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The family income of the Case 3 student is three times the amount of the family income of the Case 1 student, yet the BEOG amounts are very similar. The BEOG awards are identical in the situations of Case 1 and Case 2 students, even though the family income in Case 2 is twice the family income in Case 1. The half-cost provision has no effect at all on the student in Case 3 since the family income is high enough to bring the family into the middleThe half-cost provision affects only students whose family incomes are below the middle-income range. The poorest of all college students, where the expected family contribution (EFC) is zero, are harmed the most. Clearly, the one-half cost provision is a regressive social policy that we can

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Students are dependent is all cases. Tuition equals $400.

Senator PELL. Senator Javits, do you have an opening statement? Senator JAVITS. No, thank you. I just came because I realized the importance of this question, especially to many institutions in my State, and Dr. Eggers is here representing some of the great ones, and I just came to be informed.

I hope very much that we can find a way to make this percentage higher, and of course, I will do my utmost to see what can be done.

Senator PELL. Thank you.

Dr. Coor, if the subcommittee were unable to adopt all of the elements of the half-cost compromise, what elements do you see as the most important?

Dr. COOR. The concept that is most central to the efforts of all of the higher education associations is to see that balance exists as between the basic educational opportunity grant program, the special educational opportunity grant program, and the loan provisions that are attached thereto.

It is important that all of those move forward in balance. If this committee and the Senate were unable to adopt the magnitudewe would hope, of course, that that is not the case, but if they were unable to adopt the magnitude of the overall plan, we believe it important that each provision move forward so that half-cost limitation begins a progression, balance of support for the basic educational opportunity grants and the SEOG's move forward so that the structure we have designed be able to act itself out in the fashion we have described.

Senator PELL. Have any of you made an estimate of the cost of the compromise, the cost to the taxpayer?

Dr. COOR. If we take the grant program itself, and of course, that is different from all of the provisions that have been there, the best estimate we have that the BEOG increase would be $900 million over the 5 years of the authorization. Of that $900 million, $200 million would be contained in the increase of the half-cost provision.

The bulk of that, Senator, would take place, we are informed, in the first year of its implementation. It would be more gentle beyond that.

Senator PELL. The estimates we got are a little bit different in the sense that the total cost is estimated to be $12 billion. You point out about $900 million in the basic grants. But then the triggers would make up an extra $600 million. This is the problem we face. The House bill, as you know, is somewhere between $2 to $3 billion more than the administration proposal, and this question that you are raising here, this compromise, is part of the reason for that increase in cost.

Dr. COOR. The triggers themselves, as we understand them, in the first year, particularly the funding threshhold for the SEOG's, in the first year, would not make a significant difference. It would be slightly less than a 7-percent increase. There will be, of course, an added amount when that threshhold would go to the $480 million.

Senator PELL. You would not disagree with the total figure of $12 billion, the figure we get?

Dr. COOR. We were not able, in reviewing the materials we have, to get a precise figure. The billion and a half is consistent with what we have seen.

Senator PELL. I think you are right. It would be a well-spent billion and a half, but I am not optimistic of shaking the money tree this time for that amount.

The half-cost, I think, is a very significant measure to alter because, as was pointed out, it does, at this point, adversely affect the community colleges, or low cost schools. I would like to see the half-cost compromise move up so that these schools could be helped.

In connection with applications, do any of you have any view on the administration's simplified application form, and a single needs analysis for Federal student aid programs? Some of you may have seen the new form, or samples of it.

[No response.]

Senator PELL. None of you have.

Do you have any other ideas in the House bill where there could be cutbacks. As I have said, that legislation is about $2 to $3 billion more than the current student aid programs. Do you see other measures in it that, if we did go for this half-cost compromise, do you see other measures in the bill that could be cut back? In other words, we are just not going to get a $3 billion increase this year. Dr. COOR. Senator, I would guess the wisest course, were that, indeed, to be the case, would be the timing of the phase-in of its full implementation. Again, if each of the provisions could draw a fair share of the increase that was possible with the triggering mechanisms, of course, made a part of that, it would insure there would be some balance. Then it would simply be the question of how closely the ideal could be approximated by the annual appropriations process.

The compromise is designed in such a way that it would provide balance at each stage along the way. It is my assessment in looking at the overall package that that would be the wiser course to follow than to take one segment out of it.

Senator PELL. In connection with this business of the triggers, and I think Dr. Eggers touched on this in his testimony, the Senate is becoming increasingly unwilling to agree to mandatory funding mechanisms or triggers. Do you feel that the triggers are essential to the compromise?

Dr. EGGERS. If we do not have the triggers, we do not have an agreement among the sectors. That is crucial to the entire matter. The triggers are really not of that order of magnitude, and beyond that, the allocation, the increased allocation for SEOG does not come until there is actually an appropriation of the $2,160 level for the BEOG.

So the control over the allocation still rests with the Appropriations Committee.

