[Congressional Record Volume 141, Number 150 (Monday, September 25, 1995)]
[Senate]
[Pages S14199-S14203]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    REPUBLICAN CUTS IN STUDENT LOANS

  Mr. KENNEDY. Mr. President, we have an extremely important measure 
that is before the Senate at the present time where we have had 
discussion. I would like to take just a few moments to talk about 
another extremely important measure that will be and is important to 
the Senate tomorrow when the Labor and Human Resources Committee meets 
its obligations under the budget recommendations and addresses how we 
are going to reach the instructions by the Budget Committee. I wish to 
take just a few moments of the Senate's time on this issue.
  Mr. President, tomorrow, the Senate Labor and Human Resources 
Committee will be asked to take $10 billion out of the student loan 
accounts to help pay for a tax cut for the wealthiest Americans. That 
priority is wrong, and I oppose it.
  Senator Kassebaum's reconciliation proposal strikes at the heart of 
the Federal commitment to higher education. It adds to the debt burden 
of students, increases the costs for working families struggling to pay 
for college, and penalizes colleges and universities for accepting 
needy students.
  Tomorrow's markup marks the third time in a week we have been asked 
to meet to consider student loan cuts, and the proposal has not 
improved with time. Senator Kassebaum's proposal retains the 
unprecedented student loan tax on colleges and universities, it forces 
schools out of the direct lending program against their will, and it 
triples the cut imposed directly on students.
  More than two-thirds of the proposed cut--$7.6 billion--fall on 
students and 

