[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1501 Introduced in House (IH)]
104th CONGRESS
1st Session
H. R. 1501
To amend the Federal Credit Reform Act to improve budget accuracy of
accounting for Federal costs associated with student loans, to phase-
out the Federal Direct Student Loan Program, to make improvements in
the Federal Family Education Loan Program, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 7, 1995
Mr. Istook (for himself, Mr. Baker of Louisiana, Mr. Boehner, Mr. Bono,
Mrs. Chenoweth, Mr. Doolittle, Mr. Hutchinson, Mr. Inglis of South
Carolina, Mr. Sam Johnson of Texas, Mr. Kasich, Mr. Kim, Mr. Klug, Mr.
McIntosh, Mr. Miller of Florida, Mr. Norwood, Mr. Porter, Mr. Saxton,
Mr. Scarborough, Mr. Talent, Mr. Watts of Oklahoma, and Mr. Weller)
introduced the following bill; which was referred to the Committee on
Economic and Educational Opportunities, and in addition to the
Committee on Government Reform and Oversight, for a period to be
subsequently determined by the Speaker, in each case for consideration
of such provisions as fall within the jurisdiction of the committee
concerned
_______________________________________________________________________
A BILL
To amend the Federal Credit Reform Act to improve budget accuracy of
accounting for Federal costs associated with student loans, to phase-
out the Federal Direct Student Loan Program, to make improvements in
the Federal Family Education Loan Program, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Student Loan Privatization Act of
1995''.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The Federal Direct Student Loan Program will result in
an increase of at least 500 full-time equivalent employees at
the United States Department of Education and the hiring of
over 15,000 Federal contract employees, assuming full
implementation of the program.
(2) The involvement of private sector financial
institutions and not-for-profit corporations chartered for the
purpose of providing or supporting Federal student assistance
results in increased efficiency, maintenance of quality of
service to students and institutions, and innovation in and the
use of modern data processing technology.
(3) The Federal Family Education Loan Program is subject to
excessive regulation resulting in burdensome administrative
requirements for students, schools, and other program
participants, the reduction of which would ease administrative
burdens and improve program management.
(4) The program costs of the Federal Direct Student Loan
program are inaccurately reflected under the provisions of the
Federal Credit Reform Act due to the exclusion of accounting
for certain administrative costs associated with the program
under that Act.
(5) The budget scoring of Federal student loans under the
Federal Credit Reform Act led to projections of savings which
are highly unlikely to occur in reality for the Federal Direct
Student Loan Program.
TITLE I--REFORMS TO IMPROVE THE ACCURACY OF THE FEDERAL CREDIT REFORM
ACT WITH RESPECT TO BUDGET SCORING THE COST OF THE FEDERAL DIRECT
STUDENT LOAN PROGRAM
SEC. 101. AMENDMENTS TO THE FEDERAL CREDIT REFORM ACT.
Section 502(5)(B) of the Congressional Budget Act is amended to
read as follows:
``(B) The cost of a direct loan shall be the net
present value, at the time when the direct loan is
disbursed, of the following cash flows for the
estimated life of the loan--
``(i) loan disbursements;
``(ii) repayments of principal;
``(iii) payments of interest and other
payments by or to the Government over the life
of the loan after adjusting for estimated
defaults, prepayments, fees, penalties and
other recoveries; and
``(iv) in the case of a direct loan made
pursuant to a program for which the Office of
Management and Budget estimates that for the
coming fiscal year (or for any prior fiscal
year) loan commitments will equal or exceed
$5,000,000,000, direct and indirect expenses,
including but not limited to the following:
expenses arising from credit policy and
oversight; activities related to credit
extension; loan origination; loan servicing;
technical assistance; training; program
promotion; payments to contractors, other
government entities, and program participants;
collection of delinquent loans; write-off and
close-out of loans; and an amount equal to 1
basis point multiplied by the amount of the
total Federal debt obligations outstanding on
the last day of the Federal fiscal year for
each $50,000,000,000 outstanding in such direct
loans.''.
SEC. 102. EFFECTIVE DATE.
The amendment made by section 101 shall apply to all fiscal years
beginning on or after October 1, 1995, and to statutory changes made on
or after the date of enactment of this Act.
TITLE II--PHASE-OUT OF THE FEDERAL DIRECT STUDENT LOAN PROGRAM
SEC. 201. PHASE-OUT OF PROGRAM.
Section 453 of the Higher Education Act of 1965 (20 U.S.C. 1087c)
(hereinafter in this title and in title III referred to as ``the Act'')
is amended by adding at the end the following new subsection:
``(f) Phase-Out of Program.--
``(1) General authority.--The Secretary shall modify or
phase-out agreements entered into with institutions of higher
education pursuant to section 454(a) to implement the phase-out
of the Federal Direct Student Loan Program as specified in
paragraph (2) of this section.
``(2) Modification or phase-out of agreements.--In order to
ensure an expeditious but orderly phase-out of the programs
authorized under this part, the Secretary shall modify or
phase-out agreements entered into pursuant to section 454 with
institutions of higher education to achieve the following
results:
``(A) For academic year 1995-1996, loans made under
this part shall represent not more than 5 percent of
new student loan volume for such year.
``(B) For academic year 1996-1997 and all
subsequent academic years, no loans shall be made
pursuant to this part.
``(3) New student loan volume.--For the purposes of this
subsection, the term `new student loan volume' has the same
meaning as under subsection (a)(4) of this section.
``(4) Modification of software and systems for phase-out of
direct loans.--The Secretary shall not make system
modifications or upgrades to software used in support of the
program under this part after the date of enactment of this
subsection.
