Here I might add the equality of postsecondary educational opportunity is essential if individuals are to have a fair chance of moving into the mainstream of American life regardless of their family circumstances.

We took these six basic objectives and then we said, "How do you propose a financial system that will fund it and give better funding and, at the same time, carry out these objectives in an appropriate, effective and efficient way?"

It was very clear that the criteria indicated that direct grants to institutions was probably the correct method for the achievement of many goals, particularly the first two I mentioned.

On the other hand, the effective and efficient means of delivering support from State and local governments on a direct grant or appropriation to public institutions based on undergraduate enrollment and programs and direct contract with private institutions may be better where you can give the grants to the individuals.

The CED report has been criticized primarily because of the recommendation that tuition cover 50 percent of instructional cost. And let me point out here that we made no judgment as to the difference between how much the students and parents should pay and how much the society should pay.

But let me remind you that 50 percent of instructional cost is about 35 percent of total cost of education, so that even if one-third were being paid by students and parents through tuition, together with some individual subsidy, there remains two-thirds of the cost of college education which is being paid for by society in general.

As we began to work on a plan we discovered that both the Federal and State supports have been primarily in form of institutional grants. We are proposing here that we move grants from the Federal Government from the present institutional grants to individual grants. Such a change would allow more equality in the system because it gives more flexibility to those with lower incomes to enter the system. And second, it brings about, as it did with the GI Bill of Rights after World War II, more choice for students. They can select their colleges and there would be more market opportunity for the schools.

We make no distinction between public, private or the vocational or profit schools because in developing a program of total education you need all of these schools to give the diversity you need.

In doing this, we have proposed a number of different recommendations we think will be helpful. First of all, the money that is now going to support education to students, according to the National Commission evidence, shows that the impact of financial support on student decisions is greatest for those with low family incomes and diminishes at higher family income levels.

And although they are not based on behavioral studies, the financial aid advisory services of both the American college testing program and the College Scholarship Service estimate that student and family capacities to pay for higher education increases as the family income

increases.

Table 1 in the full testimony shows that the current system of supporting students does not demand dramatically different proportional support from families at different income levels. Almost regardless of family income range the support remains approximately the same.

The average awards resulting from current grant and scholarship programs shown in this table are both small and relatively weakly targeted. Incidentally, 95 percent of those grants result from Government sources of support.

In order to make an effective student grant program work the programs must be carefully designed and easily understood by prospective students and their families. We think that because of the generally small and undeveloped character of State student assistance programs, we recommend that the so-called increase in tuition in public institutions be phased in over a period of 5 to 10 years.

In saying this we also recommend that as the higher tuition is brought in that it be done at the same time as student loan funds become available. They must go hand in glove.

I might point out that what we are suggesting here, at the end of the full phase-in of increased tuition, again, at 1972 levels, we are talking about an increase of about $500 per year per student.

Over 4 years of college we are talking about a $2,000 increase. Of course, there is a great deal of comment that this is going to hurt the middle-income people. We recognize that what was middle income 2 years ago may not be middle income today.

But let me suggest to you that what we are talking about here is roughly $2,000 plus or minus, depending upon the school the student selects. Based upon an economic study of what a college education can do for an average individual student as compared with a student who goes through high school, the study shows that it increases their annual earnings from between $1,500 and $3,000 per year throughout their entire lifetime.

What we are talking about here in increased tuition is something a little over 1 year's increased earnings that would be charged and have to be paid back. In order to have the maximum effect here we feel that when the grants are given to students they must reach students whose families have lower incomes who are the most unassisted today.

As a result of this, we have made a number of recommendations; first, an expanded federally operated student loan system to provide. students and their families with sources of supplemental funds.

We think, in this way, that with increased tuition you not only get more funds into the system but you provide a method for families to pay for tuition.

To make the point I simply call your attention to table 2 which shows that students in the 18-to-24-year-old bracket in families with incomes of $15,000 or more are three times more likely to be in college than those students from families with $5,000 income or less.

This is why we think we need this targeting on a more direct basis. I think it is interesting to note that in our table 3, showing where the students came from you will note that for present students well over half of them are from families of $15,000 of income or more.

What is happening today is that students who have higher family resources are still taking advantage of the lower tuitions in the public schools so you get a double kind of subsidy here.

Equality of educational opportunity can conceivably be achieved in several ways. College costs for students who could not otherwise enroll can be reduced through general grants to institutions, whether based on enrollment or on some other criterion or by grants to institu

tions based specifically on enrollment of low- and moderate-income students, or through direct grants to these students. Which funding mode will most efficiently support the goal of equalizing opportunity? The question of which funding mode would be most efficient was considered in our study. We concluded that general grants to institutions, which are the most common form of aid, could result in three different things.

It could result in an increase in institutional quality without an increase in tuition, a general reduction in tuition for all students, or an institutionally administered selective reduction in tuition for lowand moderate-income students.

Because this could be used in so many different ways we really concluded the most efficient and effective way was to move a substantial part of the Federal grants from the institutions to the individual. If you look at table 3a and note that the subsidy per student is pretty much the same-between $1,000 and $1,100-for family income groups of less than $5,000 up to $25,000, and even for students from families with more than $25,000 the subsidy only drops to about $806.

Clearly, vast amounts of money would be needed if we are going to provide all of this money to all of these students. We noted that a subsidy of $2.3 billion for students from families with incomes over $15,000 is a very high figure and if you are going to simply add to that, that is why we came back and said the best approach we thought--and we are not locked in at the $12,000 or $15,000 level because when we made the study $15,000 looked like a real breaking point. Today it may have to be somewhat higher.

The fact remains that there is reason, under our system, where there is limited money and tremendous demands upon all Federal and State funds, to find a way to bring more money into the system, and that is why we recommended that individual grants be made and that tuition be increased.

