[Congressional Record Volume 140, Number 27 (Friday, March 11, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 11, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              FFELP LOAN DEFAULT EXEMPTION EXTENSION BILL

                                 ______


                          HON. ROBERT C. SCOTT

                              of virginia

                    in the house of representatives

                         Friday, March 11, 1994

  Mr. SCOTT. Mr. Speaker, one of the most important tasks of the 103d 
Congress will be to consider education reform initiatives that will 
help to bring our Nation's standards and quality of education up to par 
with our major foreign competitors. While we consider reforms that will 
be necessary for our students to compete on a global level, we must not 
forget that our economic fate as a nation is closely linked to the 
availability of a quality education for all students, including those 
lower-income and minority students who have not enjoyed equal access to 
higher and postsecondary education.
  In July of 1994, some of the institutions that have historically led 
the way to provide lower-income and minority students with 
opportunities to attain a college degree may be in danger of losing 
their eligibility for the Federal Family Educational Loan Program 
[FFELP]. Almost one-third of the historically black colleges and 
universities [HBCU's], and many of the tribally controlled community 
colleges and Navajo community colleges may be eliminated from this 
program by the Department of Education because their cohort default 
rates exceed the 25-percent cutoff.
  The elimination of these institutions from the FFELP would have 
devastating effects on efforts to increase minority participation in 
higher education. Economically deprived students at HBCU's, for 
example, are increasingly relying on FFELP loans, as the HBCU loan 
volume has more than doubled in recent years. FFELP funds are therefore 
a vital source of support for many minority students. Despite this, 
less than 3 percent of the $13.5 billion in FFELP loans go to HBCU 
students.
  In the 1990 Omnibus Budget Reconciliation, Congress granted an 
exemption through July 1, 1994, to HBCU's, tribally controlled 
community colleges, and Navajo community colleges from the default 
cutoff, largely because these institutions have opened their doors to 
poor and working-class students. Currently, the exempted institutions 
are working on measures to insure that their students can successfully 
meet loan obligations. Through a collaboration of higher education 
organizations and minority-serving institutions, these schools are 
implementing a self-help program designed to reduce student default 
rates, including financial aid workshops and default management plans.
  These schools, however, cannot guarantee adequate financial 
assistance for their students without our help. Many of us in Congress 
are working on developing fairer criteria to determine exclusion from 
title IV programs that will more accurately predict loan mismanagement, 
abuse, and fraud. Until then, however, we must insure that these 
institutions, and the students they serve, can continue to receive the 
Federal student loans that are vital to their survival.

  Mr. Speaker, I believe that access to higher education must remain 
open for all students. I ask that those Members who share my concern 
will join me to extend until July 1, 1998, the FFELP default exemption 
for HBCU's, tribally controlled community colleges, and Navajo 
community colleges. The American Council on Education, the United Negro 
College Fund, the National Association for Equal Opportunity in Higher 
Education, and many other educational organizations all support the 
extension of the default exemption deadline. In addition, the Secretary 
of Education has expressed his support for an extension of the default 
cutoff for the currently exempted institutions. It is now the 
responsibility of Congress to continue the policy that we have adopted, 
and continue to make student loans available where they are needed 
most.
  Mr. Speaker, I am including for the Congressional Record the letters 
from Secretary Riley, The American Council on Education, and the United 
Negro College Fund.


