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

Biennial Evaluation Report - FY 93-94

Chapter 526

Interest Subsidy Grants

(CFDA No. 84.001)

I. Program Profile

Legislation: Higher Education Act (HEA) of 1965, Part D of Title VII, (effective prior to July 23, 1992) and Section 702 (20 U.S.C. 1132a-1) (expires September 30, 1997).

Purpose: To reduce the cost of construction, reconstruction, and renovation of academic facilities by subsidizing the interest costs on privately funded facilities loans.

Funding History

Fiscal Year	Appropriation	Fiscal Year	Appropriation
1969	$ 3,920,000	1986	$22,490,000
1970	11,750,000	1987	23,000,000
1975	0	1988	21,878,000
1980	29,000,000	1989	22,744,000
1981	26,000,000	1990	22,499,000
1982	25,500,000	1991	20,396,000
1983	25,000,000	1992	19,412,000
1984	24,500,000	1993	18,689,000
1985	18,775,000	1994	18,029,000

II. Program Information and Analysis

Population Targeting

Institutions of higher education and agencies empowered by a State to issue bonds on behalf of private institutions of higher education are eligible for interest subsidies.

Services

From FY 1970 through FY 1973, 711 privately secured loans, valued at about $1.4 billion in principal, were approved for Federal interest subsidies. Since FY 1973, no further loans have been approved for subsidization. The subsidy payments have totaled about $425 million from the program's inception through FY 1993. At the beginning of the year there were 424 outstanding loans receiving subsidy. However, during the year, 32 loans were paid off, withdrawn of estimated, leaving 392 loans in activie status. Outstanding loan volume under subsidy continued to decline slightly in FY 1993 as loans were repaid (Table 1).

Table 1

Annual Interest Subsidy Grants
Fiscal Years 1989 to 1993

	FY 1989	FY 1990	FY 1991	FY 1992	FY 1993
Total number of outstanding loans receiving subsidy	558	549	531	478	424
Total number of loans paid off, withdrawn or otherwise terminated during year	11	31	33	53	32
Average annual amount of interest subsidy grant	39,357	39,655	38,410	41,729	47,677
Total outstanding volume of loans for which interest subsidies are paid (in millions of dollars)	1,040	998	958	554	463

Source: II.1

Program Administration

Subsidy grants, which are administered by the Department's program office, are provided to reduce the interest rate to the institutions or agencies from market levels to three percent. The amount of the annual subsidy, calculated each year, is the difference between the interest costs actually incurred by the institutions or agencies on loans obtained from non-Federal sources and a subsidized interest rate of three percent.

Management Improvement Strategies

To limit Federal costs, institutions and agencies have been required to demonstrate to the satisfaction of the Secretary of Education that their non-Federal loans were obtained at the lowest possible interest costs.