conversion of the student loan program would not lessen the number of such families participating. I therefore do not believe the tax credit offers these families any substantial relief from the necessity to borrow to continue the college education of their children.

Senator ALLOTT. It might not eliminate the necessity for all to borrow but to the extent that they got a tax credit this would. Perhaps this is a philosophical question, but there are many Members of Congress-in fact, I believe the Senate will have a chance to vote on this this afternoon-who have very strongly felt, and I am one of them, for a long time that we ought to give tax relief incentive to higher education. If we had done it, I think perhaps we would have been able to lessen the burden on the Federal Government for a long time and help families a great deal.

OPPORTUNITY TO BORROW NDEA FUNDS

With respect to your loan program, I understand that we have a flat assurance that the net effect of our loan program is not going to be diminished. Is that correct?

Mr. MUIRHEAD. You have an assurance that young people from needy families will have an opportunity to borrow from NDEA funds next year.

Senator HILL. You have $150 million in the budget for that purpose.

Mr. MUIRHEAD. There is $150 million in the budget for that purpose. Mr. Kelly pointed out, in view of the budgetary restrictions, that this in effect will not represent a budget expenditure during the year but the money will be available to the students.

Mr. KELLY. In this budget before you there is not a request for $150 million. There has been a request for $34 million under the NDEA program, and $20 million under the health professional and nurse profession. The President has indicated that upon enactment of the legislation modifying the student loan program, he will request an additional $150 million which, in the aggregate, would bring you up to $204 million.

Senator HILL. This is not in the budget now?

Mr. KELLY. It is not yet before you; no, sir.

Senator HILL. So far as this loan program is concerned, what would be the effect on these 20 States that have taken steps or have passed legislation to come under the loan program as far as the NDEA provisions are concerned. Have any loans at all been denied under the NDEA program?

Mr. MUIRHEAD. They will not be denied. The colleges in those States will submit their requests and they will be reviewed as are the requests from the other States. I think it is a reasonable thing to expect, however, that if there is a substantial amount of money available under the guaranteed loan program to an institution in such a State, it will have its request looked at a little more critically than where there is no guaranteed loan program.

STRENGTHENING DEVELOPING INSTITUTIONS

Senator HILL. Title 3 is for strengthening developing institutions. You have a budget estimate here for $30 million. Is that authorized?

Mr. MUIRHEAD. We are assuming that legislation would set up that authorization.

Senator HILL. That will have to be extended?

Mr. MUIRHEAD. That is correct.

FURTHER DEVELOPMENT OF COLLEGES OF AGRICULTURE AND THE MECHANIC ARTS

Senator HILL. You propose to take $11,950,000 out of the Land Grant Colleges Act. That act was originally passed, as we pointed out the other day, in 1862. Buchanan had vetoed the act, and when President Lincoln came in he signed it and it has been on the books. 104 years.

Mr. MUIRHEAD. That is right.

Mr. KELLY. The President asked that we review the older programs in light of the current circumstances, and you have to admit that we selected one of the older ones.

Senator ALLOTT. I wish you would have reviewed some of the newer

ones.

Senator HILL. You thought that one that was 104 years old was about to pass out.

Mr. KELLY. At the time that legislation was enacted and at the time it was expanded, this was one of the few available sources in Federal aid. Subsequently, there have been developed these large-scale programs which have a more equitable distribution nationally in relationship to the population and student loans. It was with this thought in mind, that this program had concluded its purpose, not that it was not a useful purpose.

Senator HILL. Are there any other questions?
Senator ALLOTT. I have none.

Senator HILL. Thank you, gentlemen.

SUBCOMMITTEE RECESS

The subcommittee will recess until 10:30 o'clock next Monday morning.

I want to thank you all very much.

(The hearings were recessed at 1 p.m. Friday, March 4, 1966, until 10:30 a.m., Monday, March 7, 1966.)

DEPARTMENTS OF LABOR, AND HEALTH, EDUCATION, AND WELFARE, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1967

MONDAY, MARCH 7, 1966

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,
Washington, D.C.

The subcommittee met at 10:30 a.m., in room 1318, New Senate Office Building, Hon. Lister Hill, chairman, presiding.

Present: Senators Hill, Byrd, Bartlett, Cotton, and Allott.

