Mr. FRANKLIN. Just one question, is it still too early to give us some communication as to the effectiveness of the law extending subsidized loans to students without need analysis whose adjusted family income is less than $15,000?

Dr. SHEEDER. Right, I think it's fair to say we're still making calculated professional estimates about this. Our best feeling is that there are substantial improvements representative of this law, and certainly the key improvement is the avoidance of the needs test automatically for those of the income levels and loan levels mentioned.

Mr. FRANKLIN. It won't make eligible again a lot of students who have been eligible before, but were cut off by the Educational Amendments of 1972?

Dr. SHEEDER. Yes, sir; there will be some deleted.

Dr. BUTLER. May I add just one additional word?
Mr. LEHMAN. Would you identify yourself?

STATEMENT OF DR. WILLIAM R. BUTLER, VICE PRESIDENT FOR STUDENT AFFAIRS, UNIVERSITY OF MIAMI

Dr. BUTLER. Yes, thank you, Mr. Lehman. I'm Dr. William R. Butler, vice president for student affairs at the University of Miami. Dr. Sheeder did mention the requirement for notarization. I'm not sure how often that irritant comes up and has come to your attention, but it is also something we feel very strongly about that is another hassle for the students and adds very little value to the whole application process.

Mr. LEHMAN. Thank you, just another nuisance factor.

John?

Mr. LEE. About this part-time student thing, some of the authorized legislation indicates that students can be less than full time and receive student aid in some form. I've been led to believe in my conversations with student aid officers that oftentimes because of the limited funds the decision is made on the local level to take care of the full-time students first, and unfortunately there's never enough money to spread

out.

If you had more funding, do you think that would be better to take care of full-time students, or would you give some portion of your funds to the less-than-full-time students?

Dr. SHEEDER. Yes; we do. As you know, the current authorization permit funding of students at the halftime levels or better, and it's our pattern to assist students at halftime levels or better based on their demonstrated financial need, rather than the demonstrated volume of course work. I think the issue is between halftime and part time. Mr. LEE. You mean less than halftime.

Dr. SHEEDER [interposing]. Less than halftime is the key factor. Mr. LEE. Are you concerned about some sort of financial help for someone who might just take one or two classes?

Dr. SHEEDER. That's right.

Mr. LEHMAN. Sometimes they have to get started with 3 or 6 hours in order to then, as they become involved and go into more full time, but if you don't give them some help to get started, they never get to the full-time or halftime level.

42-884-75- -7

Dr. SHEEDER. The Office of Education regulations have read half of normal full-time academic regulations have read half or normal fulltime academic load, but of course the normal full-time academic load is 15 hours, and half of that, for practical purposes, is 8 hours.

It's pretty difficult for some of them working full time sometimes to take an 8-hour load.

Mr. LEHMAN. I've tried it.

Mr. LEE. There's a program that's causing some concern, and we're going to talk about it in later hearings I think more extensively, but it's the veterans cost of instruction program.

Do you people have that program going?

Dr. SHEEDER. We do not have that program going, but I think I'm hopeful that we will move in that direction. We have a substantial enrollment of veterans on the campus, and I think we do need to move forward in that area.

I'm not familiar with the details of the program to respond to specific questions.

Mr. LEE. I understand you don't have the program?

Dr. SHEEDER. That's right.

Mr. LEHMAN. Thank you very much, and I'm sure your testimony will be of great value, as those who have gone before you, to this committee.

Dr. STANFORD. One parting comment, we're proud of the chairman as an alumnus of the University of Miami.

Mr. LEHMAN. Thank you.

The next witness is John Conlon from the First National Bank. senior vice president of the First National Bank of Miami. John is an old friend of mine, and before he gets started I want to comment a little bit about what might have been misinterpreted this morning. It's not the fault of any of the institutions in this area for not more fully participating, but the problem was the inability of our legislation to provide the incentives, to provide the means and to provide the brainwork for them to really become more deeply involved.

I just wanted to assure John that myself and this committee are grateful for what the First National Bank has done in student loans, and we just wanted to try to make it more feasible and more exciting for you to even get more involved in this activity.

