[Congressional Record Volume 141, Number 60 (Friday, March 31, 1995)]
[Senate]
[Pages S5022-S5023]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                DIRECT LOAN PROGRAM IS GOOD DEAL FOR ALL

 Mr. SIMON. Mr. President, one of the controversies we will 
face in the Senate before this session is out is whether to follow the 
advice of the bankers and the secondary markets and cut back on the 
direct loan program.
  Direct loans are a great thing for students, their parents, the 
colleges and universities, and for the taxpayers.
  To cave in to the financial interests, who want to keep their Federal 
subsidy--often the same people who denounce welfare for the poor--is 
something I hope the Senate will not do.
  Recently, the Chicago Sun-Times, which originally opposed the direct 
lending program, had an editorial supporting the program now.
  The experience in the schools that have it is so positive, I hope we 
will listen to our colleges and universities and not to those who are 
eager for profits at the taxpayers' expense.
  I ask that the Sun-Times editorial be printed in the Record.
  The editorial follows:

                  [From the Sun-Times, Mar. 29, 1995]

                Direct Loan Program Is Good Deal for All

       Under the guises of deficit reduction and reduced 
     government, Republican forces in Congress are pressing for 
     changes in student loan programs that would impose onerous 
     new costs on college students and stall broader availability 
     of direct loans, the plan sponsored by Sen. Paul Simon (D-
     Ill.) to eliminate middlemen.
       [[Page S5023]] Both proposals are without merit and should 
     be ``zeroed out,'' to swipe a phrase from the new 
     congressional vocabulary.
       Efforts to eliminate the federal subsidy of interest 
     charges on student loans come at a time when rising college 
     costs are forcing more students to borrow money to pay for 
     their education. The American Council on Education reports 
     that 6.6 million students took federal loans this year, up 
     from 4.5 million in 1988. Meanwhile, the dollar amount 
     increased from $11.8 billion to $25.8 billion. The government 
     eases that burden by paying interest on loans while the 
     student is in school. Without the subsidy, the debt of an 
     undergraduate who takes out the maximum loan amount for four 
     years would increase 20 percent, the ACE says.
       These subsidies are costly--$2.2 billion this year--but 
     they are based on sound public policy: providing access to 
     higher education.
       Elsewhere in Congress, moves are afoot to limit the direct 
     loan program, which Simon sponsored to allow students to get 
     loans directly from the federal government. The program, 
     which is being phased in over five years, is strongly opposed 
     by banks that have risk-free profits under government loan 
     guarantees, and by the huge public-private agencies that 
     administer the program and run profitable secondary loan 
     markets. Having failed to block the original legislation, 
     opponents now seek to limit direct loans to 40 percent of 
     student loan volume, arguing that private enterprise works 
     better than government.
       Although we would like to see stronger guarantees that 
     schools are not ripping off the direct loan program--as many 
     for-profit trade schools did under the subsidized bank loan 
     program--we believe the record of the direct loan program to 
     date calls for its continued expansion. Students and 
     participating schools, including the University of Illinois 
     at Champaign-Urbana, report fewer hassles with direct loans.
       More important, the program is expected to save money. The 
     Clinton administration estimates $5.2 billion would be saved 
     by 2000, if the direct loan program were fully implemented by 
     the 1997-i98 school year. That's a good deal for the schools 
     and a good deal for the taxpayers. The program should 
     continue on schedule.
     

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