'Phasing Out' the NDEA

President Johnson has asked Congress to cut federal outlays for National Defense Education Act loans by $40 million next year and eventually "phase out" the entire program. From any point of view but his own, the President's plan is an outright mistake.

Since it was approved, in 1958, the NDEA has helped hundreds of thousands of college students for whom this very expensive four-year proposition would have been impossible. NDEA, if the experience of Harvard students is any indication, has been a dependable, easily accessible source of money. Graduate and undergraduate students may now borrow up to $1000 a year interest free while they are in school; after graduation, they begin to repay the principal and pay interest at three per cent.

Members of Congress are reluctant to do away with a system that has been such a popular success. Rep. Edith Green (D-Ore.), the President's choice to steer his health-education package through Congress, has said the House is unlikely to go along with Johnson unless he offers "concrete guarantees that no one will be hurt" by phasing out the NDEA. Rep. John Brademas (D-Ind.), who serves on the House Committee on Education and Labor with Mrs. Green, has predicted that the President will face fierce fights in both houses.

Although he has asked that funds be slashed by only one-quarter in the coming year, the President would like to replace the NDEA loans with government-in-sured loans. He has proposed that the government guarantee loans which students would negotiate themselves through home town banks or state agencies. The government would pay all of the interest while the student is in college and part of it after he graduates, provided his family's income, figured on a complicated formula, is under $15,000. If the family's income exceeded that amount, the government would not subsidize the interest.

Johnson regards the change-over as a concession to thrift and good bookkeeping. Bankers, college administrators, and students with NDEA loans--the people most concerned with a switch in the procedure--are not as dispassionate. Forcing a student to obtain a loan from a hometown firm, they say, will create problems never encountered when all he had to do was walk to his college's financial aid office and sign a single form.

Bankers have compained that, in a tight money year, they would always prefer to lend larger sums to businesses than to negotiate myriads of small loans for college students. In a letter to Sen. Jacob Javittss (R-N.Y.), the American Banking Association last week made it clear that they will never be willing to do that kind of business.

In any town, students would be competing with each other for money--and bankers naturally would lend money, to the better business risk, denying funds to the neediest. Brademas argued last week that it was unreasonable to expect bankers to lend $1000 to a family whose mortgage the bank was foreclosing. "And could a Negro ask a loan of a white banker in a Southern town?" Brademas asked. "He would be lucky if he was able to walk in the front door," he said.

Because the neediest students would not be able to negotiate their own loans, the financial aid resources of many colleges would be severely strained. Harvard, with its enormous private loan funds, could stand by its students, but many small private colleges depend completely on NDEA money. Colleges like Radcliffe could no longer afford to admit great numbers of students with financial need. Northeastern, Boston University, and other colleges whose enrollments are drawn from lower-income families, would find that many of their students simply could no longer afford higher education.

In administering the guaranteed loan program, colleges would be caught in snarls of paper work, trying to gather financial information from thousands of banks across the country before determining students' needs and resources. The visions of this jungle have turned administrators, at least at Harvard, against the plan. They think it would be simply unworkable.

The President's reasons for tossing aside these objections is patently political. He wants to go on record "as trying to keep the budget deficit down," according to Rep. James H. Scheuer (D-N.Y.); if the government insures the loans, the full amount will not have to be listed on the budget. Congressmen speculate that the President will gracefully accept defeat on this issue and others--including the school lunch program--if Congress is willing to accept blame for the budget deficit.

Johnson has failed to realize that the proposed revisions would be more expensive than the present plan. Under the NDEA, the government is the banker; students get 90 per cent of their money from the government--the colleges put up the rest--and they repay the full amount after graduation. But under the guaranteed loan plan, the government would be subsidizing the interest on student loans and that money, paid to private banks or lending agencies, would never be returned to the government.

The guaranteed loan program originated in the Higher Education Act of 1965, but was designed to give aid to "middle-income" families--too wealthy to qualify for aid from ordinary loan programs but not wealthy enough to finance college education without a hefty strain. It ought to be used for this and this alone.

Guaranteed loans are simply not appropriate for the country's neediest college students, those whose families will be unable to negotiate loans privately; NDEA loans are easily accessible to the poorest. College administrators envision a two-headed federal loan program; they would like to retain National Defense loans, on a much smaller basis, and also establish a guaranteed loan program for middle-income families. If Congress wants to make the best--and today that unfortunately means the most costly--higher education available to rich and poor, it will follow the college's advice.