Thus, the IBA can see no advantage to giving the Commissioner the option of reducing the interest rate on Federal college loans by a full one per cent below the prevailing rate on long-term Government bonds. If some protection against the normal movements in the Government bond market is necessary, a provision for adjustment up to one-half of one per above and below the U.S. Government borrowing rate would be more realistic for purposes of fixing terms on the loan of Federal funds. If an interest rate of even 1⁄2 of 1 per cent below the yield on outstanding U.S. obligations was fixed on Federal loans, the rate would have been less than the private market rate for over 60 per cent of the number of municipal bond issues marketed for higher education in 1966 (which accounted for over 60 per cent of the dollar volume raised in 1966). Even in 1965, a year of lower municipal interest rates, the Federal rate, less 1⁄2 of 1 per cent, would have been lower than about 20 per cent of the volume of private market financing for public higher education facilities. So even an arbitrary reduction of 1⁄2 per cent could result in a surplus of application for Federal loans to the detriment of those schools most needful of Federal assistance. A compilation of the relationship between private market rates for state and local obligations of various investment ratings that were issued for higher education, with the corresponding rate on outstanding U.S. obligations, is presented in the accompanying chart. Should it be the aim of the Subcommittee to subsidize higher education beyond the interest rate formula suggested by this bill, it is our suggestion that it be accomplished in such a manner as to not substantially restrict or preclude the participation of the private sector of the economy in financing college expansion. Where credit is available at prevailing reasonable market rates, but this legislative body determines that the resulting student costs will be too high and therefore a subsidy is needed, it is suggested that the subsidy be direct and be provided in such a manner as not to offset its benefit by the reduction in the availability of credit for the Nation's colleges. For the most part, we are all parents, be we Investment Bankers or Members of Congress; and individually we can attest to the higher cost of higher education. It is therefore the suggestion of the Investment Bankers Association that some means be found to reduce the cost of education to that party which is ultimately responsible for the education of the child-the parent. Many Members of Congress have introduced legislation calling for some type of income tax adjustment for expenses incurred in providing higher education for dependents. Just last week the Senate approved a special tax credit for parents of college students as a rider on the Administration's Business Tax and Incentive Bill. This provision, if adopted by the House, would allow those individuals earuing $25,000 or less a year to deduct up to $325 in college costs for each child in college and with a declining maximum amount for deductions for parents up to an annual income of $57,500. A Federal subsidy could also be provided by (a) expansion of the present grant program, (b) a variable interest grant (to absorb interest costs over a prescribed rate), or (c) a guaranty program that would lower market interest costs on all bonds colleges sold to investors. In conclusion, we are confident that our objectives are the same as yoursmaximum financing and construction on new academic facilities and dormitories for the Nation's colleges and universities on reasonable terms. The present 3 per cent interest rate on Federal college loans is a self-defeating means of trying to accomplish this. Its net effect is to force an abnormally high demand for Federal money by causing many large public institutions, with interest savings in many cases of less than one per cent, to apply for Federal loan funds. This results in less Federal funds being available for the private and small public institutions of higher learning, many of which badly need Federal loan aid. In addition, it results in the resources of the private market not being used to their fullest capacity for college facility financing. The maximum construction of new college academic buildings and dormitories depends upon utilizing the private market to its full potential, and then supplementing it when necessary with a Federal government loan program. Accordingly, we strongly support the Administration's effort to revise the rate of interest on the Office of Education's loan program for college academic facilities to a flexible rate at least more closely in line with the cost of money to the Government and the cost of money to colleges in the private market. CHART I PERCENTAGE DISTRIBUTION OF THE DOLLAR VOLUME OF MUNICIPAL BONDS ISSUED FOR HIGHER EDUCATION - 1965 10 .1% Aaa Aa Unrated All unrated More than 2% above MUNICIPAL BORROWING COST RELATIVE TO YIELDS ON U.S. GOVERNMENT OBLIGATIONS 1/ As measured by Moody's ratings Note: U.S. Government yields (all maturities included) are as given in the Treasury Bulletin, February, 1967. 