Several plans threaten university federal funds

The financial aid that students at the University currently receive may be threatened if federal officials agree on one of several newly proposed aid plans. President George Bush recently proposed a new system, under which only students whose families' total yearly income is less than $10,000 would receive federal grants. It would eliminate grants for all other families, which now total 400,000 nationwide. However, starting in the 1994 fiscal year, those students who still qualify for aid would see an increase in their federal funding. While Bush's plan would almost certainly have wide-reaching effects on all University students, a less well known proposal under federal consideration is Representative Tom Petri's (R.-Wisc.) Income-Dependent Education Assistance Act, whose "repayment would be based on a student's income after school," according to George Conant, Petri's legislative assistant. Under the current system, default on student loans is a major problem. IDEA, Conant said, would virtually eliminate this default, as collection would be made by the Internal Revenue Service. "There would be no means to default [on the loan] because it would be tax evasion," Conant said. Currently at the University, there are two federal loan programs which benefit students who qualify for aid: the Stafford Plan and the Perkins Plan. William Schilling, the University's director of financial aid, said either of the plans could have a dramatic impact on financial aid at the University. "I think that any proposal should be looked at [including] the idea of having a loan program tied to future earnings," Schilling said. "How much of one's income is going to [paying off a loan] is a concern." Three billion dollars would be saved, according to IDEA plan designers, if this plan is adopted because banks would not be used to subsidize the loans. Banks are currently involved in student loans, charging high interest rates which cost both the government and the students a significant amount of money. According to Conant, money would also be saved by the simplified administration. There would be "no [financial] needs analysis," which determines the amount of money each student deserves, since all students are eligible. This one-on-one analysis is expensive and time consuming. "[The plan] would cut out a number of layers," he said. The loan payments are withheld from the graduates' paychecks, thereby eliminating a student's need to seek help from a guarantee agency. "It is a more efficient means of collecting on the loans," Conant said. Since it is based on one's income, the rate at which each individual student pays off his or her loan can be controlled. If a person can pay off the loan in less than 12 years, an interest rate slightly above the regular rate which is based on the Treasury-bill rate would be in effect. Any payments not made after 25 years, in the case of extremely poor recipients, would be forgiven.

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