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Reagan's budget proposes $2.3 billion financial aid cut

By Ellen L. Spero

President Ronald Reagan's fiscal 1986 budget proposal, presented Monday to Congress, calls for a $2.3 billion reduction in federal financial aid to college students.

Most of the reductions will come through the elimination of subsidized guaranteed student loans (GSLs) to students from families whose gross incomes exceed $32,500 per year.

Reagan also proposed limiting all federally subsidized aid, including direct grants, loans, and subsidized jobs, to $4000 annually per student. The president's proposal also includes a $25,000 income eligibility cap on Pell Grants, jobs, and direct loans.

Many MIT undergraduates will find the reduction in aid hard to handle, said Leonard V. Gallagher '54, director of financial aid. "I'm very concerned that these proposals be defeated."

Sixty percent of MIT undergraduates receiving financial aid will fall above the $32,500 mark, Gallagher said. They will no longer be eligible to receive subsidized GSLs if Congress accepts the proposals.

Only 16 percent of all MIT aid recipients have family incomes of under the $25,000 mark. Gallagher said the income cap, along with the maximum aid of $4000 annually per student, could cause the loss of a lot of federal funding to MIT for distribution use in its student financial aid package.

"We may find that we have too much money from the federal government," said Gallagher. "We'll have to give it back." He said he will release his office's figures on the severity of the cuts' effect on MIT by next week.

Students whose parents' incomes fall above the cutoff point will be able to obtain federally guaranteed loans at current interest rates. These loans would not be federally subsidized.

"If the GSLs vanished, I would argue that we continue to make the [Technology Loan Fund's] available," Gallagher said. These MIT subsidized loans have an interest rate of nine percent.

"If [GSLs] are available," he cautioned, students may not be given free choice over what type of loan to take. "We may continue to insist that the GSL be the first source of aid."

The added cost of the unsubsidized interest to families' financial burdens and the added obligation after graduation is a major concern, Gallagher said.

The federal government pays the interest on a GSL while students are attending school. It partially subsidizes interest payments after the student leaves school and guarantees repayment of the loans. It subsidizes the banking industry to provide incentives for offering student loans.

"In our financial aid, we are already asking parents to provide as much as they can," he explained. "We are taking it all already ... Theoretically, there is no more to take."

"MIT will have to decide how it will have to handle this additional obligation," he said. Gallagher said he did not know if MIT would absorb the difference in aid caused by the proposals. President Paul E. Gray '54 and the Academic Council will make that decision, he said.

"It's too soon to speculate what we will be able to provide," said James Culliton, vice president for Financial Operations. "We have no idea what really will occur" in Washington.

"It will be worked out somehow." If the proposals are approved, Culliton said, "we will do our utmost ... within our creative ability, as well as the constraints of our limited resources" to make sure that no student will be unable to attend or continue his or her education at MIT for lack of funds. He said a primary goal of the Institute is to continue need-blind admissions.

Culliton said he could not determine from where the additional funds would come. "There is a demand for scarce resources," he said. "There is a limit to where we can get them."

Director of Student Financial Services Jack H. Frailey said "there are a lot of things that can happen and that MIT can cause to happen to take the sting out of this thing."

One possibility, Frailey said, would be to try to persuade those donors who shifted their contributions to more needy, non-educational institutions in the 1960s when federal aid was easily accessible to target their efforts at educational institutions once again.

About 55 percent of MIT undergraduates receive MIT aid and 65 percent receive GSLs, Gallagher said. About 80 percent of MIT undergraduates receive some sort of federal financial aid, he added.

Neither the federal nor the state government decides who qualifies for GSLs. MIT does so, using standards set by the federal government.

The final binding budget figures are not due until Sept. 15. MIT must determine its financial aid policy by the time it declares the tuition level in March.

It may be necessary for the Academic Council to review the financial aid situation when it has more knowledge of the approved changes, Gallagher added.

MIT is part of a consortium of 30 universities "whose voice is heard in Washington," he said. The group is presently drafting a unified position statement that will show impact statements, he said.

When asked what students can do about the proposals now, both Gallagher and Frailey echoed the same sentiment: Write your congressman.