I might point out that there is some shift in resources here. The shift in resources we have recommended allows a lot of flexibility. You had about 70 percent institutional grants and 30 percent individual grants. We feel that there is always a place for the institutional grants and that it should be around the minimum of 30 to 40 percent, and then, depending on the situation, the balance could be used for the individual grants.

What this amounts to is that as resources are shifted from institutional to student assistance directly colleges will have to increase their tuitions to maintain or increase their revenues.

In other words, if colleges are to attract the tuition from these individual grants they will have to raise it, and as they raise tuition to offset the drop in institutional grants they will get more money because there will be more money coming into the system.

You would have the same Federal funds coming through individual grants but you would attract more funds from the private and the loan sectors which could be used to fund the higher tuition.

We estimated, as in our table 5, that the total college support could be increased by $2.5 billion per year through this system, and we think this can be done in a way that will give equal opportunity and not jeopardize the opportunity of students to go to college because of the

increased cost because you simply raise the opportunity to borrow funds for those people who need it.

And you are taking the opportunity for those families with higher incomes to help contribute to the system, still recognizing that well over two-thirds of the total cost of education will still be paid for by society even under our program.

So, in summary, the CED recommendations are designed to increase revenues to higher education by targeting public support and by increasing support from those students and families who have the greater ability to pay;

Second, to increase the capacity of students and families to pay for higher education by insuring access to higher education loan funds; and, three, to increase the achievement of important public objectives; equality of opportunity by targeting these public resources effectively and efficiently toward their achievement.

These three goals go hand in glove. We don't increase the tuition until the loan funds have come up so there is no basic hardship in this kind of program. I think that covers the subject generally. I think there are a couple of short comments from each of my team.

Mr. Neal, I think you wanted to make a short comment.

Mr. NEAL. Mr. Chairman, when we completed this policy statement, in fact, before it was published, we felt we ought to market test it so we set up meetings in five different regions of the country; Boston, Atlanta, Denver, Chicago and San Francisco.

To these meetings we invited members of the boards of trustees of colleges, the executives of colleges, members of the faculty and students. These meetings ran between 100 and 150 people. Each meeting took a day and a half. Virtually one whole day was filled with the discussion, by workshops of about 20 each, of the proposed policy statement, or, as time went on, it became the issued policy statement.

I thought you might be interested in what this very careful consideration in these various groups resulted in in terms of the discussion groups' support or lack of support of the financial recommendations, particularly as it relates to this committee's work.

It is precisely the package that Mr. Eberle has just described. This looks like a fairly close election so far as these groups were concerned. On a block-vote basis we had nationwide 13 of the groups in favor of the financial recommendations. We had 9 groups opposed, but we had 14 groups undecided.

Mr. MCMURRIN. Mr. Chairman, I was very pleased to comment on two or three things which Mr. Eberle has already referred to. I am particularly interested in calling attention to what the CED report does not recommend because there are certain emphases that are made so strongly in it that one can easily get a wrong impression.

Mr. Eberle has already made this point but I would like to re-emphasize it, that the report does not recommend an increase in tuition in advance of the increase in the ability of prospective students to pay that tuition.

The thrust of the report has to do with getting money into the hands of students in order that the students would be able to pay for their education. It is not a report that is geared primarily to the increase in

tuition.

It is geared to equality of students and making it possible for universities and colleges to pay their expenses and to maintain and

achieve high quality. But the increase in tuition is intended by the CED recommendation to follow and not precede the establishment of the ability of the students to pay the bill.

I would like also to re-emphasize a point that Mr. Eberle has mentioned on the matter of cutoff points for Federal grants and loans to students. The CED is very flexible on that point and, as a matter of fact, it is about 2 years now since the committee talked in terms of a $12,000 cutoff point in loans.

My own feeling is that if the committee were now discussing this issue the figure would be considerably higher and, at no time was it intended that this be taken as a kind of inflexible cutoff point.

Another matter is the question of institutional grants. I personally am strongly in favor of the preservation of institutional grants for colleges and universities, and there is no intention in the report, though it has sometimes been interpreted in this way, to get rid of institutional grants.

The emphasis of the report is that Federal money for colleges and students, quite apart from money for such purposes as research, that Federal money be placed primarily, not exclusively, but primarily in the hands of the students, and then the States might very well move more of their money into student hands rather than to follow institutional grants as a format.

But there is no suggestion here that States do away with institutional grants. Quite the contrary, it is assumed that institutional grants be continued and the extent to which States may increase grants to students would be a matter of the discretionary policies of the States, a matter of the habits of the States in the financing of institutions.

The report, for instance, recognizes that in some parts of the country there is more of an inclination in one direction than in another. It takes all of that into consideration, so that it would be in error to suppose that the CED report is an attempt to get rid of institutional grants.

Another thing that is worth noting, it seems to me, is that the CED policy statement has to do entirely with undergraduate education and in discussing the costs of instruction, the costs of instruction referred to here are the costs of undergraduate instruction and do not include in any sense the costs of graduate instruction, which are much greater. And these discussions do not include the other educational costs, including such matters as moneys for research. One or two other items, Mr. Chairman; I am personally not an economist and a large number of economists have worked on this as you well know and have been involved in interpretation of this report, comparisons of it with other recommendations.

It is my impression that the differences in many cases here are due to differences on assumptions with regard to the economy, as to what the present state of the economy is in terms of the ability of the Nation to finance higher education and what the future, both the immediate future and the long-term future, is likely to be.

I would say that the Committee for Economic Development has taken a comparatively conservative view of the situation from both the standpoint of expansion of institutions in terms of enrollment and finance higher education and what the future, both the immediate ate future in relation to its ability to finance higher education.