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Unlike most members of the higher education community, however, we endorse the major features of the Administration's Proposal, HR 5210, and the KennedyBelimon Bill, HR 1600, which are similar in many respects, which propose restructuring the student loan programs. We stress that these proposals are supplemental to and not substitutive for the BEOG and College Work-Study Programs. We look with favor upon these proposals for the following reasons:




We know from experience that large numbers of low-income students simply do
not have access to bank loans for educational purposes under the Guaranteed
Student Loan Program. Banks do tend to give priority to their regular
customers. Many low-income students come from families that have had little
experience in dealing with banks and, accordingly, cannot be counted among the
banks' regular customers. If sufficient funds have not been generated from other
sources to cover all educational costs, these low-income persons simply do not
enroll. If they do not enroll and, accordingly, their latent talent goes
undeveloped, they and society are the losers. It is, therefore, appealing to have
a program which will assure the availability of loans to meet those expenses that
BEOG, College Work-Study, and parental contributions will not have met.

We particularly favor the provision of the Administration and the Kennedy-
Bellmon Proposals that the Student Financial Aid Officer on campus would
administer the loans. We consider the Financial Aid Officers to be the pivotal
persons in packaging financial aid. They know of the high priority to be given to
grants. They know of the importance of College Work-Study to the development
of the students, to the institution, and to off-campus employers. They are in a
position to warn students concerning the long-run implications of assuming loans.


Our Officers have stressed the importance of having loans available in the event of processing delays in making BEOG awards. There is some evidence that these delays that occurred last year in making BEOG grants caused discouragement among many prospective students who dropped out of the higher educational channel altogether.

The existence of readily available campus-controlled loans could have kept many of these students in college.


We are pleased by the proposal that an agency other than the college or university itself would be charged with the responsibility of collecting loans in default. We have long contended that the colleges should not be collection agencies. Accordingly, we are delighted by the prospect that the loan collection responsibility would be removed from our campuses.

Although we generally endorse the Administration and Kennedy-Bellmon Proposals, there are certain specific changes we would recommend:

A. Establishing the Interest Rate at 3 Percent.

Both HR 5210 and S 1600 propose an interest rate of 7 percent on the student loans. We consider this excessive. Economists recognize that the gross interest rate is a composite payment that includes many elements payment for risks, payment for administration, and some gain to the lender. After subtracting these elements, the economists arrive at a pure interest rate which probably would not exceed 3 percent. Since loans are part of a financial aid package based on students who have need, we find no compelling argument for exceeding the 3 percent.

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We wish to encourage more low-income students to pursue graduate and professional studies upon completion of their undergraduate work. Requiring that students begin paying interest while in graduate school would be a deterrent to their pursuing advanced studies. We, accordingly, recommend that both principle and interest be postponed for students pursuing graduate and professional studies.

Cancellation For Those Serving the Needy

We are pleased by the proposal that a cancellation provision would be included to forgive the indebtedness at a specified rate for those becoming full-time teachers in public or nonprofit private elementary or secondary schools serving significantly large numbers of low-income students, lowincome preschool children, or the handicapped; or for those serving in certain positions in the Armed Forces of the United States.

Our feeling is that this provision could be broadened to cancel indebtedness for persons going into a variety of occupations in which public service would be rendered to a significant number of low-income and disadvantaged persons. This could include even students going into business administration who would then enter 8A type firms catering to low-income communities. We also could envision loan forgiveness for those who have committed themselves to render their teaching services on a full-time basis to low-income students in postsecondary education.

In brief, we could seek to get a multiple benefits out of our investment in

the development of needy students by directing them toward serving the needy in a variety of ways.

We feel that both the Administration and the Kennedy-Bellmon Proposals should be amended to address two concerns that have been widely expressed in the higher education community that we find convincing. One is that the availability of large quantities of loan funds could saddle students with a very heavy indebtedness that would burden them for life. The second is that the existence of an apparently unlimited pool of loan resources would tempt State, private and proprietary institutions to increase their tuition and costs and, thereby, erect further barriers to many low-income students.

