$2.5 Billion in Cuts Proposed for Education Budget: Big College-Aid Programs Targeted for Sharpest Drop

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Reporters here witnessed a preview of the upcoming debate over the fiscal 1987 education budget last week, as higher-education representatives, saying the Reagan Administration was "living in a dream world," engaged in an impromptu clash with Education Department officials on the sidewalk outside their office building.

The representatives had called a press conference to denounce the Administration's proposed cutbacks in student aid, arguing that the reductions would result in two million fewer aid awards, crippling the ability of lower- and middle-income students to attend college.

But in the middle of their presentation, they were challenged by Undersecretary Gary L. Bauer, who argued that the cuts were necessary to reduce the federal budget deficit.

"We await with interest your proposals on where you would find the savings," said Mr. Bauer.

"We will take our lumps if everyone else does," said Dale Parnell, president of the American Association of Community and Junior Colleges. Mr. Parnell added that the Congress should consider cutting defense programs and raising revenues before cutting student aid.

For fiscal 1987, the Administration has proposed reducing student-aid expenditures by $2 billion from the $8.1-billion level passed by the Congress for fiscal 1986. However, the Gramm-Rudman-Hollings budget-reduction law is expected to trim fiscal 1986 spending to $7.9 billion.

The Education Department's budget proposal would cut Pell Grants from $3.6 billion to $3 billion and would combine work-study aid and Supplemental Opportunity Grants into a single program, cutting spending on the two programs from $1 billion to $400 million.

In addition, the department would reduce spending on Guaranteed Student Loans from $3.3 billion to $2.3 billion, primarily by eliminating the federal subsidy for the loans while the student is in school or deferring payment and by tightening eligibility for aid.

The budget also includes a new proposal that would convert the subsidized National Direct Student Loan program to an unsubsidized program, in which the repayment rate would be based on a student's after-college income. And the department proposes strengthening debt-collection efforts-for example, by asking the Internal Revenue Service to reduce income-tax refunds of student-loan defaulters.

Other proposals include:

  • Requiring a uniform needs-analysis test for all recipients of student aid, and requiring a greater family contribution to educational costs. In a new development, the department dropped proposals from prior budget requests to limit financial assistance to families with incomes below a certain level.
  • Requiring financial-aid recipients to pay college costs of at least $800 a year to be eligible for federal aid, and limiting grants to 60 percent of those costs.
  • Limiting financial aid to students with a high-school diploma" or the equivalent.
  • Eliminating allowances paid to reimburse educational institutions for the administration of financial-aid programs.
  • Limiting the federal guarantee of student loans made by private banks to 90 percent of the principal, instead of 100 percent, as is currently the case.
  • Raising from $3,000 to $5,000 annually, and from $15,000 to $25,000 cumulatively, the maximum loan levels under the Parental Loan to Assist Undergraduate Students (PLUS) program; these are unsubsidized and carry a higher interest rate than G.S.L.'s. In addition, the department proposes to charge fees equal to 5 percent of the principal on both G.S.L.'s and PLUS loans.
  • Eliminating the $12-million graduate and professional opportunity fellowship program, and the $l.5-million CLEO program, which Provides legal training for the disadvantaged.

Secretary of Education William J. Bennett, at a press conference to present the budget last week, defended the proposals as fair. He said that while the cutbacks would reduce the proportion of college students receiving aid from 50 percent to 40 percent, those affected would be the most affluent, who can find ways of affording higher education.

"There will not be a student in America who wants to go to college who will not be able to go to college and get a good education," said Mr. Bennett.

Fewer Restrictions

He added that under the proposals families with incomes below $23,000 would be eligible for Pell Grants and those with incomes below $58,000 would be eligible for a guaranteed loan. These new eligibility standards, he said, are less restrictive than previous proposals, which would have limited aid to students from families with incomes below a certain level.

"That's the advantage of this approach," he said. "It is responsive to individual circumstances, and aid goes to the truly needy."

But the higher-education officials who gathered outside the Education Department challenged those assumptions. "Bill Bennett lives in a dream world," said Mr. Parnell of the junior-colleges group.

Congressional Prospects

Representative Augustus F. Hawkins, Democrat of California and chairman of the House Education and Labor Committee, predicted that the proposals would face trouble in the Congress, "Enactment of the Administration proposals would dismantle the federal role in higher education and effectively deny a postsecondary educational experience to all but the very rich, the unusually bright, and a few of the nation's poorest students," he said.

But Education Department officials predicted that this year, because of pressures to reduce the federal budget deficit, the proposals would stand a better chance of enactment than in prior years, when similar ideas were rejected.

Mr. Bennett suggested last week that the proposals could be considered during deliberations over the reauthorization of higher-education programs.

The House passed its version of a reauthorization bill in December, calling for more spending than the Administration has proposed. And the Senate Labor and Human Resources Subcommittee on Education has approved a version of the higher-education bill that also calls for greater spending.

Vol. 05, Issue 22, Pages 1, 15

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