[[Page S 14200]]
working families in the form of higher fees, increased interest rates, 
and an assault on the highly successful direct student loan program. 
Most surprising of all, this antitax Republican Congress is imposing an 
unprecedented new tax on Federal student loans.
  If this student loan tax is enacted into law, colleges will be forced 
to pay the Federal Government nearly 1 percent of every dollar their 
students borrow for college--nearly $2 billion over the next 7 years. 
Universities facing tight funding will have no choice but to pass the 
tax on to students and parents in the form of higher tuition and fees 
or reduced student aid.
  This tax falls especially hard on the vast majority of colleges with 
small or no endowments and large numbers of students on financial aid. 
Small liberal arts colleges, small religious colleges, many others, 
including Gordon College in Massachusetts, St. Mary's in Leavenworth, 
KS, Trinity College in Burlington, VT, Heritage College in Washington 
State, Ohio and Dominican College lack the resources to offset such 
blows to their budget.
  At the University of Massachusetts, in Boston, a large urban 
university, with a diverse student body, half the students receive 
financial aid. This new tax would force the college to pay $174,000 a 
year to the Federal Government. If UMass-Boston wanted to shield its 
students from the cost, it would have no choice but to turn to the 
State for the money. Little wonder that the National Governors' 
Association has described this student loan tax as ``yet another 
unfunded mandate that is passed on to the States.''
  I would point out that at the University of Massachusetts, in Boston, 
several years ago I had the opportunity to speak at the graduation. At 
that time, their tuition fees were $1,000; 85 percent of the students' 
parents never went to college; 85 percent of the students that were 
going to the University of Massachusetts, in Boston, were working 25 
hours a week or more.
  And the year or two after that, they raised the tuition another $100 
and they lost about 10 percent of the new applicants. Just the $100 
made a significant difference, the breaking point for many of these 
young men and women as well as those in their twenties and early 
thirties who were looking forward to going back to college to gain an 
excellent college education.
  So, Mr. President, the National Governors' Association has described 
this student loan tax as yet another unfunded mandate that is passed on 
to the States.
  We created the student loan program to make it easier for students 
from working families to attend college. If this provision stands, 
colleges will be penalized for admitting needy students.
  And that's not all. Under the proposed legislation parents who take 
out PLUS loans to ease the financial burden on their children will have 
to pay higher interest rates for those loans. PLUS loans pay for 
college expenses, including tuition, room, board, and other fees. This 
provision falls hardest on the families who need the most help. PLUS 
loans are particularly crucial for working families who have not been 
able to save, or who do not own a home against which to take an equity 
loan.
  The reconciliation package that Republicans unveiled at the beginning 
of the week cut back the interest-free grace period, during which 
students look for jobs after college, from 6 months to 4 months, 
imposing almost $1 billion in extra charges on students. This new 
proposal eliminates the grace period altogether, forcing students to 
pay almost $3 billion in additional interest over the next 7 years. A 
student who borrows the maximum over 4 years of college will be charged 
an extra $700 for the grace period alone.
  That is if they borrow the money for college. If they borrow it for 
the graduate schools, it goes up to about $2,000 more.
  Millions of students across the country will also lose the benefit of 
the direct student loan program. This proposal begins the process of 
dismantling direct lending. Direct lending will be capped at 20 percent 
of total student loan volume. Half of the 1,300 schools now in direct 
lending will be forced out of the program or forced to cut back on 
their direct lending volume by maintaining dual loan programs. This 
despite the fact that colleges in the program are overwhelming in their 
praise for direct lending, as we heard this spring at a hearing before 
this committee. Furthermore, even opponents of direct lending 
acknowledge that the program has brought healthy competition, lower 
costs, and better service to all students.
  There is no justification for Congress to tilt the balance against 
direct lending in order to prop up the guaranteed loan program that 
fattens the profits of banks at the expenses of colleges and students. 
In addition, if honest accounting is used, it is clear that capping 
direct lending adds to the deficit instead of achieving savings. If the 
Republicans had inserted a fair scoring rule into the budget rather 
than one that favors the guaranteed loan program, CBO would be telling 
us today that capping direct lending at 20 percent would cost $1.8 
billion over 7 years, instead of saving $600 million as Senator 
Kassebaum claims.
  Common sense tells us that it is cheaper to loan money to students 
directly from the U.S. Treasury than to force students to go through 
banks as middlemen. In a letter to Senator Abraham last June, Lawrence 
Lindsey, a Bush appointee to the Federal Reserve Board, said, ``As long 
as it is necessary to provide a profit to induce lenders to guarantee 
student loans, direct lending will be cheaper.''
  We can meet our budget goals without cutting education, without 
burying college students under a higher mountain of debt. The 
Republican Congress has no business picking the pockets of students and 
working families to pay for tax cuts for the wealthy.
  Mr. President, I will include in my statement an excellent letter 
that was sent to me, Senator Kassebaum, Congressman Ford, and 
Congressman Goodling in May 1993. I ask unanimous consent that that and 
other material be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                 Charles Kolb,

                                     Alexandria, VA, May 25, 1993.
     Hon. Edward M. Kennedy,
     Chair, Senate Labor and Human Resources Committee, Senate 
         Russell Office Building, Washington, DC.
     Hon. Nancy Kassebaum,
     Ranking Minority Member, Senate Labor and Human Resources 
         Committee, Dirksen Senate Office Building, Washington, 
         DC.
     Hon. William Ford,
     Chair, House Education and Labor Committee, Rayburn House 
         Office Building, Washington, DC.
     Hon. William Goodling,
     Ranking Minority Member, House Education and Labor Committee, 
         Rayburn House Office Building, Washington, DC.
       Dear Members of Congress: As Republicans who served under 
     Presidents Ronald Reagan or George Bush, we believe that the 
     time has come to restructure the federal guaranteed student 
     loan (``GSL'') program--a program that has become overly 
     complex, lacks accountability, and wastes taxpayers' dollars 
     through needlessly high loan default rates.
       We are writing to express our support for reforming the GSL 
     program by replacing the existing system with a new direct 
     loan program.
       According to estimates prepared by the Department of 
     Education (under both Presidents Bush and Clinton), the 
     Congressional Budget Office, and the General Accounting 
     Office, the new direct loan program will also result in 
     significant annual budget savings that could be used for 
     deficit reduction. Direct borrowing by the federal government 
     to capitalize the direct loan program as a revolving fund 
     will save on the current interest and special allowance 
     subsidies now paid to banks and others while ensuring a more 
     streamlined, efficient, and workable program that meets the 
     needs of America's students. As such, a direct loan program 
     offers a more cost-effective delivery system for providing 
     student financial assistance.
       Over the years, the guaranted student loan program has 
     developed a degree of regulatory and administrative 
     complexity that now undermines its fundamental integrity and 
     effectiveness. Replacing the GSL structure with a streamlined 
     structure will mean not only enhanced accountability and 
     budget savings, but also a more rational delivery system that 
     will particularly benefit students and educational 
     institutions. In particular, we believe direct loans will 
     also ensure greater responsibility and accountability by 
     participating educational institutions.
       A direct loan program will mean replacing the role 
     currently played by many banks, guarantee agencies, and 
     secondary markets with a much more competitive approach. The 
     intent is not to harm these participants in the existing 
     program but rather to recognize that more competitive, 
     efficient, and 

