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these institutions. Many of the problems evident at some of these schools occur as a result of staff and resource limitation.
For instance, more than 80 percent of the students attending private black colleges received financial aid in 1974-75, an increase of 10.9 percent over the previous year and more than 40 percent over 1958 and 1959.
Now, the student population at private black colleges has become increasingly poor over the past two decades. Not surprisingly, then, the average endowment at UNCF institutions was less than half of the national average for private colleges.
We must recognize that these poor students, by virtue of their financial status, qualify for a vast array of local, State, and Federal programs which generate reams of paperwork, Mr. Chairman.
Black college presidents, however, in many instances are loath to increase tuition beyond the stipend available under the BEOG's program, since they would then run the risk of pricing their institutions out of the student market that they serve.
This dismal Catch-22 situation locks these special purpose institutions into an unrealistic tuition scale which is hardly adequate to pay competitive faculty salaries or to finance the purchase of much-needed modern administrative services.
The lack of these modern accounting techniques and machinery, Mr. Chairman, is at the root of disputes involving charges of mishandling of Federal funds at black higher education institutions. Let me now turn to a very, very brief summary of my recommendations which seek to remedy many of these difficulties. Consistent with the histocial Federal commitment to providing equal and expended access to quality educational opportunities, my legislation would establish very firm and objective eligibility criteria by directing title III aid to those institutions which enroll substantial members of low-income, disadvantaged students, but which are able to spend only limited amounts to educate these students. The goal of this approach is to encourage rather than penalize any institution which serves low-income students. It is also imperative that this title address the needs of community colleges.
I am aware that these institutions enroll upwards of 40 percent of all minority students in postsecondary education. And I believe that a solid case has been made by witnesses in the House for adequate funding for these schools.
In my borough of Brooklyn, for example, the community colleges are faced with possible extinction due to the financial squeeze in New York City. Moreover, I also recognize that many black and brown students are dependent upon the 2-year institution as their only entry point due to high costs and poor academic preparation. Accordingly, my bill includes the 24-percent set-aside as a funding floor rather than a ceiling.
In my view, general and long-range planning is pivotal to the development of a strong and viable institution. The planning features found in the current law must be retained, coupled with new grant categories which will clarify funding expectations.
Under provisions in my legislation, Mr. Chairman, an institution could opt to pursue funding under the 1- to 3-year grant category. And reapplication for these funds would be permitted.
More substantial long-term grants would be available on a onetime basis in a 4- to 7-year category. The distinction in funding levels and duration of grants should provide an incentive for institutions to move through the program.
And as a final component in this package, my bill includes a challenge grant proposal. And I happen to think, Mr. Chairman and members of the committee, that this is very important, the challenge grant.
The challenge grant proposal provides a new mechanism and further incentive to eligible institutions in their quest for selfsufficiency and fiscal stability. The challenge grant program is designed to promote State and private sector investment in developing institutions.
Through the dollar-for-dollar match requirement in my bill, institutions which demonstrate a capacity to move away from dependency on Federal funding would be encouraged to accelerate their drive to obtain resources from a variety of sources.
I am most excited about the potential that this program represents for stimulation of the States and the private sector to take a much more active role in achieving the goal of fiscal stability among title III institutions.
In order to achieve the purpose of this title, my bill lifts the authorization level to $250 million over the life of the act, which includes a $50 million authorization for the challenge grants.
As you know, Mr. Chairman, the House Education and Labor Committee has already adopted provisions virtually identical to those which I have just described in H.R. 5192. I sincerely hope that this committee might be persuaded to do likewise.
And just a few points now on the student loan programs-this is such an important educational measure, the student loan programs. Although great strides have been made in assuring that our Nation's children have the opportunity to receive the education of their choice, there remain formidable barriers to access of higher educational opportunities for those students of economically disadvantaged backgrounds.
In recent years the rising costs of postsecondary institutions have impacted on the ability of middle-income parents to see that their children get through the educational process. So we are therefore faced with a situation in which we must find some viable means of easing the burden on middle-income families while protecting the access to higher educational opportunities of those income groups who have been historically excluded from participating in post secondary education.
After careful consideration of the complex issues surrounding reform of the current Federal loan programs, I have concluded that Senate 1600, the Kennedy-Bellmon Student Loan Reform Act, best represents, at this juncture, our national commitment to providing access to higher educational opportunities for all of this Nation's children.
The current Federal loan programs do not adequately assure access to loan capital for many students in need. The guaranteed student loan program has inherent limitations because of its dependence upon the willingness of banks to lend money during various economic circumstances, the uneven geographic distribution of par
ticipating banks and institutions throughout the county, and the tendency of banks to lend to children whose families have a prior relationship with the bank.
The latter point represents an often insurmountable problem of access to capital for the most needy student, who is often rejected as a bad credit risk. The expansion of eligibility for subsidized loans to higher income borrowers, mandated by the Middle-Income Student Assistance Act, will further exacerbate the problem of availability of loan capital for low-income students, as large numbers of middle-income students choose to take advantage of the program and private lenders direct their resources, then, toward these better credit risks.
In addition to this problem confronting all low-income students, we must be cognizant of the particular problems of minorities in securing loans from financial institutions which continue to perpetuate discriminatory practices.
I am going to try to read over this now. Thus, the National Student Loan Reform Act would eliminate the problems of loan access by assuring that every student in need of a loan to complete a comprehensive financial aid package will receive one.
Unlike the current programs, the new program would be entirely need based, thus guaranteeing that no student will be denied access to higher educational opportunities on the basis of being unable to secure an adequate loan.
Finally, coming to the end, the National Student Loan Reform Act recognizes the importance of the campus-based approach to student financial aid packaging, while making needed reforms in current distribution and collection of student loans.
There is a great deal of concern over the alarming default rate that the national direct student loan program has experienced. I believe that the default problem is wisely dealt with in S. 1600 by placing the collection of loans in the hands of financial experts, rather than educational institutions, facilitating the consolidation of loans and liberalizing the stringent repayment schedules of the programs currently in existence.
The default rate on direct student loans at many of the black colleges remains extremely high. And these are institutions which have disproportionately high administrative costs, because they serve large numbers of low-income students receiving a variety of Federal aid.
There is no reason to further burden these institutions with the task of loan collection and threaten to penalize them on the basis of something over which they have no real control. With respect to any language dealing with the administrative expenses of higher educational institutions, I would urge the committee to recognize the varying needs of specific institutions, taking into account the average expenditures of institutions reflected in 484 of H.R. 5192. My last paragraph-I have to leave out a great deal, but it is in the statement, of course.
Senator PELL. The full statement will appear in the record.
Mrs. CHISHOLM. Yes, all right. My last paragraph-the National Student Loan Reform Act will replace a poorly targeted system which is currently inadequate in meeting the need to assure access
to necessary loan capital for all students, particularly those that are in need.
It will replace a system that is becoming increasingly expensive to the Federal Government, the cost of which will rise further if we are to continue to make the guaranteed loan program attractive to private lenders and to hold down the interest rate of the direct student loan program to 3 percent.
I am convinced that a more financially stable system which will assure equitable availability and distribution of loan capital to needy students is preferable to an inadequate program with an interest rate that is hopelessly out of date and exceedingly costly to the American taxpayer.
We have learned from experience that once we are confronted with program costs which are unacceptable, the means of alleviating such expenditures more often than not work to the detriment of those most dependent on the program.
I am pleased to lend my full support to S. 1600, and I urge its inclusion into the reauthorization of the Higher Education Act. Thank you.
[The prepared statement of Mrs. Chisholm follows:]