[Congressional Record Volume 141, Number 160 (Tuesday, October 17, 1995)]
[Senate]
[Pages S15195-S15199]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         STUDENT DIRECT LENDING

  Mr. SIMON. Mr. President, Senator Harkin and I are going to talk a 
little bit about direct lending and what is happening in the area of 
student aid. Here is an area where we can save real money. It is very 
interesting what happened when direct lending was under consideration. 
Sallie Mae, the student loan marketing association which we created--
the chief executive officer of Sallie Mae, I say to the Presiding 
Officer and about to be Presiding Officer--they said that direct 
lending would cost the average school $219,000. Here is what they said 
in their letter of March 31, 1993.

       As a result of our indepth visit with 10 schools, it is 
     abundantly clear that direct lending will mean increased 
     costs, additional personnel, and upfront investment.

  This is Sallie Mae. They had big ads about what a great job they are 
doing. And they have done some good.
  (Mr. ASHCROFT assumed the chair.)
  Mr. SIMON. What is the experience now that we have had direct 
lending? The experience, Mr. President, is that it cuts redtape, it 
eliminates layers of bureaucracy--how many speeches have we made about 
that on the floor--uses competition and market forces, and is simple 
and consumer friendly, promotes accountability, is flexible, and 
provides education opportunity.
  My colleague from Iowa went to Iowa State University. Instead of 
having the experience that Sallie Mae talked about, Iowa State 
University has been able to shift four people from student loans over 
to other fields, and they have canceled eight computers, at a savings 
of $200 each month. Less bureaucracy; direct lending.
  Here is a student newspaper. ``Direct Loan Ends Long Lines,'' from 
the Daily Egyptian of Southern Illinois University. The Milwaukee 
Journal, ``Direct Student Loans Pay Off.'' The Chicago Sun Times, 
``Direct Loan Program Is Good Deal for All.'' The St. Louis Post-
Dispatch--Mr. President, I know the Presiding Officer is familiar with 
that newspaper--``Loans Should Help Students, Not Bankers.'' The St. 
Louis Post-Dispatch is right.
  ``Student Loans: The Wrong Cuts, With This Vital Program Republicans 
Appear to Prefer a Wasteful Monopoly to Effective Competition.'' That 
is the Washington Monthly.
  The University of Florida. Here is their experience in the first week 
of classes under the old program. They had $3.7 million in for 
students. Their first year under direct student lending, the first week 
they had $9.1 million. But this current year, $21 million in the first 
week. And it is similar in the other statistics here.
  The University of Colorado in Boulder, under the old program, 3,068 
loans disbursed; under the new program, the first year 4,800, the 
second year 6,500.
  Here is a USA Today editorial: ``Banks Cash In, Taxpayers Lose on 
Loan Program.'' And then it says in a subheading in this editorial in 
USA Today, ``Congress in a sweet deal for the banks is on the verge of 
killing direct student loans.''
  We hear a lot about unfunded mandates around here. If we go ahead 
with the bill that came out of our committee, Mr. President, what we 
are saying to the banks and the guarantee agencies is, ``You have an 80 
percent monopoly, 20 percent will be limited for direct lending.''
  In my State of Illinois, because they have seen what a good program 
it is, over half the loans right now are direct loans. It is 
interesting that not a single college or university that has gone to 
direct lending is moving away from it; not a single one anywhere in the 
50 States, including Missouri and Illinois.
  Unfunded mandates? What we are doing is we are imposing costs on 
universities if we do not take that 20-percent cap off and permit 
choice--that is all I ask. I am not going along with the administration 
that says it ought to be 100 percent direct lending. I recognize that 
would save money. But let us give colleges and universities the choice. 
Let competition prevail.
  What did we do in order to somehow make the old program, the 
guaranteed loan program, appear to be a money saver? Well, in the words 
