EDUCATIONAL ATTAINMENT COULD WELL INHIBIT PROGRAM PARTICIPATION. FINALLY, MY UTMOST CONCERN IS THE BURDEN OF PROOF WHICH I HOPE THE MEMBERS OF THIS SUBCOMMITTEE WILL CAREFULLY REVIEW THIS NEW CONCEPT BEFORE MOVING IN THE DIRECTION OF PERHAPS ELIMINATING THOUSANDS OF STUDENTS OF WHOM THE TRIO PROGRAMS ARE INTENDED TO SERVE. THANK YOU FOR THIS OPPORTUNITY TO TESTIFY BEFORE YOUR WITH YOU AS WE GO FURTHER INTO THE REAUTHORIZATION PROCESS Senator PELL. Thank you very much, Representative Chisholm. Senator Javits. Senator JAVITS. Thank you, Mr. Chairman. Mr. Chairman, thank you for giving me a half minute. I would like to apologize to the witnesses from New York, Dr. Johnstone, Mr. Kornfeld, and Mrs. Dickenson--and also to Senators Kennedy and Bellmon. I have a critical Foreign Relations Committee meeting on SALT I must attend. But I should like to assure them that I will study the situation and just add one point, Mr. Chairman. I consider the student loan financing, however we do finance student attendance at higher institutions of learning, the most important element of this whole bill. And I will do my utmost, having been with it so many years, to bring such expertise as I have to bear on a good resolution. I think that Senators Kennedy and Bellmon are to be much congratulated for the initiative which produced an alternative. And it is our duty to give it the most careful attention. Thank you, Mr. Chairman. Senator PELL. I thank the Senator from New York. And we will do that. I must confess that I too should be at the same meeting, but as chairman, my paramount responsibility is here. But that is one reason why I hope that the witnesses will move along as quickly as possible, so that I can join Senator Javits before too long. Senator Kennedy. Senator KENNEDY. Well, thank you very much, Mr. Chairman. Senator PELL. May I interrupt to congratulate you and Senator Bellmon on the imagination and the initiative that went into making this proposal, which will be very much cranked into our thinking. And you as a member of the subcommittee, I know, will make sure that it really is, too. Senator KENNEDY. Well, I want to thank you very much, Mr. Chairman. I think all of us who serve on the Human Resources Committee and serve on the Education Committee have known how strongly committed you have been in terms of the education programs generally and this specific program in terms of higher education over many years. And I personally am grateful for the scheduling of these hearings and for the willingness to give the kind of attention to this proposal which has been fashioned by Senator Bellmon and myself and some 17 other cosponsors, members of this committee, six other members of this committee, which we are hearing today. I welcomed the opportunity to join with Senator Bellmon and my other colleagues in the Senate who have been attempting to try and devise a process and a means to insure that the availability of scholarship assistance to all young people in this country at a price that is affordable and rational and a payback provision which is sensible and responsible and do it in a way which we believe actually will save the American taxpayer money. I have an opening statement which reviews the legislation. Senator Bellmon is going to comment on this legislation in some detail. And I will certainly look forward to reviewing that material as he goes through his statement here today. I want to ask that my statement in its entirety be printed in the record. Senator PELL. Without objection. [The opening statement of Senator Kennedy follows:] OPENING STATEMENT OF SENATOR KENNEDY Senator KENNEDY. Mr. Chairman, I am pleased to be here today to join you in receiving testimony on title IV of the Higher Education Act. I have been a member of the Subcommittee on Education for the 17 years that I have been in the Senate. Through those years, I have felt that educational opportunity is essential to the young people of this country, and to the country itself. Mr. Chairman, through the years, you and I have worked together to insure that the promise of educational opportunity comes to fruition. We have made great strides in the areas of improving scholarship grants and improving institutional aid. The Pell grants, the basic education opportunity grants, have become the foundation of our Federal efforts. Our focus on scholarship assistance must continue. The dependence of the needy on aid to attend school, and the great public good of education necessitate a strong commitment on our part. I believe that a federally sponsored and subsidized loan program can be an important supplement to such efforts. But I am concerned that our current loan efforts lag behind our other educational efforts. I am concerned that current programs do not meet the objectives we have for our loan programs. First, we want a progran which reaches those in need. The national direct student loan program and the guaranteed student loan program fall short. We know that many people are turned away. In certain regions of the country, like the West, few banks participate. In certain cycles in the economy, such as the current period, competing demands for capital make loans difficult to obtain in many places. And in all regions and in all cycles, banks have an incentive to lend to better credit risks and those who are more likely to establish other relationships with the bank. These people are less likely to need loans than are many who are denied them. In her testimony, the Acting Commissioner of Education, Mary Berry, noted a poll in which 25 percent of the students said they were unable to obtain the GSL they wanted. In testimony before the House, the president of Smith College estimated that one-third of her students were unable to obtain the GSL. Second, we want a program which relates the amount loaned to the need of the student. Under the GSL program, private lenders can lend up to $2,500 to anyone. This means that the program does not account for the different economic backgrounds of loan applicants. Nor does it account for the different costs of different schools. The amount of the NDSL loan is usually much smaller, around $700. The actual amount made available depends in large part upon the funds on the campus-which in turn