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(a) "Under Contract" training, or,

(b) financial aid to students

without discrimination to the student by reason of the corporate structure (i.e. public, nonprofit, or proprietary) of the school.

Eight of these programs involve under contract training with proprietary institutions. The money received by the institution is not a grant or a subsidy, but is legal consideration received in performance of a contractual service performed by the institution. The two best known programs of this type are the Vocational Rehabilitation Act and the Manpower Development and Training Act.

Ten of the programs provide direct aid to the student. Six of these programs provide monthly cash allowances, which are not loans, to students enrolled in educational institutions and this includes accredited proprietary schools. These programs are:

(a) "Under Contract" training.

1. Vocational Rehabilitation Act of June 2, 1920, as amended 29 U.S.C. 31 et seq.

2. Manpower Development and Training Act of 1962; as amended 42 U.S.C. 2571; P.L. 89-792

3. Indian Adult Vocational Education; 25 U.S.C. 309, 452, 823 (c)

4. Economic Opportunity Act of 1964, as amended, 42 U.S.C. 2701 et seq; P. L. 89-794

5. Government Employee's Training Program; (P. L. 80-554) 5 U.S.C. 4101-4118

6. Economic Development Administration (P. L. 89-15) 42 U.S.C. 2583

7. Veteran's Vocational Rehabilitation, 38 U.S.C. 1501-1511

8. Vocational Education Act of 1963; P. L. 88-210; Sec. 8(1)

(b) Student Financial Grants, Loans or Tax Benefits.

*9. Social Security Student Dependent; P. L. 89-97; See Sec. 202(d) (8) (C)

*10. F.E.C.A. Student Dependents; P. L. 89-488; See Sec. 10 (M)

*11. Railroad Retirement Student Dependents; P. L. 89-700; See Sec. 5(1) (Z)

12. Civil Service Retirement Student Dependents; P. L. 80-504; 5 U.S.C. 2251-2268; See Sec. 2251(j) and Sec. 2260, and P. L. 89-554; Sec. 8341 *13. War Orphans Educational Assistance; 38 U.S.C. 1701 et seq.

* 14. Veterans Readjustment Benefits Act of 1966; P. L. 80-358; See Sec. 1652 (c)

15. Vocational Loans to Indians; 25 U.S.C. 471.

16. Vocational Loans to Eskimos; 25 U.S.C. 479

17. National Vocational Student Loan Insurance; P. L. 89-287

18. Income Tax Deduction for Student Dependents; 26 U.S.C. 151 (e) (4)


Much confusion has resulted from the lack of a conceptual analysis of how Federal money is used in support of education. Educational support is accomplished both by aid to institutions and by aid to students. The eighteen programs cited are all in the form of student aid. None of them constitutes institutional aid insofar as the involvement of proprietary schools is concerned.

It is the need of the student and the quality of the educational program offered which determines whether or not the student is properly enrolled in an eligible institution. The corporate form of the institution, whether it is public, private nonprofit or proprietary, has nothing to do with the need of the student or the quality of the education program. The proper question is "Is the institution approved or accredited by a recognized authority?"

It is true that proprietary institutions are the recipients of Federal funds under at least eight programs whereby their facilities are used to provide training for people "under contract." But, in none of these cases is the money received in the form of grants or subsidies. It is payment for services rendered under a contract. The money is earned.


All of the eighteen programs which we have previously listed are speicalized, peripheral, and ancillary programs designed to meet the particular needs of a *Outright grants of money paid monthly direct to student.

particular category of people. This would include Veterans, War Orphans, American Indians, MDTA, Social Security, Student Dependent Survivors, etc. But, the very heart of student financial aid in cases of "need" is the NDEA Student Loan Program. The only basis which excludes needy students in accredited proprietary schools from the Title II student loans of the NDEA is the proprietary corporate form of the accredited educational institution.

A Stanford Research Institute study' under contract from the U.S. Office of Education has pointed out graphically that:

"Many young high school graduates-more has generally been suspected-pass up low-cost public education to go to proprietary schools."

The USOE sponsored Stanford study has shown that even in the face of public education, at no cost to the student, some students find that proprietary schools are better able to offer them an educational program to prepare them for employment. We don't say all students but only some.

