CABLE 15.-Loans approved under title III to nonprofit private schools, by State: Fiscal years 1961 and 1962 St. John's Preparatory School, Shrewsbury. 16,000 TABLE 15.-Loans approved under title III to nonprofit private schools, by State }p: ['ABLE 15.—Loans approved under title III to nonprofit private schools, by State: Fiscal years 1961 and 1962-Continued DEAR MR. CHAIRMAN: Transmitted herewith for your consideration is a draft proposed of technical amendments to section 215 of the National Defense Education Act of 1958, as contained in S. 5800 (H.R. 3000), the National Education Improvement Act of 1963, now before your committee. Section 215 in its present form would establish a procedure whereby a loan, under the student loan insurance part of title I of the bill, would be insured only upon issuance by the Commissioner of Education of a certificate of insurance with respect to that loan. The proposed amendments would provide an alternate, simpler procedure under which the Commissioner, subject to his regulations, would be authorized to issue to an eligible lender a certificate of comprehensive insurance. A certificate of this character would insure all eligible loans of the lender made before a specified cutoff date, and within the limits of an aggregate amount stated in the certificate. The amendment would work no substantive change in the student loan insurance part, and is intended solely to simplify an aspect of that program's administration upon enactment. The Bureau of the Budget advises that enactment of S. 580 with the amendments recommended above would be in accord with the program of the President. Sincerely, Enclosure. ANTHONY J. CELEBREZZE, Secretary. DRAFT AMENDMENTS TO PROPOSED SECTION 215 OF NATIONAL DEFENSE EDUCATION ACT (STUDENT LOAN INSURANCE) AS CONTAINED IN S. 580 (PP. 13-15) AND H.R. 3000 (NATIONAL EDUCATION IMPROVEMENT ACT OF 1963) 1. Redesignate subsection (a) as "(a) (1)"; redesignate subsections (b) and (e) as paragraphs (2) and (3) of subsection (a); redesignate subsections (d), (e), and (f), and references thereto as subsections (c), (d), and (e), respectively; and insert new subsection (b) reading as follows: "(b) (1) In lieu of requiring a separate insurance application and issuing a separate certificate of insurance for each student loan made by an eligible lender as provided in subsection (a), the Commissioner may, in accordance with regula a certificate of comprehensive insurance coverage which shall, without further action by the Commissioner insure all insurable loans made by such lender, on or arter the date of such certificate and before a specified cutoff date, within the limits of an aggregate maximum amount stated in the certificate. Such regulations may provide for conditioning such insurance, with respect to any loan, upon compliance by the lender with such requirements (to be stated or incorporated by reference in the certificate) as in the Commissioner's judgment will best achieve the purpose of this subsection while protecting the financial interest of the United States and promoting the objectives of this part, includ ing (but not limited to) provisions as to the reporting of such loans and informa tion relevant thereto to the Commissioner and as to the payment of initial and other premiums and the effect of default therein, and including provisions for confirmation by the Commissioner from time to time (through endorsement of the certificate) of the coverage of specific new loans by such certificate, which confirmation shall be incontestable by the Commissioner in the absence of fraud or misrepresentation of fact or patent error. "(2) If the holder of a certificate of comprehensive insurance issued under this subsection grants to a student a line of credit (as defined in section 212) extending beyond the cutoff date specified in such certificate, loans or payments thereon made by such holder after such date pursuant to such line of credit shall not be deemed to be included in the coverage of such certificate except as may be specifically provided therein; but, subject to the limitations of section 211, the Commissioner may, in accordance with regulations, make commitments to insure such future loans or payments, and such commitments may be honored either as provided in subsection (a) or by inclusion of such insurance in com prehensive coverage under this subsection (b) for the period or periods in which such future loans or payments are made." 2. Amend the second sentence of redesignated subsection (e) (p. 15, lines 12-15 of S. 580) to read as follows: "If the loans thus consolidated are covered by separate certificates of insurance issued under subsection (a), the Commis sioner may upon surrender of the original certificates issue a new certificate of insurance in accordance with such subsection upon such consolidated obligation; if they are covered by a single comprehensive certificate issued under subsection (b), the Commissioner may amend that certificate accordingly." THE COUNCIL OF PRIVATE LENDING INSTITUTIONS, INC., Hon. WAYNE L. MORSE, Chairman, Subcommittee on Education, Committee on Labor and Public Welfare. U.S. Senate, Washington, D.C. DEAR MR. CHAIRMAN: The Council of Private Lending Institutions, Inc., appreciates your courtesy in permitting us to file the attached statement of views with respect to proposals now pending before your subcommittee. We would be grateful to you if arrangements might be made to have the council's statement included for printing in your official hearing record. Sincerely, GEORGE F. MOSHER, Chairman, STATEMENT OF GEORGE F. MOSHER, CHAIRMAN OF THE BOARD OF TRUSTEES, THE COUNCIL OF PRIVATE