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Proposals Could Hurt Financial Aid

By Christopher L. Falling
Associate News Editor

"Republican leadership proposals will cut investments in our future and increase the cost of student loans to our neediest students to fund tax cuts for the wealthy," said President Bill Clinton in a speech to the American Council on Education on Feb. 14.

"I will fight these proposals every step of the way," Clinton said at the conference in San Francisco.

While Clinton has talked about expanding student aid by putting more money toward Pell Grants and expanding the direct lending program, some Republicans have made proposals to reduce government spending in this area.

On Wednesday, a subcommittee of the House of Representatives Appropriations Committee voted to eliminate funding from a variety of programs including the Javits and Patricia Robert Harris fellowships for education.

Javits fellowships are portable four-year fellowships in the arts and humanities, while the PRH fellowship is the largest federal government effort to open graduate education to women and minorities.

Another Republican proposal is to cut the interest subsidy on certain loans.

Currently the Stafford Loan Program allows students to borrow money from third party lenders without paying interest while they are in school, said Director of Student Financial Aid Stanley G. Hudson. The federal government pays the interest on these government secured loans to the lender while the student is still in school, he said.

The Department of Education estimates that ending this subsidy would mean that a student who borrows $17,125 during four years of school would owe $3,150 more, and have his monthly repayment increased by more than 18 percent.

These cuts would have no effect on the costs of the Perkins Loan program, Hudson said. The federal government lends the money directly to the student so no subsidy is needed to make up the difference in interest.

John C. Crowley, director of the MIT Washington office said, "The results of the [Alliance to Save Student Assistance] research on public support of student aid shows that only Social Security has a stronger base of support among citizens."

"Right now there are no plans to change MIT's current commitment to meet 100 percent of student need or changing need blind admissions," Hudson said. We do not know what the effects will be, but if federal aid is cut we will see increased pressure on students to meet the costs of the financial aid program, he said.

A proposed recommendation on "Tuition and Student Budget" considered by MIT's Academic Council at its Feb. 14 meeting calls for a $900 tuition increase for the 1995-96 school year, and a 6.5 percent increase in the self-help threshold to $8,150.

Direct lending evaluated

Two years ago, Congress passed a plan allowing direct loans from the federal government to students via colleges that choose to participate, Hudson said. MIT joined the program last year.

Direct lending eliminates the middleman role played by banks and guarantee agencies in the program. Direct loans made up about five percent of the new student loans issued for this academic year.

In his speech, Clinton said the only proposal from Republicans for spending more money on education would be "to increase the funds paid to middlemen by capping the direct-loan program just as it is beginning to take off."

According to Hudson, congressional Republicans disapprove of this program because it is "contrary to free enterprise" and propose to cap participation at 40 percent. A pilot program for direct lending was started by the Bush administration.

Clinton has proposed to open up the Pell Grant to people receiving non- degree short term training, while increasing the total funds available for the program, Hudson said. However, he feels that the increased money will not be sufficient to meet the increased demand.

MIT currently receives over $1 million from the Pell Grant program - a maximum of $2,300 per year per student, Hudson said.