John, you have a few kids of your own, don't you?

STATEMENT OF JOHN CONLON, SENIOR VICE PRESIDENT, FIRST NATIONAL BANK OF MIAMI

Mr. CONLON. Five.

Mr. LEHMAN. How many have you got in college now?
Mr. CONLON. One going.

Mr. LEHMAN. I think you know what the problems are.

Mr. CONLON. Mr. Chairman, you just took the opening remarks away from me.

And in conclusion-I would like to take this opportunity to introduce Larry Ginsberg, who is an associate of mine at the First National Bank of Miami and handles internally all of the functions regarding the student loan program.

Mr. Chairman, for background, the First National Bank of Miami entered the federally insured student loan program in 1971 with an

initial commitment of $1 million. By September, 1971, 97 students. were participating in the program, with $128,000 outstanding.

At yearend December 1971, the number of students had increased to 125, which was an increase of 28.9 percent, while outstandings had. expanded to 165,000 or an increase in that of 28.7 percent. Our joint program has now been in force for 2 years and 10 months.

Bank policy stipulates that we will grant a federally insured student lean to bank customers or their children, and by and large no exceptions have been made to this policy. We have not experienced any problems in the area of prime eligibility.

Most inquiries are made by phone, and as such, if the prospective borrower is not a bank customer, we invite him to become one. If this materializes and he remains 1 for 6 months, we will then allow him to process a federally insured loan application and a supplement.

Once a loan is funded we must make two separate bookkeeping functions. One is on the subsidized loans, and the other is on the nonsubsidized loans. Relatively minor problems exist with subsidized loans other than it is always necessary to obtain payoff figures for those loans on the repayment in order to reclaim the quarterly declared bonus.

Conversely, one of the most-one of the biggest problems is the time consuming portion of the program as represented by the quarterly interest billing on the nonsubsidized loans. Each accrual is computed separately, and such student is mailed a statement.

If we fail to receive a response to the billing, the loan is referred to our collection section where a similar letter is prepared and sent. If this brings a negative response, more collection efforts are made. If this action does not bring satisfactory results, no further disbursement is made until the student brings the interest payment up to date. We are presently receiving numerous telephone calls from nonbank customers who state that although their financial institutions are engaged and participating in this program, they reportedly are not lending any additional money for this purpose at this time.

At the First National Bank of Miami there are three interviewers fully trained in the handling of this program. One interviewer is assigned to the program with the other two utilized as backup for peak periods and to spread the workload in the event of absenteeism.

One loan officer, one collection oflicer, and one bookkeeping officer are fully trained in their respective functional roles for the program, in addition to the two bookkeepers and four adjustors.

The absolute cost involved in salaries, space, equipment, supplies, and postage brings the effective yield well below the combination of the 7-percent simple interest and declared bonus awarded quarterly. The following portion of testimony is a statistical portion, and I would just like to point out from December, 1971, that 1972 over 1971 the entire direct lending non-secured portfolio increased by .083, while our increase portion of the student loan program was 100 percent. The year 1973 increased in outstanding by 13.76 percent, while our increase in the federally insured student loan program was 14.61. So far this year we have increased 2.37 percent in total outstanding, 25.46 percent in our student loan program.

Our volume has steadily increased in our student loan program starting with $166,000 in December of 1971, and ending in December 1973, we had $374,000 for that year. So far this year it's $173,000.

The percentage of increase, 1972 over 1971, was 47.79 percent. On 1973 over 1972 was 51.89 percent. We have practically no delinquency at all. Our delinquency as of December, 1973, was .374. Overall delinquency in the department is 1.8 percent. National statistics are 2.6 percent in all delinquency.

In 1972 five students transferred to our repayment program. In 1973 the total was raised to 23, and thus far this year 25 more have been set up on the repayment schedules.

Our present federally insured student loan outstanding is comprised of 297 students still in school with balances of $739,000, and 48 students on repayment with balances due, including interest, of $99,000. Of the students in school, 220 of these are subsidized and 77 are nonsubsidized.

We have not been forced to file a claim on any of the loans we have set up on repayment schedule and have elected to request preclaim assistance only once.