[[Page S 14201]]

     practical ways exist to provide student loans. We hope that 
     as the Congress considers direct loans it will look beyond 
     the misleading information that is being spread by 
     representatives of those entities who have a direct financial 
     stake in preserving the status quo.
       We believe that the Clinton administration has taken the 
     correct position on this issue and urge the Congress to 
     consider this much-needed reform of the student loan program. 
     In fact, much of the initial work that led to the direct loan 
     program currently under consideration was undertaken during 
     the Bush administration. While a valuable direct loan pilot 
     program was authorized last year, we regret that this work 
     was not pursued more seriously and vigorously during last 
     year's reauthorization of the Higher Education Act. 
     Nonetheless, we hope that the Congress will act in a true 
     bipartisan fashion to approve direct loans in order to bring 
     sweeping and needed reform to the student aid delivery 
     system.
       Should bipartisanship not be possible, we call upon our 
     fellow Republicans to unite behind the direct loan proposal 
     and to show leadership in this and other efforts to reform 
     government. We favor reforms that will ensure real value for 
     the taxpayers' dollar, with government activity targeted to 
     ensure more effective efforts delivered in ways that are 
     accountable to the American people.
           Sincerely yours,
         Rich Bond, Former Chairman, Republican National 
           Committee; Diana Culp Borx, Former Deputy General 
           Counsel, U.S. Department of Education; James P. 
           Pinkerton, Former Deputy Assistant to the President for 
           Policy Planning; Carolynn Reid-Wallace, Former 
           Assistant Secretary for Postsecondary Education, U.S. 
           Department of Education; Nancy Mohr Kennedy, Former 
           Assistant Secretary for Legislation and Congressional 
           Affairs, U.S. Department of Education; Michael J. 
           Horowitz, Former General Counsel, Office of Management 
           and Budget; Charles E.M. Kolb, Former Deputy Assistant 
           to the President for Domestic Policy; George A. Pieler, 
           Former Acting Deputy Under Secretary for Planning, 
           Budget and Evaluation, U.S. Department of Education.
                                                                    ____

