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Proposal cuts aid for college students

WASHINGTON — President Obama's budget plan would cut $100 billion from Pell Grants and other higher education programs over a decade through belt-tightening and use the savings to keep the maximum college financial aid award at $5,550, an administration official said.

Nearly $90 billion of the projected savings would be achieved through two changes, said the official, who spoke on condition of anonymity ahead of today's release of Obama's 2012 budget. The spending plan applies to the budget year that begins Oct. 1.

Congress would have to approve both changes.

The first proposal would end the "year-round Pell" policy that let students collect two grants in a calendar year, with the second grant used for summer school. The official said the costs exceeded expectations and there was little evidence that students earn their degrees any faster.

The change would save $8 billion next year and $60 billion over a decade, the official said.

A second proposal would reduce loan subsidies for graduate and professional students. That would free $2 billion next year and save $29 billion over 10 years, according to the official.

The government currently pays the interest on student loans for some graduate and professional students as long as they stay in college. But the official said experts think the subsidy has failed to encourage more students to attend graduate school and isn't well-matched to borrowers who have trouble repaying the loans.

Another $4 billion in savings over 10 years would be achieved by broadening the use of IRS data to determine eligibility, reducing improper payments and easing the application process, the official said.

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