When the U.S. Congress reauthorizes the Higher Education Act next year, the process could strip the Stafford federal loan program of its entitlement and transfer the entitlement to the Pell Grant program, congressional aids say.

A student aid program has entitlement when every student who demonstrates financial need receives funds. Currently, the federal Stafford loan program -- formerly the Guaranteed Student Loan program -- is an entitlement program, and the Pell Grant program is not.

If the act is reauthorized under the current proposal, the average University student with a GSL could lose part, but not necessarily all, of that funding. If a student has a Pell Grant, that person would be eligible for a larger grant and would therefore have to borrow less money.

Robert Evans, University director of Financial Aid, said his office will be creating test scenarios to determine the effect such a proposal would have on University students.

"Penn State represents one of the largest institutions in the country and one of the largest student aid programs, so we're going to be testing it no matter what," he said, adding there is a lack of grant money now.

David Evans, staff director of the Senate Education, Arts and Humanities Subcommittee, said in the Jan. 26 issue of Student Aid that grants should be the predominant form of financial aid, and loans should be supplemental assistance.

Robert Evans said that in recent years increases in student-loan availability have surpassed the availability of grants.

Next year Congress will try to decide how to appropriate money between loans and grants, he said.

"Given this open door that we've had toward the Guaranteed Student Loan program, the federal government has to pay a lot of interest on those loans," Evans said. "It may be better to take the money from the federal treasury and put it into grant programs."

Many people who qualify for Pell Grants also qualify for federal loans, Evans said. Under the proposal, people who receive a combination of loans and grants would have to borrow less money because for every dollar the grant goes up, the loan eligibility is decreased.

"(But) It doesn't work in reverse," Evans said. "If you're eligible for a Stafford loan, that does not necessarily mean you're eligible for a Pell Grant."

About 25,000 University students receive Stafford federal loans, while almost 12,000 students receive Pell Grants.

According to a recent document from the American Council on Education, which outlined recommendations for the HEA reauthoriztion process, Pell Grants account for 16.7 percent of all student aid while Stafford Federal loans total 44.5 percent across the nation.

The document pointed out that low-income students are being denied access to higher education because of the present imbalance between loans and grants.

To combat this, the council's Task Force on Low-income Students recommended an increase in maximum award levels for grant programs.

Other recommendations call for a simplification of the needs analysis system. According to the document, many low-income students are discouraged from applying for grants because of complicated forms.

This week, President Bush released his budget proposal for the fiscal year 1991. Because funding for student aid programs is planned a year in advance, the changes in funding suggested for 1991 would not take effect until the 1992-93 academic year.

The budget represents no substantial increases in student aid funding, said Richard Elwell, information officer for the U.S. Department of Education.

Richard Jerue, staff director for the House Post-secondary Education Subcommittee, said giving the Pell Grant program entitlement does not necessarily involve stripping the Stafford federal loan program.

"We are just trying to make sure that grant programs are not subject to the annual whims of the budget," Jerue said.

However, Jerue said members of the higher education community fear that giving more money to the Pell Grant program will cause other programs to suffer.

"The higher education community has a mind set that the education budget is a fixed pie," Jerue said. "There is no rule that says education has a limited budget. Money for education could come from a reduction in the defense budget."

Congress does not intend to make the Pell Grant program a substitute for other programs, Jerue said.

Sarah Flanagan, professional staff member of the Senate Education, Arts and Humanities Subcommittee, said the Senate has not devoted much time to the reauthorization process because it is currently involved in the reauthorization of vocational education programs.

"We certainly would like to see a major increase in the grant program," Flanagan said. "(However) Whether or not it's realistic to get a new educational entitlement now is a big question."