The requirement of NDEA Sec. 103(b) (4), that the institution be public or private nonprofit is the barrier to student aid. This same requirement for purposes of grants and subsidies to institutions for bricks and mortar may be a valid expression of present public policy. But we are talking about student aid and not institutional aid.

Therefore, we respectfully request the repeal of Sec. 103(b) (4) of the Title II NDEA Student Loan Program. This can be accomplished by the following language:

To amend NDEA title II student loans


The second sentence of section 103(b) of the National Defense Education Act of 1958 is amended by striking out “(4),”.

This is exactly the same type of amendment which has been proposed in the Work-Study Amendment of Sec. 435 of the bill now before the Subcommittee (H.R. 6232).


All discussion both from the Congress and from the Administration have clearly identified the insured loan program as being specifically designed for assistance to the middle class income group. But the fact is that most students enrolled in proprietary business, trade and technical schools come from lower-income families.

Dr. Kenneth B. Hoyt, immediate Past-President of the American Personnel and Guidance Association has studied thousands of these students and has stated: "

"I have collected the research data personally and so have had extensive opportunities to both observe and visit personally with these students. Our data show that most of them-both from the trade-technical and the business schoolscome from families of a lower-income socioenomic (sic) background."

The guaranteed loan program, which is admittedly designed for middle income students, somehow turns into a panacea when the discussion involves vocational students who preponderantly come from lower-income families;

Possibly by now the USOE has clarified its statement of last week to this Subcommittee that under the Guaranteed Loan Program $400,000,000 of loans have been made to 460,000 students. These figures relate solely to the insured loan program of Title IV-B of the Higher Education Act. The Student Financial Aid Division of USOE, as of last week, has been unable to supply us with any figures as to the number of students or the number of dollars loaned under the Vocational loan program. They were clear on one point however. Neither the $400,000,000 nor the 460,000 students includes any vocational students.

Possibly by now the USOE has clarified its statement of last week to this Subcommittee that there are in operation now 50 state agencies to operate the Guaranteed Loan Program. The Student Financial Aid Division of USOE, as

2 Final Report, Contract No. OE-5-85-068, "Supply and Demand Factors Affecting Vocation Education Planning," A Methodological Study in Santa Clara County, California, October 1966, U.S. Department of Health, Education and Welfare, Office of Education, Bureau of Research, Stanford Research Institute, Menlo Park, California.

"American Education,' published by Department of Health, Education, and Welfare, U.S. Office of Education, Vol. 3, No. 4, April 1967, back cover.

Statement by Dr. Kenneth B. Hoyt, University of Iowa. Hearings before the Subcommittee on Education of the Committee on Labor and Public Welfare, United States Senate, (89th Congress, First Session), Higher Education Act of 1965, p. 1083.

of last week, informs us that "seed money" for vocational loans has gone to only twenty-four states. Agreements to operate the vocational program have been signed in only twenty-six states as follows:

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Possibly by now the USOE has clarified its statement of last week to this Subcommittee that there is also in the Vocational Loan Program a provision which would say that if some students are not able to get loans at the bank under the Guaranteed Loan Program there would be a direct loan program available to them. It is our understanding and information that no money has ever been requested and no money has ever been appropriated to implement the Sec. 10 Direct Loan provision of the vocational loan program.


Attached to this statement as Exhibit "A" are copies of a number of letters written by and received by Mrs. M. L. Gaston of the Booker T. Washington Business College of Birmingham, Alabama. These letters illustrates graphically the plight of vocational students who cannot get access to bank loans. These are the students who cannot get loans whether credit and interest rates are high or low. These letters point out why the Vocational Loan Insurance program is not doing the job. While these letters concern primarily needy Negro students. I am confident that the same problems apply to poor white students.

The Booker T. Washington Business College has ten to fifteen calls a day on how to get vocational loans. The school has been carrying students since last September who are unable to pay tuition. What a difference access to Title II NDEA loan funds would make!

These letters graphically show that poor children whose parents don't have bank accounts or credit experience are not going to get loans whether credit is "easy" or "tight." The bank replies show an expressed policy of reserving available funds for regular customers with credit experience.