                                         Board of Governors of the


                                       Federal Reserve System,

                                     Washington, DC, June 9, 1995.
     Hon. Spencer Abraham,
     U.S. Senate,
     Washington, DC.
       Dear Spence: I appreciate your kind note and understand the 
     many conflicting and unexpected demands on your time. I hope 
     we will have a chance to talk again soon. In the meantime, it 
     was good to have an opportunity to meet with your staff.
       I also wanted to take this opportunity to share with you my 
     personal views about direct lending, largely from the 
     perspective of an economist. First, the Bush Administration 
     made credit reform a high priority and the Clinton 
     Administration has since built upon that goal. Credit reform 
     was designed, at the outset, to enable policymakers to look 
     at the credit programs of the government in a defensible and 
     comprehensive way. No particular program was singled out for 
     special treatment. Embarking on policy changes that impact 
     one program and do not apply the same requirements for all 
     may not be consistent with sound public policy.
       Second, a change in the credit reform treatment of student 
     loans was included in the budget resolution in response to 
     industry criticism regarding the calculation of 
     administrative costs for student loans. Making the change the 
     industry proposes without looking at other changes which 
     might be necessary it problematic. For example, the use of 
     the ten year treasury rate for estimating purposes when 
     program costs are based on short term rates creates obvious 
     inconsistencies. Further, the $2.3 billion in revenue loss 
     that occurs through the use of tax exempt student loan bonds 
     is not taken into account in estimating program costs.
       To help clarify the effects of direct versus guaranteed 
     lending, a couple of comparisons may be in order. The 
     economic effect of both forms of loans is identical. They 
     both divert private capital to carry out a government 
     purpose. The aggregate amount of government borrowing is the 
     same since student terms and conditions are identical. 
     However, taxpayer cost is less for direct lending largely 
     because the government can obtain capital less expensively 
     through the sale of government securities than the market 
     rates it must pay to support a system of loan guarantees. As 
     long as it is necessary to provide a profit to induce lenders 
     to guarantee student loans, direct lending will be cheaper.
       Finally, direct lending may be the best way to involve the 
     private sector in student loans. The loan capital for direct 
     loans comes from the private sector and the administration of 
     the program--servicing, computer support, etc.--is 
     accomplished through competitive contracts with the private 
     sector. This approach may be more accountable than the 
     guarantee system which is based on government entitlement 
     expenditures for guarantee agencies, secondary markets, and 
     lenders.
       Spence, I hope you find this helpful. I'd be glad to talk 
     further with you about these issues. Good luck in the 
     challenging days ahead.
           Sincerely,
     Larry.
                                                                    ____