Senator PELL. To be specific, I think the possibility of increasing the SEOG trigger is quite slim. Do you mean that the whole compromise will fall apart if one of those triggers falls apart or if it is not passed?

Dr. EGGERS. Yes, I am afraid it does fall apart, yes.

Senator PELL. So the only way we can keep the general consensus would be to follow Dr. Coor's suggestion of having it all proportionate?

Dr. EGGERS. Yes, that is, indeed, the position of the independent sector.

Senator PELL. I must say that I agree, too, that the unchecked growth of student loan programs can threaten the basic grant program. I am curious, Dr. Terrey, if your association of community colleges supported the Kennedy-Bellmon bill or the administration bill as an alternative to the current loan program. I am speaking to you now not as a member of the consensus but on your own association.

Dr. TERREY. Senator Pell, at the moment, we have no official position because we are guided by the Governmental Affairs Commission which will not meet until next month, but I can say with some degree of certainty that the philosophical positions incorporated in Kennedy-Bellmon are consistent with the position of the association in years past.

If I may, Mr. Chairman, you asked about forms earlier, and I was not fast enough on the draw. I would emphasize that the whole student financial aid program is a carefully organized system, a very complex system, and we in the community colleges have a number of people who have been out of that system for sometime. They may be 25 or 30 years of age, entering college for the first time, and they find it very difficult to get into that system and understand the forms. We urge a simplified form as the administration has recommended.

Senator PELL. Then we have this whole question of what the interest rate should be, and Dr. Morrissey touched on this in his testimony. The question of whether the direct student loan program with its 3-percent interest rate or even the proposed 7-percent rate, both sound very little when you think the average consumer interest rate today is about 18 percent. I am wondering how we can justify this kind of a subsidy or whether we ought to be more realistic and raise the interest rates up to what the market rate is.

Dr. MORRISSEY. Well, granted that a 7-percent rate against the market rate is considerably less; however, it has been national policy up to this point in time to have a 3-percent rate with a substantial subsidy built in as one of the conditions for student loans to improve access and to make it more tolerable on the repayment provision for the student himself.

So there is a question here of shifting, the shifting of cost. If you shift it entirely to the student in one fell swoop, as is suggested, at least, in the administration and the Kennedy-Bellmon proposal, you markedly increase the sum of money required of individuals on an annual basis.

Senator PELL. But you had the 3-percent interest rate when it was originally introduced as a little more than half of the going interest rate at the time. Now, it is one-sixth of the going interest rate. So the proportions have tremendously changed.

Dr. MORRISSEY. Granted, it has not kept pace. It then becomes a question of what relationship the policy of the Federal Government

should be relative to the balance between, for example, a loan program and a grant program.

Going to a general Federal loan bank, generally available to everybody, it seems to me runs the very real danger of having the grant proposals which are provided for in questions of access, particularly for needed students, very much endangered in the future. It seems to me you tip the scale.

Dr. Coor. Senator, so long as the 3 percent goes to the most needy student, it forms a rather interesting partnership between grants on the one hand and 7-percent loan on the other. Should it not go to those most needy students, then I think the arguments would be quite different.

When it was originally conceived, we were dealing with a national interest rate that was below the 3 percent and it had a different purpose, but in the galaxy of support, it has come to play this rather different and interesting role. That is why we have found it attractive at least in the concept that we presented to you. Senator PELL. Thank you very much, gentlemen.

Senator Stafford?

Senator STAFFORD. Thank you very much, Mr. Chairman.

I am going to address a couple of questions to you, Dr. Coor, but I would invite any members of the panel who also care to join in the response.

Dr. Coor, on the one hand, the analysis leading to major increases in student grants across the next 5 years has much merit. On the other hand, we face a climate and an expectation of financial constraint. Suppose we authorize increases to, say, $2,000, $2,200, and $2,400 instead of the $2,160, $2,400, and $2,700 proposed in H.R. 5192. The question is: Would that really make a profound difference at the University of Vermont and similar schools, assuming we keep the necessary balance in the SEOG program.

Dr. COOR. Senator, the question, I guess, is at which point the financial realities of available sums must be imposed, and while the threshhold and trigger concept obviously carries with it some implication of an imperative in the finance. It is our view that, certainly mine in looking at this with respect to the University of Vermont, that the actual appropriations process can impose that constraint at the time of appropriation and still keep the integrity of the overall concept.

If, in fact, appropriations could only bring the level from $1,800 to $2,000, that is a reality, of course, with which not only the Senate and the Congress as a whole would have to live but so would we.

However, if the structure could be there so that, as dollars were available in the priority of national spending, then there is a capacity to trigger these other mechanisms that we have discussed. When the $1,800 was put in place, we had a very different level of the Consumer Price Index, and the $1,800 when it was first established would be comparable today with about $2,800 with the increase that has gone on over time. We realize that is not possible. What meaning would it have for the University of Vermont? As you noted earlier, we are just about evenly balanced between receipt of BEOG and SEOG. If the trigger were not placed, we simply

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