H.E.A. Bills Said Likely To Include Direct-Loan Proposal

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WASHINGTON--Members of the House and Senate education committees are working on proposals that would radically reshape federal student-loan programs and convert Pell Grants into an entitlement.

Leaders of the two panels plan to produce versions of legislation reauthorizing the Higher Education Act of 1965 by the end of the month, and aides say each of the bills could contain one or both of the controversial changes.

The proposals would make the federal government a direct lender to students, thus excluding banks from their central role in the program, while the Pell Grant provisions would largely exempt such aid from the uncertainties of the annual budget process.

House and Senate aides spent the August recess working on the reauthorization and are currently crafting bills that are tentatively scheduled for markup later tiffs month.

An aide to William D. Ford, chairman of the House Education and Laber Committee, said the Michigan Democrat hopes to have a draft of the bill ready for members of the committee when they return from recess this week.

Meanwhile, an aide to Senator Edward M. Kennedy, the Massachusetts Democrat who chairs the Senate Labor and Human Resources Committee, said committee aides are "in the middle of delicate staff negotiations" that are expected to wind up soon. The House bill will include a direct-loan plan in which the Education Department would make money available to colleges and universities, which would then issue loans to students, the aide to Mr. Ford indicated.

Saving Money, Expanding Aid

The proposal will be modeled on a bill introduced this summer by Representative Robert E. Andrews, Democrat of New Jersey.

Under Mr. Andrews's bill, a new direct-lending program would replace Stafford Loans, Supplemental Leans for Students, Parent Loans for Undergraduate Students, and Income Contingent Demonstration Leans.

Mr. Andrews contends that the program could save $1.4 billion annually, while also allowing more students to participate.

"This program could vastly increase the student-loan money available without raising federal appropriations at all," Mr. Andrews said in an interview.

Under the plan, eligibility would be extended to students from families earning up to about $60,000 annually, from the current cut-off of $37,000.

The government would continue to pay the interest on loans for the neediest students. But, unlike the current Stafford program, less needy students would be required to pay interest on the loans right away.

Alexander's Doubts

Banking groups have strongly criticized the proposal, however, and Secretary of Education Lamar Alexander has expressed doubts that the department could administer such a program. Mr. Alexander instead has called for improved oversight of the current loan program.

Despite the skepticism expressed by Mr. Alexander, Republican members of the Education and Labor Committee "have an open mind" about direct loans, according to an aide to Representative Bill Goodling of Pennsylvania, the panel's ranking member.

G.O.P. members will want to consider such questions as whether the department can handle the program, if there are ways to cut the cost of the current program, and if estimates of the potential savings under a direct-loan program are correct before taking a position on the issue, the aide said.

In addition, the aide said, Mr. Alexander has given mixed signals on the proposal.

"I don't know where Secretary Alexander really stands. I mean, he was a university president," the aide said. "I don't know whether Alexander will weigh in... and if he does, if he will take on O.M.B."

Richard G. Darman, the director of the Office of Management and Budget, has been the Administration's most vocal critic of the plan, which was floated by a member of Mr. Bush's domestic-policy staff last spring.

The aide to Mr. Kennedy said inclusion of a direct-loan program into the Senate version of the reauthorization bill is under consideration.

Pell Grant Entitlement

The House bill also is expected both to make the Pell Grant an entitlement and to boost authorization levels for other programs.

House Republicans, however, are planning to try to block such a move because of the financial squeeze another entitlement would put on the budget.

Mr. Bush has proposed targeting Pell Grants to students from families earning less than $20,000, thereby removing the majority of middle-income students from the program.

The Bush proposal also calls for an increase in the annual maximum award from $2,300 to $3,700.

The aide to Senator Kennedy said the Senate bill will probably not include the President's proposal, but instead will increase authorization amounts for the Pell Grant and other programs.

Mr. Kennedy has introduced a bill that would increase the Pell Grant maximum award from $2,300 to $4,500 and adjust it annually for inflation. The bill would also expand eligibility to families with incomes up to $44,000.

Both the House and Senate bills also will call for a new program to make students in elementary and secondary school more aware of college aid possibilities, aides said. The exact form of such a program, however, is not yet clear, they said.

In addition, interest is also strong in both chambers in efforts to improve the integrity of the aid programs and upgrade the department's management and oversight.

Vol. 11, Issue 02, Page 19

Published in Print: September 11, 1991, as H.E.A. Bills Said Likely To Include Direct-Loan Proposal
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