                                 U.S. Department of Education,

                                 Washington DC, February 24, 1994.
     Hon. William D. Ford,
     Chairman, Committee on Education and Labor, House of 
         Representatives, Washington, DC.
       Dear Bill: The Honorable Robert C. Scott has corresponded 
     with me regarding his support for an extension of the 
     exemption for Historically Black Colleges and Universities 
     from the statutory provision that makes a school with high 
     default rates ineligible to participate in the Federal Family 
     Education Loan (FFEL) Program. Congressman Scott asked me to 
     correspond with you directly on this issue.
       Congress originally granted this exemption for historically 
     black colleges and universities, tribally controlled 
     community colleges, and Navajo community colleges because of 
     the unique role these institutions play in promoting minority 
     student access to postsecondary education. I believe 
     legislation authorizing an extension through July 1, 1997 
     would be appropriate. I will support such legislation and am 
     committed to working with these institutions in their efforts 
     to lower their default rates, to ensure that they are all in 
     full compliance by the end of the extension period. President 
     Clinton, in signing Executive Order 12876 on November 1, 1993 
     (copy enclosed), has reaffirmed his support for the 
     historically black colleges and universities.
       Please let me know if I can be of further assistance.-
           Yours sincerely,
                                                 Richard W. Riley.
                                           Secretary of Education.
     Enclosure.

