There are always those who will use the exception rather than the rule to defeat such things. I would hope on these loan programs we would allow no abuse. I would hope we, as a government, would enforce it even if you have to go to court to force people who are able to pay to pay.

Mr. KELLY. I think the early results were disturbing but they were not universally disturbing. Many of the universities were doing an excellent job. In some instances, people were entitled to defermentpeople who had gone into military service, for example-but the institutions had not been properly informed.

Senator PASTORE. I hope you will enforce it. I am not saying if a person is sick and cannot afford to pay it back or happens to be a lawyer, let us say, who is not doing so well due to illness and cannot afford to pay it back. You may have extenuating circumstances. We are not getting into that. I think we have to be stern with the chiseler in order to set the good examples; otherwise, they will destroy this program and I hope it will never be destroyed.

WASHINGTON POST ARTICLE ON STUDENT LOAN PROGRAM

Senator HILL. I noticed a story in this morning's Washington Post which I quote:

"President Johnson put the heart back into the popular program of direct Federal loans for college students yesterday.

"Mr. Johnson asked for restoration of most of the $150 million the administration had proposed to cut from the National Defense Education Act loan program.

"The President's budget, for the year starting July 1, sent to Congress in January, spelled the early death of the NDEA program. It proposed shifting the direct loan program to a system of privately financed loans that would be insured by the Government."

CONTINUANCE OF DIRECT-LOAN PROGRAM

From your statement, I understand that you are going to continue the direct-loan program.

Mr. GARDNER. I would like to have Wilbur Cohen speak to that. Senator HILL. In spite of the fact that the budget we had in January did not so provide is that correct?

Mr. COHEN. Yes, Senator. The President's statement in the message that he sent up yesterday said:

To increase loan funds available to students who want college educations, I recommend the conversion of the direct-loan program to a program in which loans will be made from funds provided by the private capital market with the Government subsidizing these loans. The teacher forgiveness features for students eligible under the National Defense Education program will be retained. I am proposing an orderly transition to the new student loan program so that no eligible student will be deprived of the needed financial assistance and I will ask for the necessary funds to accomplish this purpose.

PROPOSED SUPPLEMENTAL REQUEST FOR $150 MILLION

Senator HILL. You say "necessary funds." What do you mean? Mr. COHEN. The legislation authorizes the amount of money to do this and it is my understanding that when the necessary legis

is adopted by the substantive committee and the Congress, if it is in accordance with the President's proposal, then there would be a supplemental of approximately $150 million to carry that out which would continue the National Defense Education Act student loan program. Senator HILL. But it is not in force today?

Mr. COHEN. The actual amount of that money is not before you today.

Senator HILL. How much is before us today?

Mr. KELLY. $34 million for student loans and approximately $20 million for health profession student loans is before you. In the 1966 appropriation language, this was the amount we are authorized to commit between April 1 and June 30 of this fiscal year. Therefore, we have asked for appropriations to cover those commitments. Then, legislation has been requested to modify the student loan program to move it in the direction of the use of the private credit. But it contemplates authorization for appropriations of up to $150 million which will aid in this transition and this would be requested following enactment of the legislation.

Senator HILL. Do you mean $150 million for direct loans?

Mr. KELLY. Yes, sir.

Senator HILL. As you move the program into the private financing?

LESS OF SUPPLEMENTAL FUNDS

Mr. KELLY. Yes, sir. It would be our hope that this would not result in the expenditure of $150 million, but it would assure that commitments could be made so that the student could be assured of the loan and could enter college in the fall or continue his college education. We would then seek to get him to obtain those funds by going to a bank that is authorized to make loans under this new program.

The proposal would also authorize us to encourage the educational institutions to go to the financial institutions to borrow the funds with our guarantee, but the $150 million is a backstop to this program to assure the needy students that they are not deprived of loans to enter college or to continue college while the transition is occurring.

Senator HILL. The $150 million would be in the supplemental and not in this bill?

Mr. KELLY. That is correct.