``(5) Regulations governing phase-out of direct loans.--The
Secretary shall promulgate regulations governing the phase-out
of the Federal Direct Student Loan Program not later than 90
days after the date of enactment of this subsection. Such
regulation shall not be subject to the provisions of the Master
Calendar as specified under section 482 of this title. The
provisions of this subsection shall be implemented
notwithstanding the nonpublication of regulations required
under this subsection by the Secretary.''.
SEC. 202. DIRECT LOAN VOLUME LIMITS.
Section 453(a) of the Act (20 U.S.C. 1087(a)) is amended by
striking paragraphs (2) and (3).
SEC. 203. ADMINISTRATIVE EXPENSES.
Section 458(a) of the Act (20 U.S.C. 1087h(a)) is amended to read
as follows:
``(a) In General.--Each fiscal year there shall be available, from
funds not otherwise appropriated, funds to be obligated for
administrative costs under this part, and for certain expenditures in
support of the program authorized under part B, not to exceed (from
such funds not otherwise appropriated) $50,000,000 in fiscal year 1996,
$45,000,000 in fiscal year 1997, and no funds available in fiscal year
1998. The total expenditures by the Secretary (from such funds not
otherwise appropriated) shall not exceed $700,000,000 in fiscal years
1994 through 1998. The Secretary is also authorized to carry over funds
available under this section to a subsequent fiscal year.''.
SEC. 204. REPEAL.
Part D of title IV of the Higher Education Act, as amended by this
title, is repealed effective October 1, 1997.
TITLE III--IMPROVEMENTS TO THE FEDERAL FAMILY EDUCATION LOAN PROGRAM
SEC. 301. RECOVERY OF GUARANTY AGENCY RESERVES.
The last sentence of section 422(a)(2) of the Act (20 U.S.C.
1072(a)(2)) is amended by striking ``Except as provided in section
428(c)(10)(E) or (F), such'' and inserting in lieu thereof ``Such''.
SEC. 302. RESERVE FUNDS.
Section 422(g) of the Act (20 U.S.C. 1072(g)) is amended to read as
follows:
``(g) Disposition of Funds Returned or Recovered by the
Secretary.--Any funds that are returned or otherwise recovered by the
Secretary pursuant to this subsection shall be returned to the United
States Treasury for purposes of reducing the Federal debt.''.
SEC. 303. TERMINATION OF FDSL CONSOLIDATION LOAN AUTHORITY.
(a) Part B Authority.--Section 428C(b) of the Act (20 U.S.C. 1078-
3(b)) is amended by striking paragraph (5).
(b) Part D Authority.--Section 455 of the Act is amended by
striking subsection (g).
SEC. 304. CONSOLIDATION UNDER FFELP OF LOANS MADE PURSUANT TO PART D.
Section 428C(a)(4)(B) of the Act (20 U.S.C. 1087-3(a)(4)(B)) is
amended by inserting ``part D or'' before ``part E''.
SEC. 305. ACCOUNTABILITY OF FUNDS FOR DIRECT LOAN ADMINISTRATIVE
EXPENSES.
Section 458 of the Act (20 U.S.C. 1087h) is amended by
redesignating subsection (d) as subsection (e), and by inserting after
subsection (c) thereof the following new subsection:
``(d) Prohibition on Certain Expenditures.--Notwithstanding any
other provision of law, funds available under this section shall not be
used to support public relations activities (by Department of Education
employees or pursuant to contracts with the Department) or marketing of
institutions to encourage participation in the program authorized under
this part.''.
SEC. 306. SALE OF FDSL LOAN PORTFOLIOS.
The Act is amended by inserting after section 458 of the Act (20
U.S.C. 1087h) the following new section:
``SEC. 459. SALE OF FEDERAL DIRECT STUDENT LOAN PORTFOLIOS.
``(a) Auction Sales of Loan Portfolios.--The Secretary shall
conduct auctions to sell the outstanding portfolio of loans made
pursuant to this part. Such auctions shall consist of sales of
portfolios representative of the overall characteristics of the direct
loans held by the Secretary. Auctions shall be held for portfolios of
not less than $40,000,000 of loans per sale. The first sale of loans
shall take place not later than 120 days after the date of enactment of
this section, and shall not include Federal guarantees or reinsurance
against the contingency of borrower default, death, or disability.
``(b) Loan Terms Subject to Promissory Note.--Such loans shall be
subject to the terms and conditions as specified in the borrower
promissory note, and shall not be subject to further Federal
regulations pursuant to this Act.
``(c) Assessment of Auction.--The Secretary, following the auctions
required pursuant to this section, shall prepare a report on the
results of such auctions. Such report shall include (but not be limited
to) the following:
``(1) The Secretary's opinion as to whether the results of
the auction represent a true reflection of the Federal subsidy
costs associated with federally supported student loans; and
``(2) an estimate of the reductions in Federal
administrative costs achieved through eliminating future
Federal oversight and administrative responsibilities of
affected loans as a result of sale to the private sector.
``(d) Transmittal of Results to Congressional Budget Office and
Office of Management and Budget.--The Secretary shall provide a copy of
all reports and analyses prepared in connection with implementation of
this section to the Director of the Congressional Budget Office and the
Director of the Office of Management and Budget.
``(e) Disposition of Proceeds.--All proceeds received as a result
of the auctions conducted pursuant to this part shall be returned to
the United States Department of the Treasury after deduction of
expenses incurred by the Department of Education in connection with the
auctions required pursuant to this section.''.
SEC. 307. EFFECTIVE DATE.
Except as otherwise specified therein, the amendments made by this
title shall be effective 30 days after the date of the enactment.
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