Panels Act to Cut Cost of Student-Loan Program

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y Washington--While hearings on legislation to extend federal higher- education programs continued, the Congress moved late last month to trim the government's largest financial-aid program for postsecondary students.

As part of a budget reconciliation measure, the Senate education subcommittee last week voted to cut more than $800 million over three years from the Guaranteed Student Loan program. The cuts would be achieved primarily through administrative changes, rather than by limiting the number of students who can receive the loans.

The Senate action sets up a conference clash with the House, whose Education and Labor Committee voted late last month to require all students to pass a financial-needs test before qualifying for the federally subsidized loan program.

If upheld in conference, the House action would cut the number of students receiving gsl's by some 400,000 and reduce the size of loans for another 250,000 students, according to committee estimates. Currently, only students from families earning more than $30,000 a year must pass a needs test before obtaining a loan.

Both the House and Senate ac-tions were taken in response to a budget resolution the Congress passed over the summer, in which it ordered an $800-million cut in the loan program over three years. Extension of the needs test would save about $335 million, proponents say.

Although the Congress has steadfastly opposed Administration efforts to make deep cuts in spending for student-loan programs, it approved the $800-million cut as part of a deficit-reduction package.

But critics of the House action say they object to extending the needs test in a budget reconciliation measure, especially since the Higher Education Act, which authorizes the loan program, is up for reauthorization this year.

"The significance of this particular action is that it goes beyond simply making budget adjustments into making policy," said Becky Timmons, assistant director for governmental relations for the the American Council on Education. "That's better left to the reauthorization process."

Ms. Timmons also said the House action increases the chances that the Congress will extend the means test when it reauthorizes the Higher Education Act. Senate subcommittee aides have indicated that the8Senate might be more willing to consider extension of the needs test during reauthorization.

Although the changes the Congress makes now in the loan program will ultimately be bound by the terms of the reauthorization, Ms. Timmons said the changes are important because the Congress may not act on reauthorization until well into 1986. Late last month, the Education Department announced that it would not issue recommendations for extending the act until the Administration submits its budget in January.

The overlap between the time the reconciliation measure passes and the Congress acts on reathorization could create a period of "confusion" for lenders, especially if the Congress extends the needs test now, Ms. Timmons said.

"There could be additional disruptions in the whole pattern of lending," she said. "Lending agencies won't know what's required of them, and they'll either take a shot in the dark and make loans or not make loans."

Although most students apply for loans in the spring, and therefore probably will not be affected by what the Congress does now, Ms. Timmons said many also apply in the fall, and some could find themselves unable to obtain a loan.--jrs

Vol. 05, Issue 05

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