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Academic Girds for Fight On Student-Aid Cutback

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Washington--Minutes after last week's Education Department press conference outlining President Reagan's proposed 1986 federal budget, representatives of the nation's colleges and universities held a press conference of their own on the sidewalk outside the department's headquarters.

Wearing heavy winter coats, gloves, and scarves, they came to protest a budget that they said left them "shivering" and put higher education "out in the cold."

According to Robert H. Atwell, president of the American Council on Education, the umbrella organization representing several thousand colleges and universities, the 25-percent cut in federal financial-aid programs proposed by the President would affect "virtually all six million recipients of student aid."

The budget, released to the Congress Feb. 4, would reduce support for financial-aid programs from $8.6 billion to $6.3 billion as part of the President's efforts to reduce the federal deficit.

Specifically, the Administration's proposals would:

Set a $4,000 limit on the amount of federal aid a student may receive, other than federally guaranteed loans under the Parental Loan to Assist Undergraduate Students (plus) program. These loans, not subsidized at as high a rate as Guaranteed Student Loans (gsl's), are currently offered at 4-percent higher interest rates. Under the Administration's plan, interest rates for plus loans would change from 12 percent to a rate set by the lender. The gsl loans now carry an interest rate of 8 percent.

Require that students pay a minimum of $800 toward their education as a condition of eligibility for federal aid.

Redefine the status of students who claim to be independent of their parents, a group that has tripled in number since 1978, according to the Education Department. To "restore emphasis on family responsibility in meeting secondary costs," all students under 22 years of age, except orphans and wards of the courts, would be classified as dependent students, according to budget documents.

Merge the Supplemental Opportunity Grant program with federal work-study aid. Up to 50 percent of funds could be used to provide supplemental grants to students with demonstrated need at the school's discretion. Total funding for the combined programs would shrink from its current level of about $1.1 billion to $994 million in fiscal 1986, according to budget documents. According to an estimate released by the House Education and Labor Committee, the merger of the two programs would result in 410,000 fewer grants.

Terminate the $152-million State Student Incentive Grant program, which gives states matching funds to provide grants to students with demonstrated need. About 304,000 awards were made this year to students under the program.

Raise the interest rate on Guaranteed Student Loans from the current 8 percent to the average 91-day Treasury-bill rate for the quarter ending March 31 of a given year. The average rate for last year was about 9 percent.

Require that students have a high-school diploma or its equivalent to be eligible for student aid.

Slash the Pell Grant program, which provides scholarship support for the nation's neediest college students, by $634 million. The maximum grant would increase from $2,000 to $2,100, but the number of awards would decline from 2.82 million to 2.02 million as the result of a proposed eligibility ceiling that would affect most federal financial-aid programs. Some 574,000 fewer students would receive awards, according to budget documents.

College officials noted last week that approximately half of the na-tion's 12 million postsecondary students now receive some form of federal financial aid.

Eligibility Caps

Under the Administration's plan, students from families with annual incomes above $25,000 would be barred from receiving Pell Grants, direct loans, or work-study employment. Students from families earning more than $32,500 would not be eligible for Guaranteed Student Loans (gsl).

Under the eligibility cap for the guaranteed loans, some 750,000 to 900,000 middle-income students would not be eligible for the loans, according to the House Education and Labor Committee.

The Administration proposes other changes that would affect banks and not students. The budget calls for reforming gsl payment mechanisms to lenders to reduce windfalls to the banking industry and to eliminate the government's administrative costs. Special allowance payments will cost taxpayers $1.5 billion this year, budget documents say.

The special allowance, which guarantees lenders a specific rate of return, is built into the program to make it attractive to them to make student loans, said Dennis J. Martin, assistant director of the National Association of Student Financial Aid Administrators. While the yield on those loans has been "higher than conventional loans" and financial-aid officers argue that lenders may be making too much profit, "nobody knows how much is too much," he added.

