New restrictions on student loan program upset lawmakers and educators

December 02, 1991|By Boston Globe

Educators and lawmakers are angry over the extent of restrictions placed on the federal student loan program to help fund extended jobless benefits under the bill signed by President Bush Nov. 15.

One of the new restrictions requires all student applicants over 21 to prove creditworthiness to qualify for federally guaranteed student loans. Failing that, borrowers must find co-signers.

Another measure requires student borrowers to sign a waiver admitting personal liability should they default on their student loan, regardless of whether the default was caused by other factors.

The student loan provisions were submitted by the Bush administration to produce long-term savings that would help fund the $5.3 billion jobless benefits bill, which Mr. Bush had resisted signing because of its cost. The severity of the measures is just beginning to sink in.

"The administration has exacted a very heavy price in educational opportunities for American students in return for desperately needed benefits for the unemployed," said Representative William D. Ford, D-Mich., chairman of the House Education and Labor Committee. "It is a classic case of legislative extortion."

"They stuck them into a bill that nobody could vote against," said an aide to Sen. Edward M. Kennedy, D-Mass., chairman of the Senate Labor and Human Resources Committee.

Mr. Kennedy has said he would try to reverse the provisions in next year's planned reauthorization of the Higher Education Act of 1965, the enabling legislation for the $13 billion-a-year federal student aid program.

The provision requiring credit checks and cosigners for borrowers over 21 has triggered the most controversy. Opponents say it undermines the intent of the student loan program, which is designed for students with little or no credit history.

"If most students could qualify for a regular low-interest loan from a bank, we wouldn't need the guaranteed student loan program," said Stephen J. Blair, executive director for the Career College Association, which represents 2,000 private career schools.

Mr. Blair and others also oppose tightening access to money for education at a time when many people are seeking to return to school. "The greatest irony is that many unemployed workers who are helped by one part of the law will now be hurt by this part," Mr. Blair said.

Career schools offer certificates in fields ranging from business to truck driving. They enroll mostly adults and would be most affected by the restriction.

The administration anticipates that restricting loans to adult students will save $125 million over five years -- money saved by defaults they believe would not occur with the restrictions in place.

Another measure would require student borrowers to sign a waiver assuming personal liability in the event of default.

Students are responsible for paying off federally guaranteed loans now, but the waiver would allow an immediate legal judgment to be entered against them if a loan goes into default -- even if they are not personally responsible. Defaults sometimes occur because collectors lose a forwarding address.

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