Student Aid Proposal Seeks Major Expansion Of Unsubsidized Loans;Repayment Schedule Linked to Income
The Department of Education today released a proposal to increase dramatically a new and controversial student financial aid program that does not subsidize interest rates and links repayment schedules to a student's earnings after college.</br></br>If approved by Congress, the program of "income-contingent loans" would grow from a $5 million pilot project this year to $600 million in fiscal 1988. The program would allow students to borrow more than they are allowed under current financial aid formulas but would require them to pay the full cost of interest.</br></br>Under most financial aid programs, the federal government covers the interest costs above a set ceiling.</br></br>The funding proposal-part of the department's fiscal 1988 budget proposal to be released Monday-would provide 500,000 loans to students at 1,500 institutions, according to education officials. Under the pilot project scheduled to begin in the 1987-88 school year, the program will be tested at 10 colleges and universities.</br></br>"We're very excited about this program," said Bruce Carnes, deputy undersecretary of education. "We think it is the single biggest advance in the financing of higher education for students in the last 15 years."