                         Presidential Documents

       Executive Order 12876 of November 1, 1993.
       Historically Black Colleges and Universities.
       By the authority vested in me as President by the 
     Constitution and the laws of the United States of America, in 
     order to advance the development of human potential, to 
     strengthen the capacity of historically Black colleges and 
     universities to provide quality education, and to increase 
     opportunities to participate in and benefit from Federal 
     programs, it is hereby ordered as follows:
       Section 1. There shall be established in the Department of 
     Education the President's Board of Advisors on Historically 
     Black Colleges and Universities (``Board of Advisors'' or 
     ``Board''), a Presidential advisory committee. The Board of 
     Advisors shall issue an annual report to the President on 
     participation by historically Black colleges and universities 
     in federally sponsored programs. The Board of Advisors will 
     also provide advice to the Secretary of Education 
     (``Secretary'') and in the annual report to the President on 
     how to increase the private sector role in strengthening 
     historically Black colleges and universities, with particular 
     emphasis on enhancing institutional infrastructure and 
     facilitating planning, development, and the use of new 
     technologies to ensure the goal of long-term viability and 
     enhancement of these institutions. Notwithstanding the 
     provisions of any other Executive order, the responsibilities 
     of the President under the Federal Advisory Committee Act, as 
     amended (5 U.S.C. App. 2), which is applicable to the Board 
     of Advisors, shall be performed by the Secretary, in 
     accordance with the guidelines and procedures established by 
     the Administrator of General Services.
       Sec. 2. The members of the Board of Advisors shall be 
     appointed by the President. The Board shall include 
     representatives of historically Black colleges and 
     universities, other institutions of higher education, 
     business and financial institutions, private foundations, and 
     secondary education.
       Sec. 3. The White House Initiative on Historically Black 
     Colleges and Universities, housed in the Department of 
     Education, shall: (1) provide the staff, resources, and 
     assistance for the Board of Advisors; (2) assist the 
     Secretary in the role of liaison between the executive branch 
     and historically Black colleges and universities; and (3) 
     serve the Secretary in carrying out his responsibilities 
     under this order.
       Sec. 4. To carry out the purposes of this order, each 
     executive department and each agency designated by the 
     Secretary shall, consistent with applicable law, enter into 
     appropriate grants, contracts, or cooperative agreements with 
     historically Black colleges and universities. The head of 
     each agency subject to this order shall establish an annual 
     goal for the amount of funds to be awarded in grants, 
     contracts, or cooperative agreements to historically Black 
     colleges and universities. Consistent with the funds 
     available to the agency, the goal shall be an amount above 
     the actual amount of such awards from the previous fiscal 
     year and shall represent a substantial effort to increase the 
     amounts available to historically Black colleges and 
     universities for grants, contracts, or cooperative 
     agreements. In order to facilitate the attainment of the 
     goals established by this section, the head of each agency 
     subject to this order shall provide technical assistance and 
     information to historically Black colleges and universities 
     regarding the program activities of the agency and the 
     preparation of applications or proposals for grants, 
     contracts, or cooperative agreements.
       Sec. 5. Each executive department and designated agency 
     shall appoint a senior official, who is a full-time officer 
     of the Federal Government and who is responsible for 
     management or program administration, to report directly to 
     the department or agency head or designated agency 
     representative on department or agency activity under this 
     order and to serve as liaison to the Board and White House 
     Initiative. To the extent permitted by law and regulation, 
     each executive department and designated agency shall provide 
     appropriate information requested by the Board and the White 
     House Initiative staff pursuant to this order.
       Sec. 6. Each executive department and designated agency 
     shall develop an annual plan for, and shall document, the 
     agency's effort to increase the ability of historically Black 
     colleges and universities to participate in federally 
     sponsored programs. These plans shall describe the measurable 
     objectives for proposed agency actions to fulfill this order 
     and shall be submitted at such time and in such form as the 
     Secretary shall designate. In consultation with participating 
     agencies, the Secretary shall review these plans and develop, 
     with the advice of the Board of Advisers, and integrated 
     Annual Federal Plan for Assistance to Historically Black 
     Colleges and Universities for consideration by the President. 
     The Secretary shall ensure that each president of a 
     historically Black college or university is given the 
     opportunity to comment on the proposed Annual Federal Plan 
     prior to consideration by the President. Each participating 
     agency shall submit to the Secretary and the Director of the 
     Office of Management and Budget, an Annual performance Report 
     that shall measure each agency's performance against the 
     objectives set forth in its annual plan. The Director of the 
     Office of Management and Budget shall be responsible for 
     overseeing compliance with the Annual Federal Plan.
       Sec. 7. Each year the Board of Advisors shall report to the 
     President on the progress achieved in enhancing the role and 
     capabilities of historically Black colleges and universities, 
     including findings and recommendations on the Annual 
     Performance Reports, described in Section 6, submitted by the 
     participating agencies. The Secretary shall disseminate the 
     annual report to appropriate members of the executive branch 
     and make every effort to ensure that findings of the Board of 
     Advisors are taken into account in the policies and actions 
     of every executive agency.
       Sec. 8. The Department of Education, along with other 
     Federal departments or agencies, shall work to encourage the 
     private sector to assist historically Black colleges and 
     universities through increased use of such devices and 
     activities as: (1) private sector matching funds to support 
     increased endowments; (2) private sector task forces for 
     institutions in need of assistance; and (3) private sector 
     expertise to facilitate the development of more effective 
     ways to manage finances, improve information management, 
     strengthen facilities, and improve course offerings. These 
     steps will be taken with the goals of enhancing the career 
     prospects of graduates of historically Black colleges and 
     universities and increasing the number of such graduates with 
     degrees in science and technology.
       Sec. 9. In all its recommendations, the Board of Advisors 
     shall emphasize ways to support the long-term development 
     plans of each historically Black collage and university. The 
     Board of Advisors shall recommend alternative sources of 
     faculty talent, particularly in the fields of science and 
     technology, including faculty exchanges and referrals from 
     other institutions of higher education, private sector 
     retirees, Federal employees and retirees, and emeritus 
     faculty members at other institutions of higher education.
       Sec. 10. The Board of Advisors, through the White House 
     Initiative, shall provide advice on how historically Black 
     college and universities can achieve greater financial 
     security. To the maximum extent possible, the Board of 
     Advisors shall consider how such institutions can enlist the 
     resources and experience of the private sector to achieve 
     such security.
       Sec. 11. The Director of the Office of Personnel 
     Management, in consultation with the Secretary and the 
     Secretary of Labor, shall develop a program to improve 
     recruitment and participation of graduates and undergraduate 
     students of historically Black colleges and universities in 
     part-time, summer and permanent positions in the Federal 
     Government.
       Sec. 12. Administration: (a) Members of the Board of 
     Advisors shall serve without compensation, but shall be 
     allowed travel expenses, including per diem in lieu of 
     subsistence, as authorized by law for persons serving 
     intermittently in the Government service, (5 U.S.C. 5701-
     5707).
       (b) The Board of Advisors and the White House Initiative 
     shall obtain funding for their activities from the Department 
     of Education.
       (c) The Department of Education shall provide such 
     administrative services for the Board as may be required.
       Sec. 13. Executive Order No. 12677 of April 28, 1989, is 
     hereby revoked.
                                                  William J. Clinton.  
  The White House, November 1, 1993.
                                  ____