Mr. Martin said that if the special allowance is cut drastically, from 3.5 percent plus the current T-bill rate to 1.5 percent plus the T-Bill rate as the Adminstration proposes, banks and lending institutions may see the loans as "not profitable and choose not to make them."

Proposals No Surprise

The budget proposals did not come as a surprise to higher-education leaders. Every Reagan budget has called for major changes in financing student aid, either by program budgets or by altering the priorities of the student-aid system established under the Higher Education Act of 1972, which made Pell Grants the primary source of federal student aid.

By making loans and work-study programs--and not federal grants--the primary source of aid, the Administration has sought to make students and their families assume a greater proportion of the expense of college-going.

The President's proposals have not been well received by the Congress, however. A study by the College Board indicates, for example, that funding for Pell Grants, although lagging behind inflation, has increased by 16.2 percent since 1980-81, while support for work-study programs has risen by less than 1 percent during the past four years.

Gary L. Jones, who led last week's press conference as acting secretary of education, asserted that because higher education escaped serious cuts in past years, it was hit harder this year than were programs for elementary and secondary education.

He also said the Administration "assumed that students have funds" and that, in the improved economy, parents could do more to support their children's education instead of choosing to "buy cars" or to spend on nonessentials.

But the college officials who gathered outside said parents' and institutions' financial resources have already been stretched to the limit. They argued that the Administration's proposals would jeopardize economic growth and abandon a federal commitment to educational opportunities that began in the 1960's when government support for postsecondary education shifted from categorical grants and institutional funding to aid given directly to students.

The Reagan Administration is "speaking with a forked tongue," said Mr. Atwell, the ace president.

On the one hand, he said, the Administration is talking about "national growth, security, and American competitiveness," but at the same time it is undermining those goals with proposals to slash student aid and terminate programs including graduate fellowships, foreign-language studies, and support for research libraries.

The budget also seeks to eliminate the $13-million Fund for the Improvement of Postsecondary Education, a competitive-grant program for colleges and universities that has in recent years placed increasing emphasis on funding innovative teacher-training programs.

Proposals Termed Unfair

The proposals to place caps on financial aid were called unfair and unrealistic by the higher-education officials and some Congressional leaders.

John Phillips, executive director of the National Association of Independent Colleges and Universities, released a study by his group's research division indicating that more than one-fourth of all aid recipients at private institutions would have their aid reduced by an average of $1,585 under the $4,000 cap proposed by the Administration.

The study found that 43 percent of students from families earning less than $6,000 would lose $1,180 per year, and that 40 percent of families earning between $6,000 and3$18,000 would have their aid cut by between $1,276 and $1,989.

Mr. Phillips said that "any income cutoff is unfair," particularly to families with more than one child enrolled in college.

He said that even a Congressman who earns much more than the proposed $32,500 ceiling for National Direct Student Loans might have trouble putting one or two children through school if they attended private institutions.

Mr. Martin of the financial-aid administrators' group said that students from families earning $15,000 who attend either a public or a private school would see Pell Grant aid cut from $1650 to $950 if the cap and eligibility changes are enacted.

Senator Robert T. Stafford, Republican of Vermont, chairman of the Senate education subcommittee, called the income cap on the gsl program and the $4,000 maximum federal-aid limit "ludicrous."

"Our middle-income families have not asked for a free ride from the federal government, only limited assistance which the student will repay after leaving school," he said. "Without it, many students will be unable to attend the school of their choice or attend college at all."

Representative Augustus F. Hawkins, Democrat of California and chairman of the House Education and Labor Committee, said the proposed cuts and cutoffs are "not sensible" and will hurt families that are not in high income brackets or that have two or more children.

Changing Congressional Mood

But he expressed concern that the Congress, which has rejected proposed cuts in financial-aid programs in the past, was changing its attitude because of concern about containing costs. He said he was especially worried about procedural arrangements promoted by Republican leaders that could force the budget to be considered as one omnibus cost-cutting package.

According to Mr. Hawkins, there is a "better-than-equal chance" now that the Congress will enact some cuts. But he predicted the public would react harshly to changes in financial-aid programs.

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