         Executive Office of the President, Office of Management 
           and Budget,
                               Washington, DC, September 19, 1995.
     Hon. William F. Goodling,
     Chairman,  House  Economic  and  Education Opportunities 
         Committee, House of Representatives, Washington, DC.
       Dear Chairman Goodling: The President asked me to respond 
     to your September 12 letter, in which you objected to the way 
     he had characterized Republican plans to make savings in the 
     student loan programs. I am pleased to do so.
       I believe that the President's statements were correct, 
     based on oral and written statements that were made by 
     Republican leaders, including yourself.
       One of the savings proposed in your letter is to eliminate 
     the Direct Student Loan program to save $1.5 billion. We 
     strongly disagree with this policy. Direct lending works. 
     Some 1,3000 schools are already in the program and hundreds 
     more have already filed applications for the school year 
     beginning July 1, 1996. Students and school administrators in 
     the program are near-unanimous in their preference for direct 
     lending.
       The Education Department estimates that at least $1 billion 
     of this $1.5 billion in savings that is attributable to 
     direct lending comes not from repeal, but from simultaneously 
     cutting funds available to monitor all student loan 
     programs--a move that would put students at considerable risk 
     in both loan programs. As the General Accounting Office has 
     repeatedly observed, there are significant problems in the 
     guaranteed loan program. This is due to its near-unmanageable 
     statutory structure. Constant Federal oversight is essential.
       The remainder of the $1.5 billion occurs under the special 
     scoring rule for direct loans which the Budget Resolution 
     directs the Congressional Budget Office (CBO) to use. This 
     directive addressed the way the Federal Credit Reform Act 
     (FCRA) requires the government to score the budgetary 
     consequences of credit programs. That Act, which predated the 
     enactment of direct lending, treats Federal administrative 
     costs differently from other costs. Most, but not all, 
     administrative costs in guaranteed lending are in the form of 
     mandatory payments to banks, guaranty agencies and secondary 
     markets. The FCRA includes these costs on a net present value 
     basis in the guaranteed loan program subsidy.
       In contrast, direct lending administration is primarily by 
     Federal contract, so that taxpayers get the benefit of the 
     lowest cost possible each year. The FCRA scores these costs 
     outside of the direct lending subsidy. The combination of the 
     structure of the two programs and the workings of the FCRA 
     results in scoring direct lending as substantially less 
     expensive than guaranteed lending.
       The Budget Resolution instructed CBO to move scoring toward 
     a more ``level playing field'' by scoring Federal 
     administration in a manner similar to mandatory payments for 
     administration in guaranteed lending. Unfortunately, the 
     directive stopped there, and did not apply the same treatment 
     to the remaining administrative costs of guaranteed lending. 
     This results in artificially lower costs for guaranteed 
     lending.
       This Administration would be glad to join the Congress in a 
     scoring rule change to level the playing field for student 
     loan programs so that the administrative costs of both 
     programs are treated in the identical manner. By doing this, 
     we can take this technical scoring debate off the table, and 
     debate the real benefits and costs of the two approaches to 
     student loans.
       When we look fairly at the two programs, we see that each 
     provides loan capital to students, but the Direct Loan 
     program does so with far greater ease of administration and 
     far less complexity, and with additional benefits to students 
     through flexible repayment options. Students get their funds 
     with less government red tape, schools get simple 
     administration and low administrative costs, students get 
     better ways to pay their loans, and thousands of 
     intermediaries and attendant complexities are eliminated. 
     Under direct lending, banks, guaranty agencies, and secondary 
     markets lose the billions they have been receiving from 
     Federal subsidies and from excessive charges to students. 
     Advances in technology have made direct lending the better 
     deal for the taxpayer, without regard to technical scoring 
     issues. That is what the public should hear in this debate.
       In examining the remaining proposals you outlined, this 
     Administration welcomes your willingness to take billions of 
     dollars out of the excess profits of the guaranteed loan 
     programs, and will support your efforts to reduce these 
     federal costs. We further welcome your willingness to set 
     aside most of your earlier plans to eliminate in-school 
     interest subsidies for poor students. But we will oppose 
     proposals that will eliminate or cap direct lending, or 
     increase student costs.
       With level playing field scoring, your proposals for 
     eliminating profits from the guaranteed loan industry and a 
     reasonable phase in path for direct lending, I can foresee 
     the basis of an agreement that will result in reasonable 
     levels of savings from the loan programs without hurting 
     students.
       The Administration looks forward to working with you in the 
     weeks ahead.
           Sincerely,
                                                  Alice M. Rivlin,
                                                         Director.

                                                                        

[[Page S 14202]]
                    SENATE REPUBLICAN RECONCILIATION PROPOSAL: FACT SHEET, SEPTEMBER 21, 1995                   
----------------------------------------------------------------------------------------------------------------
                                                                                                      Percent of
           Proposed cut or fee                                      Dollars                             total   
                                                                                                       proposal 
----------------------------------------------------------------------------------------------------------------
Cuts or fees which fall on students                                                                             
    Imposes .85 percent new student loan                                                                        
     tax.................................                                                 2 billion           18
      Institutions pay new fee equal to                                                                         
       .85% of school's annual federal                                                                          
       loan volume, and payment to direct                                                                       
       lending schools zeroed                                                                                   
    Raises interest rate on working                                                                             
     families............................                                               1.5 billion           14
      Increases interest rate on PLUS                                                                           
       (parent) loans from 3.1% to 4%,                                                                          
       increases cap on interest rate                                                                           
       from 9% to 10%, and requires                                                                             
       lender rebate to government                                                                              
Rolls back Direct Student Loan Program                                                                          
 and slashes management and oversight of                                                                        
 all student loans.......................                                              1.35 billion           13
      Caps direct lending at 20% and                                                                            
       forces \1/3\ to \1/2\ of current                                                                         
       schools out of the program                                                                               
      Cuts administrative budget of both                                                                        
       direct and guaranteed loan                                                                               
       programs by a total of $750                                                                              
       million over 7 years                                                                                     
    Eliminates interest-free grace period                                               2.7 billion           25
Adjustments to lenders and guaranty                                                                             
 agencies in guaranteed loan program:                                                                           
    Adjustments to guaranty agency                                                                              
     entitlements........................                                               1.4 billion           13
    Adjustments to lender entitlements...                                               1.7 billion           16
Cost sharing to states...................                                               100 million            1
Total costs imposed upon students........                                              7.55 billion           70
Total costs imposed upon loan industry...                                               3.1 billion           29
----------------------------------------------------------------------------------------------------------------