of the Chicago Tribune editorial, ``Cooking the books on student 
loans,'' that is what we did. We passed in the budget resolution a 
provision that said on the old guaranteed student loans, ``You will not 
count administrative costs, while you will on the direct loans.''
  We asked CBO--and my colleague who is presiding, and I see my 
colleague from Michigan here--we asked CBO, ``If you don't take this 
rigging that took place in the budget resolution, if you just put under 
the old law what we would save or what it would cost''--under the old 
Congressional Budget Act the cost of going to this 20-percent 
limitation would be $4.64 billion instead of a phony savings--I heard 
Senator Domenici talking about phonying up numbers. That is what we did 
in a major way in order to protect the banks and the guarantee 
agencies. I think we have to do what is right.
  Our former colleague--and, Mr. President, you did not serve with him 
nor did the Senator from Michigan--but Senator David Durenberger said, 
``This is not the free market. It is a free lunch.'' He is talking 
about the old guaranteed student loan program.
  Take a look at the numbers of Government personnel involved in the 
old program: 2,500 or more in the guarantee system, only about 500 
under full direct lending. And this does not count college and 
university personnel. Every college and university says that a direct 
loan program reduces paperwork, reduces personnel demands. Just take a 
look at the personnel under the Federal Government and the guarantee 
agencies paid for by the Federal Government under the direct loan 
program and under the guaranteed loan program and add on top of this, 
Mr. President, the colleges and universities.
  Now, why, if this is so obviously good, why are we having opposition? 
Why do we have this 20-percent limitation? The banks, my friends--and I 
am all for healthy banks; I have a house mortgage on my home in 
southern Illinois--the banks make more money on student loans than they 
do on house mortgages, on car loans, on any other enterprise other than 
on their credit cards. And they are interested.
  And the guarantee agencies are interested. Take a look at what 
happens--forget all the other things--what happens on the collection of 
defaulted loans. Under the old program--Mr. President, I direct this to 
you because I know you are a fiscal conservative. Under the old program 
we want to guarantee 80 percent to the old programs. We say to these 
financial institutions, ``You get 27 percent on defaulted loans for 
collection.''
  Take a look at what happens under the direct program. Instead of just 
giving people a monopoly, we put it out for competitive bidding. Do you 
know what it is turning out to be? Fourteen percent. You want to save 
money? Here are millions and millions of dollars that you can save.
  Why are the guarantee agencies, which do not have--these are not 
stockholders. This is not private enterprise versus Government. It is 
Government versus Government. But the guarantee agency in Indiana, 
called USA Group--their CEO incidentally, Roy Nicholson's 1993 salary 
was $619,949, not too bad for an agency that does not have any private 
funds in it. We pay the President of the United States $200,000 a year. 
They are spending $750,000 to lobby against direct lending. This is 
just one group.
  Let me tell you, this Guaranteed Student Loan Program was fine for 
its time, and I would say in fairness to these groups, they helped 
students when we were trying to find our way, but we certainly ought to 
do it the right way. I ask unanimous consent, Mr. President, to print 
in the Record a letter from the president, Dallas Martin, of the 
National Association of Student Financial Aid Administrators.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                 October 16, 1995.
     Hon. Paul Simon,
     U.S. Senate, Dirksen Senate Office Building, Washington, DC.
       Dear Senator Simon: On behalf of the National Association 
     of Student Financial Aid Administrators (NASFAA) representing 
     professional student aid administrators at over 3,100 
     postsecondary institutions across the nation, I am writing to 
     strongly urge you to include in any floor amendment to the 
     Reconciliation bill four provisions to benefit 