Mrs. Gaston, who serves as a member of the Advisory Council on Insured Loans to Vocational Students, notes further that the demand for graduates far exceeds the number trained. She says they get four to six calls every day for secretaries.


It has been alleged that an expansion of NDEA to include needy students in accredited proprietary institutions would necessarily involve planning for additional students in additional institutions. But in the overall budget picture it would represent a judicious reallocation of student financial aid which would permit public and private nonprofit institutions to reallocate their own total budgets more effectively.

Additionally, with the prospect of a $50,000,000 overage in view there may be no need for any reallocation of NDEA student loan funds. The budget request for fiscal 1968 is $190,000,000. The projections given to the Subcommittee last week were rounded off at $240,000,000 based upon proposed amendments to the NDEA financing method.

The USOE sponsored study by the Stanford Research Institute has shown conclusively that some students are motivated and are educated better in a proprietary institution even though the same program is offered at no charge in a public institution. But what are the true costs of inducing a needy student to enroll in or remain in a public institution when he really should not be there? This too is a budget factor.

A 1966 Oregon study of Education Beyond the High School is most exhaustive and detailed on the whole subject. Statements by the American Council on Edu

5 "Education Beyond the High School," A Projection for Oregon, a report of the PostHigh School Study Committee appointed by the Educational Coordinating Council, October 7, 1966. See page 51, Table II.

cation show that colleges and universities spent an estimated $2,442 per student in operating costs per student in 1965. The American Association of Junior Colleges claimed they spend annually per student $800 to $1200 in operating costs and $3000 to $4000 for construction and equipment.

The Oregon study showed that for 1964-65 operating costs per student at the University of Oregon were $1,117 and that tuition and fees of in-state students of $330 were only 29.5 percent of those operating costs. Thus, another $787 had to come from Federal, state or endowment sources.

In contrast, the proprietary business, trade or technical school relies 100 percent upon tuition for its operating costs. It gets no Federal or state tax money and seeks no such institutional support.

The increasing percentage of students with one or more semesters of college who are enrolling in business schools and the USOE sponsored SRI report show that these schools have a needed and legitimate role in American postsecondary education for some students. The Oregon study devotes fifteen pages to proprie tary schools.

Every time one of these such students enrolls in a proprietary Oregon business school the University of Oregon budget can then devote that same $787 to a student who can more properly benefit from a four-year college program.

The business schools are not in competition with the colleges and universities for the same students. Our role is to complement and supplement the structure of postsecondary education. Access to NDEA loans for our students has a far reaching budgetary impact of almost geometric proportions in permitting the colleges and universities to budget their operating cost of $2442 per student for those students who can best profit by a college or university program.

By making NDEA loans available to students in accredited proprietary schools the University of Oregon would then be relieved of $787 operating cost for a student who should not be there. The University of Oregon could properly aid a needy student from its NDEA allocation for the payment of the tuition increment of $330.

On the budget side, it would be most judicious to utilize the resources of the proprietary business, trade and technical schools by allowing them to administer Title II NDEA funds for students to use and pay back. This is certainly a far more conservative approach than that recommended by the U.S. Chamber of Commerce in its report calling for tuition grants."


The question has been raised whether, as a matter of policy, should Federal resources be used to help strengthen profit-making institutions? The question is not pertinent and such an allegation is, perhaps, a red herring. Student aid is not institutional aid.

For many years it has been Federal policy to utilize "under contract" the resources of the quality proprietary (i.e., tax-paying) schools. Since 1920 proprietary schools have been training students for the Vocational Rehabilitation Administration. According to Secretary Gardner of HEW in his 1967 Report to the Congress on MDTA:

In all, 140 Manpower training projects in 28 states involved private schools in one or more of these ways during the year. The cost was about $6.8 million, and 7,858 trainees were enrolled. (p. 27)

UBSA itself is administering the educational aspect of a million dollar MDTA demonstration project in an eight state area for about 450 people. Tuition is limited to $300,000 with the balance for subsistence and transportation to the MDTA trainees.

