IN 1978, in an act whose importance was under- appreciated at the time, Congress greatly liberalized the government's college student aid programs. The major forms of aid became available to families well up into the middle class. In three years the cost rose 135 percent, to $8.9 billion. The Reagan administration has spent its entire tenure trying, unsuccessfully, to reverse that expansion for both fiscal and philosophical reasons. The president's new budget continues that effort even as Congress moves toward passage of a new Higher Education Act, which would keep the programs about as they are.
There are two basic student aid programs, one involving grants, the other loans. The Congressional Budget Office estimates that, under the administration's latest proposals, the grant program by 1991 would be reduced by a third from the level it would otherwise attain; the loan program -- which is of most importance to the middle class -- by 60 percent. A withdrawal of that magnitude would be poor policy, and foolish politics besides. But the programs do run to flab in some ways; some of the president's proposals should be salvaged.
The grant program is for needier students. The maximum is $2,100 a year. Grants decline as income rises; the phase-out occurs as income approaches $24,000. The president would move the cutoff points to increase grants a little for some lower-income students but cut them substantially in the program's middle and upper reaches. That is fair enough at the very top of the eligibility range. Below that there are better ways to reduce the deficit, particularly because the president would also scale back the loan program to which students turn next.
In general, students who qualify are given government guarantees to take to banks when shopping for loans. The guarantees are good for $2,500 a year. The government pays all the interest while the student is in school, and part of the interest as the student repays the loan thereafter. The president would cut this to part of the interest while in school and for two years thereafter; then the student would pay it all. Once again, his proposal would be fairer in the upper reaches of the program than below. Burden should be geared to ability to pay.
The president would also protect the programs by cinching up the definition of an independent student (who is self-supporting and whose parents therefore cannot be dunned; there has been an astonishing increase in these) and by putting more pressure on the banks to help collect from defaulters (now more than 10 percent of those who borrow). The bills in Congress also address these administrative issues.
But there is no more constructive use of federal funds than equalizing and increasing access to college by reducing the heavy cost. Individuals gain, but so does society. Congress was right to broaden the programs in 1978; that decision should not be reversed. For their own sake, the programs need to be sewn up around the edges, and if that helps reduce the deficit, fine. But the deficit should not be the pretext for dismantling them.