[[Page S 15196]]
     students and postsecondary institutions. We believe any amendment must 
     include retention of the grace period for student loan 
     borrowers; elimination of the .85 percent tax on annual 
     school loan volume; allowing schools the choice to join in 
     the Direct Loan Program without elimination of current 
     participating institutions; and, retention of the current 
     interest rate calculation and caps in the PLUS loan program. 
     Each of these provisions is so critical for students and 
     postsecondary institutions that NASFAA would seriously 
     consider not supporting any amendment package that does not 
     include each of these four provisions.
       Retention of the grace period is important to ensure 
     students do not have even greater loan debt as they begin 
     their chosen careers. Depending on how much a student 
     borrowed, elimination of the grace period would add up to 
     $2,500 to their loan debt possibly leading students to alter 
     career plans, default in greater numbers, or defer major life 
     and consumer decisions for the future.
       Every student in the country and every postsecondary 
     institution would be affected by the .85 percent tax on a 
     school's annual loan volume. If this fee is approved, 
     postsecondary institutions would either cut their budgets in 
     various areas leading to decreased academic or student 
     services, or schools will pass this cost onto their enrolled 
     students in the form of increased tuition or fees. This would 
     be an unfortunate escalation of student costs imposed by 
     Congress at a time when American families are already having 
     difficulties financing postsecondary education.
       NASFAA believes Congress should follow through on its 
     earlier commitment to operate a Federal Direct Loan Program, 
     along with the Federal Family Education Loan Program for a 
     minimum five-year period. In 1993, when the William D. Ford 
     Federal Direct Loan Program was authorized, institutions were 
     assured this new program would operate for a minimum five-
     year period in order to determine whether such an approach 
     might prove more cost-effective and efficient than the 
     existing Federal Family Education Loan Program. For the first 
     time in many years there is healthy competition occurring 
     between the two Federal loan programs.
       The quality of service being offered by both programs, 
     however, is much better than it was with a single program, 
     and students and institutions are being better served. 
     Therefore, NASFAA supports inclusion in any amendment to the 
     Reconciliation bill ``plus demand'' language to ensure 
     postsecondary institutions have the freedom to choose the 
     Direct Loan Program if that best serves the needs of its 
     students. Under the committee-reported bill reducing loan 
     volume to twenty percent, half of the current Direct Lending 
     Program participants would be arbitrarily removed from that 
     program. Further, the committee-reported bill would eliminate 
     scores of schools from participating in the current award 
     year since the legislation mandates a drop of Direct Loan 
     Program volume to thirty percent in academic year 1995-96. 
     This would not be a ``minor inconvenience'' to these 
     postsecondary institutions that have invested heavily in 
     changing operating procedures, hardware and software systems, 
     and explanatory materials to students.
       The cost of a PLUS loan could increase by as much as $5,000 
     unless this provision is stricken from the bill. This large 
     increase could potentially lead to greater defaults in this 
     program when combined with an increase in the PLUS loan cap 
     or discourage parents from assuming their responsibility to 
     pay for their children's postsecondary education expenses.
       NASFAA is thankful for your leadership efforts to develop 
     an amendment reducing the impact of cuts mandated by the 
     Reconciliation bill. While we appreciate your efforts, again, 
     NASFAA must strongly urge you to include in any amendment all 
     of the above four elements benefiting students, families, and 
     schools.
           Sincerely,
                                                    Dallas Martin,
                                                        President.

