THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, June 19, 1995 TAG: 9506190031
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY PHILIP WALZER, STAFF WRITER
LENGTH: Long : 122 lines
In terms of personal finance, it comes down to how hard it would be for college graduates to fork out an extra $45 or so a month. In other terms, the issue is what's best for the country's future.
The question is whether to charge more interest on some college loans, and it has become the primary battleground for educators in the budget wars in Washington.
Nearly 5 million students a year - about 83,000 of them in Virginia - get what are known as ``subsidized'' Stafford loans, which generally range from $2,300 to $4,300 a year. About half come from families whose annual income is less than $20,000.
The federal government does not charge interest on the loans while students are in school or during the first six months after they leave. But some members of Congress say it's time to drop that break so the government can raise more money in its struggle to reduce the deficit.
The House has passed a budget resolution for fiscal year 1996, which begins in October, that would drop the interest exemption for all students. That, advocates say, would bring in nearly $19 billion over seven years. But Senate leaders want to eliminate the exemptions only for graduate students, raising an estimated $4.4 billion.
The interest matter, along with other budgetary tugs-of-war, is being hashed out by a congressional conference committee. In the labyrinthine ways of Washington, the final dollars-and-cents decision isn't expected until September.
But already, college boosters ranging from President Clinton to student leaders are pushing hard to keep the ``interest subsidies,'' as they're called.
NaTasha Geth, a Norfolk resident entering her sophomore year at Old Dominion University, will get a $3,500 subsidized Stafford loan next school year. ``I can support what Newt (Gingrich) and the Republicans are trying to do,'' she said, ``but I think they need to take into consideration what they're doing to us. With education, you're building our future. If you take away the means of getting an education, you're taking away the future.''
Bruce Cuthbertson, a spokesman for U.S. Rep. John R. Kasich, R-Ohio, the chairman of the House Budget Committee, says the proposal would brighten everyone's future by helping whittle down ``the overhanging $4.7 trillion national debt.''
``If we don't,'' Cuthbertson said, ``we will face a slow but steady erosion in our ability to generate jobs and opportunities for people in the future.''
But Rep. Owen B. Pickett, D-2nd District, said, ``This is not a program that, in my judgment, is frivolous. Many other programs are less essential to the future of our country than the development of intellectual capital.''
Terry Hartle, vice president for the American Council on Education, the leading lobbying group for colleges, responded: ``I think everybody should suffer, but in the federal student loan program, it's coming out of the hides of students. They are not touching $3 billion a year in subsidies to banks and guarantee agencies to make the loans available.''
The plan to drop the interest exemptions would not force college students to pay interest while they're in college. The interest would accrue while they are in school and would be added to their payments once they leave school. The change would not take effect before the 1996-97 school year.
Perhaps the only thing supporters and opponents agree on is the exact monetary change. For the entire pool of Stafford borrowers, removing the exemption would add an average of about $22 more a month, increasing payments from $133 to $155. But for the typical graduate of a four-year college, the monthly payment would go up $44, or more than 20 percent - from $208 to $252.
Students usually have about 10 years to pay off their Stafford loans. So the change would mean that the typical bachelor's degree recipient would be paying back an added $5,000 or more.
The effect of that increase is, of course, open to interpretation.
Geth, the ODU student, says it will drive up loan default rates, so the government won't end up adding much to its coffers.
David L. Warren, president of the National Association of Independent Colleges and Universities, said, ``It puts students at greater risk of dropping out, going part-time or taking a third job to finish. It doesn't strike me that that's in the national interest.''
But Cuthbertson said colleges are exaggerating the hardships. ``Twenty-two dollars a month is going to keep kids from going to school? Give me a break.''
A fact sheet from Kasich says the $22 monthly increase for the average borrower is ``roughly the cost of basic cable television.''
Warren, who represents 850 private colleges, said that for recent graduates, who he said earn an average of $22,000 a year, ``this is a big sum of money.''
Cuthbertson said colleges should examine their own financial practices before attacking the budget-cutting plan: ``Why do we need loans in the first place? Because the cost of all education continues to spiral. Until the colleges do a better job of controlling their costs, they have no reason to complain.''
Warren, though, says colleges have had to raise tuition, sometimes above the inflation rate, because state and federal governments haven't provided enough money for higher education.
A compromise gaining favor would drop the interest exemption only for graduate students, who usually earn more than workers with just a bachelor's degree.
``Why should people who don't go to graduate school be forced to subsidize those who do?'' Cuthbertson asked.
Hartle estimates that a master's degree recipient would have to pay $111 more a month, up from $413 to $524. That may be all right for lawyers and doctors, he said, but ``many graduate students in the helping professions - education, social work, theology - aren't going to make that much more money.''
Dolores Furtado, a microbiology professor at the University of Kansas Medical Center, has another idea.
Furtado was among a corps of professors visiting Capitol Hill last week. She suggested to congressional aides a sliding scale based on income after college: Highly paid graduates would be charged the added interest; others, such as young professors, would be exempt.
``It seemed to be attractive to them,'' Furtado said. ``At least to write down and pass the word.'' ILLUSTRATION: Color Staff photo CHRISTOPHER REDDICK
NaTasha Geth, will attend ODU on a Stafford loan next year, she
supports the GOPs' budget-balancing efforts, but ``they need to take
into consideration what they're doing to us.''
KEYWORDS: FINANCIAL AID COLLEGE UNIVERSITY TUITION STUDENT LOAN by CNB