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Budget Limits Student Aid, Alexander Tells Panel

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Washington--The Congress must contend with a difficult dilemma as it works on extending federal student-aid programs, Secretary of Education Lamar Alexander told members of the Senate education subcommittee last week.

Given a limited amount of money for student aid, the Secretary said, lawmakers have two options: concentrate grant dollars on the poorest students, thus forcing middle-income students to borrow to attend college; or bring more middle-income students into the grant-recipient pool and risk discouraging low-income students from college because they fear taking out loans.

"It's a philosophical choice. Either you're going to focus more money on the lower-income students or focus it on the middle-income students," Mr. Alexander said at a hearing on reauthorization of the Higher Education Act of 1965.

"These are never easy choices," he added. "You could make a pretty good case for either side."

The debate over the balance between grants and loans to students was the main topic of the hearing, the Secretary's first since being con4firmed by the Senate last month.

In his testimony, Mr. Alexander laid out the Bush Administration's plans for reauthorization of the law. The proposals differed little from changes suggested by the President in his fiscal 1992 budget. (See Education Week, Feb. 13, 1991.)

That similarity prompted Senator Paul Simon, Democrat of Illinois, to say that Mr. Alexander was "putting his rubber stamp" on the Administration's proposal rather than "putting his mark" on it.

While noting that he has only been in office a few weeks, the Secretary did not deny the characterization. "I know what a rubber stamp is, and that's a big part of my job," he said. "I wasn't elected to anything."

Education lobbyists also emphasized that Mr. Alexander's stands on student-aid issues would be shaped by broader Administration policies. ''The fact that he feels he's operating under some budget constraints will make for an interesting debate on the Pell Grant program," said Pat Smith, director of legislative analysis for the American Council on Education.

Grant, Loan Limits Raised

The Administration's most controversial proposal would increase the maximum Pell Grant from $2,300 to $3,700 and target aid on students coming from families with incomes of less than $10,000 annually. As a result, about 400,000 middle-income students would no longer be eligible for the program, which is currently funded at nearly $6 billion.

To offset the changes, the Administration would increase the amount students could borrow under the Stafford Student Loan program. The maximum loan would rise from $2,625 to $3,500 for first- and second-year undergraduates and from $4,000 to $5,000 for third-, fourth-, and fifth-year undergraduates.

The proposal would discontinue, however, the National Direct Student Loan program, which offers the lowel10lest interest rate of all student loans.

Mr. Alexander said he is still studying a proposal under which the federal government would make loans directly to students.

Members of the panel criticized the proposed changes, arguing that they would pit needy students against their even-needier classmates for the most desirable type of aid.

The President's aid proposal is "moving in precisely the wrong direction," said Senator Claiborne Pell, Democrat of Rhode Island and chairman of the subcommittee. "We need larger Pell Grants for more students, not larger grants for fewer students."

But Mr. Alexander reminded Mr. Pell and the other lawmakers who called for more grant aid that both the Administration and the Congress are living under fiscal restraints imposed by the Budget Enforcement Act of 1990. Under that law, adding significant amounts of money to the aid programs would force cuts in other domestic programs.

Achievement Scholarships

The Secretary also outlined several other proposed changes in aid programs, many of which were included either in Mr. Bush's 1991 or 1992 budgets. They included:

Presidential Achievement Scholarships, which would provide up to $500 to Pell recipients who ranked in the top 10 percent of their class or excelled on standardized tests.

Technical changes in the procedure for determining Pell awards based on such factors as the expected family contribution and the cost of attendance.

Mandating credit checks of borrowers and delayed disbursement of loans, and requiring lenders to provide graduated-repayment options.

Requiring states to share default risks by backing their designated guarantee agency and paying a part of default costs if schools in the state have high default rates.

Consolidation of such programs as Upward Bound, Talent Search, and Educational Opportunity Centers into a Precollege Outreach program that would be funded based on a state's Chapter 1 basic-grant and concentration-grant funds.

The Administration also wants a single needs-analysis formula to be used to determine eligibility for all need-based programs.

In addition, it has suggested a program that would put teacher-education students in a classroom setting for much of their training. These teaching schools would also serve as centers for further study of the profession by experienced teachers.

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