Daily Nebraskan
Monday, January 12, 1987
Cuts mot ceinMn
UNL financial-aid director opposes budget cut proposals
By Kirk Zebolsky
Staff Reporter
The Reagan administration's pro
posed cuts of grants and work-study
programs for college students will face
"discussion, amending and new prop
osals" before they become law, said Bill
McFarland, the UNL director of Finan
cial Aid.
"Reagan has always submitted this
kind of budget proposing drastic cuts
and eliminating many programs and
hampering others," McFarland said.
"Historically, this budget does not get
through as presented."
The administration also proposes an
end to paying part of the interest rates
on Guaranteed and National Direct
student loans. The administration, in
its 1988 fiscal year budget proposal,
said college students should pay for
most of the costs of education accord
ing to the Associated Press.
To make federal loans easier to
repay, the administration has proposed
"income-contingency" loans that would
allow holders to make payments that
vary with the size of their incomes.
The White House wants to drop the 5
percent origination fee charged to GSL
holders, but wants to add a 9 percent
fee to cover the costs of defaults.
The Reagan budget would cut $5.5
billion from the $19.5 billion approp
riated for the Department of Education
this year. College students would "bear
the brunt" of most of the cut, the arti
cle said.
McFarland said he, financial aid
associations and the Association of
Land Grant Organizations will lobby
against the budget.
"It would be a serious reduction in
financial aid," he said.. "But I just
would say that we will have many
opportunities to make our points.
"I understand the needs for making
cuts," he said. "I think we're willing to
take our fair share with other programs
to help the country to survive."
But, he said, comparing the cost of
education funding to the cost of build
ing "one or two B-l Bombers . . . I'd
rather see it go to education."
McFarland said a shift in availability
from grant funds to loan funds has
created a situation where more stu
dents borrow more money. If the coun
try gets on "sound economic footing,"
he said, there could be a shift back to
grant funds.
New requirements for schools and
banks to counsel students about debts
before they borrow "helps the students
to gain some maturity in the financial
area," McFarland said, but "they seem
to be mortgaging their future."
"The more informed individuals might
be less willing to mortgage their future
. . .and will simply take another option,"
he said, referring to "middle-and upper
class" students.
A Lincoln bank official said "disad
vantaged" students also might not bor
row for education.
"I think maybe they aren't aware of
what's available," said Ken Backemeyer,
senior vice president and trust officer
at Union Bank and Trust Co.
"I have heard that disadvantaged
people are not used to borrowing money
... he said. "And to them it's more
traumatic ... to think that they might
have to take out a loan and what that
may have to require in the future to
make the payments."
Kathy Hoffart, a student-loan spe
cialist at FirsTier Bank of Lincoln, said
families in higher income brackets will
find it more difficult to qualify for stu
dent loans because of new needs tests.
This will offset the increase in the max
imum loan amount allowed yearly, she
said.
Both officials said increased student
debt will not greatly harm borrowers'
economic well-being.
If students responsibly plan to pay
off loans, Backemeyer said, their ability
to borrow for other needs won't be hurt.
Hoffart said students are "just going to
be more obligated." She said that she
predicted that UNL students will move
out of Nebraska to find jobs with a big
enough salary to pay off the loans.
Hoffart and Backemeyer said that
staff at their banks try to warn students
about how much their payments will
be.
"A lot of them maybe don't under
stand exactly how much they're com
mitting themselves for payments in the
future," Backemeyer said. "A lot of
students don't even realize it's a loan."
He said that it is important for deb
tors to "keep in contact" with their
lenders to prevent defaults, which will
hurt their credit.
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