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Federal proposals may reduce financial aid

Compiled by Craig Jungwirth

Congress is currently considering budget-balancing proposals that could reduce federal spending on higher education programs, according to an Oct. 23 article in The Chronicle of Higher Education.

Uncertainties created by the proposals could lead to the elimination of entire programs or decreased participation by banks in the Guaranteed Student Loan (GSL) program, the federal government's largest student aid program.

Even if certain educational programs are not completely eliminated, analysts expect the budget measures would force drastic reductions in student, research and institutional aid.

A plan approved by the Senate would reduce the deficit as it balanced the budget. It would probably significantly affect higher education programs. The proposal would require that the deficit be decreased by $36 billion each year, from $180 billion in fiscal 1986. An across-the-board spending cut would be imposed on federal programs if the yearly goals are not met.

Sen. Phil Gramm (R-TX), Sen. Warren Rudman (R-NH) and Sen. Ernest F. Hollings (D-SC) proposed the plan, which the Senate approved this fall by a vote of 75 to 24.

The House of Representatives voted Wednesday to cut funding by an estimated $1.3 billion, according to The Boston Globe. The bill would enlarge the government's<>

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Congress weighs education cuts

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two main aid programs -- GSL and Pell Grants -- but would redirect those funds to the neediest students after 1986.

Other aid programs, such as college work-study and National Direct Student Loans, would maintain or increase current funding levels, but increased contributions from participating colleges would be required under the bill.

More restrictive needs analysis would be used to discourage those students whose aid needs could be met solely by grant programs from applying for loans. But maximum borrowing levels would increase from the current $12,500 to $14,500 for undergraduates and from $25,000 to between $25,000 and $40,000 for graduate students.

Uncertainties introduced

Most banks would drop out of the GSL program if the Senate plan takes effect, forcing the program to shut down, said Carl A. Modecki, president of the Consumer Bankers Association, in The Chronicle. The threat of across-the-board spending cuts<>

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alone would stop banks from offering loans to students, he said.

Furthermore, students borrowing from banks participating in the program under the Senate deficit reduction proposal could not accurately predict the amount available from the loan program from year to year. Reductions in spending might dictate a cut in the loan funds made available to the program, thereby reducing the total amount of money available per student.

Funding for the Supplemental Education Opportunity Grant and College Work-Study programs could be cut by up to 60 percent in fiscal 1986, estimated the Committee on Education Funding, a lobbying group, in The Chronicle. The committee also projected that funding for the Pell Grant program could be cut by 15 percent.

Over 60 percent of the $947 billion federal budget would be exempt from the cuts, said Susan Frost, executive director of the committee in The Chronicle.

Higher education funds would be reduced disproportionately, because they would be among $300 billion of unprotected programs cut to balance the budget.