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Accepting recent Republican statements at face value, we would think student aid has always been a high priority in the minds of the Right. We would see this commitment demonstrated by increased funding for Pell Grants and work-study, by efforts to retain programs such as State Student Incentive Grants (SSIG), and above all by assurances that students and their families would pay the least amount of money with reduced hassle through Republican-backed student loan programs.
But the Republicans are wearing masks to fool the public. Some who
now tout their support for higher education voted for the largest
student aid cuts in history in 1995, and still support a reversal of
reforms that have saved taxpayers and students billions of
dollars.
How big is the student aid bill?
To help separate fact from fiction, here is some background information. About half of the 14.5 million students in the U.S. receive student aid. Almost 80% of the money these students receive is in the form of loans.
The student loan program mostly pays for itself. In FY 1997, which began in October 1996, students were expected to receive $33.7 billion in loans. Funding this program will cost taxpayers about $3 billion, most of which goes to cover the interest exemption students enjoy while still in college.1
The rest of the student aid budget, about $9 billion in FY 1997, comes directly from the treasury. About 10% of that is for work-study and the rest for grants, primarily Pell Grants. Student aid amounts to less than 1% of the federal budget and less than 10% of the deficit.2
In the mid-70s, Pell Grants provided 80% of the cost of the
average public institution. Now they provide only 35%, according to
US PIRG and the US Student Association.3
Opening Debate: the Contract With America
Reflecting an ideological stand against federal government involvement in education, Representatives Newt Gingrich and John Kasich targeted student aid programs in their plans to "balance the budget" by 2002. At the same time, they proposed a $245 billion tax cut for the wealthiest Americans. In February of 1995, Gingrich said that students should have to work for their Pell Grants, while Kasich proposed ending the interest exemption on student loans. In order to "balance the budget," Republican leaders claimed that they needed to cut $20 to $25 billion from higher education, again over the seven-year period from 1996-2002.
Needless to say, these proposals did not go over well on campus, with over 100 student demonstrations that spring against the "Contract On America." However, the Republican leadership pushed on with their plan. On August 4, 1995, the House of Representatives passed a budget that contained loan cuts of $10.2 billion over seven years4 and cuts of $600 million in grants and fellowships in just one year.5
At the same time, the Republicans adopted a remarkable strategy: to claim that they done the opposite of what they had just done. On September 11th, the House Republican Conference released a memo stating, "GOP funds biggest Pell Grant Award," touting the fact that the House budget proposal would offer a maximum award of $2,400 to some Pell recipients. They conveniently failed to mention that their plan would reduce the total number of Pell recipients by 280,000 students, and total Pell funding by $482 million.6
Then, on September 28, College Republican National Committee (CRNC) Chairman Joe Galli sent a memo titled "Student Loans and Balancing the Budget" to campus chapters, stating that "Clinton and the Democrats" were creating "a student loan scare campaign in order to push his latest socialist policy down the throats of Americans."7 This memorandum noted that "money available for student loans will increase 50% over the next seven years" under the Republican plan. The memo failed to note that the same increase in loan programs would be achieved in only 3 years under the Clinton plan, without any increase in the budget deficit.8
The lies continued. In November, the College Republicans
distributed a posterboard sized sign on college campuses which said
that Republicans would not "eliminate the six-month grace period for
loan repayment" (even though they proposed charging interest during
the "grace" period) and that their plan "Eliminates Clinton's
Direct-Lending plan, saving $1.5 trillion over 7
years."9 Apparently, they meant to say $1.5
billion because $1.5 trillion is larger than the combined tuition of
all students in the U.S!