1/ As measured by Moody's ratings Note: Unrated U.S. Government yields (all maturities included) are given in the Treasury Bulletin, February, 1967. Prepared by the Research Department of the Investment Bankers Association of America Mrs. GREEN. Thank you, very much, Mr. Carr. Mrs. GREEN. Congressman Hathaway? Mr. HATHAWAY. I have no questions. Mrs. GREEN. I am really very grateful to you for making this trip from Chicago. By the time situation, we probably should have come to you first. (Off the record.) (Whereupon, at 12:15 p.m., the subcommittee recessed to reconvene Thursday, April 27, 1967.) HIGHER EDUCATION AMENDMENTS OF 1967 THURSDAY, APRIL 27, 1967 HOUSE OF REPRESENTATIVES, SPECIAL SUBCOMMITTEE ON EDUCATION OF THE The subcommittee met at 10:30 a.m., pursuant to call, in room 2261, Rayburn House Office Building, Hon. Edith Green (chairman of the subcommittee) presiding. Present: Representatives Green, Gibbons, Quie, Erlenborn, and Reid. Mrs. GREEN. The subcommittee will come to order for the further consideration of H.R. 6232 and H.R. 6265. This morning the first people to comment on this legislation will be the representatives from the United Business Schools Association. We welcome to the table those people who are representatives from this group. My paper says Mr. Rohlffs, Mr. Green, Professor Binnion, and our friend for many years, Mr. Fulton. STATEMENTS OF DR. C. D. ROHLLFS, PRESIDENT, UNITED BUSINESS SCHOOLS ASSOCIATION, AND PRESIDENT OF NETTLETON COMMERCIAL COLLEGE; HARRY C. GREEN, PHILLIPS BUSINESS COLLEGE AND PRESIDENT-ELECT, UNITED BUSINESS SCHOOLS ASSOCIATION; PROF. JOHN BINNION, DIRECTOR OF GRADUATE STUDIES IN BUSINESS EDUCATION, TEXAS TECHNOLOGICAL COLLEGE; ACCOMPANIED BY RICHARD A. FULTON, EXECUTIVE DIRECTOR, UNITED BUSINESS SCHOOLS ASSOCIATION Mrs. GREEN. Mr. Fulton, do I have the names right of your colleagues? Mr. FULTON. Yes, Madam Chairman, and I will introduce them. On my left is Prof. John Binnion, director of graduate studies in business education, Texas Technological College. Dr. Binnion serves as a commissioner on the accrediting commission for the schools and he is also a member of the Advisory Council on Vocational Loans for the Office of Education. He is one of the outside accrediting commissioners, he is not a business school administrator. Because time is so important in these hearings I am going to forgo listing his professional background and accomplishments. On my far right Prof. Harry C. Green, from Phillips Business College, Lynchburg, Va., president-elect of United Business Schools 245 Association and he is more or less here to prepare himself for future hearings. On my immediate right is your witness in chief, Dr. C. D. Rohlffs, who is president of the Nettleton Commercial College in Sioux Falls, S. Dak. He is president of the United Business Schools Association. I am just here in case there are some technical aspects to some questions. Therefore, with the Chair's permission I would like Dr. Rohlffs to go ahead. Mrs. GREEN. Very good. Dr. Rohlffs, we have your complete statement which will be put in the record with the attachments. Would you like to read the statement or summarize and hit the high points of the matter in the interest of time this morning? Dr. ROHLFFS. Thank you, Madam Chairman and members of the subcommittee. This will save time because we were going to ask that the complete statement be made a part of the record. (The document referred to follows:) STATEMENT OF DR. C. D. ROHLFFS, PRESIDENT OF UNITED BUSINESS SCHOOLS ASSOCIATION Madam Chairman and Members of the Special Subcommittee on Education, my name is C. D. Rohlffs. I am President of Nettleton Commercial College of Sioux Falls, South Dakota. For more than 35 years I have been associated with business education including service as a Commissioner on The Accrediting Commission for Business Schools. I am presently serving as President of the United Business Schools Association which is the one association of educational institutions in which more than 500 of the quality business schools and colleges of the Nation hold membership. The roots of UBSA go back more than half a century to 1912. However, many member institutions have been serving students for more than 100 years. UBSA itself is an affiliate of the American Council on Education. At least one administrator in every UBSA school is a member of the American Vocational Association. Also by way of background, the Accrediting Commission for Business Schools; a professionally independent body was founded in 1953 by UBSA. It was designated in 1956 as a "nationally recognized accrediting agency" by the U.S. Office of Education. In that capacity it has accredited just over 300 independent educational institutions after careful review and inspection. STATEMENT OF POSITION We are delighted to have the opportunity to express our support for the Higher Education Amendments of 1967 as represented by H.R. 6232 and H.R. 6265. We particularly would point to the following sections as having our support: (a) Sec. 103(a) which would add a new Sec. 107 to provide for Experimental Projects. We