  Mr. SIMON. Mr. President, they say what I think makes sense: Give 
people the choice. We are going to have an amendment to do precisely 
that.
  Then, finally, Mr. President, the inspector general of the Department 
of Education testified that with these guarantee agencies who are 
handling Federal funds, we have $11 billion at risk. Indiana 
University, ``What we have learned'': Ninety percent less paperwork, 
this is under direct lending; 25 percent fewer errors, easier 
adjustments, faster disbursement.
  Director of financial aid, University of Idaho:

       On registration day, we had 46 percent more funds available 
     for students who did not have to wait for the whole process. 
     Every school that has gone with the direct loan program sees 
     it as a simpler program for students. It saves taxpayers 
     money and provides the students with more options.

  Kay Jacks, director of financial aid, Colorado State University:

       I can hardly talk about eliminating the direct lending 
     program without crying. Students are happy, universities are 
     happy. Why they want to cut it, I just don't get it.

  Every college and university, I repeat, that has the direct lending 
program wants it to continue. Not a single one wants to back off.
  It ought to be clear, Mr. President, that we ought to give colleges 
and universities choice, and when reconciliation comes up on the floor, 
there will be an amendment, I hope a bipartisan amendment, which will 
save money for taxpayers, save paperwork, give colleges and 
universities the choice. That is what it ought to be about.
  One other not so minor point, Mr. President, under the old program, 
many, many students could not qualify. Under the changes we made when 
we first adopted this program, any student can qualify, including 
middle-income students. I hope we do the sensible thing.
  I am pleased to yield the remainder of this time to my colleague from 
Iowa.
  Mr. HARKIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, I thank Senator Simon for his statement. I 
want to also thank him for being a great leader on direct lending all 
these years and especially the statement just made this morning.
  I might differ one little bit from my friend and colleague from 
Illinois. I happened to have gone to college in the late fifties, and I 
remember a program came in under the Eisenhower administration. I did 
not have it my first couple years of college, but I had it in my last 
years of college, the National Defense Student Loan Program, a direct 
lending program. You went to the window and got your money.
  I always thought it was a great program for a lot of reasons: You got 
your money right there. There was not a lot of hassle. It was right 
there at the school. And then when you got out of college, well, if you 
went in the military, you did not have to pay anything. No interest 
accrued on the loan during the time you were in college.
  If you went in the military, no interest accrued during that time or 
if you went on to school after that. I am quite frank to admit that 
after college, I spent 5 years in the military and then 3 years in law 
school. I had a year's grace period after that. So no interest accrued 
for almost 9 years from the time I graduated from college.
  For someone like me whose parents had no income at all--my father was 
on Social Security when I started college, very modest Social Security, 
we had no assets whatsoever--it was a godsend. So I always thought it 
was a great program.
  Then we went to the guaranteed student loan program. Maybe it did 
work all right for a period of time. But, the banks, frankly, made a 
lot of money on that. Fine, good, that's their business. But why should 
we continue doing business as usual when we have a better way of doing 
it, and the better way of doing it is the direct lending program.
  The Senator from Illinois started his comments by saying about how 
the long lines have dwindled. I always say one picture is worth a 
thousand words. This is at the University of Northern Iowa, one of our 
regent schools in Iowa. This is a picture last year before we had 
direct lending. This is the line for students to get their guaranteed 
student loans and get it processed. These are all the students that are 
having problems with their loans.
  I was told the picture does not do it justice, because if you look 
back to the doorway, the line goes on down the hall. But you get the 
idea. There is a line of students waiting to get their guaranteed 
student loans. That was last year. They have now instituted direct 
lending.
  Here is the same picture, same place, same financial aid office. No 
lines at all. No one waiting in line, and that has been the story at 
all of the schools in Iowa that have used direct lending. We have 38 
Iowa schools right now. What I have heard from all of them is just 
positive comments about how the direct lending program is working. No 
lines, no hassle, students get their loans, and they are able to get 
about their business of studying.
  Earlier the Senator from New Mexico was on the floor talking about 
the budget. We do have to bring our deficit down. No one is arguing 
about that. The Senator from Illinois has been a leader in the effort 
to reach a balanced budget and to get us moving toward a 

[[Page S 15197]]
balanced budget. That is not the debate here. The debate is how we get 
there, out of whose hide do we take it? Who pays the most? Who 
sacrifices the most? That is the debate. I am sorry I have to disagree 
with my friend from New Mexico. He makes it seem as though the debate 
is whether or not we are going to have a balanced budget. That is not 
the debate. We all agree on the need to bring down the deficit. The 
debate is how, who pays, and what is the end result if one group pays 
more than the other.
  I daresay that if we are going to take it out of the hides of our 
students, if we are going to make it tougher on middle-income and 
below-middle-income students to get a college education, then I daresay 
that our deficit will not come down, it will probably grow in the 
future. To get out of the debt we are in, we are going to need the best 
work force possible, the most motivated, and you are not going to get 
out of our debt situation, you are not going to lower our national debt 
by increasing the debt of students in college.

