US Student-Aid Policies Up for Review

STUDENTS who work summers to help pay for college (not to mention their parents, who work all year) take note: $10 billion in grant money and $8 billion in guaranteed student loans are under the legislative lens.Winding its way through the United States Congress this summer is the quarter-century-old Higher Education Act (HEA), which provides funds for grants, loans, and work-assistance programs for college students. The act is up for re-authorization - a process that requires periodic review, fine-tuning, and then repassage. Congressional staff and US Department of Education officials say that the revised bill must address three concerns: * The federal government has to do a better job identifying and drawing out corrupt schools that legally, but unethically, overcharge and mislead students about the courses offered. This must be done in tandem with an effort to cut back on the high rate of loan defaults. In 1980, the government spent $200 million on student-loan defaults. In 1991, the tab is likely to be $2.6 billion, according to the US Department of Education. Many of these loans are made to students who attend proprietary or trade schools, such as for-profit truck-driving and beautician schools. These schools are often aggressive in recruiting students who take out federal loans, pay the tuition up-front, then, because many are poorly prepared for the course of study - or the course of study is seriously deficient - drop out and default on a loan for which they never received the education. US Sen. Sam Nunn (D) of Georgia issued a report identifying some 500 such "problem" trade schools. * Get the money to students in a much simpler manner, something along the lines of a 1040EZ income-tax form, rather than through the morass of paperwork and filing currently required. "The Holy Grail is not more than a 10-page form," says one congressional staffer close to the deliberations. Anyone who has had to fill out a financial-aid form will champion efforts to simplify the application process. The most compelling reason for this is that students from families with the least experience in higher education - minority and low-income students - are most likely to need financial assistance. Yet the complexity of securing aid, according to a recent General Accounting Office report, makes low-income students the most likely to be discouraged and not even apply for available grants or loans i n the first place. * Establish family-income levels and set other criteria for who receives a grant (not repaid) and who gets a loan (must be repaid with interest). In 1975 grants accounted for 80 percent of all student aid; loans accounted for 17 percent. By 1989, grants were only 49 percent, while loans had grown to 48 percent. Secretary of Education Lamar Alexander says he believes that federal aid has done little to increase access to higher education for the poor; rather, too much of the money available has gone to the middle class. Existing budget agreements between the administration and Congress preclude raising funds for one item without balancing them from another item. The administration is proposing to increase the amount of money an individual could receive as an outright grant from $2,400 to $3,700 per year, while a t the same time tightening eligibility requirements so that only families earning $10,000 or less per year qualify. This would remove some 400,000 families from being eligible for grants and require that they borrow money instead. Reaching an agreement on the first two points should be relatively easy. There is widespread consensus on cutting out fraud and simplifying the application process. But there are serious differences between Congress and the Bush administration on who should be given money for a college education and who should have to borrow funds. This point goes to the heart of who will be the leaders in the 21st century. One possible compromise that should be considered is the proposal to increase grants and reduce loans for students in the first two years of college, while reducing the number of grants for third- and fourth-year students. This makes sense since, by the third year of college, students will have established the likelihood they will graduate and be able to pay off their loans.

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