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Pennsylvania Student Loan Agency Planning Cuts to Some Aid Programs


The state-run student loan agency is planning to cut spending on certain programs by a projected 58 percent.

The cuts at the Pennsylvania Higher Education Assistance Agency mean a reduction in the number of grants given to full-time students and in financial aid to adults taking job-training classes. PHEAA’s nonprofit foundation also will have less money to hand out to nursing students and nursing educators.

The agency anticipates spending $44.4 million on the aid programs in 2008-09, down from $105.8 million this year. The cuts are needed because of a new federal law governing student lenders and by unsettled financial market conditions, said James Preston, PHEAA’s interim president and CEO.

PHEAA’s board on Friday accepted the recommended cuts. The agency owns $12 billion in student loans and services $80 billion in student loans paid back, but must adjust to a new business paradigm, Preston said.

“We’re going to try to look carefully at 2008-09 going forward in terms of our mission to public service and to keeping the business going,” Preston said.

The cuts come as PHEAA grapples with continued criticism of its spending practices.

Earlier this month, state auditors concluded PHEAA spent $2.5 million in bonuses for its employees, including about $1.5 million to its top 23 executives, during the year that ended June 30. The size of the bonuses and the disclosure of a $108,000 amusement-park outing for employees prompted its chief executive to make a more abrupt departure than he had planned.

Rep. Josh Shapiro, D-Montgomery, said the board was forced to make the cuts, in part, “because they wasted money on incomprehensible excesses designed to serve the interests of high-level PHEAA executives rather than the students.”

The new federal law cut some $20 billion in government subsidies to banks and agencies such as PHEAA. It was designed to free up money for federal programs.

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