs substantially from the President’s plan ... some compromise, some modifications” may be necessary, Mr. Domenici said.
