Bill eases rules on college loans for middle class Bush and Congress agree on legislation

July 04, 1992|By Knight-Ridder News Service

WASHINGTON -- A million more students -- mostly those from middle-income families -- will find it easier to go to college under an election-year deal struck this week by President Bush and Congress.

Middle-income students will find federally guaranteed college loans easier to obtain. More working-class students will qualify for subsidies known as Pell grants. The legislation will also set up an experimental program of low-interest, direct government loans for college tuition.

The bill increases the amount of money that middle-income students can borrow from banks for loans subsidized by the government. And it creates a new government-backed loan program that will also be available for higher-income students.

"The most important thing this bill does is readmit the middle-class family into higher-education assistance," said Rep. William D. Ford, a Michigan Democrat who is chairman of the House Education and Labor Committee and is chief architect of the legislation.

Since 1981, the government has capped at $30,000 the amount that families can earn for their children to qualify for Pell grants. The compromise raises that ceiling to about $42,000.

Limits on guaranteed student loans (GSLs) would increase, to $3,500 from $2,625, for second-year students; to $5,500 from $4,000, for third- and fourth-year students; and to $8,500 from $7,500, for graduate students. Under the GSL program, interest rates will be capped at 9 percent. Students need not repay those loans until after graduation.

Mr. Ford also said families will no longer have to count the equity in their homes or farms to qualify for student aid. This change could swell the ranks of eligible student borrowers by 1 million or more. Families could earn up to $78,000 and qualify for the loans, he said.

The bill also authorizes larger Pell grants, but congressional sources said that budget cutting will probably prevent full funding for the higher level of grants.

The compromise calls for the maximum Pell grant to be increased from $3,100 to $3,700 starting next year. At present, however, the appropriations committee limits grants to $2,400 because of budget constraints. The committee is not expected to raise the funding much beyond that next year.

The deal also calls for about $500 million to be set aside for an experimental program of financing college educations through direct government loans instead of private bank loans.

Higher-income students will be able to obtain government-backed loans on the same terms as students qualifying for GSLs. But they will have to pay the interest on their loans while still in college.

About 6 million college students receive nearly $22 billion a year in federal, state and private grants and loans. Under the terms of the compromise bill, which followed 18 months of wrangling, an additional 1.5 million students could benefit.

The compromise bill is expected to go to Mr. Bush for his signature next week. He is expected to sign it.

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