Bill Expands Student Financial Aid

THIS summer, Amy Andriekus has written to more than 800 companies and wealthy Americans asking for financial help. The straight-A high school graduate is looking for contributions so she can attend the University of Pennsylvania in Philadelphia this fall.

Her middle-income family will have two college students to support, yet Amy qualifies for only a $2,500 loan toward the $23,000 yearly tuition, room, and board.

In light of their circumstances, the Andriekus family took great interest as President Bush signed legislation reauthorizing the Higher Education Act last week.

The $100-billion bill expands federal financial aid to middle-income families like the Andriekuses. But the changes don't take effect until next summer.

"It's a little late for us," says Amy's father, Paul Andriekus, an assembly-line electrician for General Motors. "It might be good for next year.... We do need help. The middle class has been getting shut out. I make too much money to qualify for anything. And yet I don't make enough [to cover the tuition], especially when you have two kids going at the same time."

The Higher Education Act of 1965 comes up for reauthorization every five years and covers all federal financial aid. The revisions in this bill raise the loan limits for all programs and expand the maximum grant amounts for low-income students.

"What Congress has done is create some loan programs which do not have the same level of federal subsidy involved," says Lawrence O'Toole, president of the New England Education Loan Marketing Corporation in Braintree, Mass.

If fully funded, the new legislation will make about 1 million more students eligible for Pell Grants. Another 1.4 million will be eligible for guaranteed loans.

Parents can borrow up to the full cost of education under a new unsubsidized loan program. Previously, middle-income parents could borrow only $4,000 a year.

Congress has also eliminated the value of home equity in calculating financial need. "That number alone served to disqualify a lot of New England students from federal aid programs," Mr. O'Toole says.

The bill introduces a single application form to simplify the financial-aid process, and a pilot program will experiment with ways to extend repayment schedules.

"One of the strong themes of this bill is to explore ways that students can repay loans over a career of earnings rather than just over a 10-year period after they graduate," O'Toole says.

The Bush administration threatened to veto the bill in opposition to a demonstration project in which students at some colleges will receive loans directly from the government rather than through banks. In a compromise, the program has been scaled back from 500 to 250 colleges.

"It is unquestionably cheaper for the federal government to borrow the money directly and to lend that to students," O'Toole says. "But we think that in the long run it will more expensive to administer."

In Michigan, Mr. Andriekus watches these changes warily. "I don't know all there is to know about it yet," he says. But he's not sure that increased access to loans is the answer for his family. "I have to pay that loan back, then I'll be broke. Amy's willing to take some of it on, but I hate to saddle her with a $60,000 bill when she gets out of school."

William Schilling, director of student financial aid at the University of Pennsylvania, wouldn't comment on how the new legislation might affect the Andriekus family. But, he says, there is reason to be skeptical about the overall effect of the bill.

"We have to wait for the other shoe to drop," Mr. Schilling says. "The reauthorization of the Act by itself doesn't make resources available. It really depends on the appropriation process. We're going to have to wait and see."

Budget pressures may delay funding decisions until next year.

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