LENDING INSTITUTIONS, INC. The Council of Private Lending Institutions appreciates this opportunity to present its views to the Senate through this subcommittee. Our comments are directed to legislation now before Congress in the field of higher education. Specifically, our concerns are with legislation relating to loans for college students. We are opposed to proposals (in title I of S. 580 and similar bills) for a Federal guarantee of loans made to college students from private sources. We believe the root objectives of that guarantee proposal will be best achieved by an appropriate amendment to the existing National Defense Education Act loan provisions. We therefore recommend to the subcommittee and the Congress an amendment to the National Defense Education Act. This amendment would add a high degree of flexibility to the National Defense Education Act student loan program. I would greatly increase the number of student loans. But it would not in FEDERAL GUARANTEE PROPOSALS There is no demonstrated need for a new Federal program to guarantee or insure private loans to college students. Non-Federal, nonprofit loan guarantee programs are operating today in 48 of our 50 States-in all except Alaska and Hawaii, where such programs are now in the development stage. Coverage under these non-Federal guarantee programs is expanding so rapidly it is virtually impossible to keep statistics current. However, it is clear that these programs support well in excess of 100,000 private loans to college students at the present time. More than 4,300 banks are making these loans in 48 States (see app. B, attached). The total amount now represented by such loans is in excess of $75 million. The bulk of this private loan growth has occurred in less than 5 years. For example, in 1963, more than 4,300 banks are lending to college students under guarantee programs, while fewer than 400 banks were doing so in 1958. And we anticipate a further marked upturn in all statistics covering these guaranteed private loans as the 1963-64 school year begins in the fall. Spectacular as this growth has been to date, it nevertheless reflects only a fraction of the guaranteed loan potential of the private lending industry. Clearly, private sources-supplementing as they do the existing National Defense Education Act loans-can supply the Nation's entire college lending needs. Passage of a Federal guarantee program would unnecessarily duplicate, and to a considerable degree might well discourage further expansion of the already extensive State, local, and private efforts which have sparked the expansion of We believe such a private loans to college students over the last few years. result would be highly undesirable, for several important public policy reasons. Direct Federal loans under the National Defense Education Act have materially aided many college students since the National Defense Education Act was passed in 1958. These loans, however, were also intended to stimulate companion private effort. There has been this private effort. The growth of non-Federal programs since 1958 reflects an obvious determination in a great many private quarters to advance and sustain the cause of higher education in America--a determination which, in the public interest, should be encouraged, not hindered or in any way encumbered. Conceding the importance which attaches to higher education, Congress and the public must also be concerned with the expense side of the ledger. The National Defense Education Act loan program began as a relatively modest one. It has grown to the point where the Federal Government is today the largest single lender to college students. About $300 million in National Defense Education Act loans are now outstanding. The demand for loans from all quarters will increase, not lessen, in the years ahead. It is presently proposed that the annual $90 million National Defense Education Act loan ceiling be increased to $135 million for fiscal 1964. The Council of Private Lending Institutions offers no comment here with respect to that proposed increase. But we do point out that in the normal course, under existing conditions, future authorization and appropriations requests will necessarily become greater. At least one expert in educational finance, Prof. Seymour Harris, has predicted that the need for low-cost college student credit will reach $2.5 billion annually by 1970. If this is so, and we have no reason to doubt the estimate, Congress will want to consider carefully now how much of that future obligation it will commit to the taxpayers-particularly when non-Federal sources stand ready and able to do the job, and when experience has clearly shown that college students are willing and able to avail themselves of private loans. It should be reiterated, however, that--important as it is to the American taxpayer-economy alone is not, in our view, the controlling factor. Obviously, America can-and must-afford the quantity as well as the quality of education our children need and our Nation's aspirations call for. Our youth is our greatest asset, and money for education is money well spent. To this proposition, we believe there can be no rational dissent. We recognize that existing National Defense Education Act loan programs, at their current levels, could not of themselves meet the burgeoning loan demands And the National Defense Education Act is of the Nation's college students. National Defense Education Act programs have not being asked to do it alone. already been massively supplemented by non-Federal loan guarantee arrangements. The Federal Government, therefore, should not now institute its own |