President Reagan gave tentative approval yesterday to cuts in farm price supports and a shift away from federal farm loans and toward loan guarantees, administration officials said.
Reagan also gave tentative approval to cuts in college-student aid. Officials said the president will propose tighter eligibility rules for federal student loans that would confine the aid to those who need it most when all sources of income are taken into account.
Officials said Reagan did not approve a specific plan to cut farm price supports but asked aides to draft one with the goal of reducing the $12.9 billion estimated cost of the program in fiscal 1987 to about half that in fiscal 1990. Officials said this probably would be accomplished by reducing so-called target-price or income subsidies to farmers and reducing the level of price-support loans on major crops.
There also would be a continuing shift away from Farmers Home Administration direct loans and toward loan guarantees, which result in lower outlays for the government, officials said.
The farm decisions Reagan made yesterday will be incorporated into the administration's proposal next year for a new farm bill, officials said. The legislation has not yet been drafted, however.
Officials said current farm legislation makes it impossible to get savings next year, fiscal 1986, from the farm price-support program.
The rising cost of farm subsidies has been a major headache for the administration. Current-year costs are estimated at $11 billion, compared with about $20 billion two years ago when the government was stuck with millions of tons of grain for which there was no market.
Reagan is seeking to reduce spending next year by a total of $42 billion, officials said. The student-aid cuts are part of that effort to pare domestic spending, which is expected to continue today.
Also yesterday, administration officials said Reagan has not reached a decision on defense spending but may accept a cut of about $8 billion from earlier projections of next year's defense budget.
Pentagon officials said yesterday that they have found about $5 billion in savings, mostly from reduced inflation. However, Defense Secretary Caspar W. Weinberger was in Brussels, and Reagan is not expected to make a final decision on defense until Weinberger returns at the end of this week.
The $8 billion would be savings from earlier administration projections that the Pentagon would spend $286 billion in fiscal 1986, $321 billion in 1987 and $358 billion in 1988. Reagan aides have discussed defense-spending trims of $8 billion the first year, $20 billion the second and $30 billion the third, but Weinberger has resisted cuts, officials said.
The White House says Reagan's goal is to cut the deficit to $100 billion by fiscal 1988, from the more than $200 billion deficit expected if no action is taken.
For next year, Reagan is seeking to "freeze" total spending at this year's levels, officials said. But this "freeze" would not apply evenly; because programs such as Social Security and defense would go up in cost, others would have to come down. Office of Management and Budget Director David A. Stockman has distributed to House Republicans a study of "freeze" options concluding that, without any change in defense spending, only about $8.9 billion in savings would result from freezing every other available program at this year's levels.
This "freeze" plus lowering the defense request about $8 billion would leave the White House with almost half the amount needed to reach Reagan's target.
Stockman's study showed that Reagan is considering a "structural reform" in Medicare -- mostly by limiting payments to doctors and hospitals -- that would produce $1 billion in savings in fiscal 1986, $2.6 billion in 1987 and $4.3 billion in 1988.
Reagan is expected to unveil the proposed domestic-spending cuts Wednesday to his Cabinet.
White House spokesman Larry Speakes said Reagan remains firmly against a tax increase next year, adding, "I don't look for him to accept anything that's got a tax raise in it." Speakes appeared to leave open the possibility that Reagan would accept a tax bill that was not precisely "revenue neutral."