A r c h i v e d  I n f o r m a t i o n

Speeches and Testimony

Statement by
David A. Longanecker
Assistant Secretary for
Postsecondary Education
on
Fiscal Year 1997
Request for Postsecondary Education

April 17, 1996

Mr. Chairman and Members of the Committee:

I am pleased to appear before you to discuss the fiscal year 1997 budget request for the programs administered by the Office of Postsecondary Education.

The President, in his 1997 budget request for education, emphasized that keeping the doors open wide to college and other postsecondary education is one of his three priorities for education. The funds we are requesting for postsecondary education reflect the Administration's commitment to ensuring that all Americans have access to quality postsecondary education (1) by providing assistance to middle- and lower-income students to meet the increasing cost of postsecondary education, (2) by supporting programs to encourage at-risk students to attend and complete postsecondary education, and (3) by supporting development activities at institutions that serve large numbers of these students. In addition, the Administration is proposing a Presidential Honors Scholarship program that would reward academic achievement by providing a $1,000 scholarship to every student who graduates in the top 5 percent of his or her class.

The discretionary budget for postsecondary education programs, excluding Pell Grants that would be funded in part by prior year surplus funds, shows an increase from $2.4 billion to almost $2.7 billion. On the mandatory side, we are making significant changes to reduce the cost of the student loan programs. These changes, and the expected decline in interest rates, will reduce the cost of these programs.

ENSURING EQUAL ACCESS TO QUALITY POSTSECONDARY EDUCATION

The Administration's fiscal year 1997 budget addresses the issue of equal access by increasing the Pell Grant maximum award, by expanding funding for college work-study, and by increasing the amount of support for outreach and other services to encourage disadvantaged students to enter and complete postsecondary education. The programs would act in concert with the President's workforce development initiatives and his proposal for a tuition tax deduction that would permit families to deduct up to $10,000 in postsecondary education expenses.

Student Financial Assistance

Our budget request for Pell Grants proposes to increase the maximum award to $2,700, up $360 or 15 percent from the fiscal year 1995 level and $230 up from the tentative conference level. This proposed increase in the program, which will serve 3.8 million low- and middle-income students, is particularly important because the Pell Grant program maximum award has not kept pace with inflation or college costs. During the last 2 years, the average cost of attending postsecondary education has increased by more than 12 percent. Over the last decade the cost of attending higher education has increased by 103 percent (i.e., more than doubled) and inflation increased by 42.4 percent. During that same period, median family income increased by just 40 percent, and the maximum Pell Grant award, by a mere 11.4 percent. As a result, a greater percentage of students are having to finance their postsecondary education through loans, and many students are faced with excessive loan burdens when they finish school. The proposed increase in the Pell Grant would help to reduce the debt burden on students and their families.

The increase we are proposing for the Work-Study program would be the first step in an expansion to enable the program to serve one million students by the year 2000. During the Secretary's conference on Federal funding for postsecondary education in Charleston last October, conference participants expressed strong support for the Work-Study program, and many advocated expanding work-study opportunities to reinforce the work ethic and provide students with additional opportunities to earn rather than borrow funds for postsecondary education. The proposed increase of $62 million, together with employer matching funds, would increase the number of students earning some of their college costs under this program from approximately 713,000 in fiscal year 1996 to 786,000 in fiscal year 1997.

We are requesting funding to support the Federal Supplemental Educational Opportunity Grant program at the fiscal year 1996 level and to restore the Perkins Loan program to the fiscal year 1995 level. Operating together, these programs offer institutions of postsecondary education sufficient flexibility to develop financial aid packages to meet the individual needs of their students.

Student Loans

The William D. Ford Direct Loan (Direct Loan) and the Federal Family Education Loan (FFEL) programs provide federally-sponsored loans to help students and their families meet the increasing costs of postsecondary education. Together these two programs are projected to support over $32 billion in student loans in fiscal year 1997.

The Direct Loan program, created by the Student Loan Reform Act of 1993 to reduce the complexity and costliness of the FFEL program, is a streamlined lending system that provides borrowers with greater repayment flexibility, reduces taxpayer costs, and simplifies the processes of obtaining and repaying loans. The program began making loans in July, 1994 for the 1994-1995 academic year with 104 institutions and 7 percent of loan volume. This increased to 1,330 institutions for the academic year 1995-1996. An additional 481 have already committed to participate in the program for the 1996-1997 academic year, and we expect that Direct Loans will account for approximately 50 percent of new loan volume next year.

