642 ADDRESSES AND STATE PAPERS

by the State over the next five years can produce — even by conserva-
tive estimates — approximately $84. 5 million of student aid as a re-
sult of matching Federal funds.

Scholarship programs characteristically designate or, at least, limit
the recipient's choice of college attendance. Our loan program, on the
other hand, providing a maximum annual loan of $1, 000 for under-
graduate and $1, 500 for graduate students, removes these barriers and
permits the student to select the college and program of his choice. For
example, at the present time, there are no State scholarships to voca-
tional or out-of-state schools.

The loan program which we present is a long term, low interest loan
to the student. The student will not be required to make payments of
principal or interest until 9 months after he graduates. The interest
on his loan, not to exceed 6 percent, while in college and for the first
9 months of his employment will be paid by the Federal government.
Beginning with the tenth month after graduation, the student has a
maximum of 10 years to repay his loan at the modest interest charge
to him of 3 percent. The remaining 3 percent interest charge will be
borne by the Federal government. Such a program enables the stu-
dent to repay his loan while fully employed.

We know that our present limited loan program has experienced
some difficulties to date. These problems stem from the fact that pres-
ent legislation and procedures cause the lending institutions to make
these loans at a loss. Statistics indicate that approximately 40 percent
of all students making loan applications at lending institutions fail
to secure loan approval from the lender. Practically all of the re-
maining 60 percent have their loans guaranteed by our existing pro-
grams under the Higher Education Loan Corporation. This program
is designed to offset these problems.

In light of these considerations, I am recommending an increase
of $1, 068, 000 in the Higher Education Loan Corporation budget. This
increase is balanced by the omission of all new funds in five State
scholarship programs after July 1, 1968. Under the separate legislation,
existing scholarship grants would be continued and the State Scholar-
ship Board, consolidated with the Higher Education Loan Corpora-
tion, would continue to administer the program.

THE UNIVERSITY OF MARYLAND AND THE
STATE COLLEGE SYSTEM

In the 1968 budget, General Fund appropriations for higher educa-
tion rose 15. 7 percent, largely due to across-the-board increases in