House, Senate backing off of severe financial aid cuts
By Matt Berres,
Staff Writer

What's the difference between $9 per month and the average student loan? According to some polticians, not much.

In the fervor to balance the federal budget, the U.S. Congress is shooting to cut federal spending - higher education is the perfect target.

For several weeks now both the US House of Representatives and the Senate have been negotiating the 1996 federal budget.Their common goal is achieving a balanced budget. Their common problem is deciding where to cut. One major aim is student aid.

On Sept. 26, committees in both sections of Congress approved cutbacks on federal financial aid. Both bills are moderate - compared to initial Republican designs.

Support for cutting or keeping student aid basically divides down party lines. Democrats promote federal spending, while the Republican majority favors cuts and privatization of programs.

Lynn Rivers (D) represents Michigan's 13th District (Ann Arbor and Washtenaw). Her key legislative aid, Gayle Boesky, told The Pleiad that she is "not in favor of cutting financial aid in any way shape or form - education is too important."

David Camp (R), represents Michigan's 4th district (Midland). He too supports education, according to Kirk Everrett, key legislative aid. In a prepared statement to The Pleiad, Everrett indicated that Camp recognizes a "huge roll for the federal government to play in the education of America's youth. But two key questions need answers: Who is the best service provider? Is it financially beneficial for students, parents and taxpayers?"

Camp's answer to the first question is private institutions. Everett said Camp wants to end federal direct loans and switch to federally guaranteed loans through intermediary lending agencies. "We want to get the federal government out of the loan business. It is not equipped to deliver loans adequately - private service should be better."

Camp has moderated his earlier stand. According to the April 28 Pleiad, Camp then said the interest subsidy on student loans was only the cost of "about a Big Gulp a day."

He now supports the interest grace period for undergraduate student loans - just not for graduate students.

He's not the only one retreating from talk-tough positions. Republicans in general have backed down from early proposals to gut educational spending.

According to a Sept. 1 press release from The Alliance to Save Student Aid, the House originally suggested: cutting $10.5 billion from the Stafford Loan program; eliminating in-school interest exemptions on student loans, the State Student Incentive Grant, and direct loan progams; taking 280,000 students off of Pell Grants; and holding spending for other student aid programs at 1995 levels.

According to an Economical Education Opportunities Committee press release, the House package replaces the direct federal loan program with federal guaranteed loans and changes the fees charged to lending institutions. It also ends the interest subsidy on student loans during the 6-month post-graduation grace period and increases the PLUS program's interest rates.

Peter Hoekstra (R), from Michigan's 2nd district (Holland and Grand Haven) and EEOC member, supports the bill. He told The Pleiad, "We have put together a budget package that is very reasonable and will meet the goal of a balanced budget with a minimal impact on the student."

Dale Kildee (D), from Michigan's 9th district (Flint) and EEOC member, sees it differently. He says it's "a decimation of student loan programs in order to pay for a fat tax cut for the very wealthy." He worries that the cuts will "hurt middle-class Americans who are sending their kids to school to better their lives."

The Sept. 26-approved Senate bill is similar to the House's. It has an .85 percent fee for lending agencies, a 20 percent cap on volume of direct federal loans and elimination of loan interest subsidies grace period for new borrowers.

What will these cuts mean to Albion College students? Evan Montague, director of financial aid, said it is "difficult to gauge exactly what effect the cuts will have, but [they] will most likely result in additional loan burdens on students and families."

The initial plan to cut the student loan interest subsidy, for example, would've increased student debt by 20-50 percent. The subsidy allows students to defer loan payments, without interest, until six months after graduation. Cutting it would make students begin paying loan interest while they're still in school.

But according to Everrett, the cost to students under the revamped interest subsidy is only about $9 per month. Montague is still worried. "

It's very scary. These cuts may limit access to educational opportunity to students. We're at a critical mass in higher education - students can't stand for big increases in tuition."

Around 90 percent of Albion students receive financial assistance, and about 60 percent of all students receive need-based aid.

The college gave out $18,392,757 in financial aid for the 1995-96 year. Of this amount, 57 percent came from endowments, scholarships and institutional revenue, 23 percent from the federal government, 8 percent from state government and 12 percent from private sources.

Montague said the college will continue to try to meet student needs, but federal cuts make it difficult.

Both bills go before the full House and Senate, respectively, for approval and then to a joint congressional conference committee later this month.

The committee will iron out the differences in the bills and send them on toPresident Clinton, as part of the federal operating budget for FY 1996.