A key component of the President's proposal is to provide schools the freedom to choose the loan program best suited to their needs and those of their students by continuing to support both the Direct Loan and the FFEL programs. By preserving this choice, as many FFEL and Direct Loan participating institutions have requested, both schools and borrowers will benefit from the market competition.

The Department has submitted a "barebones" request for administrative costs for the student financial aid programs, including the student loan programs. This request includes over $135 million in administrative expense allowances for guaranty agencies to help cover their costs of managing the FFEL program in fiscal year 1997. Almost 80 percent of the remaining funds requested are for the Department's student aid management activities, including support for automated data processing contracts and compensation and benefits for Federal employees. Unlike many Federal agencies, the Department relies heavily on contractors to design and operate its major computer systems. The Department will spend $325 million for ADP contracts associated with student aid management -- an increase of 39 percent. Nearly 90 percent of the ADP funds will be used for either student aid delivery or loan servicing and default management. About 80 percent of the funding for the ADP activities comes from funds authorized under section 458 of the Higher Education Act that support Direct Loan activities and are instrumental in the Department's overall student aid delivery and default collection efforts.

Program Results

Since 1965 the Federal Government has invested $135 billion in student financial aid programs designed to remove financial barriers to enrollment in postsecondary education by targeting students with the greatest financial need, and by encouraging these students to persist through the attainment of an undergraduate degree or other postsecondary education credential. The success of these programs and of the higher education outreach and support services is well documented in terms of program effectiveness and individual and societal benefits. Title IV student aid recipients are significantly poorer than are undergraduates overall--in academic year 1992-93 almost three-quarters of all Title IV recipients were from families with incomes below $30,000, while less that half of all undergraduates had incomes that low. Furthermore, regardless of degree sought, individuals who received a significant amount of Federal student financial aid (more than $2,500) were more likely to attain the educational credential they were seeking within 4 years after starting their studies.

The earnings differential between individuals who have completed high school and those who have obtained a postsecondary education credential has also been sufficiently documented. A study commissioned by the Department found that for every dollar of financial aid spent on men with 2 years of college, the Federal Government received $2.19 in net present value of future tax revenues. The return for women was $1.24. For men and women with 4 years of college, the returns are $5.86 and $2.65, respectively. Clearly, the dollars invested in these programs offer significant returns to the taxpayer.

Higher Education Programs

The Department's other postsecondary programs address a broad range of institutional and student support activities to enhance academic preparation of disadvantaged students and to strengthen institutions serving these students, to promote student achievement and academic excellence, and to support programs critical to the Nation's security and economic well-being.

To assist low-income individuals overcome the non-financial barriers to postsecondary education, the Administration is requesting $500 million for the Federal TRIO programs, an increase of $37 million or 8 percent over the fiscal year 1996 tentative conference agreement level. These programs complement the student aid programs by supporting outreach and student services designed to identify and encourage qualified individuals from disadvantaged backgrounds to enter and complete postsecondary education. The proposed increase would allow the Department to maintain current levels of services in these programs and to support activities to increase retention and graduation rates among disadvantaged students.

We are proposing to continue support for programs that help institutions of higher education improve the quality of educational programs. We are requesting a slight increase for the Fund for the Improvement of Postsecondary Education (FIPSE) to enable us to continue supporting innovative reform and improvement of postsecondary education. In addition, we are proposing to continue support for institutions that serve economically and educationally disadvantaged students-- including the Nation's Historically Black Colleges and Universities and Hispanic-serving institutions --to improve the quality of their programs and faculty.

This year the Administration is requesting $130 million for a new Presidential Honors Scholarship program that would provide 1- year $1,000 scholarships for the first year of postsecondary study to an estimated 128,500 high school seniors graduating in the top 5 percent of their classes in 1997. This program expands on and complements the effort of the Byrd Honors Scholarships to recognize and reward meritorious students.

The budget request reaffirms our commitment to graduate education by providing a modest increase for the Graduate Assistance in Areas of National Need (GAANN) program. The proposed increase would permit us to support continuation awards under Harris and Javits Fellowship programs and new and continuation awards under the Graduate Assistance in Areas of National Need program. While funding is proposed at a level substantially below the amount that had previously been provided under the three graduate programs, the $30 million requested will provide adequate funds to assure that continuing graduate students do not lose needed funding. Our long-term goal--which we intend to address more definitively through the reauthorization of the Higher Education Act--is to consolidate the important purposes of the three programs into GAANN, with funding sustained at least at the current level, which we believe is the minimal level required to meet national needs.

