tion. So I did not want to bias the programs as a result of past incompetence.

Second, I think that the administration may well have used higher interest rates than I have used. Even when I did this there was some suggestion that I should use an unsubsidized interest rate of 112 percent.

When I undertook this analysis, I believe the special allowance was limited. The special allowances plus the 7 percent student interest rate was limited to a total of 12 percent which has now been raised at least temporarily, so it is possible those increases have been taken into account as well.

I really can't speak to the difference beyond that. But I certainly would be prepared to outline in great detail precisely how the computations were made.

Now going back to the question of the increase in cost, my computation, and I may have to qualify this but it is roughly correct, is that stretching out the repayment period would add about $50 to that increase in cost. It may be as low as $35. My original computation for the Maguire-Steiger proposal was that costs would increase from-I may have it here-yes, I think it is about $35 or $40, so in order of magnitude less than 10 percent of the costs of the program.

Mr. BUCHANAN. Thank you very much. I appreciate your testimony and all your research. I have always believed that the motto of the Congress ought to be one that is the motto of the University of Virginia which was founded by my leader, Thomas Jefferson, who was a Repubican-Democrat or a Democrat-Republican.

Mr. PEYSER. Just like me.

Mr. BUCHANAN. One of his statements which is a motto for the school, is

For here we are not afraid to follow the truth wherever it may lead us, nor to tolerate any error so long as reason is left to combat it.

Mr. FORD. Mr. Peyser.

Mr. PEYSER. Thank you, Mr. Chairman. I am going to be very brief because of the time problem that we are facing.

The one thing I want to restate, you did say in your statement that all students should be given equal opportunity for student loans. I include in that "all" the group that we have been talking a good deal about, middle income and higher income people.

I would like to suggest that the concept that these people are going to utilize these loans because of the increased earning potential presently having that sort of free ride over that 4-year period isn't, I don't really think, a very valid point because you know, even if they were to have $15,000 in loans and they were gathering in this 7 percent earning factor, that is $350 and I don't reallyand even if it were doubled it would be $700-I don't really see a so-called high income people, as we are painting them, working this devious route to get another $350 or $700 that they would be deriving by this program.

I see it serving a very valid purpose and a very real need, the removal of the income program.

Mr. DRESCH. I definitely agree. That is why I would not reimpose the income ceiling. I would provide for interest to reduce the

discrepancy between the current GSL program and other forms of credit.

Mr. PEYSER. But that affects all students.

Mr. DRESCH. I think it should.

Mr. PEYSER. It does. That is where I have the problem. I think there are students where that could create a problem in the program of having that extra cost, and as you mentioned, you said, well, the education should be worth that or else they perhaps should not participate.

I find myself a little at odds with that comment because it can just reach a point and someone says, I just can't do it and maybe they really should do it.

I would hate to have this 7 percent factor be the factor that pushed them out the window.

Mr. DRESCH. I would still suggest, sir, that there is an alternative mechanism by which to encourage that educational investment and that is to increase grants available to this particular individual or class of individuals. I think that is a more appropriate device, a direct grant that one can observe rather than an implicit grant through a loan program.

Mr. PEYSER. Mr. Chairman, I yield back my time.

Mr. FORD. Thank you.

Mr. Tauke?

Mr. TAUKE. Thank you very much for all of the information. Now I really need a quiet room, I think, in which to carefully analyze it. I am interested in what I believe is the thrust of table 11-that under the Maguire proposal all of the loans would be repaid under a 20-year period.

Mr. DRESCH. That is a slight overreading of the table.

Mr. TAUKE. OK, tell me what I should conclude from that. Ninety-six percent would be paid in a 20-year period?

Mr. DRESCH. What I have taken are representative income profiles. This entire analysis is based upon an assumed distribution of borrowers over lifetime earning histories. I have taken three of those as representative, what I have characterized as low, middle, and high income individuals in terms of lifetime income after schooling. The low income corresponds to roughly the lower quartile income. Similarly, high income the upper quartile. So 25 percent of the people have incomes at or below the low income profiles. Those individuals would be repaying their loans in 19 or more years under these assumptions about income growth.

I should say the estimated repayments are not terribly sensitive to the assumptions made about the rates of income growth over the period. So there would be significant numbers of people who would be repaying in 20 and perhaps even 25 years, perhaps as many as 15 percent of all borrowers.

In general, they would account for less than a pro rata share of the original borrowing because they would generally be those who had dropped out of school before completing and hence would have lower levels of debt, and assuming equal borrowing rates in all years of school and taking into account attrition over the schooling period.

In this context, you can look at the total repayments you are ever going to receive under any of these programs. Under the

Maguire program, for example, I think I computed that roughly 96 percent of the funds that you will ever receive will have been received by the 20th year.

