[Congressional Record Volume 141, Number 70 (Monday, May 1, 1995)]
[Senate]
[Pages S5929-S5930]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                     DIRECT LOANS BENEFIT STUDENTS

 Mr. SIMON. Mr. President, we are going to hear a lot about 
direct lending during the coming months.
  It is a success for everyone but the people who profit from the 
present system. I want banks in America to be successful, but if we are 
going to subsidize banks, we ought to do it openly and not do it in the 
name of aiding students.
  The Daily Illini, which is the student newspaper of the University of 
Illinois, had an editorial recently about direct lending. The 
University of Illinois is one of the schools that is now on the direct 
lending program.
  I think my colleagues would be interested in what the student 
editorial says. I ask that it be printed in the Record.
  The editorial follows:

                 [From the Daily Illini, Jan. 31, 1995]

                     Direct Loans Benefit Students

       Students love direct lending. College administrators love 
     direct lending. So why are the House Republicans thinking of 
     limiting the program?
       William Goodling, House Economic and Educational 
     Opportunities Committee chairperson, wants to cap the number 
     of new student loans under direct lending at 40 percent, 
     which is how large the program is expected to grow in the 
     next academic year. The original legislation called for a 60 
     percent growth in the program by the 1998-99 academic year.
       Goodling's reasoning is not clear yet, but there are 
     already plenty of reasons why direct lending should be 
     expanded, not curtailed.
       The old system of going through the Student Loan Marketing 
     Association, or Sallie Mae, doesn't work well. Students have 
     to negotiate a long process involving complicated forms. And 
     the overhead has been huge. Besides Sallie Mae, the federal 
     government operates a system of more than 35 ``guarantee 
     agencies'' to collect payments and repay on defaulted loans.
       By contrast, the year-old direct lending program delivers 
     loans fast and without hassle. As a result, the University 
     has seen fewer students encumbered during registration for 
     the spring semester and fewer student deferring payments or 
     needing emergency loans, according to Orlo Austin, director 
     of the office of student financial aid.
       His office has also benefited from having control at the 
     local level. Direct lending is less complex than the federal 
     guaranteed-loan system because schools do not have to cut 
     through a massive bureaucracy to get ahold of students' 
     payments, he said.
       And Austin isn't the only administrator happy with the 
     program. ``(Direct lending) makes those of us in financial 
     aid more sophisticated and user-friendly in helping to 
     [[Page S5930]] serve students. We can't do anything but do 
     our jobs better,'' said an official at the University of San 
     Francisco in the Jan. 20 Chronicle of Higher Education.
       In fact, the only people who seem to prefer the guaranteed-
     loan system are the bankers and guarantee agencies who direct 
     lending will put out of work. That's not enough support for 
     limiting the scope of this new program.
     

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