  The Senator from Illinois--and, again, I commend him--has been a 
leader in this effort. I might also add, Mr. President, that Iowa State 
University, my alma mater, was one of the first 104 schools to 
participate in direct lending. Last spring, Earl Dowling, the financial 
aid director, testified at an oversight hearing on direct lending. He 
told the committee that ISU is running a larger loan program with fewer 
staff. That is not a bad deal. He has been involved in the 
administration and management of student financial aid programs for 23 
years and said, ``Direct lending is the first new program in those 23 
years that was such a definite improvement over its predecessor.''
  The financial aid director for the University of Northern Iowa, 
Roland Carrillo, said that direct lending has been a ``resounding 
success.'' He said, ``* * * there is no question that direct lending is 
the most efficient method of delivering financial aid dollars to 
students.''
  As the Senator from Illinois pointed out, in the collection of those 
loans later on, we pay less money under the direct loan program by 
putting out for competitive bids than we did under the old program. So, 
again, Mr. President, the direct lending program has worked. It is 
working well. The last thing we need to do is throw that overboard, in 
some kind of mistaken idea that somehow this is going to help reduce 
the deficit. Absolutely not. It is going to do just the opposite. I 
want to take most of my time, Mr. President, to talk about taxes and 
about the taxes that are being levied by the GOP's proposal that will 
be before us here in the so-called budget resolution. There is going to 
be a lot of talk about cutting taxes. I understand there is a big tax 
break in that bill. But what is not going to be talked about, and what 
I want to talk about, are the hidden taxes that are included in that 
reconciliation bill that will be before us.
  As I said--and I will keep repeating the argument--the debate is not 
about reducing the deficit. It is, who pays and how much do they pay, 
and does it reach a good result in the end? It will be middle-class 
working families already pinched that will be asked to pay these new 
hidden taxes, stealth taxes. Most Americans will get less, but pay 
more, so that a few people on the top can get a tax break.
  People ask me, Mr. President, to describe what is going on in 
Washington these days and I say it is not easy to explain it. When 
ideology gets ahead of common sense, when I see the agenda of these 
extremists, I have to say they have turned the Nike add slogan on its 
head. You know, the ad that says, ``just do it.'' I think the new motto 
for the GOP ought to be, ``just undo it.'' Do not analyze, do not 
question, do not even have hearings, just undo it. Undo laws that give 
our seniors quality health care. Undo laws to protect workers on the 
job, and undo our Nation's commitment to quality education.
  The GOP says provide more tax breaks for the wealthiest. Pump 
billions more into the Pentagon--$7 billion more than they asked for. 
Put education on the chopping block. To that, I say: We have been 
there, we have done that. We tried that in the 1980's, and it dug us 
into the biggest debt hole our Nation has ever been in. Let us use some 
common sense and cut down the spending for the Pentagon. Let us cut the 
waste, fraud, and abuse. Let us cut the tax breaks.
  We do not need tax breaks now. I figured it out. It would be maybe a 
dollar a day, at the most, to people in the upper income brackets. I do 
not know what they are going to do with that--maybe buy another Big Mac 
and a Coke. You cannot even get that for a buck anymore. Maybe you can 
get a giant Coke. In downtown Washington, maybe you can get a cup of 
coffee. Maybe it will buy an extra cup of coffee a day. That means if 
we are going to have those tax breaks, we are going to have these 
hidden taxes on student loans.
  The budget proposal cuts about $11 billion from student loans. This 
will result in increased student debt, a new direct tax on schools, 
elimination of the successful direct lending program, about which 
Senator Simon spoke. The GOP plan adds an extra $700 to $2,500 of debt 
per student. How? By eliminating the interest subsidy during the 6-
month grace period. People say, well, that is not a big deal, 6 months. 
Well, it is a big deal. When you are out of school and trying to find a 
job and jobs are hard to find, and maybe you want to get married and 
start raising a family, you bet it is a big deal. Well, you say maybe 
it is a little bit of a hit.
  This is the seventh time, Mr. President, since 1981, we have 
increased the cost of student loan programs. It is always just a little 
bit, a little bit, and a little bit, until finally the straw breaks the 
camel's back. That is what is happening here. Not only is it more than 
just a little bit, what is worse about it is that the lower income the 
student, the higher their debt load. Why? Well, the poorer student 
borrows the most money, so they have the most debt. They get out of 
school and have to start paying interest during the grace period, and 
they have to start paying more money right away than higher income 
students. What kind of sense does that make? Well, also, the GOP plan 
adds up to $5,000 in additional costs for families who use the PLUS 
loan by raising interest rates, and a new Federal tax of 0.85 percent 
on colleges and universities participating. Well, they say that is not 
much. But it is a lot when you look at a college in my State of Iowa. 
Where are these colleges going to get it? They have to pass it on to 
students. The plan will also force at least half of the schools 
participating in the direct student loan program out by rolling back 
the successful program.
  So we are going to hear a lot about tax breaks. How about the taxes 
that are in the GOP plan? Taxes on students, taxes on their families, 
taxes on the schools. All of it added together--you can say, this is a 
little bit here and here. But you add it all up, and it is a direct 
assault on higher education, a direct assault on middle and lower-
income students having the ability to go to college, and to get ahead 
and to work and be productive members of society and help us reduce the 
deficit in our country.
  Mr. President, I heard a comment a week or so ago in the committee 
about how students are going to have to sacrifice, too, because we have 
this big debt and we have to reduce the debt. As I said, we all want to 
reduce the debt. I think we ought to think about this and look at 
history a little bit. I know the occupant of the Chair heard me say 
this because he was in the committee when I said it. I will say it 
again because it needs repeating and repeating and repeating. Right 
now, our debt to gross national product is somewhere in the 
neighborhood of 70 to 75 percent. That is bad. I am not saying that is 
good. That is bad. It ought to be reduced. As our gross national 
product goes up, we have to start reducing that debt so that gap 
widens. Well, we had another period of time when our debt to gross 
national product was bad. That was after World War II. Our debt was 
actually greater than our gross national product.
  Now, did President Truman and the Congress stick their heads in the 
sand and say, oh, my gosh, our debt is more than our gross national 
product, so we cannot afford student loans, to send kids to college? 
No. What they recognized was that the best way out of the debt 
situation was to send kids to school. So President Truman and the 
Congress passed the GI bill. 

