H EAL (the Health Education Assistance Loan Program) is a loan program students don't like. It provides loan money at a 12 percent annual interest rate, and the unpaid interest becomes part of the principal. Students who receive HEAL loans may not utilize other federal loan programs. Since HEAL went into effect September 15, 1978, there have been seven public hearings to get public reaction to three provisions of the program that won't go into effect until 1979. They are the nonstudent approval process, service contracts for shortage areas, and borrower default. Lynne Laverentz, project officer for HEAL, says that there was very little testimony at the public hearings concerning these three provisions. Testimony, she said, generally opposed the program itself, and that can only be changed through legislation. "The hearings, "Laverentz said, "will probably have little impact on the HEAL program. Ralph van Brocklin, U Penn '81. is chairman of ASDA's Ad Hoc Committee on the HEAL Program. Van Brocklin says that ASDA is planning a letterwriting campaign to its members' individual congressmen and to Senator For those of us from lower middle class families, this seems more like cruel and unusual punishment than financial aid! Testimony by Michele Saunders In Subpart A Sec. 126.1 Par. (a) of the HEAL program, it is stated that the "basic purpose of the program is to encourage lenders to make loans to students in these fields who desire to borrow money for their educational costs." By making this the primary purpose of the program, Congress has created a situation whereby the lenders benefit and the The results of HEAL are contrary to the goals espoused by the government: the provision of sufficient health services to meet the needs of all the nation's people. Testimony by Ralph Jay Van Brocklin The HEAL program will have profound deleterious effects on the students it ostensibly is meant to benefit, and the provisions of this bill will be detrimental to the best interests of the nation's people. Health professional students are concerned and unhappy with these clauses within the HEAL bill: Ted Kennedy. Students will be contacted about this in February. He also said that all dental schools' student councils will be notified and given copies of the HEAL bill. As of December 1, 1978, several dental schools had already said they would not participate in the HEAL program: West Virginia, Illinois. New York University, Boston, Harvard. SUNY at Buffalo, and Texas at Houston. Opposition to HEAL is mounting. Testimony below was given in Philadelphia on November 17, 1978. O students are penalized and given an unfair financial burden. By allowing an interest rate that overrides state and federal usury laws restricting interest charges on loans to be less than 12 percent, and by further allowing this interest to accrue from the date of the loan and to be compounded twice a year and added to the principal, and by allowing the lender to require the student to pay interest while in school, Congress has indeed made the program attractive to prospective lenders. The student, on the other hand, is placed in a situation where she or he, given residency programs and the like, might end up paying quadruple the amount of the loan. For those of us who come from lower middle class families, this seems more like cruel and unusual punishment than financial aid! Shouldn't the main thrust of this program be that any 126.5(g) In order to receive a HEAL loan, a student must not have received a loan under the guaranteed student loan program for any part of the same academic year for which the HEAL loan is sought." 126.11(d) Minimum annual repayment. "During each year of repayment, a borrower's payments to all holders of his or her HEAL loans must total at least $600 or a sum equal to the interest that accrues during the year on all of the loans, whichever is greater."* 126.13(a)(1) Rute. "Interest that is calculated on a fixed rate basis may not exceed 12% per year on the unpaid principal balance of the loan.** 126.13(b) Compounding of interest. "As a general rule, unpaid interest must be compounded semiannually and added to principal. However, a lender that permits a borContinued on page 18 THE NEW DENTIST JANUARY 1979 13 Kendis testimony Yam pug 12 Acer pot involves the social of mais ve student debt. Taten here we are not consumer bo debt should dered a consumer loan. good to society of # Cat Jag av has been the grams and loan as there has always in the Tes tem a vengemis ball, “y in the student • 2 and purposes, canc. knew about debt as #gar begwer knows about e we debt has always been limited, subsidized, and managed through long repayments. Under HEAL. however, the first year's repayment of a full $72.000 indebtedness will be almost $10,000, and this will fall on the shoulders of young health professionals beginning their financial lives: starting a practice and making a home. I contend that the equity considerations which have always characterized student lending programs are brutally absent from HEAL In place of sensitivity to student borrowers (as differentiated from consumer borrowers), HEAL may generate a number of behavior patterns. none of which is in society's best interest First, by permitting the accumulation of large debt by what can best be described as naive borrowers, we are training a set of individuals to be risk seekers in their financial affairs instead of risk averse or risk neutral as most young people are when entering the labor force. Health professionals, traditionally have been financial conservatives. I contend we are encouraging