I am quite confident that the particular company in this particular case hired to do the job had never heard of the subject. They had to start from the ground up.

I wonder why are we turning increasingly to outside concerns outside the Government, outside institutes. Is it with the idea that Congress is going to be more visibly impressed by what is supposed to be an objective study?

Mr. GARDNER. Sir, I can't answer that authoritatively, because many agencies are engaged in this. I can give you my guess and my philosophy on it.

I am sure that instances arise in which a study is contracted out which could have been done by a first-class Government research unit. I am equally sure that it would be a grave mistake for the Government not to avail itself of the enormous resources of this Nation in research personnel and in research institutions that are outside of Government.

One of our great strengths is that our system permits us to play back and forth between Government and the private world so that we can use the universities to the fullest, use the private research laboratories, and use the management consultant agencies; in many cases, there are far superior resources outside.

COST AND SCOPE OF STANFORD RESEARCH INSTITUTE STUDY

Senator BARTLETT. I wonder how much it takes the taxpayers to learn from the Stanford Research Institute that we ought to cut back on the impacted areas. Do you know how much the study cost?

Mr. KELLY. I do not have that information but I would like to give you the information for the record. We gave the most serious consideration to the scope of this study. It was discussed between the Department and the Bureau of the Budget for some time before the Congress directed it.

It started out with the concept of being a much broader study, a study not related just to Public Law 874 or just schools but what is the economic impact of a Federal installation in a community.

This was such a far reaching economic evaluation to get at and so expensive that in the arrangements with the Congress that led to the study, it was decided to restrict the study to the impact on schools, that is, what is the educational and economic impact and how does Public Law 874 relate to that.

We actually got the University of Maryland to assist us in designing the study so that we could send out specifications and ask for proposals as to what various organizations would do, and it is an area in which the staff of the Department of Health, Education and Welfare do not really have background for it.

It is hard for us to find within our Department a group of economists whose basic relationship is to economic impact on a community and municipal financing and State financing.

It seemed to us we would be getting a much more professional quality of study if we went outside.

(The Department subsequently provided the following information:)

T

of the Stanford Research Institute study was $175,000.

RTLETT. I am not disagreeing with you; I just wanted to ons on this since I was interested in it.

When the Senator from Colorado said he was going to dedicate himself to maintaining needed monies for this impacted areas, I told myself then silenty and I will say it publicly that I will be with him. Senator HILL. Senator Cotton.

SITUATION IN FISCAL YEAR 1966

Senator COTTON. I notice that in the fiscal 1966 appropriation you got the full amount requested, $347 million being appropriated. Both the House and the Senate did so.

The statement appeared from the Senate Report that this estimate will provide 100 percent of entitlements. It fell short of 100 percent entitlement.

Mr. KELLY. Just over $41 million short.

Senator ALLOTT. That relates to the $44 million I had projected. The right figure is $41 million?

Mr. KELLY. I think it is just over $41.

Senator COTTON. I understand, of course, what the Bureau of the Budget recommends is what you abide by and that there are some rules or procedures that prevent your going behind the Budget recommendations but that does not preclude our asking about it.

Was the amount recommended by the Budget for 1966 less than what we would ask the Budget for to give 100 percent entitlement?

Mr. KELLY. Let me say, Senator, at the time that we appeared before the Congress and that the Congress appropriated the $347 million, in all good faith, we had said that this would cover full entitlement and we thought it would.

Two events occurred. The Congress enacted legislation which modified Public Law 874 and made eligible some districts which had not heretofore been eligible; and secondly, the number of students enrolled that constitute a Federal impact and the average cost per student exceeded our estimate somewhat. This explains the $41 milLon we had not anticipated we would need when we appeared last year.

ADEQUACY OF 1967 REQUEST

Senator COTTON. Is that the amount that you are asking for fiscal 1967 or is that amount the Bureau of the Budget has authorized you to ask for?

Here again I am requesting information which you might be precluded from presenting, but has the Budget requested what, in the opinion of your Department, is the full amount necessary for 100 percent entitlement under the new reduced formula.

Mr. KELLY. Yes, in the formula under the legislation proposed to the Congress yesterday, it has. The estimate fully covers that.

Senator COTTON. In the absence of any new legislation by the Congress that would increase demands or requirements, the amount that you are requesting under the new formula you are confident is all that you will have to request for 100 percent entitlement under that proposed new formula?

Mr. KELLY. Yes, sir; that is correct.

INFLATION OF ACTUAL COST

Senator COTTON. I would regret if anything appeared in the nature of a caustic exchange, Mr. Secretary, so I apologize for it, but I do

want to ask this: Mr. Secretary, you indicated that one reason for the cynicism and for the tendency of expert educators to find reason for joking and laughter about the impacted-area program was the fact that it forced districts to juggle their bookkeeping or falsify their accounts to get their total allowance.

Of course, I realize this would involve your predecessor, but what have you done about that falsification?

Mr. GARDNER. I am sorry, I did not use the word "falsification." Senator COTTON. You may not have used it and incidentally, I have seen these records go back for correction and a lot of things removed bodily. I trust that this full colloquy will appear because it is of extreme interest to me and it should be in the record.

I do not mean that sentences should not be corrected but I hope that these statements will not be removed. No doubt you did not use "falsification." What have they been doing?

Mr. GARDNER. They have been behaving entirely properly in terms of the law. The law permits them to use as a basis for per pupil costs the State averages or national averages and for many districts this does permit an inflation of the actual cost.

Also, as the Stanford research study shows, the whole program inplies that there is greater impact at these Federal establishments than there actually is.

Those were the two elements I was referring to. I certainly was not referring to anything concerning improper behavior on the part of school administrators.