Mr. TAUKE. Are you assuming in those statistics that everybody who graduated from college or graduate school or ceases his or her education, is going to immediately enter the work force?

Mr. DRESCH. I guess implicit in this is the assumption that all will enter the work force. Let me qualify that slightly. The income profiles were derived from the 1970 census orginally and have been updated using the current population survey. Basically it is the same profile, with adjustments to make it correspond to income growth in the intervening period.

Mr. TAUKE. Do we have any idea what percent do enter the work force upon graduation?

Mr. DRESCH. With respect to Ph. D.'s, roughly 98 percent are employed.

Mr. TAUKE. What about B.A.'s?

Mr. DRESCH. That is a good question. I could not give you a number, but I think one could get that information from BLS.

Mr. TAUKE. Wouldn't it be fair to say that unless there is some kind of a minimum or maximum time requirement on the repayment of loans, that it would be possible under this system for a substantial number of the people to never be able to completely repay the loans?

Mr. DRESCH. When you say substantial number, I think I would probably disagree.

Mr. TAUKE. Do you think it would be out of line to suggest that 20 percent of the people who graduate from college in this country do not enter the work force for more than, let's say, a 2-year period of time during the remainder of their life?

Mr. DRESCH. My guess is that that is an underestimate of that female labor force participation, and I assume that is what you are targeting on.

Mr. TAUKE. I don't want to be sexist about it, but I assume the statistics would show there are many more females who don't enter the work force for a 20-year period upon graduation than males. Mr. DRESCH. I am sure that is true, but the number of women in the labor force has increased dramatically, particularly for those who are highly educated. I think this is probably a nonproblem, possibly affecting no more than 5 percent of the profiles here. This is a small fraction relative to the total participation.

Mr. TAUKE. Then let's say the person who gets out of school has a $25,000 loan. By the time the accumulated interest is added it would not be difficult to arrive at that figure under this program. Then he or she does not work for 5 years. Similarly, if someone who has accumulated the $18,000 maximum during the first 4 years of college and subsequent 2 years of graduate school and then continues his or her education for another 4 or 5 years, the amount of money that he or she will have borrowed or will be obligated to pay back at the time that person graduates is going to be very, very high.

It appears to me that there are serious problems in all the statistical analyses about payback unless I am missing some provi

sion of the bill. I think maybe you are telling me I am missing a provision of the bill.

Mr. LEVIN. Congressman, my expression was really related to something I just read and not to something you had said.

Mr. TAUKE. I am sorry. Thank you very much.

Mr. FORD. Thank you very much.

I now call on Bobbi Avancena, legislative assistant to Representative Peter Peyser.

I will yield to the gentleman from New York.
Mr. PEYSER. Thank you, Mr. Chairman.

While Bobbi is approaching the table, I would like to mention that Bobbi has been working as legislative assistant on this legislation and she mentioned to me just a few days ago her own experiences in dealing with the student loan program.

I was so impressed with what she had to say, I urged her to let the committee hear this testimony as well so that they could have a better idea of some of the practical applications and problems that are involved.

So I would like to now ask her to tell her story if she would. STATEMENT OF MS. BOBBI AVANCENA, LEGISLATIVE ASSISTANT TO HON. PETER PEYSER, REPRESENTATIVE FROM NEW YORK [Prepared statement of Ms. Avancena follows:]

Statement of Bobbi J. Avancena

Legislative Assistant to
Representative Peter A. Peyser

I greatly appreciate the time this Subcommittee has given me this moming to speak about my personal experience with federal financial aid programs for students seeking a higher education.

As a former student borrower who just last week made my last payment an $5,000 worth of student loans, I believe that my personal experience, which is still relevant even with the changes made by the Middle Income Student Assistance Act, might help to put into a concrete human perspective many of the issues that have been discussed by this Subcommittee over the past several weeks.

I grew up and attended public schools in Rockville, Maryland, a suburb of Washington, D.C. My father was a civil servant and my mother, a housewife, did not work. I had two younger brothers.

I graduated in the top four percent of my class. I was also editor of my high school newspaper and president of our school's largest community service club. In short, I believe that I was a good student and had eamed the opportunity of attending the college of my choice.

I entered Drew University in Madison, New Jersey in September 1968. The $3,000 tuition plus room, board and miscellaneous expenses was covered by a combination of a DAR history scholarship, a scholarship for selected freshman offered by the college itself, and a $10,000 loan my parents had borrowed from the Government Employees Financial Corporation. That $10,000 was loaned by semester, but was guaranteed to my father to be available each semester for the four years that I was in school.

The summer between my freshman and sophomore year my father died. Our family income to that point was about $20,000. Our new income after