Senator PASTORE. One of my staff members told me that that was changed by the President. Is that correct?

Mr. COHEN. The paper did not get the nuance of the fact that the President said, "I will ask for the necessary funds to accomplish this purpose." I think they assume it was asked for in the budget, but since, again, like the impacted areas, there is a matter of change of legislation to accomplish this purpose, it was the thought that

CURRENT AVAILABILITY OF FUNDS FOR COMMITMENT

Senator PASTORE. Where does a student go now when he wants a loan? Does he go to his own bank, or where?

Mr. KELLY. Right now the only commitment that can be made, irrespective of what is in the 1967 budget, is that between April 1 and June 30, institutions can make commitments which in the aggregate would amount to $54 million, $34 million for NDEA student loans and $20 million for health profession loans. This would be through the regular institution student loan officer.

We are now issuing regulations under the 1965 Higher Education Act, which authorizes insured loans with subsidized interest with State institutions or nonprofit institutions, or directly between the Federal Government and financial institutions. We are negotiating with 20 States which have the authority to set this up and as quickly as it is organized under the 1965 act, we will then encourage the student to go to the bank.

Senator PASTORE. I have received some mail on this and there are some objections to it. The argument is that some students are rather fearful that the banks' standards will be a little more severe than if they went to their own loan officer. Is that true?

Mr. KELLY. We recognize that there is concern and it is for this reason that the President has said that he will recommend the funds to assure that this does not happen. In other words, he wants us to move in the direction of going to the banks, and he wants the banks to use the same standards as under present programs, but he will assure that if they do not

Mr. COHEN. In other words, you are correct, Senator. When that fear was expressed and it came to our attention and the President's attention, he modified his position from what these people heard before to assure that there was always an NDEA backup situation so that the student could get the loan from the educational institution, if he did not get it from the bank.

Senator BARTLETT. Would these regulations set a maximum bank interest rate?

Mr. KELLY. Yes, sir. The law establishes a maximum in connection. with the State and the nonprofit organizations at 6 percent. In connection with the direct Federal guarantee, it says under some circumstances the Commissioner of Education could authorize it to be 7 percent.

Senator BARTLETT. Simple interest?

Mr. KELLY. Yes, sir. The student pays 3 percent, and the difference between the 3 percent and the 6 percent is the subsidized Federal Government portion of it.

Senator HILL. You may proceed, Mr. Secretary.

LIBRARY PROGRAMS

Mr. GARDNER. The Higher Education Facilities Act provides assistance for the construction of college and university libraries; the 1965 Higher Education Act authorizes aid for purchasing library books and materials, training professional librarians, and conducting research and demonstration projects to improve library services. We are requesting a 1966 supplemental to initiate these library programs, and the 1967 budget calls for greatly increased support, providing for about 2,700 grants for library resources, 800 traineeships, and 70 research and demonstration projects.

STUDENT ASSISTANCE PROGRAMS

Under the NDEA graduate fellowship program, 11,500 graduate fellowships were awarded, from the beginning of the program through last year. In 1966, about 10,500 will be awarded; under our 1967 request, this number would increase to 15,000.

The student assistance programs are designed to enable more individuals to pursue a higher education. But this expansion of opportunity will require more academic facilities to accommodate rising enrollment. It is the purpose of the higher education facilities program to meet this need. Under this program, almost $1.1 billion has been appropriated in 1965 and 1966, the first 2 years of the program, and in 1967 we are requesting appropriations of $723 million. This request will support over 1,200 grants for construction projects at public community colleges, technical institutes, and other higher education institutions. The 1967 budget will also provide for about 250 construction loans. In extending the legislation, we are proposing to change the character of the construction loan program to decrease the Federal capital contribution through the use of the private credit market in the sale of loan participations.

FUNDS FOR LAND-GRANT COLLEGES

Expansion of Federal aid to higher education has been rapid and dramatic-in the programs of the Office of Education, from $164 million appropriated in 1964 to over $1.2 billion requested in the 1967 President's budget. It is because of this recent and tremendous growth that we are not requesting in 1967 the relatively small amount in annual fund authorized and specifically earmarked for the landgrant colleges. They will, of course, continue to participate in our higher education programs.

