Cutting Uncle Sam's outlay for college

The problem with federal aid to college students is that it has rapidly moved from a little help for the neediest to a veritable pot of gold offering a little something for everyone --taxpayer.

That, at least, is the view of the Reagan administration. As part of its package of federal budget trims and reforms, the administration aims to tighten student aid eligibility requirements for both loans and grants and to require both students and their parents to pay a larger share of college costs. The President also hopes, through tighter controls, to cut back on abuse and waste of funds.

Most of the federal government's more than $6 billion annual budget for higher education goes for student aid. Almost half of it is given out in so-called Pell Grants, named after Sen. Claiborne Pell (D) of Rhode Island and launched in 1972 to help low-income students who might not otherwise afford a college education. The other major channel of help, dating back to 1965, is the guaranteed Student Loan (GSL) program. Both programs have been greatly liberalized in the last three years to include many more students from middle-income families. The cost to Washington since 1973 has balooned from $ 414 million to more than $4 billion.

The Reagan administration proposes to slice both major programs from what former President Carter had requested by a total of $491 million this year and by $838 million in 1982.

Under the President's new plan for the Pell Grants, which Senator Pell has dubbed "penny wise and pound foolish," the eligible income limit for a family of four would drop from $25,000 to $21,000.Students, unless in extreme need, would be required to chip in a $750 "self-help" contribution. The size of the grants would be kept to a maximum of $1,750 this year and $1,800 next year, based on how much other aid and discretionary income the family has. The President would like to remove the traditional adjustment for inflation in deciding how much help the family needs.

The changes in the grant formula would affect grants given for the coming school year and are highly controversal. While Congress debates them, the administration has put a temporary freeze on grant processing. Many educators are incensed over the delay, since this is the time when admission and financial aid offers traditionally go out and nonrefundable deposits from students are required to hold places.

The ultimate concern of officials in more expensive private institutions is that the delay will siphon off students who might otherwise come their way.

Though some smaller aid programs would be continued at present funding levels and the need-based National Direct Student Loan program would be increaed by $ 100 million this year, the Guaranteed Student Loan program would be tightened in several ways.Basically GSLs have been available from banks at a modest interest rate to any student. Washington subsidizes the rate and guarantees the loan against default. Some families in the past have been known to take the loans and put the money to work at a higher interest rate.

The Reagan administration aims to establish a new needs analysis for the loans and require students and parents to shoulder more of the cost.The students would still pay a relatively low 9 percent interest rate but would no longer be able to exempt years spent in school from interest charges. And Washington would guarantee but stop subsidizing new parent loans. These would be offered at market rates rather than the low 9 percent Congress had proposed.

Also phased out under the Reagan plan in 1982 would be $1 billion worth of student social security benefits. And colleges would also be affected by 1982 National Science Foundation cuts of $320 million. Cuts would include the scrapping of summer college programs to update high school science teachers and workshops for high ability high school students. Though universities would gain some new federal research funds, largely under the Department of Defense which may move back into the basic research field on campuses, NSF research efforts in social behavior, economics, and science would be cut back.

Most college and professional association leaders agree that the impact will hit middle-income families and private colleges hardest, but that all in the education community will feel it. They point out that the changes come at a time when the cost of running colleges and universities is escalating and enrollments are falling.

For some private colleges as much as two-thirds of tuition revenue comes to them just through the GSL program. Some educators predict that the Reagan plan will send large numbers of students scurrying from private to public institutions and will speed the closing of a number of marginal private colleges.

Even Secretary of Education Terrel Bell's assertion that the administration's first concern has been to protect aid for the neediest students is under challenge from educators who doubt the effects will match the assurances.

At Atlanta's predominantly black Clark College, for instance, about three-fourths of the students lean on Pell Grants for help.Clark's president, Elias Blake, says: "I think the administration is overestimating what alternatives might be available to families whose children come to black colleges. Our families face a constant struggle to get together what's necessary, and anything that even marginally reduces the amount of money available creates a kind of shock wave."

From their own vantage point, many middle-income parents also worry about the added dollar strain the changes could bring.Many parents, educators, and students wish they could have had, at the very least, some influence in the shaping of the Reagan plan.

So far the Senate side appears to be buying the Reagan changes, but the House Education and Labor Committee has rejected them all. Compromises and more "fine tuning" on details in the package are sure to come.