a turnaround of attitudes of an entire segment of society by providing unbridled and uncounseled access to large debt. Second, in the face of huge debts, the young health professional with all inclination to do community work pro bono or public service will consider his financial needs first, and choose those Guidelines to HEAL Fred Werner of Illinois "81 War & WEAL" Meal is the Health ance Love Program * of federal rasuraculata) kams designed for Blomste teic of medicine, aswinedine demistry, vetertmerry, podiatry. pic health may borrow up to *Equal each academic Commissioner of Education insures each lender of HEAL against losses it may suffer if the borrower defaults. The Commissioner charges the lender an insurance premium which the lender charges the borrower. The rate of insurance premium is one-fourth of 1 percent per year of the loan principal. This is illustrated in Example #2, Table 1 Terms of Repayment. The repayment period begins the first day of the 11th month after the borrower ceases to be a full-time student at a HEAL school. The borrower is allowed not less than 10 years and not principal-amount of more than 15 years to repay, calculated from the beginning of the repayment period. However, a grace period is allowed if a borrower continues his education. Furthermore, a special contract between the borrower and the Commissioner of Education can be made. Under the contract, the borrower agrees to serve for at least 2 years in a health manpower shortage area, as a member of the National Health Service ames Rate and basurance Pre That the lenders axalated on a fixed "nable ratic basis The by ether plan cannot exyear on the unpaid Wawet is allowed to wine the paid interest T This can be seen in Corps, or as a private practitioner. The Commissioner agrees to pay an amount not to exceed $10,000 per year to the holder of the borrower loan to be applied toward interest and principal. Who is eligible? To become eligible a borrower must be a permanent citizen to the United States and be in good standing as a full-time student in a HEAL school. The borrower may not have received a loan under the Guaranteed Student Loan Program for any part of the same academic year for which the HEAL is sought. It is the responsibility of the schools to make sure that no more than 50 percent of their students in each class are authorized to receive new loans each 12-month academic year. HEAL was initially planned by the Georgetown and University of Washington Schools of Medicine. The final provisions were made by the Bureau of Student Financial Assistance of the Office of Education. Information, copies of the rules and regulations of the program, and written comments should be addressed to: HEAL Program/P.O. Box 23022/ L'Enfant Plaza/ Washington D.C. 20024. career paths which will generate income. Thus HEAL will discourage the same voluntary public service work that the legislation hoped to ensure. Third, those HEAL debtors who enter into health profession fields (with large debts) are being conditioned as true entrepreneurs: the income maximizers which we believe to be proper in the business world. I do not feel that it is in the best interests of health care delivery in the United States to be conditioning our future health professionals to maximize their incomes rather than to serve their clients. I contend that the HEAL loan program limits the options of our young professionals to income maximization and only income TABLE I maximization. As health care delivery pricing works in the United States today, our physicians are not only the setters of the price for their own services, but they are also the determinants for the use of hospitals, pharmaceuticals, and specialists. It is incumbent upon those who design public programs to consider the psychological impact on these physicians: men and women whose professional devotion to their work should always receive a greater consideration than the resultant earnings. Can we be assured that this behavior will persist when we load the students with debt? I believe we cannot. I feel that the debt burden imposed by the HEAL program imposed early in the lives of young profession als will have devastating consequences for overall medical costs because of the behavioral consequences of this early conditioning. We thus have incentives, within what appears to be a simple student program, which signal an eventual impact on health care cost in the United States. The most serious component of these behavioral incentives is the time bomb they represent. A young student beginning medical school in 1978 will not practice under circumstances where he can set his own fees for probably a period of ten years or more. HEAL is actually a health care legacy for future generations to absorb in the quality or price of medical services they receive. We also need to consider our system of financing education in America. Parents have always sought to provide an educational endowment for their children and thus an intergenerational transfer of wealth through the responsibility they assume for all or part of educational costs. In case of financial need, the government provides grants or subsidized loans in balance with the concept of student self-help. Even in HEAL is nothing it is alleged to be. The name of the program is a deception. 