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 adminis tration 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

63-979 O-1980--21

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