Clinton Unveils Student Aid Plan

President Clinton has revealed a new plan for providing student aid that would give students $5,000 toward tuition in return for each year of community service and that would restructure federal student loan programs.

The proposal, unveiled in a speech Friday at the University of New Orleans, fulfilled a campaign promise to both encourage involvement in public service and to make college more accessible to the middle class.

The program consists of three major parts. The national service trust act would pay $10,000 toward tuition for two years of service, in addition to rewarding participants with at least the minimum wage and any health and child care needed. Jobs would have to be in education, the environment, public safety or human services.

The direct lending provision would distribute federally guaranteed student loans to students via a pool of aid from which schools could draw, ending the current practice in which loans are made by commercial banks.

Another proposal would allow graduates to repay loans at a monthly rate based on their income, rather than at a set rate.

The programs are expected to be submitted as separate bills to Congress soon. The president said that he hopes to begin the pilot program in 1994 with a budget of $400 million for 25,000 participants in the national service project.

Jane H. Corlette, Harvard's acting vice president for government, community and public affairs at Harvard, said that the service trust is a good idea, but one that presents several problems in practice.

"I don't think the program is really a substitute for regular public aid programs, [such as] Pell grants," she said. "I hope that if it is successful as a pilot program and they expand it, they don't forget the other programs as well."

Harvard, said Corlette, already has a well-developed public service program at Phillips Brooks House. Corlette said that no details had been worked out on how the new proposal would work with student time devoted to PBH.

"A tremendous amount of students do public work now and don't get paid for it," she said. "We do a lot more in terms of most schools in allowing students in work-study work off-campus in public service."

The additional funding received from the national service trust would be welcomed by Harvard, said Corlette. But she also pointed out that the large cost of the program could make it difficult to pass as a bill.

The direct lending plan, however, would save about $1 billion in federal dollars per year by reducing default rates, she said. In fact, she said, Harvard would prefer the proposed change to the current system, by which banks receive interest from students in return for loans.

"The program now...is very complicated for students, not to mention very complicated for us," she said.

Harvard is well set up for the onset of direct lending and the national service initiative because of its current large-scale system of financial aid, said Corlette. The University as a whole gave out $167.7 million in financial aid to undergraduate and graduate students in 1992, and approximately two-thirds of Harvard undergraduates receive some form of financial aid.

Corlette said some smaller schools could be apprehensive about playing a greater role in distributing governmental aid. She said, however, that she expects it actually to be easier for schools to manage.

"The school role [under the new program] is to simply make sure that students sign the promissory note. The burden on the school would be less than it is now," she said.

But she said that banks and "Sallie Mac," the private student loan marketing agency, have already expressed resistance to the idea, presumably because it would mean a significant loss of revenue generated by the interest collected on student loans.

Corlette said she approved of the provision by which graduates could repay loans as a percentage of their salaries. She said that, although the College does not currently have such a system, other parts of the University do.

"We have those in the Law School and the Kennedy School. Those programs show a lot of promise," she said.

Conservative critics such as Baker Professor of Economics Martin S. Feldstein '61 have said such programs that link loan repayment to income wrongly distort work effort. Feldstein has also argued that taxpayers should not subsidize students who go to college, saying that students benefit from their choice in the form of high income

"The school role [under the new program] is to simply make sure that students sign the promissory note. The burden on the school would be less than it is now," she said.

But she said that banks and "Sallie Mac," the private student loan marketing agency, have already expressed resistance to the idea, presumably because it would mean a significant loss of revenue generated by the interest collected on student loans.

Corlette said she approved of the provision by which graduates could repay loans as a percentage of their salaries. She said that, although the College does not currently have such a system, other parts of the University do.

"We have those in the Law School and the Kennedy School. Those programs show a lot of promise," she said.

Conservative critics such as Baker Professor of Economics Martin S. Feldstein '61 have said such programs that link loan repayment to income wrongly distort work effort. Feldstein has also argued that taxpayers should not subsidize students who go to college, saying that students benefit from their choice in the form of high income