If there ever was a question of public policy over the use of proprietary schools, it was resolved long ago. Little publicity has been given to the successful training of students in proprietary schools under Title V of the Poverty Program. Only the notoriety of the Job Corps Centers seems to have emerged.

"Higher Education and National Affairs," American Council on Education, Vol. XV, No. 41, December 16, 1966, p. 8.

7 Statement by Bill J. Priest, President, American Association of Junior Colleges, HearIngs before the Subcommittee on Education of the Committee on Labor and Public Welfare, United States Senate, (89th Congress, Second Session), Higher Education Amendments of 1966, July 1966, p. 181.

"The Disadvantaged Poor: Education and Employment," Third Report of the Task Force on Economic Growth and Opportunity. Chamber of Commerce of the United States, Library of Congress Cat. No. 66-29037.

80-155-67-pt. 1-17

Last year USOE Assistant Commissioner Walter Arnold told the General Subcommittee on Education about the need to use all resources. He said:

"Mr. MEEDS. And the fields in which there is such a crying need today, with inadequate facilities to even serve vocational education.

Mr. ARNOLD. That is correct. I was reminded when you were discussing where the emphasis should be placed, I think you could say safely that if we utilized every resource in this country to its maximum, we wouldn't meet the needs in all of these programs, and for all kinds of persons in the country, at different levels of schooling."

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Public policy in the State of Pennsylvania now includes scholarship grants to students in proprietary business, trade and technical schools. Please see Exhibit "B."

In terms of the total education budget it would be consonant with long-established public policy to further utilize the resources of the proprietary schools through NDEA student loans with no problem or expense of institutional support.


An increasing percentage of business school graduates are transferring on to a number of four-year colleges with credit hour recognition for their business school courses. Many are becoming busines education teachers of which, according to the testimony last week, there is a shortage. Is such a partial solution to an admitted shortage to be discouraged or encouraged? It should be encouraged. Present public policy dictates that services as a teacher in certain institutions justify "forgiveness" of the loan at the rate of 10 percent per year up to 50 percent. If there is some statutory technicality involved, it can easily be rectified by amending Sec. 205 (b) (3) of the NDEA (P. L. 88-665).

The Administration has already proved via the proposed language amending Sec. 435 Work Study that statutory technicalities can be resolved with a little thought and a little care in order to help students without aiding insitutions. It is unconscionable to penalize a qualified teacher in a favored institution because of where he might have gotten some portion of his education.


When the Congress enacted Social Security payments for student dependent survivors under P.L. 89-97 there were no halting steps in implementing this program of monthly cash grants to students enrolled in proprietary institutions. Within weeks the checks began to flow from the Social Security Administration, an agency of HEW, to the students. The same expeditious handling has been accomplished for similar cash payments under the F.E.C.A. (P.L. 89-488); Railroad Retirement (P.L. 89-700); Civil Service Retirement (P.L. 89-504); and of course for Veterans and War Orphans.

Certainly accreditation is no problem. The Accrediting Commission for Business Schools was designated back in 1956 by the USOE as a "nationally recognized accrediting agency." The Social Security Administration, for example, merely asked for our Directory of Accredited Schools and that was that. If it can be done for cash grants to aid students it can be done for NDEA loans.


Certainly the quality of our educational programs is not a problem. Attached are representative letters (Exhibit "C") from the U.S. Civil Service Commission, General Tire and Rubber Company and the National Institutes of Health all showing the need for our graduates.

The NIH uses without charge our monthly magazine The Compass to help reIcruit needed secretarial and clerical employees. The U.S. Civil Service Commission equates a business school education with that of a junior or community college for purposes of the Junior Federal Assistant Examination as well as for many other Federal positions.

Business School graduates are eagerly sought by government and industry. Other Federal agencies have experienced little, if any, difficulty in administering

9 Statement of Walter M. Arnold, Assistant Commissioner for Vocational and Technical Education, Bureau of Adult and Vocational Education, Office of Education, Hearings before the General Subcommittee on Education of the Committee on Education and Labor, House of Representatives, (89th Congress, Second Session). Vocational Education Amendments of 1966, H.R. 1544 and H.R. 1545, June 1966, p. 42.

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