Higher Education Amendments of 1979

would have to place more of the students' cost on loan in some intervening period.

Senator, those are financial realities with which we all live. I would simply suggest that the structure itself permits that flexibility at the time of appropriation and still keeps the concept in tact for future times.

Senator STAFFORD. Thank you very much, Doctor. Does anybody else wish to comment?

Dr. TERREY. Senator Stafford, I would like to point out that the one-half cost provision is an essential concept from the point of view of the community colleges. It would help us to eliminate what we consider discrimination against poor students attending low tuition institutions.

Senator STAFFORD. Thank you very much.

Dr. Coor, your judgment might be valuable to our subcommittee and the full committee on the Kennedy-Bellmon proposal on student loans. It is an important initiative, and I would appreciate you assessing its consequences as you see them.

Dr. COOR. The concept of simplifying the task for students receiving funds, to know what is available and to be able to execute loans related to them and to have a sensible collection mechanism as a way of reducing any defaults that are possible is an attractive one. And to Senators Kennedy and Bellmon for those provisions and added to that the concept of a parent loan fund, I offer my personal salute. However, our experience in Vermont where we have the lowest default rate in the Nation tells us that people who know one another have a far more likely chance of both conceiving, executing and consummating loan arrangements.

The idea of taking that responsibility from a very careful package of private lenders where, in our State, Senator, people know one another in the way that it has all of those beneficial qualities and putting it in a central function and in the course of that setting in motion a whole different partnership, in my judgement, is not a necessary step to accomplish the basic goals that were spelled out earlier.

I believe it is worthy of some examination, not just the proposal by Senators Kennedy and Bellmon but the concept of cost for the future has been alluded to many times this morning. It has to be on the minds of everyone. The actual cost of the subsidy, the cost of administration.

The data that I have seen to date suggests that when administrative costs are factored into the proposal of Senators Kennedy and Bellmon, it does not make the actual cost that much less, and it could place some rather difficult constraints on the number of loans available.

I would urge that we continue to refine the existing system of locally based, private lender, institutional lender that we have in place, if given an opportunity to work, and incorporate many of the fine features that are contained in the Kennedy-Bellmon bill, as indeed the House committee did when it considered this matter on the other side.

Senator STAFFORD. Any further comment on that? If not, one final question. Dr. Coor, what are your costs in handling student

aid and how to you recommend handling the administrative cost allowance?

Dr. COOR. They have grown, as you might imagine, Senator, as the pace of activity in our financial aids office has grown. In fiscal year 1974, we had eight full-time staff members, professional and clerical, servicing the total student population we had which then is about the same size as our total student population today, about 8,500 full-time students and another roughly 2,000 part-time students.

That staff of eight has grown in the past 5 years to 14, and we know that because of our own internal constraints, particularly now our requirements for collection, the office is even now not quite as large as it should be.

The cost of running that office when it has eight people in it was $77,000 a year. Our cost for operating that office today with 14 people is $212, 000. The administrative cost allowance concept, introduced, as I noted in my testimony, as an idea by Senator Pell in 1976, would provide a sensible offset for the cost of handling these federally based programs within the context of our own office.

We find the proposal that is embraced in the House bill a sensible one, namely, that it would be 5 percent up to a certain level, dropping then to 4 percent and then to 3 percent where the economy of scale for the very large institutions would make it less costly on a per-unit basis.

If that were done, we would be able, we believe, to approximate most of the cost of administering the Federal program and carry with it a sensible and fully staffed collection system.

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

man.

Senator PELL. Thank you, Senator Stafford.

Senator Javits?

Senator JAVITS. No questions, Mr. Chairman. I have had my say. Senator PELL. Thank you very much, indeed, gentlemen, for being with us and for giving us the benefit of your views and your testimony which will be carefully examined.

Dr. COOR. Thank you, Senator.

Senator PELL. Our next panel is a panel representing State independent colleges and universities. Mr. Henry Paley, president, Commission of Independent Colleges and Universities, State of New York, Albany; and Mr. David Irwin, executive vice president, Washington Friends of Higher Education.

