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House, Senate Bills Address Financial Aid

Proposed Legislation Calls for More Grants, Fewer Loans

By Gia Kim

Both the House of Representatives and the Senate are considering bills which would change the Higher Education Act and alter several aspects of federal financial aid programs.

The most dramatic change outlined in the bills would be the elimination of banks from the Stafford Loan Program. By creating a Direct Loan Program, students would borrow money from the federal government instead of from banks.

According to James S. Miller, Harvard director of financial aid, the Direct Loan Program would save the federal government "a significant amount of money" that could be applied to grants.

Because Harvard is one of the few universities that currently lends money to undergraduates and graduates, the proposed bill would affect the University differently than most other colleges.

"Harvard is now acting like a bank, since it is lending money and collecting interest," said Thomas R. Wolanin, staff director of the House's Post-Secondary Education Panel. "If the bill is passed, they would continue to be an originator, but instead of using their own funds, they would be using federal funds."

Another feature of the House bill involves changes to the Pell Grant program. The income level to qualify for Pell Grants would be raised from $35,000 to $44,000.

In addition, the minimum Pell grant would be raised from $200 to $400, and the maximum Pell Grant would be raised from $2400 to $4500.

Miller said he supports the proposed change because it will help reverse the current trend toward more loans and fewer grants in financial aid packages.

"Anything that helps correct the growing imbalance between loans and grants is beneficial," said Miller.

A spokesperson for Sen. Edward M. Kennedy '54-'56 (D-Mass.), the sponsor of the Senate bill, said that the expansion of the Pell Grant program would "open up access to aid to middle-class families who too often find themselves left out."

Pell Grants are listed as entitlements in the federal budget agreement. According to the spokesperson, this means the increase in Pell Grant funding would only be possible by cutting other entitlements, increasing the federal budget deficit or raising taxes.

The House and Senate bills also call for the creation of a single application for all federal aid programs, which would replace the multiple applications now required.

Miller said the federal application will streamline the financial aid process.

'Will Eliminate Confusion'

"It will eliminate the complexity and confusion for students applying for financial aid," Miller said, explaining that the application would create "one-stop shopping" for federal aid.

But representatives of companies that would be removed from the financial aid application process disagree with Miller's assessment.

"The unitary federal application would be divorced from state and institutional programs, which only fragments the process," said Lawrence E. Gladieux, executive director of the Washington office of the College Board.

"Federalizing the process would spawn additional forms and paperwork to add to the bureaucracy," Gladieux said.

The bills also provide for an application bypass for low-income students, a simplified definition of independent students and the removal of home, farm and small business equity from financial aid considerations.

Another controversial feature of the bill relates to the elimination of accrediting agencies from the financial aid process.

"It would shift the burden of evaluation to the federal government," said Miller, who was concerned that Department of Education officials would not be as thorough as local inspectors.

The House Committee on Education and Labor will begin considering the bill next Tuesday. The Senate bill is already under consideration by the Labor and Human Resources Committee.

According to the spokesperson, the two bills are not exactly alike, but he expects the minor differences will be worked out.

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