[Congressional Record Volume 141, Number 142 (Wednesday, September 13, 1995)]
[House]
[Pages H8894-H8895]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                             FINANCIAL AID

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from New Jersey [Mr. Andrews] is recognized for 5 minutes.
  Mr. ANDREWS. Mr. Speaker, I rise tonight after listening with great 
interest to the colloquy which took place between and among my friends, 
the gentleman from Pennsylvania [Mr. Goodling], the gentleman from 
California [Mr. McKeon] and the gentleman from West Virginia [Mr. 
Wise], with respect to the issue of financial aid for people wanting to 
go to college or to pursue higher education in the country.
  First let me say as a matter of record that I know and I accept that 
the intentions, particularly of the gentleman from Pennsylvania [Mr. 
Goodling] and the gentleman from California [Mr. McKeon], are entirely 
positive in promoting higher education. It has been their record. It 
has been their personal commitment, and I am very honored to serve with 
them on the Committee on Economic and Educational Opportunities. Having 
said that, I think that the plan that is being put forward is a serious 
assault on the ability of Americans, particularly middle-class 
Americans, to go to college or to pursue a higher education.
  First let me say that the first time that we heard about this plan 
was tonight. As a member of the Committee on Economic and Educational 
Opportunities, I would expect that there would be more opportunities 
for both Republicans and Democrats to learn about the plan, debate its 
merits, and propose alternatives.
  I am, finally, glad to hear something from the majority as to how it 
plans to reduce higher education spending by $10 billion over the next 
5 years, but I think that the proper way to do this would be to have 
hearings and a debate within the committee, not do it this way.
  Having said that, it is my understanding that there are three ways 
that the committee is considering proposing to meet this $10 billion 
target. Numbers, Mr. Speaker, fly around here freely. And if our 
constituents are listening to us, numbers like $10 billion and 5-year 
appropriations and all of this is very, very confusing.
  I would like to attempt to cut through that and talk about my 
understanding as to what the majority is, in fact, proposing and how it 
would affect students of all ages trying to get a higher education in 
the country. First of all, they propose the abolition of
 the direct loan program and claim that it will save $1.2 billion. 
There is only one way that the abolition of the direct loan program 
saves money, and that is if you cook the books. With all due respect, 
that is what the Congressional Budget Office is doing with the direct 
loan program. It simply makes no sense whatsoever to argue that the 
taxpayers will spend less money by borrowing it at 5 percent than they 
will paying a bank to lend it at 8 percent. You do not have to go very 
far in school to figure that out.

  In the next couple of days we will be revealing specific evidence 
which shows that the Congressional Budget Office for partisan political 
reasons has chosen to distort this issue and to distort the real 
economic impact of direct lending. It does not save money to abolish 
direct lending. It costs money. What it does is to take a program that 
is working successfully on college campuses across this country and 
turn it back to the maze of banks and guarantee agencies, and, Mr. 
Speaker, our constituents understand this.

                              {time}  2130

  They bounce from bank to guaranty agency to financial aid office and 
back all over again. You sometimes need a degree in educational 
administration to figure out how to apply for a student 

[[Page H 8895]]
loan and to pay one. It will not save money to abolish direct loans, it 
will cost money.
  Second, the plan apparently says they are going to take profits from 
the bank, I think I heard the number $4.7 billion, from the banks and 
the guaranty agencies. I find this remarkable for two reasons. First, 
for the last 10 years every time someone has proposed taking money from 
the banks in the student loan program by reducing the rate of interest 
that they are paying, the banks come tripping up to Capitol Hill and 
say, ``We will not stay in the program anymore if you take profit away 
from us. It will no longer become profitable.'' Frankly, it has been 
the very same Republican defenders of the banks on this issue who are 
now proposing taking profits away from the interest rate that the banks 
earn.
  The question I would raise, Mr. Speaker, is were they wrong in 1990 
and 1992, or are they wrong now? Because for two decades the banks have 
said if you
 take anything away from their subsidy in this program, they will leave 
the program. They will not make any more loans. I find it miraculous 
that now all of a sudden that argument has changed. It has not changed, 
and some of the banks will in fact leave the program.

  Where do you think the guaranty agencies are going to get part of 
this $4.7 billion? Mr. Speaker, here is where. When an American student 
applies for a student loan, he or she usually pays 5 percent of their 
loan principle as a guarantee fee. That fee will go up, inevitably, 
under this.
  Let me say this. The plan apparently proposes that we will end the 
deferment of payments after graduation. Here is what that means in 
English. It means the day after you graduate, Mr. Speaker, the day 
after a student graduates he or she will have to start to pay their 
loan back before they get a job, whether or not they get a job. If you 
want a surefire recipe to increase defaults that the taxpayers are 
liable for, that is the way to do it. This is a plan that hurts 
students. In the future I will be happy to outline specific ways to 
save even more money. This is not the way to go.

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