             The Student Loan Tax Colleges Will Have to Pay             
------------------------------------------------------------------------
                                                              First year
                   State and Institution                       .85% tax 
------------------------------------------------------------------------
California:                                                             
    University of California System........................   $3,000,000
    Scripps College........................................       34,000
Colorado: University of Colorado at Boulder................      578,000
Connecticut:                                                            
    Yale University........................................      332,000
    Univ. of Hartford......................................       68,000
    Univ. of Connecticut...................................      170,000
    Quinnipiac College.....................................      102,000
Florida: University of Florida.............................      731,000
Georgia: University of Georgia at Athens...................      434,000
Illinois:                                                               
    University of Illinois.................................      578,000
    Southern Illinois University...........................      510,000
    Northwestern University................................      510,000
    Chicago State..........................................       62,600
    Greenville College.....................................       49,000
    Rockford College.......................................       33,000
Iowa:                                                                   
    Iowa State.............................................      553,000
    William Penn College...................................       20,000
    University of Northern Iowa............................      172,000
    Clarke College.........................................       19,000
Indiana:                                                                
    Indiana University.....................................    1,100,000
    Notre Dame University..................................      213,000
    IUPUI..................................................      402,000
    Martin College.........................................        8,900
Kansas:                                                                 
    University of Kansas...................................      297,000
    Ottawa University......................................        5,000
    Bethel College.........................................       17,000
    Univ. of Kansas........................................      348,000
Maryland:                                                               
    University of Maryland.................................      255,000
    Johns Hopkins University...............................      204,000
    Western Maryland College...............................       25,000
    Univ. of MD, Baltimore.................................      180,000
Massachusetts:                                                          
    Northeastern University................................      680,000
    University of Massachusetts............................      531,000
    Northeastern University................................      250,000
    Simmons College........................................       62,000
    Western New England....................................       66,000
Michigan:                                                               
    University of Michigan.................................      723,000
    Olivet College.........................................       17,000
    Marygrove College......................................       29,000
    Wayne State Univ.......................................      225,000
Minnesota:                                                              
    University of Minnesota................................      935,000
    Univ. Saint Thomas.....................................      125,000
    College of Saint Scholastica...........................  ...........
Missouri: University of Missouri at St. Louis..............      172,000
North Carolina: UNC-Chapel Hill............................      204,000
New Hampshire: University of New Hampshire.................      225,000
New Jersey: Rutgers University.............................      706,000
New York:                                                               
    SUNNY Schools..........................................    4,000,000
    New York University....................................    1,300,000
    CUNY Schools...........................................      510,000
Ohio:                                                                   
    Ohio State University..................................      850,000
    Case Western Reserves University.......................      289,000
Pennsylvania: University of Pittsburgh.....................      230,000
Rhode Island:                                                           
    University of Rhode Island.............................      255,000
    Brown University.......................................      145,000
Tennessee: University of Tennessee.........................      374,000
Texas: University of Texas at Austin.......................      987,000
Vermont: University of Vermont.............................      213,000
Virginia:                                                               
    James Madison University...............................      153,000
    Marymount..............................................      171,000
Washington: University of Washington.......................     680, 000
------------------------------------------------------------------------
Figures reflect total student loan volume for 1994-95 school year.      