Last year the Committee expressed interest in knowing more about three higher education programs: International Education and Foreign Language Studies, Minority Science Improvement, and Minority Teacher Recruitment. We think these programs address important national concerns and we are requesting funds to continue them in fiscal year 1997. I would therefore like to speak to those interests.

International Education Programs

The well-being of the United States, our international economic standing, and our long-range national security depend on the education and training of Americans in foreign languages and international and area studies. The Department's international education programs address the Nation's need for expertise in foreign languages and world areas and for a more internationally literate citizenry through a range of interrelated activities. Although individually these programs are small in comparison to other Federal programs, taken together they provide an integrated, cohesive, and mutually supportive approach to preparing America's citizens for the country's leadership role in the international arena. Group projects, faculty research, and doctoral dissertation research are all part of a comprehensive approach by which the Federal Government supports the development of the Nation's international expertise. For this reason we are seeking $59.1 million, which is a slight increase over the likely fiscal year 1996 funding, to restore funding to the fiscal year 1995 level for the International Education and Foreign Language Studies programs.

Minority Science Improvement

The Minority Science Improvement Program (MSIP) contributes to the development of the Nation's scientific research and educational potential by supporting a variety of activities designed to improve science education at predominately minority-serving institutions and to increase the number of qualified minorities who enter the fields of science and engineering.

Although minorities still account for less than 5 percent of all U.S. scientists and engineers, minority representation in the sciences and engineering has nearly doubled over the past 20 years as a result of MSIP and similar programs. We believe that this is adequate testimony to the contribution of this program, and that further improvement is still needed in this area. For this reason, we are requesting $5.8 million, an increase of $600,000 or 11 percent, over the 1996 tentative conference level.

Minority Teacher Recruitment

The Minority Teacher Recruitment program supports the development of more effective strategies to recruit and train greater numbers of minorities, including language minorities, as teachers for the elementary and secondary school level. Funds under this program are used to develop and strengthen institutional capability to recruit, educate, and place minority students in elementary and secondary schools, with potentially greater impact and long-term effects than a program of individual assistance could offer. The proportion of school-age children who are minorities has grown from 13 percent to 30 percent over the past three decades, but the proportion of minority teachers is projected to be only 5 percent in the year 2000. We believe that far greater numbers of minority teachers are needed for elementary and secondary schools, and therefore, we are also seeking an 11 percent increase in funding for minority teacher recruitment.

INSTITUTIONAL OVERSIGHT

We are committed to promoting greater accountability to consumers and taxpayers and are working to enhance our system of monitoring and oversight of institutions that participate in the Title IV student financial aid programs. Under a proposal published in the Federal Register in February, we would provide regulatory relief to institutions that have continually demonstrated outstanding performance in administering Title IV programs. This, in turn, would enable us to direct our resources to increase oversight of institutions that have experienced problems in administering our programs and those that pose significant risks to Federal funds. Comments received on this proposal are now being reviewed, and we expect to issue a Notice of Proposed Rule-Making early this summer.

To implement this performance-based approach to oversight, the Department is developing a risk-analysis model that will allow us to target oversight resources on institutions with poor performance records. This model will be available for pilot-testing this summer. The Department will also re-align staff with oversight responsibilities along case management lines, with a team of employees responsible for all oversight activities for an assigned group of schools.

We believe that this approach will enable us to manage the program more effectively and efficiently and to be more responsive to our customers.

CONCLUSION

The budget we are requesting for the Department's postsecondary education programs addresses opportunity by targeting a modest, though critical increase in Federal commitment on both access and quality through our proposed increase in the Pell Grant maximum award and increased funding for the Federal TRIO programs. True opportunity requires access to a quality educational experience if access is not to become a hollow promise. Thus, we have proposed an increase for FIPSE and sustained funding for the institutional aid programs and minority science improvement. Our budget request increases responsibility--on the part of students by proposing a scholarship based on academic achievement and by increasing opportunities for college work-study; on the part of institutions by a performance-based approach to oversight; and on the part of the Department by supporting improved program management.

In short, we believe this budget request, with the administrative reforms we are undertaking, supports President Clinton's commitment to expanding not only opportunity, but opportunity with responsibility.

My colleagues and I will be happy to respond to any questions you may have.
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Last Updated -- April 20, 1996, (pjk)