                                American Council on Education,

                                Washington, DC, November 16, 1993.
       Dear Representative: I am writing you about a matter of 
     great importance to the higher education community.
       Since 1990, the federal government has excluded schools 
     with high default rates from participation in the Federal 
     Family Education Loan Program. However, because of their 
     unique history and missions, Historically Black Colleges and 
     Universities and tribally controlled and Navajo and community 
     colleges have been exempt from the default trigger. This 
     exemption expires on July 1, 1994.
       The expiration of the exemption will have a devastating 
     impact on these schools and the students they serve. 
     According to a recent study by the General Accounting Office 
     (GAO), 33 of the nation's 105 Historically Black Colleges 
     will lose their eligibility to participate in the Federal 
     Family Student Loan Program when the exemption expires. 
     Tribally controlled community colleges will suffer a similar 
     loss of eligible institutions.
       The importance of Historically Black Colleges and 
     Universities and Tribally controlled community colleges can 
     not be overstated. Historically Black Colleges and 
     Universities account for 28 percent of the enrollment of 
     African American students in higher education. Three-fourths 
     of the members of the Congressional Black Caucus are 
     graduates of these schools. Most of the students who attend 
     Historically Black Colleges and Universities and Tribally 
     controlled colleges need federal student aid to do so. 
     Efforts to increase the enrollment of minorities in higher 
     education will suffer grievous harm if any of these 
     institutions are unable to offer financial aid because they 
     fail to meet default thresholds.
       To ensure that these institutions continue to provide 
     economic opportunity for the individuals who attend them, we 
     believe it is vitally important that the exemption from the 
     default trigger be extended. And, since colleges are 
     currently accepting admissions and financial aid applications 
     from students for the 1994-1995 academic year, we believe it 
     is essential that this exemption be extended as soon as 
     possible.
       To address this issue we recommend that in both Section 
     428(j)(3)(B) and 435(a)(2)(C) of the Higher Education Act, 
     you strike ``Until July 1, 1994, this'' and insert in lieu 
     thereof ``This''.
       We were disappointed that the Higher Education Technical 
     Amendments currently pending before the Congress did not 
     address this provision. Given the urgency of this issue and 
     the importance of strong and vital Historically Black 
     Colleges and Universities and tribally controlled and Navajo 
     Community Colleges, we ask that you make this amendment as 
     soon as possible.
       Thank you for your consideration and prompt efforts to 
     address this problem.
           Sincerely,
                                                 Robert H. Atwell,
                                                        President.
                                  ____