 The .85% Student Loan Tax--What Massachusetts Schools Will Have to Pay 
------------------------------------------------------------------------
                          College                             Tax amount
------------------------------------------------------------------------
Westfield State College....................................      $53,000
Worchester State College...................................       39,000
Northeastern University....................................      680,000
U. Mass--Boston............................................      174,000
U. Mass--Amherst...........................................      531,000
U. Mass--Medical School (Worchester).......................       38,000
Brandeis...................................................      102,000
North Adams State College..................................       35,000
Clark University...........................................       47,000
College of the Holy Cross..................................       87,000
Bridgewater College........................................      102,000
Tufts University (Somerville)..............................      289,000
Radcliffe University (Cambridge)...........................      123,000
Wellesley College (Wellesley)..............................       34,000
Boston College.............................................      400,000
------------------------------------------------------------------------

         Massachusetts Schools Participating in Direct Lending

       Amherst College
       Atlantic Union College
       Bay State School of Appliances
       Berklee College of Music
       Blaine Hair School
       Blaine The Hair & Beauty School-Waltham
       Blaine The Hair & Beauty School-Boston
       Boston University
       Brandeis University
       Bridgewater State University
       Burdett School
       Emerson College
       Fitchburg State College
       Franklin Institute of Boston
       Greater Lowell Regional
       Hallmark Institute of Photography
       Hampshire College
       Harvard University
       Labaron Hairdressing Academy
       Labaron Hairdressing Academy--Brockton
       Labaron Hairdressing Academy--Springfield
       Learning Institute for Beauty Sciences--Malden
       Learning Institute for Beauty Sciences--Worcester
       Mansfield Beauty Schools--Quincy
       Mansfield Beauty Schools--Springfield
       Massachusetts College of Art
       Massachusetts Institute of Technology
       Massachusetts Maritime Academy
       Merrimack College
       Mt. Holyoke College
       Mt. Ida College
       New England College of Optometry
       Newbury College
       North Adams State College
       Quinsigamond Community Colleges
       RETS Electronic Schools
       Radcliffe College
       Simons Rock of Bard College
       Smith College
       Springfield Technical Community College
       Stonehill College
       University of Massachusetts--Amherst
       University of Massachusetts--Lowell
       Wentworth Institute of Technology
       Western New England College
       Western State College
       Williams College.

  Mr. KENNEDY. Let me just mention these few sentences. It is signed by 
Rich Bond, who is the former chairman of the Republican National 
Committee; Diana Culp Borx, who is the former deputy general counsel, 
Department of Education; James Pinkerton, the former Deputy Assistant 
to the President for Policy Planning--this is under the previous 
administration-- Carolynn Reid-Wallace, former Assistant Secretary for 
Postsecondary Education, Department of Education; Nancy Mohr Kennedy, 
former Assistant Secretary for Legislation and Congressional Affairs, 
Department of Education--that is under President Bush--Michael 
Horowitz, former general counsel, Office of Management and Budget, 
Charles Kolb, former Deputy Assistant to the President for Domestic 
Policy; George Pieler, former Acting Deputy Under Secretary for 
Planning, Budget and Evaluation.
  These are all leaders in the field of education in the Bush 
administration. And this was their letter to us.

       As such, a direct loan program offers a more cost-effective 
     delivery system for providing student financial assistance.
       Replacing the [guaranteed student loan] structure with a 
     steamlined structure will mean not only enhanced 
     accountability but budget savings, but also a more rational 
     delivery system that will particularly benefit students and 
     educational institutions. In particular, we believe direct 
     loans will also ensure greater responsibility and 
     accountability by participating educational institutions.
       A direct loan program will mean replacing the role 
     currently played by many banks, guarantee agencies, and 
     secondary markets with a much more competitive approach. The 
     intent is not to harm these participants in the existing 
     program but rather to recognize that more competitive, 
     efficient, and practical ways exist to provide student loans. 
     We hope that as the Congress considers direct loans it will 
     look beyond the misleading information that is being spread 
     by representatives of those entities who have a direct 
     financial stake in preserving the status quo.