1978, as costs for health professions education are severe, we have statistiIcal evidence that American families continue to contribute significantly to the cost of education -- often at a level known to be a sacrifice to them. We thus continue to rely on the American family, to the extent possible, as a foundation for the financing of higher education. By promoting loans for the full costs of education (and believe me the banks will promote the HEAL loans) we essentially create a turnabout in education finance. The role of the family will diminish role of government along with the and again business or entrepreneurial attitudes will come to dominate the early conditioning of our health professionals. Since these loans are not subsidized, the role of the government in ameliorating the THE NEW DENTIST / JANUARY 1979 15 debit disappears — a areas in consideration I be at a benefits to education — au du gɛvertinent bears the responamo v d he eventual social costs Add hon plan to health profem a quite simple It should Terest cost for students who postpone principal Ang dewy and graduate and exeu que me when in practice But not be ideal due to statual and only three recomdare possible repayments must be Tubeste case the burden in the am aware that this is posshen he regulations, but I also where currently are no con 101 use graduated repay"hat the choice of palate payment must be made and an obligation must be gsm of the loans to ve to his obliga dr the program This counselTEAM. CHET that an administra Bordowance man he made available Būdą, moseling tools and proce That bearance and restructur{ if the repayments is absolutely es sential with this type of program. Not only the obvious ease of the dropout or nondegree earner but also the inevitable human events which put pressure on all walks of society must fall within a comprehensive and equitable program of repayment forbearance. Debt levels are so high and the terms cover so many years that a detailed forbearance plan is required, particularly under a plan containing a bankruptcy exclusion. Without comprehensive forbearance, HEAL becomes a program of indentured servitude. These recommendations may lessen the burdens of HEAL - the inequities or the social costs. But my final recommendation is to let the HEAL program die and to develop new borrowing plans under the student loan mechanisms of Title IV of the Higher Education Act. The HEAL law did not come from the education subcommittees of the Congress. Responsible individuals in education should prepare a program of education assistance not permit education assistance to become a tool for manpower allocation. Letting HEAL die, with an interim and temporary increase in capital availability in other programs, is a positive step in an inevitable and logi cal consolidation of the multiple loan programs which now present high levels of inefficiency in student finance. Only with loan consolidation and under the design of those in Congress responsible for education can our health professions students be served. 0 Kurt Kendis is a policy analyst and associate director of the Higher Education Finance Research Institute at the University of Pennsylvania. Chisick testimony Continued from page 12 financial means. In fact, recent statistics compiled by the Division of Educational Measurements of the Council on Education of the American Dental Association show that there has been a significant decline in the number of applicants to dental school from the socio-economic lower middle class a trend that the Council on Education believes is due to increased tuition. It is distressing to witness the federal government establish something like the Health Education Assistance Loan (HEAL) Program as a means of An analyst's footnote on a failing legislative program kart L. Kendia, policy analyst, Higher Education Finance Research bude, Laiversity of Pennsyl deal of enjoyment at trending and raising of dogs — old english sheep and german shepherds The time a que apuram with purebred pupDer um marketable at Christmas and wisted When the females are tal breed there is always danger emma rayshreeding when a a mutes with a sheep dog. not complex We can shum the female with little on ber, but donenting the timing of her next litter. Or we can let her go to term, raise the babies, and be forced to give away puppies nobody will buy. The HEAL loan program was begotten out of the crying need for additional capital access by health professions students, and sired, originally as Super-FISL, by the health manpower legislation. This ill-fated breeding (certainly without romance) could have been easily terminated with an analytic simulation showing the burden on students, a survey of institutions revealing overwhelming displeasure with the plan, or a canvassing of lending institutions revealing a reluctance to participate. But instead the program went through the legislative process and now there are no takers in the marketplace. Hopefully those responsible for the generation of the future loan programs must know that a student loan is an education issue and not a manpower allocation tool. Likewise, the analysis should indicate whether or not the program will work when in place - particularly after investing administrative time and energy developing a program. Finally, despite an absolute immediate need for additional capital access, a loan program with no lenders now is not comparable to a better program in six months with lenders. The price in this case appears not six months, but much longer. Only purebred puppies sell. addressing financial burdens of health professional students. Although a student may borrow up to $50,000 under the HEAL program, a loan ceiling that would cover even the most exorbitant of dental school tuitions, borrowers may be charged up to 12 percent interest per annum with interest accruing from the inception of the