DEPARTMENT OF HEALTH, EDUCATION, AND
WELFARE

OFFICE OF EDUCATION

STUDENT LOAN INSURANCE FUND

STATEMENTS OF PETER P. MUIRHEAD, ASSOCIATE COMMISSIONER FOR HIGHER EDUCATION; ACCOMPANIED BY S. WILLIAM HERRELL, EXECUTIVE OFFICER, BUREAU OF HIGHER EDUCATION; NORMAN KARSH, ASSISTANT COMMISSIONER FOR ADMINISTRATION; JOE G. KEEN, BUDGET OFFICER; AND JAMES F. KELLY, DEPARTMENT COMPTROLLER

APPROPRIATION ESTIMATE

"STUDENT LOAN INSURANCE FUND

"For the Student Loan Insurance Fund created by section 431 of the Higher Education Act of 1965 (79 Stat. 1245) and the Vocational Student Loan Insurance Fund created by section 138 of the National Vocational Student Loan Insurance Act of 1965 (79 Stat. 1046), $3,200,000, to remain available until expended: Provided, That said funds shall be merged into one account."

An increase of $2,700,000 is requested under the Higher Education and the National Vocational Student Loan Insurance Acts of 1965 so that the Office of Education may insure loans of students without access to State or private nonprofit insurance programs. This amount includes $2,500,000 to insure an additional 5,000 higher education student loans averaging $500, for a total of 6,000 new loans in 1967, and $200,000 to increase the vocational student loans from an average of $200 in 1966 to $400 in 1967 for 5,000 new loans each year.

Under the Higher Education Act of 1965 and the National Vocational Student Loan Insurance Act of 1965, the Office of Education received authority to insure loans of students in eligible institutions which do not have reasonable access to a State or private nonprofit program of student loan insurance.

In 1966 $500,000 was appropriated for the higher education student loan insurance fund, and $50,000 is being requested for the vocational student loan insurance fund in a 1966 supplemental under "Expansion and improvement of Vocational education." These funds are being merged and will be known henceforth as the student loan insurance fund.

It is anticipated that most loans will be guaranteed by a State or private nonprofit agency, but the Federal Government must stand ready to provide an insured loan plan if these other sources do not adequately serve the purposes of the acts. Defaults on any federally insured loans would be very small during the first year and would probably result only from the death of the borrower. At this time it is unknown whether those States which do not now have a plan will initiate a State plan or whether the private plans will have sufficient guarantee funds to meet the demands. Therefore, an amount of $3,200,000 is requested for 1967 to enable the Federal Government to establish a modest insurance fund from which insured lenders would be paid when any of their student loans were in default. Of the total, $3 million is included for higher education loans and $200,000 for vocational student loans.

In addition to the amounts appropriated, lenders will pay into this fund an insurance premium of one-fourth of 1 percent per annum of the unpaid principle amount of the loan. All insurance premiums and interest earned on the fund will be retained in the fund to meet additional requirements for payments of defaulted loans. The fund may borrow from the Treasury if at any time the moneys available are insufficient to make payments on defaults of insured loans. It is estimated that the appropriation requested will make it unnecessary to utilize this authority in 1967. The fund will take over loans on which it pays insurance claims and seek to collect on them, but the schedules reflect a full reserve for losses on such loans.

It is anticipated that 6,000 higher education student loans averaging $500 will be insured in 1967, compared to 1,000 loans averaging $500 in 1966; and that 5,000 vocational student loans averaging $400 will be insured in 1967, compared to 5,000 averaging $200 each in 1966.

Senator HILL. The subcommittee will please come to order. We are glad to have Dr. Peter Muirhead, Associate Commissioner for Higher Education, here. He will address himself to the student loan insurance fund.

All right, Dr. Muirhead.

Dr. MUIRHEAD. Mr. Chairman and members of the committee, we are requesting $3,200,000 for the student loan insurance fund for 1967, an increase of $2,700,000 over 1966.

Under the programs authorized by the Higher Education and the National Vocational Student Loan Insurance Acts of 1965, those eligible students who do not have access to a guaranteed loan program of a State or nonprofit agency can obtain insurance on loans directly from the Federal Government. Although it is anticipated that most students will be able to obtain insured loans through non-Federal sources, we do not have enough information at this time as to whether guarantee funds from those sources will be available to all students. Therefore, we are requesting $3 million to insure loans for 60,000 higher education students, assuming an average loan of $500, and $200,000 to insure loans for 5,000 vocational students, at an average loan of $400. This is submitted as a separate account, since a revolving fund must be established in order to collect the insurance premiums and to invest unused funds in U.S. securities.

This request will complete the coverage of insured loans for both vocational and higher educational students who need such assistance in order to pursue their studies.