STATEMENT OF DAVID M. IRWIN, EXECUTIVE VICE PRESIDENT, WASHINGTON FRIENDS OF HIGHER EDUCATION, SEATTLE, WASH.; AND HENRY PALEY, PRESIDENT, COMMISSION OF INDEPENDENT COLLEGES AND UNIVERSITIES, STATE OF NEW YORK, ALBANY, N.Y., A PANEL

Mr. IRWIN. Thank you very much, Mr. Chairman. I would like to, first of all, indicate to you that the 43 States that have State association executive councils, representing some 1,400 private colleges and universities in this country, are in basic agreement with the national secretariat plan that has been developed here in

Washington, D.C., but I do not want to dwell much on that today. I think you will have a lot of testimony on that.

I would like to talk about the distribution process. We are very concerned out in the States about what is happening in the distribution process. Although we believe that it is essential to include these provisions in the legislation which this subcommittee has developed and we are concerned that even after all the above provisions are included in the education amendments of 1980, the regulations which the Office of Education will issue to implement those amendments will obstruct the intend of Congress.

What I am referring to are the regulations which OE promulgated last year to allocate campus-based funds among States and institutions throughout the country. Mr. Chairman, we are very concerned about what we hear the Office of Education intends to propose for the allocation process for the 1980-81 academic year. Although the regulations which were used last year and those being developed within HEW for the next year speak in terms of equity consistently and applied standards, techniques and procedures, the fact of the matter is that the regulations and the process they create are having exactly the opposite effect.

The fair share funding methodology has already produced swift and major dislocations of funds from campus to campus, sector to sector and State to State. We are deeply concerned about the shifts among the campuses and sectors and believe the shifts among States violate the statutory State allocation formulas.

As an example, Washington State's share of national appropriations for the three campus-based student aid programs dropped from 2.5 percent in 1978-79 to 2.3 percent in 1979-80. We estimate it will further decrease to about 2 percent in 1980-81. That will result in the loss of $2.7 million to students attending institutions within the State of Washington in 1980, and if the fair share concept is fully implemented, Washington would lose approximately $4 million.

I would like to point out that when MISAA was enacted, Congress increased appropriations for college work-study by 26 percent and SEOG by 25 percent. However, the Washington State increase was 15.4 percent in CWS and 10.3 percent in SEOG.

I want to also point out that I am not talking just for Washington. That there are other States in the Nation that are very concerned about fair share. In the West, Alaska, California, Colorado, Hawaii, Nevada, Oregon, Utah, Washington, and Wyoming will lose significantly if the formula is allowed to go into effect.

In the eastern region, New Jersey and West Virginia also would suffer significantly losses under the fair share allocation. In the Midwest, Illinois and Ohio, Wisconsin, and in the South, Arkansas would suffer losses.

I am certain, Mr. Chairman, that you and other members of the subcommittee have already received correspondence from your constitutents about this formula the effects of which are a national problem.

Although I recognize that Congress does not often legislate formula for allocating Federal funds, this problem cries out for the attention under your strong oversight authority.

i

I would also like to point in, in closing, Mr. Chairman, in my portion of the testimony, the concern we have about the current Ford bill. That deals with the combining of SEOG-IY-CY. We would like to point out to you, Mr. Chairman, that we feel that that combination could be detrimental to about 16 States in the union.

I have, and would like to submit, a paper that was done by the financial aid officer, R. J. Gibson, at Yale University, for your perusal, and I would like to submit for the record at this point an analysis and submit to you this paper for analysis, and I would like to point out that the States that are going to lose under this combination of IY-CY includes the States of Rhode Island, Maine, Massachusetts, West Virginia, and the State of Washington.

I urge you to look closely at this issue in this subcommittee. I want to thank you very much for your kind attention, Mr. Chair

man.

[The prepared statement of Mr. Irwin and information referred to follows:]