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Federal Cuts That Make No Sense : Does Congress really want to slice student aid?

February 26, 1995

When college was free or cheap, everyone could afford to go. Then it got expensive, but often there was student aid. Student aid started to dry up, but there were student loan programs. Now, in part thanks to the Republican "contract with America," loan programs too may be on their way out. As an ominous first step, the chairman of the House Budget Committee, John R. Kasich (R-Ohio), has proposed requiring students to pay interest from the start on their education loans.

Under current law, the federal government pays the interest while a student is in school; the loan becomes payable, with interest, when a student graduates. A student who graduates in four years and borrows $17,125, the maximum possible under the Federal Family Education Loan Program, faces a monthly payment of $205 after graduation. If interest is charged from the start, that $17,125 debt grows to $20,532 and the post-graduation monthly repayment to $246. Two hundred five dollars is 14% of disposable income for a new college graduate earning the national average of $24,000 per year. Two hundred forty-six dollars is 18%. Is that difference enough to keep a motivated student out of college? You bet it is, most knowledgeable higher education officials insist. For people who are living on little to begin with, a small loss is the difference between just making it and just failing to make it.

The mind of the GOP as a whole seems not yet entirely made up when it comes to de-funding higher education. To be sure, many "contract Republicans" are prepared to cut far more than federal interest payments. Sen. Phil Gramm (R-Tex.), though his own education and early professorial career were heavily subsidized by the federal government, wants to eliminate all federal education programs. Moderate Republicans, however, who see higher education as both an indispensable investment and a popular, partially middle-class entitlement, have kept this part of the "contract" from climbing to the top of the legislative agenda.

Middle-class entitlements are of course the easiest to defend (witness Social Security), for the middle class defines the electorate. Moreover, in a December Times Mirror poll, 84% said federal aid to college students should be kept the same or increased. President Clinton, who opposes cutting student aid, seems to sense that higher education is an issue on which he can win.

We hope so, for if Washington starts to phase out student aid just as the states phase in big tuition increases, an entire generation of middle- and lower-class undergraduates could be left out in the cold. Washington's share of total college student aid (about 70%) comes to $42 billion. This is slack that the states are not going to pick up. Congress needs to think seriously about the broader cost of the exclusion on the entire economy.

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