In May 1974, the First National Bank of Miami increased its commitment to this program to $14 million.

Methods by which the program could be streamlined procedurally to induce yield enhancement and growth potential, and has been touched upon by all people who have sat here before me-the rate. We stated we would like to see the rate tied to the prime rate of First National Bank, and this is a plug because we led the Nation last week in reducing the prime from 111% to 1114 percent.

We would also consider possible plugging of the rate to the 90-day advanced Government bills or any other market-money market instrument whose yield is more conducive to this type of lending. In the area of collections, where I mentioned we have practically no delinquency, we would like to see skip assistance set-up from the Social Security and the Internal Revenue Service to assist the lending institutions in locating students who have skipped. This will be of benefit to the program in that the lender can find the student and effect collection and therefore have no insurance claim against the Government.

Since there are discriminations regarding the installment repayment note and disclosure form, we suggest that new forms be printed or allow the lender to use his own disclosure forms for the finalization of the loan.

We would like to see the speedup of time of the return of applications and supplements. At present, the student fills out his portion and delivers the documents to the school.

The school fills in their portion and returns the forms to the student. We suggest at First National we know of many instances where the schools will return those forms directly to the lender-then the student returns it to us.

We appreciate the fact that on June 2, 1974, an attempt to alleviate this situation has been made by sending subsidized loan requests directly to Kansas City, Mo., rather than through the Regional Office in Atlanta, Ga., who then would forward them to Kansas City.

Once we receive the applications back from the students, we send them to either Kansas City or Atlanta, depending upon being subsidized or nonsubsidized. Six to 8 weeks later we receive the application back and are ready to process the loan within 48 hours.

The whole process has been known in our institution to take from 12 to 16 weeks from the initial time that the student came in, until the application is returned. Meanwhile, the student usually has called numerous number of times wanting to know if they've been approved. In conclusion, a random sampling of our federally insured student loans reveals that 92 percent are attending Florida schools, the other 8 percent elsewhere in the country, and a marginal percentage is outside of the country.

Federally insured student loans account for 12.71 percent of our direct lending's unsecured port folio and 4.41 percent of the direct lending's total outstandings.

Our posture at the First National Bank of Miami in assessing the merits of this particular student loan program extends beyond pure enlightened self-interest. As the largest banking institution in the community and the State, we feel that we must adopt a very positive stance with respect to corporate responsibility, and as such, endorse such a program that has far-reaching social and economic implications. By virtue of our participation and responsive support, we not only bridge a large gap in the student financing, but we make a positive contribution as well to the social marketplace.

We feel that this is a most appropriate scope of corporate involvement from the standpoint of management, considering the limitation of resources, the cost benefit ratios, as well as attempting to balance the future conditions of the business community.

Mr. LEHMAN. Thank you, John.

In regard to this wait of 12 to 16 weeks some of the students have to endure, I suggest, if they continue to call you wanting to know when it's going to be ready, that if they live in the 13th Congressional District, you have them call our office, and we'll find out what's holding them up out there in the Office of Education.

I'm sure by the same basis that Senator Pepper and Congressman Fascell will be glad to cooperate through their offices.

There's no reason why they have to take this long, and I think if we lean on them, we can get it done more quickly.

It's interesting to see the other side of the coin from the institutions themselves.

Do you require that the student become a customer by making a deposit before you begin to process the loan and is that customary with other institutions?

Mr. CONLON. Mr. Chairman, I can't talk for any other institutions, but for ours you must be a bank customer that would be involved with any of the services that we have. If you're not a bank customer, we would of course ask that you become one and wait a period of 6 months to see that you just don't open an account and close it the next day. We have taken this posture for several reasons, one particularly, based on the number of customers at the First National Bank of Miami. In our installment loan department alone there are 54.000 customers. That's 5 percent of the total population in Dade County. So we feel that we have a source and a base by which we can enhance the people to come in and use this program.

We don't feel that we should go outside to get noncustomers.

Mr. LEHMAN. Well, of course I think that's only fair in a sense, but sometimes I just think it's almost impossible for the people who need the loans the most to be other than perhaps a token customer.