May 26, 1970
Page 17136
FEDERAL ROLE IN HIGHER EDUCATION
Mr. MUSKIE. Mr. President, on Sunday, May 10, 1970, an excellent article appeared in the Washington Post by Dr. Alice M. Rivlin, former Assistant Secretary of Health, Education, and Welfare and Dr. Robert W. Hartman, also formerly of HEW.
As Drs. Rivlin and Hartman point out, the administration's higher education proposals place admirable emphasis on aid to students rather than aid to colleges and universities. However, the proposals also give rise to serious questions which must be answered as Congress considers the Federal role in support of higher education.
I ask unanimous consent that the article be printed in the RECORD.
There being no objection, the article was ordered to be printed in the RECORD, as follows:
[From the Washington (D.C.) Post, May 10, 1970]
A CHECKBOOK FOR THE STUDENT
(By Robert W. Hartman and Alice M. Rivlin)
(Miss Rivlin is a former Assistant Secretary of Health, Education and Welfare and Hartman is a former HEW employee.)
The administration is proposing a drastic overhaul of Federal aid to higher education. The new plan – announced in the President's Higher Education Message and spelled out in subsequent legislative proposals – is complicated and sure to be controversial.
Like the administration's welfare proposals, the higher education plan is bold reform on an inadequate budget. Moreover, gaps between the President's message, his legislation and recent statements by the Vice President have opened some grounds for doubting whether the intent of the program can be realized.
The big emphasis in the President's plan is on aid to students – not on aid to colleges and universities. For the first time, the government would guarantee assistance to all financially needy full-time undergraduate students in accredited colleges and universities. The amount and form or assistance would be based on the income of the student and his family – not on his grades, his geographic residence or the whim of the college.
The plan has aroused cautious enthusiasm among those who seek to improve the access of poor students to higher education. It is acutely disappointing to those – including many college presidents – who believe that colleges and universities can be rescued from their deep financial trouble only by direct federal support. In their view, the Nixon plan adds to the problem – by enabling more students to go to college – without contributing to the solution.
FOUR PROGRAMS NOW
The government now has four major programs for aiding students: educational opportunity grants, work study, national defense student loans (government funds) and guaranteed loans (private funds). The first three are administered by colleges and universities.
A student must first gain admission to an accredited institution and then apply to it for aid. The institution's federal aid budget depends on state distribution formulas and the approval of review panels. The college decides how much aid to offer the student and in what mix of grant, loan or work obligations. It can concentrate its aid funds on a few exceptionally needy students or spread them more over a larger number.
The guaranteed loan program is administered primarily by banks. The government guarantees bank loans to students at a maximum interest rate of 7 per cent, pays the interest while the student is in college and makes a special payment to the bank when money is tight. Most borrowers under this program are from families with middle to high incomes.
There are three big problems with present student aid programs. The first is inadequate funds. Colleges and universities have had to turn away many applicants because funds were exhausted or because they were in a state that fared poorly under the distribution and panel system. Banks have been reluctant to lend to students under the guaranteed loan program when more profitable investments were available.
The second problem is student uncertainty: a student who wants to go to college cannot tell in advance where he can get aid or how much. The third problem is that federal funds have not been concentrated on those who need them most. The administration plan attempts to deal with these three problems.
TWO KINDS OF AID
The administration program proposes two tiers of support: (1) subsidized basic aid for full-time undergraduates with low family income, and (2) unsubsidized supplementary aid for everyone.
Under the basic aid program, the Secretary of Health, Education and Welfare would establish rules about who is eligible for aid and what kind. He would set up a schedule showing how much a family of a particular size and income should contribute to its child's education, and how much the student could get in grant or work study money and subsidized loans.
For example, a two-child family earning $4,500 might be expected to contribute $100; the student would be eligible for a grant or work-study payment of $600 and a subsidized loan of $700. A two-child family with $7,000 would be expected to contribute about $900; its child would not be eligible for grants but would get $300 in subsidized loans. A family with $10,000 or more income would not be eligible for subsidized aid but could borrow under the supplementary loan program. (These figures have been used by the administration to illustrate the program: they are not spelled out in the legislation.)
The basic aid program differs from existing programs mainly in shifting the decision about the student's eligibility for different types of aid from the college to the HEW Secretary. The effect would be to spread somewhat increased government funds over many more people. More students would receive some aid, but some students would receive less than under existing programs. (Students now receiving aid would be protected against loss.)
Student aid officers at high-cost private colleges would no longer be allowed to concentrate relatively large sums on a few students. Unless the university could make up the difference with its own funds, the poor student at Harvard or Stanford would have to borrow under the supplementary programs or go to a cheaper place. But the student who now found no school willing to give him funds would be assured of enough to pay his way at a low-cost public institution.
INTEREST MERELY DEFERRED
The supplementary aid program is designed to make unsubsidized loans available to students of all income levels who want more expensive education and want to spread the cost over their earning years. The administration's proposals amend the guaranteed loan program in several ways:
The interest ceiling is eliminated. Banks would lend at the market rate – about 9-10 per cent at present.
