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Brazilian President Dilma Rousseff waves as she leaves a ceremony marking the extension of the Programa Mais Medicos (Program More Doctors), at the Planalto Palace in Brasilia, Brazil April 29, 2016. REUTERS/Ueslei Marcelino

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By Juliana Schincariol

CARUARU, Brazil (Reuters) - Jordânia Feitosa was three months into nursing studies at a private university in northeast Brazil when she learned her student loan application had been denied.

Unable to afford the fees, the 18-year old farmer's daughter dropped out and now hopes against high odds to land a coveted slot at a free public university.

Like many of her age, Feitosa feels betrayed by a leftist government that during 13 years in power has prided itself on economic and social gains for Brazil's giant working class.

President Dilma Rousseff, facing likely impeachment less than two years after being re-elected with campaign vows to broaden educational programs, instead is slashing the financing available to aspiring students.

"Everyone used to get a loan," Feitosa says. "All that has gone wrong with education is the government's fault."

Struggling to curtail a spiralling budget deficit, Rousseff's administration last year cut by half the number of loans made available for low-income students through the government's Student Finance Fund (FIES).

It is just one of many reversals made by the ruling Workers Party as Rousseff, who could be forced from office by mid-May, seeks to reorder erratic government finances.

The 68-year old president, who denies any wrongdoing, is expected to face trial in Brazil's Senate in May over budget irregularities. If that happens, she will be suspended from office and replaced by her vice-president, Michel Temer, an opposition leader who broke with her as impeachment became more likely.

INEQUALITY

Just a few years ago, when Feitosa's older brother secured a loan to study physical education, things were very different.

The northeast was still riding a wave of Workers Party support in the form of successful cash-transfer programs for poor families and a growth in FIES loans.

The region, Brazil's poorest and the birthplace of Rousseff's popular predecessor, Luiz Inacio Lula da Silva, was the bastion of Workers Party support.

Education was crucial to the Workers Party vision. Government financing was meant to help Brazil overcome inequality in the country's educational system.

Wealthy families pay for private schools and bypass what is widely considered lacklustre public education before university. That better prepares wealthy children for entrance exams to free public universities, which in contrast are generally of higher quality than most private colleges.

In the northeast, where there are fewer public universities than in the wealthier south, the problem is worse. Most students rely on private colleges, and on government loans to afford them.

University is Brazil's most important driver of social mobility. Brazilian graduates earn on average 2.5 times more than peers who didn't study, a bigger gap than any of the 34 countries in the OECD, according to a 2011 study by the group of mostly developed nations.

To get more students, especially from poorer backgrounds, into university the government started expanding FIES loans. Between 2010 and 2014, the number of new loans rose nearly 10-fold to 732,000.

The program's cost jumped to 14 billion reais (£2.7 billion) and accounted for 15 percent of federal education spending.

The flood of government cash led education companies like Kroton Educacional and Estacio SA to open new schools and increase the number of courses. For years they were some of Brazil's best performing stocks.

In few places was this growth felt more than in Caruaru, a city of 350,000 people best known for its giant open air market.

Over the past 15 years, two new universities opened and libraries and laboratories sprang up. The number of students soared from 1,000 to 15,000. Nearby towns put on dozens of cars and buses to ferry students to Caruaru.

After Rousseff's first term, the northeast had more students entering private education than anywhere else in Brazil.

DEVELOPMENT COMPROMISED

When she ran for re-election in 2014, Rousseff promised to continue the financing, stumping beneath banners proclaiming Brazil an "educational homeland." She launched a plan to put 50 percent of 18-24 year olds through higher education by 2024, from under 20 percent at the time.

But last year, Brazil entered what is now its deepest and most prolonged recession in a century. Rousseff halved the number of loans, made the ones available harder to get and raised interest rates and shortened the terms on loans.

"This is going to compromise the economic development of the country," said Janguiê Diniz, founder of the private education company Ser Educacional.

In the northeast, the reversals are hard to take. "It is one of the regions worst hit," said economist Amanda Aires.

With unemployment rising above 10 percent, polls already show a slide in Workers Party support. In a recent survey by pollster Ibope, just 13 percent of voters in the northeast thought Rousseff's government was good or excellent.

Alongside rising anger, there is a sense of sadness, too.

"If it hadn't been for the Workers Party or the FIES, how would I be studying psychology now? How would I have the money?," said Fernanda Saylla on a bus travelling to her course in Caruaru.

(Writing by Stephen Eisenhammer; Editing by Paulo Prada and Kieran Murray)

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