The new rules on who qualifies for government-subsidized student loans are going to shock a lot of people.
The biggest shock is for adult students, who now make up a sizable portion of the national student body. A married (or single) adult, whose family income topped $30,000 last year, will probably not qualify for a student loan. Some of you will find it tough to continue your education or to quit work and go back to school -- especially if you have children to support.
There are some other painful surprises in the new eligibility guidelines just published by the Department of Education.
Some wealthy students will still receive loans while some struggling students will be denied them. Families able to shoulder the cost of Ivy League schools may get student loans, while families restricting themselves to state universities may not qualify.
In general, the new student-loan rules do accomplish their purpose, which is to focus the available funds on families with middle incomes and below. Anyone with a family income under $30,000 last year can qualify for a student loan without restriction. Undergraduates may borrow up to $2,500 a year at 9 percent interest (plus a new 5 percent fee and, in many states, an insurance charge of up to 1 percent). Graduate students may borrow more.
But if your income exceeds $30,000, it's another story. You will have to submit a financial statement, comparing your income with the cost of the college your student attends. Depending on the particulars, you may be entitled to the full $2,500 loan, a smaller loan, or no loan at all.
The just-published eligibility rules apply only to loans made after Oct. 1, for the 1981-82 school year. Fortunately, most people got their loans before Oct. 1. But be warned: next year's rules are expected to be tighter. In general, here is how the student-loan lottery works today for the over-$30,000 family (all figures assume a family of four with one child in college; the income limits rise when there are two children in school):
1. If your child attends a fancy private college at $11,000 a year, you may earn up to $66,000 or so and still qualify for a $1,000 student loan. For a middle-priced, $6,800 private college, earnings may reach $46,000.
The student-loan rules pay no attention to how much money you have in the bank. If you saved for college, you may keep part of that money invested at high interest rates and use the government's cheap money instead.
2. If your child attends the average state university, costing $3,800, it will be much harder for you to get a $1,000 student loan. You could lose your eligibility around the $33,000 level.
3. If your child attends an inexpensive community college or goes to school part-time, the odds are that you will not qualify for a student loan at all (unless, of course, your income is $30,000 or less).
4. In constructing its eligibility tables, the education department assumed one wage earner and one Social Security tax. This discriminates against the two-earner family.
5. An adult who wants to return to school may be up the creek. Student-loan eligibility is based on last year's income. It makes no allowance for the fact that your $30,000-plus income will drop if you quit your job to go to school. Only when you have been in school for one year, and have somehow managed to keep body and soul together, will you start to qualify for a student loan.
6. Adult students are also expected to contribute far more of their income toward college than is expected of the parents of dependent students. That theory is okay, but the real-life effects are crazy.
Take, for example, a married couple with two children, earning $31,000, where the wife wants to return to school. According to the government's calculations, she would not be considered needy unless her tuition and fees (not even counting room and board) were roughly $10,500. Effectively, she cannot qualify for a student loan or any other federal aid.
If that same $31,000 couple wanted to send a child to school, rather than the wife, the financial-need calculations are very different. A dependent student starts to qualify for a $1,000 student loan when total college costs, including room and board, reach $3,300 and up.
Adult students should make their first stop the college financial-aid office. Some schools have funds of their own that can be used to help.