Special allowances to banks and the interest subsidy to students are eliminated. Students could defer interest accruing while they were in college but would have to pay eventually.
Students would be allowed to borrow up to $2,500 a year for seven years and repay over 20 years.
A new institution, the National Student Loan Association, is created to increase the flow of funds into student loan markets.
This NSLA would be a quasi-governmental corporation similar to the Federal National Mortgage Association. It would raise funds in private capital markets by issuing its own obligations, which would be guaranteed by the government. With the proceeds, NSLA would buy, sell or warehouse ("buy" under the condition that the seller will "repurchase"; i.e. NSLA "stores" the loans) student loan paper from colleges, banks and other eligible lenders. The volume of NSLA operations is not specified in the legislation, but the President's message on higher education specified that NSLA would buy up to $2 billion in student loans in fiscal 1972.
The hope for NSLA is that it would attract funds from new sources (including insurance companies, pension funds and even college endowments) to student lending. It would also encourage such lending by banks, which could warehouse up to 80 per cent of their low cash-flow student loans with NSLA and plow back some of the proceeds into more student loans.
The administration's intentions appear to be laudable. Unfortunately, the bill is so vaguely drafted that it is hard to be sure that these intentions will be carried out.
First, the bill does not specify who will be covered under the basic aid program or how much aid will be available. While it would be a mistake to enact an inflexible dollar schedule, some guidance should be given on the proportion of students to be aided. For example, the legislation could authorize appropriations sufficient to give basic aid to students whose family income falls below the median of all families with college-age children.
The bill also leaves the HEW Secretary too much discretion in determining the mix of grants and loans in basic aid. If he chose he could offer the low-income student only a subsidized loan without any grant at all. Being forced to borrow the full cost of their higher education would close the door to many low-income students.
Similarly, the bill fails to distinguish between pure grants and "grants" in payment for work; apparently, the colleges are to decide. The danger exists that the poorest students, who can least afford time away from their studies or from more lucrative jobs off-campus, will be forced to sing for their supper in low-paid work-study jobs.
If the administration is serious about guaranteeing higher education to low-income students, it should make clear that a substantial portion of the basic aid package (say half) is a pure grant. Students could then choose, in consultation with their college financial aid officers, whether to take the remainder of their aid eligibility in the form of subsidized loans or payments for work.
THE TRACK SYSTEM
Another problem with the administration's bill is that it may reinforce the track system in higher education under which low-income students attend public institutions, especially two-year colleges, and higher-income students attend more expensive private institutions. It certainly seems more sensible to use scarce public resources to enable three students to attend a community college than to send one student to Princeton, but this might make the Princeton student body more uniformly upper crust and less aware of how the other 99 per cent lives.
Moreover, in a major speech on higher education April 13, Vice President Agnew questioned the wisdom of expanding enrollments in four-year colleges or making special efforts to admit minority students. He said that the "cluttering of our universities ... is a major cause of campus ... unrest" and that "we must have more community colleges ... (for) the late-blooming, the underprepared and the underachieving student." His words have aroused fear that the forward strides made by our best institutions to diversify their student bodies will be nullified.
The segregation of low-income and minority students could be affected by increasing the size of the grant program in the administration's proposal by $300 to ensure all students at least $3800 in grants, work, loans and family contributions.
Finally, the administration program places heavy reliance on loans to finance higher education, presuming that students will be able to repay them in later years. Some students won't make it; although most college trained people earn high incomes, each census reports some highly trained but financially disabled households.
A number of proposals have been made to provide such persons with "income insurance." A modest step in this direction, originally suggested in an HEW report during the Johnson administration, would be the cancellation (forgiveness) of repayments for borrowers whose income falls well below the average for other families with equivalent education. Such a provision might encourage over borrowing, but by limiting the program to severe hardship cases, this could be kept under control.
The big unanswered question in the administration's program is whether it foresees general federal support for higher education. For the present, the emphasis is entirely on enrollment equalization and support for special projects through a National Foundation on Higher Education as well as a small program of "start-up" aid for post-secondary vocational programs.
General support to lower costs and enhance quality for all students is at present almost entirely a State responsibility. And most states have chosen to supply it by subsidizing state-operated institutions of higher learning. In some parts of the country, this practice has put a severe squeeze on private colleges and universities.
One scenario for the future would leave to the States the obligation of supplying partial support for higher education with the federal government participating through revenue-sharing. But this would require that the states begin to spread their support to private institutions or else the private schools will wither away.
An alternative approach to general support would be direct federal institutional aid to all colleges by formula. One gathers that the administration strongly prefers the former more decentralized. route, and this probably accounts for the absence of any general aid in the proposal.
No proposal in any domestic area is an unmixed blessing. The administration's nigher education plan has the virtue of restructuring student aid in an efficient way; but the level and mix of aid can certainly be improved upon.