One-third of the colleges in Maryland and the District will lose federal money for student loans if a proposed Reagan administration regulation goes into effect, according to a study by Maryland State Sen. Luiz Simmons (R-Mont.).
The Reagan proposal would cut off federal money to institutions that have failed to collect 25 percent or more of their overdue student loans. Funding for colleges with a default rate of 10 to 25 percent would be reduced partially.
The regulation is an attempt to enforce more stringent collection practices at colleges nationwide. Currently, the FBI is investigating allegations of fraud in the federal student loan programs at Towson State University and Harford Community College.
But Simmons critized the measure, saying it would penalize students now applying for loans, instead of past students who are at fault. Further, he charges, the regulation would do little to retrieve the defaulted money. In a letter to Education Secretary Terrel H. Bell, Simmons urged the proposed regulation be modified so that only future default rates would affect an institution.
Simmons' study reports that 33 percent of Maryland's colleges would become ineligible for funds, which are granted under the National Direct Student Loan program, compared with 35 percent of colleges in the District and 24 percent of those in Virginia.
Maryland could lose as much as $1 million, the study says.
Among those colleges that could lose money are: University of the District of Columbia, which has a default rate of 72 percent; Norfolk State, in Virginia, which has a rate of 69 percent; and Howard University, where 27 percent of the loans are overdue. None of those colleges received loans under the program during the '81-82 year, however. Lynchburg College in Virgnia would lose $60,000, and American University could lose $100,000.