Cuts Will Trim Student-Aid Rolls

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Some 91,000 college students will lose their eligibility for Pell Grants this year because of Education Department cuts mandated by the Congress's deficit-reduction plan, according to department spokesmen.

Overall, the Gramm-Rudman-Hollings deficit-reduction plan will cut federal student aid by nearly $245 million this year, including a $154.3-million cut in the Pell Grant program for low-income students.

Much bigger cuts are anticipated in fiscal 1987, when the budget-balancing law requires the Congress and the Administration to reduce the federal deficit to $144 billion. The deficit now stands at about $220 billion.

"We're terribly fearful of fiscal 1987. That's when the big cuts are going to come," said Dennis J. Martin, the assistant director of the National Association of Student Financial Aid Administrators.

Representative Charles E. Schumer, Democrat of New York, predicted last week that federal student aid would be cut by nearly $1.5 billion in fiscal 1987--including a $1-billion cut in the Pell program--if automatic budget cuts are again required.

Program Cuts

Prior to the $11.7-billion cut in fiscal 1986 federal outlays ordered last week by the General Accounting Office, the Education Department had anticipated spending about $3.59- billion in 1986 on some 2.76 million Pell Grant recipients.

Under Gramm-Rudman-Hollings, the President must sign the G.A.O. report, which adds $3.3 million in domestic- spending reductions and $44.6 million in military cuts to those ordered earlier by the White House Office of Management and Budget and the Congressional Budget Office.

In the only change in the Education Department accounts, the G.A.O. restored $227,000 cut from the college-housing loan program. The G.A.O. said $5.2 million in funds listed as "unobligated balances" and outlays for fiscal 1986 are not eligible for the across-the-board reduction.

The department will reduce the number of Pell Grants it awards this year by lowering the income-eligibility ceiling; for a family of four with one student in college, that ceiling will fall from $25,100 to $23,900.

Further, other Pell recipients will receive a lower award.

Other cuts in student-aid programs for fiscal 1986 include:

  • 31,000 fewer awards for supplemental grant&-a cut of $17.7 million;
  • 33,000 fewer awards for work study-a cut of $25.5 million;
  • 10,000 fewer national direct student Loans--a cut of $9.3 million;
  • 13,000 fewer state student incentive grants-a cut of $3.3 million.

College campuses may choose to reduce the amount of awards they give rather than the number of grants, but traditionally they have cut the number of grants, Mr. Martin said.

Funds for the Guaranteed Student Loan program would also be reduced this year by some $34 million, but the deficit-reduction plan specifies that the savings be achieved in two ways.

First, students will pay an added origination fee-the charge paid by borrowers to cover administration costs--of.5 percent, or 5.5 percent of their loan. On the maximum $2,500 loan, that fee will rise $12.50 to $137.50.

And lenders will receive a .4 percent cut in interest payments paid by the government.

The impact of the cut in payments to lenders is an "open question," Mr. Martin said, noting that the impact of the cuts in funding for G.S.L.'s will be "far greater" than anticipated if lenders drop out of the program.

Vol. 05, Issue 20, Page 10

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