  I say amen to that.
  It continues:

       We believe that the Clinton administration has taken the 
     correct position on this issue and urge the Congress to 
     consider this much-needed reform of the student loan program. 
     In fact, much of the initial work that led to the direct loan 
     program currently under consideration was undertaken [by] the 
     Bush administration.

  They are taking credit for the direct loan program.


[[Page S 14203]]

       While a valuable direct loan pilot program--

  I point out that was bipartisan, Senator Simon, Senator Durenberger, 
Senator Bradley, I, and others were involved in that debate. But here 
we have leaders in the education program and in the budget items in the 
previous administration touting the direct loan program, and 
nonetheless we find our Republican friends in the Human Resource 
Committee attempting to eliminate it under the Coats amendment last 
week and severely reduce it even under the proposal by the majority of 
the Republicans in the committee.
  The letter continues:

       While a valuable direct loan pilot program was authorized 
     last year, we regret that this work was not pursued more 
     seriously and vigorously during last year's reauthorization. 
     . . . Nonetheless, we hope that the Congress will act in a 
     true bipartisan fashion to approve direct loans in order to 
     bring sweeping and needed reform to the student aid delivery 
     system.

  We say amen to that. That was a bipartisan effort.
  Here were the leaders under President Bush who were supporting that 
concept.

       Should bipartisanship not be possible, we [will] call upon 
     our fellow Republicans to unite behind the direct loan 
     proposal and to show leadership in this and other efforts to 
     reform government. We favor reforms that will ensure real 
     value for the taxpayers' dollar, with government activity 
     targeted to ensure more effective efforts delivered in ways 
     that are accountable to the American people.

  Mr. President, there is not a person on our committee on our side 
that could say it any better than that. And that is something that we 
hope will be understood and recognized. Mr. President, we look forward 
to this debate.
  I want to just mention, finally, it is our intention to recognize 
there were 67 Members of this body, bipartisan, for the Simon-Snowe 
amendment when we debated education on the budget that restored funding 
for the higher education. And if that proposal had been accepted in the 
conference with the House--it was rejected out of hand, and we did not 
see much really of the struggle by our friends and colleagues to try to 
hold onto that proposal--but if that had been held onto, then our 
instruction would have been at $4.4 billion.
  We will have a proposal tomorrow to address that $4.4 billion. It is 
our hope that, following the process and the budgetary consideration, 
that if it comes out of our committee and without complying with the 
larger instruction which will be devastating to the students and to 
student loans and to their parents, that it goes to the Budget 
Committee, that it is wrapped together with the other recommendations, 
and it then is scored by CBO, and CBO then makes a judgment as to what 
exactly the savings will be.
  If the savings reach the $245 billion, then instructions go to the 
Finance Committee to have a tax cut for that particular amount. If it 
is $235 billion, then the recommendation will go to the Finance 
Committee for $235 billion. I think that is absolutely justified. But 
since two-thirds of the Members of the Senate went on record, 
Republicans and Democrats, saying it should only be $4.4 billion, we 
are going to recommend that we have $4.4 billion and that we will come 
back to the Senate when we have that opportunity and have a second vote 
on the Snowe-Simon amendment, because we believe that truly reflects 
the sentiment of this body with that overwhelming vote.
  And that is the responsible way to go rather than to provide this 
very, very dangerous, unfair, unjustified, unwarranted slashing of the 
student loan program in order that we provide the tax cuts for the 
wealthy individuals and corporations.
  I yield the floor.

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