To offset these two self-defeating outcomes, we would propose that a cap be placed on available loans. The ceiling could be high enough to fulfill the spirit of the proposals that there be readily available loan resources to top off other need-based grants and parental contributions, but low enough to prevent the accumulation of unmanageable debts and low enough to discourage unwarranted tuition increases.

Mr. Chairman, we feel that with proper modification, the proposals to reform student loan programs could expand opportunities for needy students and, thereby, increase their contributions to the strength of our nation.

Senator PELL. Thank you very much. Representative Chisholm, I know you have missions still to do. And so we will put you on, if you can, right now.


Mrs. CHISHOLM. Thank you very much. Mr. Chairman and members of the Subcommittee on Education, the Arts and Humanities, it is not often that I have the pleasure of appearing in these chambers and addressing my distinguished colleagues in the Senate on educational matters.

For that reason, I am especially delighted to be here today to discuss with this committee my proposals for reauthorization of the Higher Education Act.

Those of us in the House who are involved with educational legislation are well aware of key role this committee has played in marshaling important legislative initiatives through the congressional process.

I recently had an opportunity to closely monitor the efficient operation of this committee under your outstanding leadership, Mr. Chairman, during consideration of the legislation extending a number of elementary and secondary education programs in 1976. As you may recall, Mr. Chairman, I introduced my own elementary and secondary reauthorization bill at that time. And I am pleased to report that many of my major recommendations were incorporated in the 1976 act eventually signed into law.

That experience illustrated to me the importance of designing and introducing proposals which clearly speak to the needs of low

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income and disadvantaged students. And once again I place before you for consideration this morning my own legislation which will be introduced in the Senate later this week.

My bill specifically focuses on those titles in the expiring act which impact significantly on student access and retention as well as professional and institutional development. Therefore, it would amend titles II, III, IV, and IX of the current law.

I should emphasize that the House bill, H.R. 5192, reported out of the Education and Labor Committee, already includes several of my major recommendations.

I have prepared an extensive written statement which reviews each component of my bill in great detail. And I ask permission to have this entire statement entered into the committee's record. Senator PELL. Without objection, that will be done.

Mrs. CHISHOLM. In the interest of brevity, however, let me just limit my remarks this morning to my proposals involving titles III and IV.

Title III, strengthening developing institutions-title III is the only source of direct institutional aid in the entire Federal Higher Educational Act. Consequently, many postsecondary institutions have become very interested in funding available under this particular title.

Title III funds have played a key role in undergirding this Nation's small public and private colleges which enroll students from a range of economic, racial, and ethnic backgrounds. These smaller schools, including some women's colleges, community colleges, and 2-year institutions with an Indian constituency, have received financial assistance under this title.

Title III moneys have also provided a major lifeline of Federal support to historically black institutions. In fact, many incorrectly view title III as either a black program or a program exclusively serving black institutions.

However, information that I have reviewed concerning awards over the 14-year life of the program suggests that the majority of these grants-some estimates range as high as 70 percent-have gone to nonminority institutions.

While black colleges have undoubtedly operated as important beneficiaries of the title III program, I believe it is a serious error to characterize title III as a black program. Already this misimpression has precipitated attacks on the title from a number of factions.

The title III program is a funding mechanism under seige right now from many different quarters. The political reality is that many individuals are unhappy about the fact that black colleges have received a significant share of title III funds.

This displeasure has led to charges of financial irresponsibility and generated charges about the fiscal integrity and viability of historically black colleges.

I cannot support these attacks. Yet I am convinced that the issues which have been surfaced must be directly addressed if we are to maintain the current title III focus on institutions enrolling significant numbers of minority and other low-income students. Supporters of black colleges have repeatedly been asked to explain the charges of so-called financial mismanagement at many of

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