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Washington Update

Student-Aid Program Begins New Era

Beginning this month, federal student aid programs will serve as
guinea pigs in an experiment to infuse business practices into the
administration of government services.

In its Higher Education Act bill, Congress designated the
first-ever “performance-based organization” (PBO) to improve the
delivery of federal aid. On Dec. 1, the Clinton administration selected
Greg Woods, a former software executive, to direct the program.

Under the law, the PBO chief has expertise in management and
information technology and reports directly to the U.S. education
secretary. The director and senior staff will receive pay largely by
attaining specific performance goals, and the PBO has the flexibility
to hire other staff without normal civil service constraints.

Woods’ job includes “responsibilities unlike any other position in
the federal government,” Education Secretary Richard Riley said.

Among other goals, Woods is expected to increase use of the
Internet and electronic applications in processing student aid
requests. His office also will work on efforts to reduce student loan

Overall, his office is responsible for $46 billion in federal aid for 8 million students.

Woods previously served as chief executive officer of a computer
and engineering company that develops software products. Since 1993, he
has served as deputy director of information technology for Vice
President Al Gore’s National Partnership for Reinventing Government. In
his most recent role, he helped develop greater electronic access to
government services and chaired an administration task force on
customer service improvements at the Internal Revenue Service.

Winston Returning to Education Department

The executive director of President Bill Clinton’s Initiative on Race will rejoin the Education Department (ED) in January.

Judith Winston, a Howard University graduate, will return to her
old job as ED’s general counsel. Winston left the job temporarily to
serve as the day-to-day chief of the president’s race initiative,
launched in June 1997. As part of this effort, a seven-member advisory
board developed recommendations for President Clinton in September.

The advisory board faced criticism from some civil rights activists
as well as conservatives, although its final recommendations included
more federal funding for civil rights enforcement and for education.

Education Secretary Richard Riley said the nation “has benefited
from [Winston’s] expertise and hard work at the race initiative and at
the Education Department.”

Winston joined ED in 1993 after serving as a civil rights attorney
in various nonprofit organizations, including the Women’s Legal Defense
Fund. She also is a graduate of Georgetown University Law School.

Schools Get First E-Rate Discounts

The check is finally in the mail for at least some school districts
awaiting their new “education rate” phone and Internet discounts.

About 3,000 primary and secondary schools recently received
notification about special “e-rate” discounts that will save them
between 20 percent and 90 percent on telecommunications and Internet
connection costs. However, about 30,000 have applied for discounts. The
government says those schools will receive their allotments soon.

“The e-rate belongs to the kids of America,” says Rep. Major Owens
(D-N.Y.), a strong supporter of the program and a critic of industry
efforts to scale back the initiative. When implemented, the program may
be “the greatest thing that has happened to schools in a long, long

Congress created the program in the Telecommunications Act of 1996,
with large telecom companies contributing to the fund in exchange for
regulatory and tax breaks. But many companies sought to scale back
their contributions this year, and slowness in processing a heavy wave
of applications put the program behind schedule.

Under the program, schools in high-poverty areas receive the
greatest discounts, though virtually all schools are eligible for at
least a 20 percent price break. In the first wave of funding, about
one-quarter of the dollars will go to schools that qualify for the
largest discounts, said the Schools and Libraries Corp., an entity
created by the Federal Communications Commission (FCC) to carry out the

In schools with the largest price breaks, about 75 percent of students come from low-income households.

The first 3,000 schools have received about $73 million in
financial commitments. Overall, however, the 30,000 applicants have
requested more than $2 billion. Federal officials say more notices and
funding commitments will go out in December and January.

Of the $73 million in the first wave of funding, $46.7 million —
about 64 percent — will go to urban schools. About 33 percent, or $24
million, will go to rural schools.

The e-rate program remains controversial, however. Owens and other
advocates have faulted efforts by industry to scale back the program.
Under pressure from giant telecom companies, the government last summer
scaled back the timing of corporate contributions.

Companies were to pay $2.25 billion to the fund in 1998 alone,
while the new change requires them to pay about $2 billion by June 30,
1999. As a result, critics note start-up funding may be only 50 percent
of the program’s original projections for its first two years.

Some GOP lawmakers also oppose the program, calling it an “e-rate”
tax that companies pass on to the public. And the issue likely will not
go away, Since Rep. William Goodling (R-Pa.), chairman of the House
Education and the Workforce Committee, wants to examine it next year.

Congress should “eliminate unconstitutional taxes and ensure that
consumers’ telephone bills will not increase,” said Goodling, who also
faulted the FCC for spurring the tax increase even though most schools
have yet to see anything from the program.

A Goodling spokesman said the congressman likely would convene a public hearing on the issue in late winter or early spring.

But Owens has noted that the law creating the e-rate was not an onerous one for industry.

“The Telecommunications Act of 1996 gave the big corporations in
broadcasting and telecommunications almost everything they asked for,”
he said. “The one concession they made is that they would provide
discounted rates for schools and libraries.”

Students Advised to Act Quickly for Reduced Student-Loan Rates

The Clinton administration is making a major push to persuade
college students to take advantage of a money-saving college loan
option that expires in January.

College students who refinance their education loans through Jan.
31 will get a reduced interest rate of 7.46 percent. Students often use
these loans to consolidate debts under a single payment. Those who take
advantage of the lower rates will save at least $50 on every $1,000 of
debt, the Education Department says.

The lower rate applies only through Jan. 31 as a result of a late
compromise between the administration and Congress during negotiations
on the Higher Education Act. Beginning in February, the interest rate
on consolidations will vary but may reach as high as 8.25 percent.

Students who want to take advantage of the lower rate should
contact their lender or the federal government’s direct loan program at
(800) 557-7392.

The rate on consolidation loans is separate from the interest-rate
change on new loans that Congress passed in the HEA bill. Students
taking out new loans are eligible for the 7.46 percent rate throughout
the life of this legislation.

COPYRIGHT 1998 Cox, Matthews & Associates

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