loan and being compounded semiannually. These loan conditions are unjustifiably harsh. They penalize young professionals at a time when they can least afford it - during the initial stages of their careers. At the beginning of their careers, many professionals still hold debts incurred from their undergraduate college education as well as their predoctoral training. Furthermore, some dentists face the added costs of postdoctoral education and all dentists face costly initial equipment investment expenses. (Initial start-up costs for dental practitioners average $60,000.) To worsen matters, the conIditions of the Health Education Assistance Loan - 12 percent per annum compounded semiannually - would lead to a doubling of the principal in as short a time as five to six years. It is hard to imagine how the prospects of a debt-ridden future will not lead to financial barriers to those desiring a health professional education or to increased health care costs for consum ers. Two additional criticisms deserve attention. First, HEAL borrowers are not allowed to borrow money from more favorable federal loan programs. Second, schools which do not receive federal capitation grants cannot act as lenders in the program. Both of these restrictions are unfair to professional students. Borrowers are denied the privilege of using more favorable sources of federal student aid. With regards to capitation, students who are enrolled in schools which do not receive federal capitation grants are usually those individuals who are in greatest need of financial assistance. In summation, the American Student Dental Association wishes to go on record in opposition to the HEAL program as currently designed. The conditions of the loan are unjustifiably harsh, generate financial barriers to THE NEW DENTIST JANUARY 1979 entry into the health professions, encourage increased health care costs to the consumer, and contain unfair restrictions. We alternatively recommend the Office of Education of the Department of Health, Education, and Welfare to raise the loan ceiling on federally insured student Loans to $50,000 while at the same time maintaining the simple interest rate of 7 percent per annum with interest to accrue nine full months after the student. has completed his or her education. It is erroneous to believe that students must bear up to the financial conditions of their times in order to fund their education. When one reviews the history of legislation on eduIcation in this country, two pieces of legislation which stand out as landmarks for their wisdom and impact are the Morrill Act of 1862. establishing land grant colleges, and the Serviceman's Readjustment Act of 1944, establishing the GI bill. Both of these pieces of legislation enabled many individuals, who otherwise would have faced financial barriers, to obtain a higher education and thus become more productive members of society. Instead of HEAL, legislation is needed which adopts the same spirit as the Morrill Act and the Serviceman's Readjustment Act. To continue with HEAL would be a major mistake and it is worthwhile to note that a major mistake will have major consequences. Michael Chisick, Harvard '79, is president of the American Student Dental Association. Saunders testimony Continued from page 13 student who is qualified and admitted to these health professional schools should have an opportunity to attend, regardless of the student's finances? The interest rates and terms of the present guaranteed student loan program seem to reflect this more desirable attitude. What lender who also lends for the GSLP will want to continue with that program when it can have the financial advantages of HEAL instead? An increase in the loan ceiling of the GSLP from $15,000 to $40,000-50.000 is an attractive alternative to the HEAL program. Under HEAL's Subpart B Sec. 126.5 Par. (g), those students who have less than the amount of a year's educational cost remaining in their GSLP limit will be unable merely to supplement the last of their GSL with a HEAL loan. Instead they will have to pay all of the year's cost with the high-interest HEAL. This makes absolutely no sense, especially if HEAL is to be viewed as a "last resort" type of loan. Also, why is it that only 50 percent of the classes in medicine, osteopathic medicine, and dentistry are permitted to use HEAL? What are the remainder of those in It is only logical to assume that the extremely low default rate that dentists have on their educational loans will increase drastically. need of aid supposed to do once their GSL's are exhausted? Additionally. with this incredible financial burden, those students who wish to continue their education, be it in specialty programs or general dentistry residency programs where the student pays tuition or gets a meagre stipend, will not be able to afford it and will choose not to attend. Thus, those students who feel they need to be more proficient in general dentistry skills before they feel comfortable beginning practice will be forced to practice before they are ready. This can only result in decreased quality of care to the patient. The average income of a dentist during the first 10 to 15 years out of school, during the repayment period of the loan, is much less than currently assumed. Given that many of these young professionals will have loans to repay from college as well as dental school, that they will have an additional average expense of $60,000 to set up practice, that they will have young children to support, and that their total monthly loan repayments will be extremely close to their 17 |