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Study Criticizes Income-Contingent Loan Plan

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WASHINGTON--The income-contingent student-loan program advocated by Secretary of Education William J. Bennett would not only increase the burden of debt carrried by many college graduates, but is also weighted against those who choose to enter lower-paying professions, such as teaching or social work, according to a report from the General Accounting Office.

While students at higher-priced institutions would see the most dramatic cost increases as a result of the plan, the study found, even some poor students attending relatively inexpensive schools could find themselves paying significantly more for their diplomas.

The report's findings were largely in line with the department's own predictions that the new program, together with other parts of the Reagan Administration's fiscal 1988 budget proposal, would not reduce the total amount of aid available, but would force many students to replace grants with loans.

The department this week is expected to name the 10 colleges that will participate in a five-year, $10-million demonstration of the program. For the fiscal year that begins on Oct. 1, the Administration has proposed that the income-contingent loan program be expanded to $600 million.

Senator Lawton Chiles, chairman of the Senate panel that sets funding levels for the department, said that the G.A.O. study documents the plan's negative effects: sharply higher and longer-term debt, and a narrowing of the affordable options for many students.

"You keep saying that this is going to make things more manageable for the student and that just is not true,'' the Florida Democrat complained when Mr. Bennett testified last week before his Senate Appropriations subcommittee. "I think the situation for low-income families is particularly dramatic.''

The G.A.O.--the investigatory arm of the Congress--examined the impact of the Administration's proposal on 54 freshmen now attending four colleges and universities in Florida. From this group, the financial status of 12 students--three from each school--was studied in depth.

For each school, the sample included a low-, a moderate-, and a high-income student, with family incomes, respectively, of $10,000 to $15,000, $25,000 to $30,000, and $40,000 to $45,000.

According to the G.A.O., the department's proposals would fall heavily on students at the most expensive school surveyed, the University of Miami.

The low-income student there, the study said, would find his total postgraduation debt nearly doubled--from $17,474 under current law to slightly less than $31,000 under the new proposal. The high-income Miami student's debt over four years would rise from $14,193 to $29,031.

Students at some less-expensive institutions would be hit even harder, according to the study. At Bethune-Cookman College, a small, predominantly black liberal-arts school in Daytona Beach, the moderate-income student who is now carrying a guaranteed student loan of $824 would have to borrow an additional $11,000 during the course of his education.

At the University of Florida--the least expensive of the four schools--the low-income student would have to repay more than three times as much in principal and interest.

"Also, with implementation of the Income Contingent Loan Program, graduates who work in higher-paying occupations, such as engineering, would pay higher monthly payments and would repay their loans faster and with less total interest cost than those in lower-paying occupations, such as social work,'' the report stated.

This would be particularly true for students at high-priced private colleges and universities, based on the G.A.O.'s survey.

While the income-contingent plan may make it easier for a low-salaried graduate to meet his or her monthly payments, the report notes, it also stretches out the repayment period, greatly increasing total interest expenses.

At Miami University, for instance, if the low-income student surveyed enters the workforce with a "high'' starting salary--$32,600, as defined by the Bureau of Labor Statistics--that student would repay a total of $53,000 in principal and interest on a loan of $31,000, the G.A.O. calculated.

But if that same student begins a career at a salary of $17,700--roughly that of a beginning teacher--he will have to pay $8,500 more in interest over the life of the loan.

In their testimony, Mr. Bennett and other department officials challenged the G.A.O.'s conclusions, saying that the agency completely ignored two smaller federal programs that provide unsubsidized loans to students and parents. The department has proposed removing the existing borrowing limits on those programs.

"This is one of the most inaccurate reports I've ever seen,'' said Bruce M. Carnes, the department's acting deputy undersecretary for management. "The report says that under our proposals the total amount of student aid would go down and that is simply not true.''

Mr. Bennett, however, conceded that the proposed changes in the two unsubsidized programs--supplemental loans for students and so-called PLUS loans for parents--would not significantly offset the debt increases caused by the rest of the Administration's student-aid proposals.

"We certainly admit that under our proposals, indebtedness will increase for some students,'' he said. "We haven't denied that.''

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