Californians will have to pay out as much as $40 million more next year in student loan fees, including an extra $700,000 by UCSD students, if Congress approves the proposals included in President George W. Bush’s budget. Under the plan, several federal financial aid programs would receive cuts and funding for most programs would remain flat.

Education groups called the plan a disappointment for students and universities already enduring tuition increases and cuts in state funding.

“It’s a budget that says to students, ‘Work more, borrow more or drop to part-time because the federal government will not provide the resources,” said Becky Timmons, director of government relations at the American Council on Education, a coordinating body for higher education institutions. “We think it’s completely inadequate. It doesn’t even begin to reflect the need students have for assistance.”

The president’s record $57.3 billion proposal for the U.S. Department of Education included a three-percent annual increase, the largest of any domestic agency. Most of the extra money goes to primary and secondary education.

Education Secretary Rod Paige praised Bush’s funding plan for education at a press conference on Feb. 2.

“With his 2005 budget request, President Bush has reaffirmed his commitment to our nation’s children, parents and teachers,” Paige said. “And I believe that one day, we will look back on these years and say that this was the turning point.”

The plan calls for an additional $2 billion to fund special education and support needy schools.

With his 2005 budget, Bush included a request for Congress to require students to pay a guarantee fee on student loans they take out after October 2004, totaling one percent of the amount borrowed. The money would be used to reimburse lenders when students default on their payments. Current law makes the fee optional.

One critic of the proposal, Rep. George Miller (D-Calif.), argued before a House committee that the change would cost students an extra $40 billion nationwide over the next decade.

Just days after the president announced his proposal, the California Student Aid Commission and its non-profit auxiliary EdFund, which administers the commission’s guarantee program for the majority of student loans in the state, said it plans to waive the fee next year for the ninth year in a row as part of their “No G-Fee” program.

The commission cited rapidly increasing tuition fees as one of the factors for its decision, according to spokesman Dana Callihan. It estimated the plan would save students as much as $40 million next year, though the President’s proposal would require EdFund to charge the fee.

“It’s small — one percent per student — but we’d still rather see it in the pockets of students than in somebody’s coffers,” said UCSD Director of Financial Aid Vincent De Anda, who sits on CSAC’s loan advisory committee.

EdFund provides the guarantee service for all student loans at UCSD, including the $70.3 million students and their families took out during the 2002-03 school year, according to De Anda. One percent of the amount would have cost them an extra $703,000.

Smaller guarantee agencies say they must charge the fee to meet legal reserve limits and have lobbied to make the fee mandatory. They say the move is needed to preserve their solvency, National Council of Higher Education Loan Programs President Brett E. Lief told the Chronicle of Higher Education.

Bush also proposed to keep the maximum Pell Grant, the largest of federal grants, at $4,050 for the third year in a row. Though his proposal added more than $800 million in funding for the grants — most filling last year’s deficit in the program — it also forecasts that 8,000 fewer students would receive the grant and cuts the average award by $42, from $2,441 to $2,399.

In addition, the budget plan said the Pell Grant program would face a $3.7 billion deficit by the end of the year because of an unexpected surge in grant applicants.

In inflation-adjusted dollars, the current amount of the grant is $500 smaller than in 1975-76, despite sharp increases in tuition costs since then, Miller said.

However, Bush called for an extra $33 million to add an additional $1,000 to grants of freshmen who take rigorous high school classes as part of the State Scholars program, in which 14 states participate. California students would be not eligible for the money because the state does not take part in the program.

Bush’s budget keeps funding for work-study and the Supplementary Educational Opportunity Grant at current levels and cuts all future contributions to the Perkins Loan program, under which universities act as the lender in providing low-interest loans. He stated in the proposal that universities have enough revolving funds from loan repayments to continue the program without additional funds.

Bush also asked Congress to overhaul the formula used by the government to fund the three “campus-based” programs, named so because the money for the programs goes to universities, which then distribute it among students. According to the proposal, the past amount was loosely tied to how long ago campuses began applying for the funding, with the newest schools missing out, a system the administration argued did not meet the needs of low-income students.

The campus would probably lose money under the new allocation formula, De Anda said, because UCSD has participated in the programs for many years.

As part of his proposal, Bush called on Congress to increase loan limits for freshmen from $2,625 to $3,000. The limit had remained nearly unchanged since the 1970s.

“We’ve been pushing for a higher level, especially for freshmen, because the costs have continued going up,” De Anda said, explaining that he would have liked to see additional limits for all students. “We’d like to see that increased. It would help us a lot in our packaging policies, and I think it would help our packaging in general.” Congress will decide on the president’s proposed funding levels when it approves next year’s budget. However, Congressional leaders will vote separately on actual proposed changes to financial aid programs, including the loan guarantee fee, as part of their reauthorization of the Higher Education Act.