depend upon the State allocations, the college's participation level, and the college's collections. It also depends upon the relative demands of other students. Third, our loan programs should be flexible about repayment so that students are not overburdened at the time when they have just graduated and their incomes tend to be lower. Both the NDSL and the GSL programs have straight mortgage payback provisions. Under NDSL the loan is paid over a 10-year period. Under GSL it is paid in a 5- to 10-year period. In few instances are the terms sensitive to the loan amount or the income level of the former student. Fourth, programs which are intended to be loan programs should be loan programs-a program should not allow for excessive defaults. GSL loans are fully guaranteed by the Government. NDSL loans are collected by educators rather than financial specialists. These factors contribute to a relatively high default rate. In the GSL program the rate is 10 percent; in the NDSL program it is 17 percent. Fifth, we must be concerned about costs. We must see how well targeted our programs are on those who need them. And we must examine the financial implications of various methods of meeting our education loan objectives. The guaranteed student loan program may not be as well targeted as we want a loan program to be. Before passage of the Middle-Income Student Assistance Act, as many loans were going to students in the top half of the income distribution as in the bottom half; MISAA has probably increased the proportion going to the wealthier half. Mr. Chairman, as you know, I have introduced legislation, together with Senator Bellmon and 17 other cosponsors, including six other members of this committee, which we believe better fulfills our student loan objectives. S. 1600, the National Student Loan Reform Act: Assures the availability of loans to all students who need them; Assures an amount which will let all students go to college; Will make payback mechanisms more flexible so that students will not be suddenly overburdened just as they graduate, when their incomes tend to be lower; Will take the loan collection burdens off of the colleges and will cut down on defaults by placing collection responsibility in banking agencies; and Will provide a supplemental loan program for parents of college students who are not able to meet the expected family contribution. This legislation will cost less than the current student loan programs, which it is reforming, over the next 5 years. Some of these objectives have also been addressed in the House Higher Education Act Reauthorization, which has been drafted by the distinguished chairman of their Postsecondary Education Subcommittee, Congressman Ford, and which has been voted out of the full committee. The House bill provides for Sallie Mae to go into areas where GSL's are in short supply to supplement the loan effort. The House legislation also establishes a parental loan program. I am glad to see that the House has been so responsive to concerns in these areas. Mr. Chairman, I look forward to today's testimony. The witnesses before us have given careful thought to the student loan issues and can give us a better sense of how we can meet our objectives in this area. I would hope they would give particular attention to their assessment of S. 1600: How does this bill compare to the current program and other alternatives? What suggestions would they have for improving S. 1600 so that it may better meet our objectives? Thank you, Mr. Chairman. Senator KENNEDY. I want to join in expressing warm welcome to our distinguished panelists here today who are speaking to this issue, to thank colleague Congresswoman Chisholm for the excellent statement that she has made and the strong support. This issue of trying to assure that young people in our society are going to be able to receive an education and that the financial restraints are not going to be a restriction on their ability, to continue in higher education, I think is one of the great challenges of public policy today. I think young men and young women who have both the talent and the ability and who have been accepted in many of the educational institutions of this Nation, who have the desire and the will to be able to continue their educational process, should not be denied that opportunity because of the limitation of resources of their parents. We have seen time in and time out where those individuals have been willing to-under the circumstances which have been described in this bill, have been willing to pay back not only their loans, but, of course, over their life's experience, return to the Federal Treasury many, many more tax dollars from the results of their efforts. My opening statement goes into some detail of the program. It will be printed as a part of the record. And I will look forward to hearing from our educators that are here today and particularly from my colleague, Senator Bellmon, who I have enjoyed working with in shaping and fashioning this legislation. Senator PELL. Thank you very much, Senator Kennedy. Senator Bellmon, the coauthor of the bill, we are delighted you are with us. STATEMENT OF HON. HENRY BELLMON, A U.S. SENATOR FROM THE STATE OF OKLAHOMA Senator BELLMON. Thank you, Mr. Chairman. It is a pleasure to appear this morning in behalf of S. 1600, which I am pleased to cosponsor with Senator Kennedy. This bill represents a great deal of thought and work on the part of both our staffs. And I believe that we have a result here that deserves the careful attention of the committee. And I appreciate the fact that these hearings have been scheduled. I would like to say that on my staff Carol Cox has done a great deal of the work. And I would like to offer her services to the committee, as you consider this legislation and perhaps some changes that you may want to make in it. I would simply like to say, by way of an opening comment, that I feel that the investment that the Government makes in education is probably the wisest expenditure of public funds that we make. Particularly I feel that making it possible for those young people who have the ability and the desire and the drive to attend institutions of higher education is an absolutely first priority, and that |