Second Deception: the 1997 Budget
The 1996 budget was finally approved in April of 1996 after a
budget impasse shut the government down twice. It ended up striking
most cuts in loan programs in favor of a $1.3 billion decrease in
Pell Grants. Apparently, this did not go over well on the campaign
trail. By September of 1996, when Congress was about to approve the
1997 budget, the Republican Congress joined the Democrats in a
bidding war over student aid increases. The resulting increases in
Perkins, SSIG, TRIO, Workstudy and Pell programs provided Republicans
with some good news to bring back to their districts, but actually
were a net decrease over FY 1995 levels. According to US PIRG's
Higher Education Project Director Ivan Frishberg, these token
increases "do nothing to account for increased tuition costs and
other increases to the cost of living, and increased
enrollments."
Direct Lending
Much of the debate in 1996 focused on the Clinton Administration's proposals to increase the number of schools participating in direct lending, a program developed by the Bush administration and Rep. Thomas E. Petri (R-WI). Direct lending provides federal loan money to colleges, bypassing banks and loan guaranty agencies. In its second year in 1995, the program constituted 40 percent of the total loan volume. Though created by Republicans, the program was viciously attacked by the new Republican Congress.
In December 1995, Congress voted to cap direct lending at 10 percent of total loan volume, but Clinton vetoed the measure. The following March, the House voted to freeze direct lending levels at 40 percent of total loan volume. Republicans dropped this proposal during the 1996 budget negotiations in April.
During the 1997 budget debate, in June, the House Appropriations Committee voted to rein in this program through severe cuts in the direct loan administration budget. According to the Washington Post, "Clinton officials, charging that Republicans are responding to political pressure from banks and loan guaranty agencies that profit from the $25 billion student loan industry, instead have been pushing to expand the program."10
Howard P. "Buck" McKeon (R-CA), Chairman of the House Subcommittee
with jurisdiction over student aid programs, argued in late 1995 that
money could be saved from higher education by "by requiring lenders
and secondary markets to reduce their profit margin and by
eliminating the government takeover of student lending." The
Congressional budget office estimated in July 1996 that eliminating
the direct student loan program would save taxpayers $1.5 billion
over 7 years.
So which costs more: direct loans or private loans?
The Coalition for Student Loan Reform (CSLR), a national organization representing the banking industry, insists that direct loans do. Marie Clark, of the CSLR public affairs office claimed that the program would not actually save students the money they expected.11
However the US Student Association disagrees. According to Field Organizer Sandra England "Direct lending will save students and taxpayers money, as layers of bureaucracy are eliminated and billions of dollars in subsidies and special allowances are cut."
Proponents also argue direct lending saves money by eliminating banks' profits entirely. When Clark was asked if banks and guarantee agencies make a profit from student loans, she hedged, "Obviously banks make money off any money they loan. Guarantee agencies are given a certain amount of dollars for facilitating the process... but they are non-profit entities."
But according to the American Association of State Colleges and Universities (AASCU), many agencies do profit from the private lending system. An AASCU report titled "The Guarantee Agency Network: A System Designed for Waste and Abuse" pointed out that "Guarantee agencies are legislatively entitled to keep 27 percent of collections on defaulted loans; however, if the borrower does not default... the agency keeps nothing. This is a built-in, programmatic disincentive to prevent defaults."
In September 1996, Senator Paul Simon (D-IL) released a statement
showing how the direct lending alternative had enabled the government
to negotiate better deals with private banks administering existing
student aid program. All tolled, "college students have about $1.9
billion more in their pockets today than if 1993 student loan reforms
had not been enacted"12 said Simon.
Republican Retreat
The campaign to cut student aid ended up a disaster for the Right. According to the PIRG's Frishberg, they "had to abandon a huge chunk of their agenda." As of this writing, the Clinton administration has proposed large increases in higher education funding, and the Republicans are again claiming to be on students' side by warning that a student aid funding boost will cause tuition increases. Note that the Right has not made similar statements about how increases in military spending might cause the price of weapons to increase. In fact, all Republican presidential candidates proposed eliminating the Department of Education.
Ideological opposition to social spending by the federal governent makes it hard to trust the Right as an ally in the struggle for educational access. And nowhere has the gulf between rhetoric and reality been greater than in the Right's posturing on the issue of student aid.
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