Proposed Bush plan gashes loan programs

By Abigail Keefe
March 31, 2005


Bush’s proposed spending plan, if approved, could eradicate one-third of government programs in the U.S. Education Department. Loans like the Perkins Program, the Leveraging Educational Assistance Partnership Program (LEAP) and the Robert C. Byrd Honors Scholarship Program would be eliminated while some savings from these would be deposited into larger Pell Grants.

The proposed spending plan of $2.57-trillion for 2006 is both “good and bad news for low-income students,” according to The Chronicle of Higher Education. The Pell Grant maximum of $500 would be raised to $4,500 over the next five years and while some college leaders are accepting and satisfied with possible change, others weren’t so fond of the idea. A Pennsylvania Democrat, U.S. Rep. Chaka Fattah, termed the proposal “nonsensical and utterly irresponsible.”

According to The Chronicle, those satisfied with possible change, however, were not accepting of the elimination of the Perkins Loan Program, which Bush-administration officials say would be eliminated because of its limited reach. The Chronicle says with these changes, colleges would be required “to return the federal share of the money they used to make the new Perkins Loan to students from low-and middle-income families.”

Cabrini currently allocates $120,000 each year in Perkins Loans to financial-need students. Between $1,000 and maximum of $2,000 is distributed to 80-90 students. Mike Colahan, director of financial aid, said, “Bigger colleges have more at stake; they’ll feel the impact” if the plan is passed. Scholarships and grants are given and the Perkins is a small augmentation to that, however, they are “getting trimmed as well.” Although it has no been finalized, Colahan said, the Work-Study Program is expected to go down as well as the Federal Supplemental Educational Opportunity Grant (SEOG).

Elimination of LEAP, a program in which the federal government matches the dollar-for-dollar amount a state spends on need-based aid to low-income students. Removing this would call upon no changes being made to the monetary amount given by the government for Federal Work-Study and Supplemental Educational Opportunity Grants for the next year.

Money to pay for the $19 billion cost of the plan was never proposed in the plan; it would be funded strictly from the savings through changes. The President would save $6 billion through elimination of the Perkins Loan program. Additionally, another $3.7 billion would be saved by changing the now refinancing program of borrowers being locked into a 30-year low fixed interest rate to borrowers being charged a variable rate. “Public Interest Research Groups, said the proposal would ‘cost students thousands of dollars in increased interest payments,'” according to The Chronicle. Costs in running the program would save $10.4-billion.

“Loan industry officials said they supported the president’s plan to increase the maximum Pell Grant but did not believe reducing the amount lenders and guarantors could earn was the right way to pay for it,” according to The Chronicle.

Bush had “asked lawmakers to raise the amount that students in their first two years of college can borrow from the government’s direct-and guaranteed-student-loan programs.” This money would come from some of the $10.4 billion.

The Chronicle said programs that “help motivate and prepare low-income students for college” would also be disposed of. Savings from “the programs would be transferred into a block grant that states could use in a variety of ways ‘to increase the achievement of high-school students,’ according to budget documents.”

Upon approval, the Pell Grants would begin functioning in structure more like Medicare or Social Security. Limits would be set as to how long students could receive Pell Grants; however, recipients would be able to use the award year-round. Although being able to use this award year-round, the maximum Pell Grant would only cover “a quarter of the cost of attending a four-year public institution by 2010, 10 percentage points less than it does now.” Additionally, students would only be able to use the award for eight years, or 16 semesters versus the lifetime use it has now.

The proposed Pell Grant increase “doesn’t begin to compensate for what is being cut in other programs,” said Colahan. Additionally, just because a student receives the Pell Grant one year, doesn’t mean they will be receiving it the next. It is a grant whose student eligibility is considered every year.

Due to such high “opposition from college lobbyists, student advocates, and loan-industry officials, it is unclear whether Mr. Bush will be able to push his Pell Grant proposal through Congress. If not acted upon soon, “lawmakers would have a difficult time meeting the president’s objective to increase the maximum grant by $100 in the 2006 fiscal year, which begins October 1.”

Both the House Budget Committee and the Republicans in charge of the Senate Budget Committee drifted from the president’s proposal. According to the Chronicle, the Senate Budget Committee’s resolution was to use “most of the savings from the loan programs to pay off the Pell Grant shortfall ad to create a $5.5 billion reserve fund that lawmakers could use to increase spending on student aid if they renew the Higher Education Act this year.” The House Budget Committee “called for devoting an unspecified portion of savings to reducing the $400-billion federal budget deficit. College lobbyists were in favor of the Senates plan.

Colahan said the Financial Aid Office is here to help. “[The Office] wants to meet [students] halfway, it’s more hands-on and awards are given on an individual basis. [We] look and approach it as ‘what we can do to help ease the financial situation?'”

Posted to the web by Shawn Rice

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Abigail Keefe

Abigail Keefe is a Cabrini College student studying communications, enjoying her time in Radnor, Pennsylvania. Abbie loves working for the school newspaper, the Loquitur, and is also passionate about everything that the communication field has to offer.

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