feel this proposal is in line with information developed at the hearings last August conducted by this Subcommittee in its study of the U.S. Office of Education.1 (b) Sec. 403 which would permit schools such as ours to join in the Talent Search project dealing particularly with the problem of college transfers and dropouts. Our experience indicates that each year an increasing percentage of students in accredited business schools enroll after having had one or more semesters of college. These are both college transfers and dropouts. (c) Sec. 422 (b) which would raise the annual maximum of the guaranteed loan program to $1500. An increasing percentage of our students no longer live at home. Thus, room and board in addition to tuition enters into student financial planning. 1 U.S. Office of Education, Hearings before the Special Subcommittee on Education of the Committee on Education and Labor, U.S. House of Representatives (89th Congress, Second Session), pp. 30-33. (d) Sec. 423 (b) which would extend the guaranteed loan program for another five years to 1977. We feel the insured loan program should definitely be a part of what we hope will be a comprehensive package of student financial aid. (e) Sec. 435 which would authorize students attending proprietary institutions to participate in the work-study program of Title IV-C. These would be real work-study programs and not just another type of fellowship program. The students would not be working in the school but rather in places like hospitals and legal aid centers. Thus, there would be a real work experience combined with financial aid to the student. There is an urgent shortage of trained medical and legal secretaries and white collar workers to administer the Medicare program. This amendment illustrates well that statutory language can be successfully drafted to provide aid to students without any deviation from present public policy on aid to institutions. (f) Part F which would establish one Advisory Council on Student Aid. This is a most commendable proposal. At the present time there is no comprehensive program of aid for students in accredited proprietary schools. Through the means of one coordinated council the problems of all types of students in all types of institutions can be discussed and put into perspective. However, of extreme concern and interest to needy students in accredited proprietary institutions is the fact that they still do not have access to the Title II student loan provisions of the National Defense Education Act. It is to this problem which we would like to address ourselves. EXPAND THE NDEA STUDENT LOAN PROGRAM Despite eligibility and participation in some eighteen other Federal programs by needy students in accredited proprietary institutions, including six such programs which provide cash monthly payments to students, there seems to be a reluctance on the part of some administrators to make this landmark legislative program available to needy students in accredited proprietary schools. As best we can determine from the testimony last week of Commissioner Howe and Associate Commissioner Muirhead, this reluctance is grounded in five questions which these gentlemen raised in response to questions by Members of the Subcommittee. These five questions, or reservations, and our responses to them are as follows: 1. Does the Vocational Guaranteed Loan Program meet the need? It does not. 2. What budgetary effects would result from an NDEA expansion? It would have an overall beneficial dollar allocating effect on nonprofit institutions of higher education and need not disrupt present programs. 3. As a matter of policy, should Federal resources be used to help strengthen profit-making institutions? The policy has been long established that Federal resources have long been used to help people via proprietary schools. Student aid is not institutional aid. We are talking about aid to needy students. We are not asking for institutional support. 4. Do these students have access to direct loans? We find no evidence that a single dollar has been appropriated or has been requested as an appropriation to implement Section 10 of the National Vocational Student Loan Insurance Act of 1965 (P.L. 89-287). 5. Are there any "loan forgiveness" problems under the NDEA? There are no problems because the loan is "forgiven" by reason of subsequent service in a nonprofit institution. If there be any statutory technicalities they can easily be resolved by amending Sec. 205(b) (3) of the NDEA (P.L. 88–665). The USOE has already shown that statutory technicalities can be handled so as to aid students without aiding institutions. The Sec. 435 work-study proposal proves that point. We plan to develop these answers more fully but with the Subcommittee's permission we would like to give some background on present Federal policy as reflected in other programs of student financial aid and training. EIGHTEEN OTHER FEDERAL PROGRAMS Our research leads us to the conclusion that there are at least eighteen Federal programs which involve proprietary business schools with Federal programs relating to education which provide: |