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News in Brief: Several Studies Praise Direct-Loan Program

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Advocates of the new federal direct-lending program for college students praised its savings and simplicity at a Senate hearing last week, while three agencies reported that their studies found no major flaws in the program.

"It is rare...that we have such satisfied customers and such positive results," Madeleine M. Kunin, the deputy secretary of education, told the Senate Subcommittee on Education, Arts, and Humanities.

Cornelia M. Blanchette, the associate director of education and employment issues for the General Accounting Office, revealed that about 100 of the 1,495 schools slated to participate next year have dropped out, suggesting their actions were spurred by concerns about the program's future under a Republican-led Congress. All of the schools now participating plan to remain.

The G.A.O. now estimates that direct loans will account for 28.7 percent of loan volume next year. Pending legislation would cap participation at 40 percent.

The G.A.O. also reported that representatives of 38 schools it polled were "very pleased with direct lending and with the assistance and guidance provided" by the Education Department.

Also last week, an audit issued by an independent accounting firm found the new loan program had no major weaknesses. But it urged the department to improve its cash-management procedures as well as its oversight of colleges' recordkeeping.

The previous week, the Advisory Committee on Student Financial Assistance, an independent panel that advises Congress, concluded that direct lending is "a feasible loan program with important, desirable features for institutions and students" and that it has been implemented smoothly.

But the advisory panel also warned that current policy makes it difficult to prevent issuing multiple aid awards to the same student and to keep poor-quality schools or institutions with high default rates from taking part.

Budget Cuts: The Senate opened debate last week on a Democratic-sponsored amendment that would restore $1.3 billion for education and social programs to a bill that seeks to cancel $13.5 billion in fiscal 1995 spending.

Half of the cuts, known as rescissions, would offset $6.7 billion in disaster relief. Congressional leaders say the rest would go toward deficit reduction, and the Senate passed an amendment that would require this.

The bill would cut $704 million from the Education Department's budget for the current fiscal year. A counterpart bill passed by the House last month would cut $17.1 billion in 1995 spending, including $1.7 billion from education.

The Senate Democrats' amendment, however, would restore full 1995 funding for the Goals 2000: Educate America Act, the Safe and Drug-Free Schools program, Title I, impact aid, and the AmeriCorps service program.

"It's a partial restoration, but also a recognition of our spending limits," said Sen. Tom Daschle, D-S.D., the amendment's sponsor.

Earlier, the Senate rejected, 48 to 46, an amendment that would have restored $11 million in proposed cuts to the Star Schools distance-learning program and an education-technology initiative by cutting defense spending.

Senators also rejected, by a vote of 68 to 32, an amendment that would have offset disaster relief with a 1.7 percent across-the-board spending cut instead of specific spending cuts.

Aid Report: Giving disadvantaged students more aid in the form of grants rather than loans increases the chance that they will graduate from college, a new General Accounting Office report says.

The study is a companion to an earlier financial-aid report that focused on minority students.

The new report also recommends that Congress consider a pilot program in which grant aid would be "front loaded" in students' early years of college and reduced later. Some observers argue that loan debt is especially intimidating to new students unsure of their ability to succeed.

Single copies of the study are available free of charge from the G.A.O., P.O. Box 6015, Gaithersburg, Md. 20884-6015; (202) 512-6000; fax (301) 258-4066; TDD (301) 413-0006. Additional copies are $2 each.

Welfare Bill Passes: As expected, the House has passed a welfare-reform bill that would drastically overhaul federal programs serving millions of children and their families.

In a 234-to-199 vote on March 24, the House passed HR 4, which would transfer to the states authority over dozens of social-service programs, including child-care, child-protection, and school-lunch programs. (See Education Week, 3/29/95.)

Last week, supporters of the bill received a boost from Sen. Bob Packwood, R-Ore., the chairman of the Senate Finance Committee, who said he endorsed the general concept of block grants. The bill is still expected to face considerable scrutiny as it moves through the Senate in the coming weeks.

Scholarship Suit: The University of Maryland asked the U.S. Supreme Court last week to overturn a lower-court ruling that the institution's race-based scholarship program is unconstitutional.

Last October, a three-judge panel of the U.S. Court of Appeals for the Fourth Circuit ruled against the Benjamin Banneker Scholarship Program in its decision in Podberesky v. Kirwan.

While colleges have long used race-exclusive scholarships to diversify their enrollments, such awards became controversial in 1990, when a civil-rights official in the Bush Administration declared them illegal.

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