Senator HILL. You realize, of course, they are strongly protesting the denial of these funds. They have had them since 1862. When that act, the Morrill Act, first passed, Buchanan vetoed it and then, Abraham Lincoln became President of the United States and he signed it. Senator BARTLETT. How much money is involved?

Senator HILL. $11,950,000.

Mr. CARDWELL. They would continue to receive the permanent appropriation. The $11,950,000 is the actual cut.

Senator COTTON. I can only speak for the New England area, but I assume that the objective of all of these various programs is to place higher education in the reach of more of our youth. Now, our landgrant colleges have been able to furnish a college education for our young people at less cost than they would pay in private institutions even though private colleges and universities are highly endowed. It seems to me a little inconsistent and we are losing sight of the main object which is to make higher education and college education available to more and more of our youth.

To cut out this sum that has been traditionally and historically established for our land-grant colleges, because you can go there at less cost than you can go to other institutions, it seems to me that that is hitting where it hurts the most and it is penny wise and pound foolish.

Mr. GARDNER. Senator, I certainly feel strongly about the contributions that these institutions make to higher education. I have said many times publicly that these are a vital, important part of the higher educational American scene, and I fully recognize the great tradition of the land-grant colleges and universities.

These same institutions will be receiving many, many times the amount of money they receive in land-grant aid through other channels, an it was in terms of this recognition that through newly developed programs aimed at new objectives these institutions were receiv

ing even larger funds, that we felt that during a tight budget year it was perfectly appropriate to curtail this program.

REQUEST TO BUDGET BUREAU

Senator HILL. Did you formally ask the Bureau of the Budget for this amount?

Mr. GARDNER. Yes.

Senator HILL. When you use the word "we" you mean more the Budget Bureau rather than the Department?

Senator COTTON. The land-grant colleges gained from the general program only their proportionate share, if they gain that, depending somewhat on the facilities-proportionate share along with all of the private institutions, so that the cutting of this comparatively small amount is a blow at the land-grant college that is still holding down its tuition and still furnishing educational opportunity at less cost than many if not most of the privately endowed institutions. Is that not correct?

Mr. GARDNER. It would be a blow but the funds that come through these other acts will be a real gain to those same institutions and will strengthen them in very important ways.

Senator COTTON. My point is if you cut out this comparatively small but traditional amount that goes to land-grant colleges, then of necessity you are not reducing but perhaps forcing the land-grant college in its charges to students to come a little nearer to the private institutions.

In other words, our own land-grant college is facing a problem of higher tuition right now, and this is another straw to help break the camel's back to make it necessary and they are striving not to do it. But there is no use trying to convert you because I suspect you are already converted.

FUNDS FOR NEW HAMPSHIRE, ALABAMA AND ALASKA

Mr. GARDNER. I notice, Senator, that New Hampshire will receive about $2 million under the Higher Educational Facilities Act of 1963. Senator COTTON. But the reductions of other funds, exclusive, of course, of this fixed, comparatively small amount, are likely to be around $250,000.

Mr. CARDWELL. We have shown they would lose $164,000.
Senator HILL. What about Auburn University in Alabama?
Mr. CARDWELL. Auburn University would lose $149,610.
The University of Alaska would lose about $165,000.
Senator BARTLETT. Mr. Chairman, may I ask this question?

I assume that land-grant college aids are receiving a dollars every year from this program. In a noncompetitive world-and now it will become competitive they will have to compete with these other landgrant colleges and private institutions for this bigger amount of money to which you referred. Is there any grave danger that a land-grant college will be cut off and will not be able to get as much money as it had before?

From what you said, I inferred that there was a probability or a certainty, whatever the case may be, that it will receive more money than this program gave it. Is that or is that not correct?

Mr. GARDNER. That is correct.