                              United Negro College Fund, Inc.,

                                    Washington, DC, March 8, 1994.
     Hon. Robert C. ``Bobby'' Scott,
     Cannon House Office Building, Washington, DC.
       Dear Congressman Scott: I am writing to commend you for 
     your leadership in introducing legislation to extend the 
     current law exemption--for the Historically Black Colleges 
     and Universities (HBCUs)--from the student loan default rate 
     ``triggers'' in section 435(a)(2)(C) of the Higher Education 
     Act.
       The 41 member Presidents of the United Negro College Fund 
     (UNCF) and the HBCU community appreciate your interest in and 
     support of HBCUs. Your lead co-sponsorship of this 
     amendment--which is so critical to the survival of our 
     institutions--would allow the 33 HBCUs most threatened with 
     exclusion from the Title IV, Student Assistance programs time 
     to implement programs and to reduce student loan defaults. As 
     you know, the General Accounting Office (GAO) indicated in 
     its August 1993 Report (GAO/HRD-93-117FS) that ``. . . 33 of 
     the 105 HBCUs could become ineligible for continued 
     participation in the FFEL program when their exemption ends 
     on July 1, 1994.''
       The extension being sought by the HBCU community, and the 
     Tribally-controlled Indian Community Colleges, would extend 
     the exemption through the expiration of the Higher Education 
     Act Amendments of 1992 (September 30, 1998). This additional 
     time would permit ``at-risk'' UNCF institutions to implement 
     an HBCU community-wide strategy, which is being undertaken 
     with the full support of Secretary Riley and the White House 
     Initiative on Historically Black Colleges and Universities. 
     That strategy has three critical parts: (1) a peer 
     counseling element which will match student aid 
     administrators and business officers/fiscal affairs 
     personnel from institutions with low default rates with 
     their peers from high default rate schools in order to 
     identify and ameliorate problems in aid administration and 
     default management; (2) continuing consultation and 
     advice--the first of which was sponsored by UNCF, NAFEO, 
     OAPBC and the HBCU-ETS Collaboration of the Educational 
     Testing Service. This information dissemination and expert 
     consultation seminar was held on July 29-30, 1993 and was 
     attended by aid administrators and business officers from 
     102 HBCUs. That process will continue at the upcoming 
     NAFEO Annual Conference on Blacks In Higher Education 
     (March 23-27, 1994); and (3) development and dissemination 
     of a model HBCU Manual on Student Aid/Default Management 
     by the HBCU-ETS Collaboration.
       In order to ensure that all of your colleagues fully 
     understand the issues confronting HBCUs, I thought some 
     additional information might be helpful. While UNCF 
     presidents recognize the important budgetary and public 
     policy reasons which dictate our efforts to reduce student 
     loan defaults, the systemic nature of the loan default 
     problem faced by HBCUs also must be understood. Further, the 
     reality of student loan defaults in real dollar terms (as 
     opposed to cohort default rate terms) must also be grasped if 
     the national objective is to reduce the exposure of federal 
     resources to student default.
       First, HBCUs and other ``outreach'' institutions provide 
     postsecondary access and choice to many students who 
     demonstrate academic potential, but may not have outstanding 
     GPAs or ACT/SAT scores. Many of these students succeed at our 
     institutions--with academic reinforcement and counseling and 
     supportive faculty advisors--but some do not. Given the fact 
     that they must pay college costs with extensive borrowing 
     (the average UNCF student borrows $9,900 over a four-year 
     college career and $2,625 in the freshman year), many 
     students leave college in debt and without the credentials to 
     secure a job to repay their loans. UNCF member institutions 
     could solve their default problems by refusing to admit 
     academically weaker students, and we would deny educational 
     opportunity to a future Leontyne Price, Ralph Wiley or 
     Joycelyn Elders. When Congress fails to appropriate 
     sufficient funding for the Federal Pell Grant program, it 
     forces UNCF member institutions to make loans an essential 
     part of a student's aid package or deny them access to 
     college--and a chance at the American Dream.
       Second, although some of our member institutions have high 
     default rates, e.g., Philander Smith College--26.3% in FY 
     1991, their dollars in default are low ($100,890), especially 
     when compared to the dollars in repayment--$401,003. 
     Moreover, only 30 Philander-Smith students failed to enter 
     repayment on time. The GAO report makes the point clearly--
     ``Of the total dollar amount of FFELs made to students each 
     year, the percentage that goes to HBCU students is small, 
     even though HBCU loan volume more than doubled in recent 
     years. In fiscal year 1991, the total dollar volume of FFELs 
     was $13.5 billion. Loans to students attending HBCUs totaled 
     $372 million-less than 2.8 percent of the FFELs made to 
     postsecondary students that year. . . . In fiscal year 1987, 
     loans to HBCU students represented 1.7 percent of the total 
     loans to postsecondary students.''
       I want to thank you for your tireless efforts on behalf of 
     the HBCU community in working to secure the default exemption 
     extension. Please do not hesitate to contact me or Christa 
     Beverly, UNCF's Director of Government Affairs, at any time 
     should you need our assistance.
           Sincerely,
                                              William H. Gray III,
     President and CEO.

                          ____________________