President Reagan took time off today from his Caribbean holiday to vigorously defend his controversial proposal for reducing federally subsidized loans to college students.
Demonstrating sensitivity to a political issue that some advisers say has damaged his standing among middle-income supporters, Reagan said "a lot of people have simply been misled" about what he wants to accomplish.
Reagan asserted that 4 1/2 million students will receive guaranteed student loans in 1983, a 22 percent increase over this year, and that the money available for student loans will reach "the highest level ever."
"We haven't cut loans," Reagan declared in the second of a series of live, Saturday radio broadcasts. "We've cut the cost to taxpayers of making these loans available. Surely, no one can quarrel with the reduction in administrative costs that results in more money for needy students."
A variety of educators, parents and college students have quarreled sharply with the Reagan proposals, which have been blocked by the House Appropriations Committee and are now considered dead for this year.
Reaction to the president's speech was quick and critical. Rep. Paul Simon (D-Ill.), chairman of the House subcommittee on postsecondary education, called Reagan's statements "amazingly confused." He noted, for instance, that the administration proposal would deny 650,000 graduate students access to the loan program and switch them to a more expensive one that is available in only about half the states.
Jack Peltason, president of the American Council on Education, a college umbrella group, also mentioned the graduate student problem and said that Reagan didn't mention his plans to wipe out some campus-based aid programs. "He can't do all that and pretend it's only administrative costs that are being cut."
A member of Reagan's own administration today gave a far different explanation than the president did of what his proposals would do if they are enacted.
The "administrative savings" Reagan referred to are primarily in a plan to increase the cost of a loan origination fee from its present 5 percent to 10 percent, said Ed Dale, spokesman for the Office of Management and Budget.
This would have the effect of reducing the government subsidy for the loan and increasing the cost to the student or his family. Dale said the boost in the fee accounted for most of the reduction from $2.7 billion to $2.4 billion that Reagan originally wanted in the guaranteed student loan program. The president tried to give the impression today that student loans are steadily increasing, but Dale said that the number of loans would decrease slightly under the president's proposal.
"The dollar volume of loans is up even though the number of students getting the loans is down," Dale said.
The various figures cited by Reagan in his five-minute radio speech sidestepped the essential controversy of his proposal, which is aimed at tightening eligibility restrictions and reducing the number of middle-income students who could qualify for loans. Reagan also did not mention his plan to cut the family income eligibility ceilings for student grants from $27,000 a year to $18,000.
Whatever the merits of the president's plan, it is commonly accepted within the administration that none of his student loan or grant proposals will be enacted into law this year.
"The prospects of getting any of these changes are almost negligible," an administration official said in a telephone interview from Washington.
The president's decision to discuss student loans instead of foreign policy issues during a radio address that was broadcast live throughout the eastern Caribbean caught his aides by surprise.
They had expected some reference to student loans in advance of a speech which Reagan is scheduled to give next Thursday to Catholic educators in Chicago. But the expectation among Reagan advisers here was that the president would devote most of his talk to a discussion of the Caribbean Basin initiative, which had been the main focus of attention in his meetings with Caribbean leaders earlier this week.
"Next Saturday we'll go to a school in the United States and discuss foreign aid," quipped one aide.
Aides said Reagan rejected a draft proposal devoted to the Caribbean plan and the situation in the Falklands and rewrote the radio speech in his own hand. White House deputy press secretary Larry Speakes had no explanation of why Reagan had acted in this manner.
Nor could Speakes explain why the president at the last moment canceled a scheduled photograph that was to have been taken of him just before he gave the radio speech.
"That's just the way the president and Mrs. Reagan wanted it," Speakes said.
The explanation considered most probable in Barbados was that the Reagans were disturbed by pictures taken Friday by television cameramen that showed them swimming and frolicking on a normally public beach which had been shut off for their personal use by the Secret Service.
Reagan's advisers are known to be sensitive about what some of them consider the negative public relations of Reagan taking an Easter vacation in the Caribbean while the East suffers from unusually cold spring weather.
The cancellation of the "photo opportunity" meant that Reagan spent the day in virtual seclusion. No other public event was scheduled. The Reagans will appear in public here Sunday to attend church services before they fly back to Wasrington.