Senator COTTON. I believe what you indicated was then that you could not wholly approve of a law that permitted and invited local school authorities to stack their needs to get the full entitlement and there are no instances where the law has been violated so far as you know.

Mr. GARDNER. No, sir; I don't know of any.

TRANSMITTAL OF STANFORD RESEARCH REPORT

Senator HILL. When did the Department of HEW conceive the Stanford research report? How long have you had that report? Mr. GARDNER. I can't answer that.

Mr. COHEN. Before last fall.

Senator HILL. This past fall?

Mr. COHEN. Yes, sir; we received the preliminary report and then the final report. I think the law required it to be submitted last June 30, and it was so submitted if my memory serves me correctly.

Senator HILL. The record shows it was transmitted on June 30, 1965.

Mr. Secretary, you may proceed.

Mr. GARDNER. Our proposals to modify this program in 1967 are aimed at bringing the level of aid more closely in line with the actual economic impact of Federal activities on local school districts.

SUPPORT FOR HIGHER EDUCATION

The enactment of the National Defense Education Act in 1958 marked the beginning of Federal assistance to students through the student loan program. Since 1959, 1.7 million loans have been made under this program, totaling over $800 million.

The Economic Opportunity Act of 1964 established a second student. assistance program, the college work study program, aimed at providing employment opportunity for needy students.

The Higher Education Act of 1965 broadened the student assistance programs further. An insured loan program was established for students not qualifying under the student loan program.

For the first time, undergraduate scholarships were authorized. The college work-study program was expanded and transferred to the Office of Education, which is now responsible for all the student assistance programs.

In 1967 our budget request would permit 1,150,000 students to receive loans, 220,000 to receive scholarships, and 210,000 to participate in the college work-study program-overall, an increase of 64 percent over the 1966 figures.

LOAN GUARANTEE PROGRAM SOUGHT

In 1967 the budget proposes a modification in our older student loan programs. We are recommending new legislation which would utilize private capital for the loans while preserving the low-interest, teacher cancellation, and other special provisions of the present student loan programs. We have held meetings with educational institutions and others interested in this program and are working out the details for the transition from the direct Federal program to the proposed loan guarantee system.

REPAYMENT OF STUDENT LOANS

Senator ALLOTT. What is the chairman's desire? I would like to ask one question with respect to the loans. I see he is getting into the fellowships. The chairman will recall my great interest and participation in arriving at NDEA. Would it be satisfactory to ask a question?

Senator HILL. Certainly.

Senator ALLOTT. I understand that the repayment on your student loan programs has been very good. Do you have figures available on the repayment rates, and do you have any figures available on how this compares with private student loans, repayment?

Mr. KELLY. I do not have any precise figures available to use. We did have a series of reports that were made by the General Accounting Office which indicated that among the early loans that were due, made to those students that had finished school and for the first time became responsible for payments, the reports showed an alarmingly high default rate. We went to work and undertook to establish audit reviews at each of the institutions to identify where the problem existed and why it existed and to bring about certain corrective action. I think a very substantial amount of this corrective action has been taken. We are getting loan repayments made in smaller amounts, not made in an annual payment, but in more frequent installments, and we have introduced the followup systems and reports systems that would alert you when a given institution's loan collections did not work out. We have not had defaults as such; that is, we have not yet reached the point yet where we assume people are not going to pay. We have found that organizations had organized to make the loans but had not really instituted the machinery for regular collection and, in a

larger student program like this, the more routine and the more regularized this becomes, the more smoothly will be the operation.

I think the early evidence of a poor result was really salutary. put us to work so that we could develop a better managed program.

AVAILABILITY OF STATISTICS TO CONGRESS

Senator ALLOTT. When would these figures be available to the Congress? The reason I asked the qusetion the way I did, in the last 2 or 3 weeks, I have read in some magazine or somewhere that the repayment was exceptionally high. Apparently, from the information that is available to you, whatever I read was wrong.

Mr. KELLY. I think so. I think that we do not have as yet reports and statistics that would allow us to say to you that we had a substantially good record. I think what we did was identify early the possibilities of a poor record and institute corrective procedures, and we think our reports will permit us to tell you we have a very good record, but the corrective actions have not been taken over such a long period of time that we actually have reports that would allow us to say that.

Senator ALLOTT. When would Congress expect that you would have enough information so that we could get a meaningful projection on this program?

Mr. KELLY. I think by the end of this fiscal year that the reporting system should have given us some real evidence of our success. Senator ALLOTT. By the end of 1966?

Mr. KELLY. Yes.

Senator PASTORE. Mr. Kelly, I think nothing destroys the nobility of a program more than abuse of that program. I think it is the highest order of ingratitude to have any person have money loaned to him to receive an education and pay it back and then he takes the attitude it is Fedeal money and I don't have to pay it; "Nobody pushes me. Why should I pay it back?"-thereby depriving some other boy or girl of the same opportunity that he was able to enjoy in order to get the money to receive an education.

I think that one of the most noble programs we have passed in this Congress on education has been this loan program which has helped so many of our young people. I have heard the rumor contrary to the way the Senator from Colorado heard it, that the performance was very poor.

ENFORCEMENT PROCEDURES

Rather than getting figures on this, I would be very anxious to know what our procedures of enforcement are. This idea that you go back to an institution and say, "We are going to make a modification here," does not satisfy me at all. I think we ought to become a little. more aggressive. If a young man or young woman who has borrowed money to receive an education is now in the business life with a very lucrative practice or vocation, he ought to pay it back and he ought to be made to pay it back as an example to all others.

I would hope that we would become rather strict on this. Nothing destroys the unemployment compensation or the social security system more to let a few chiselers get away with some of these things.