[[Page S 15198]]


  Now, I just might point out, in 1945 our debt was 122 percent of our 
gross national product. This year it is estimated to be 69.9 percent. I 
was close, 70 percent.
  What happened, in 1945, our debt was 122 percent of gross national 
product. They passed the GI bill. Mr. President, this was not even a 
loan. They gave the money to them. They built housing all over America, 
sent the kids to school, and did not ask them to pay back a cent.
  Did they pay us back? You bet they did.
  Mr. SIMON. Would my colleague yield?
  Mr. HARKIN. I am happy to yield to the Senator.
  Mr. SIMON. I think the point is extremely important. The GI bill was 
a grant. If you were to take the average grant and put the inflation 
factor on it, today it would be a grant of $9,400--an incredible 
amount. There is not a school in Iowa or Illinois or any other State 
where students get that kind of a grant.
  Let me point out one other little bit of history that I did not know. 
The immediate past national commander of the American Legion stopped in 
my office last week and he said in the old GI bill which we all--
everyone looks back to and said what a great thing it was--the American 
Legion and the other veterans groups were in a fight. The other 
veterans groups wanted a cash bonus instead of the GI bill for 
education. The American Legion prevailed.
  Ironically, we are going through the same fight today. Is it a cash 
bonus of tax reduction, or do we put the money into education?
  We ought to learn from history. The lesson from history is that the 
Nation benefits when instead of a cash bonus we put the money invested 
in education.
  I thank my colleague for yielding.
  Mr. HARKIN. I thank the Senator from Illinois for pointing that out. 
That is a good lesson in history. I was unaware of that.
  What the Senator said, if you took the GI bill, what they gave as a 
grant to those students to go to college, in today's dollars, it would 
be $9,400--a grant to go to college. I do not know of any grant program 
around that is anywhere near that. Pell grants are down to about 
$2,000, if I am not mistaken.
  Mr. SIMON. Pell grants are about $2,400, and you have to be below a 
certain income level. Most students do not qualify.
  The GI bill was available to everyone no matter what your income was. 
Of course, you had to be a veteran.
  Mr. HARKIN. There were no income guidelines. They just gave the money 
to students to go to college.
  I point out because it is interesting another little tidbit of 
history. These students went to college, got out. They made higher 
incomes--probably the greatest period of productivity, inventiveness, 
innovations, in our Nation's history and the world's history.
  The debt in 1945 was 122 percent of our gross national product. By 
1981, it had gone down to 33 percent--the lowest point that we had ever 
had. I think that is because we were riding on the shoulders of those 
GI's who went to school and got an education and produced this miracle 
of innovation and inventiveness in America.
  I think if you look at what has happened since 1981, we have 
retreated and gone the other way in education. We are making it 
tougher. As I said, Mr. President, seven times since 1981 we have taken 
a hit on students, and made them pay more, make it more costly to go to 
college.
  What is happening? Our national debt keeps getting bigger and bigger 
and bigger. I am not saying that is the only cause. There are a lot of 
other causes.
  I will say this: Unless and until we invest upfront in education and 
in higher education and in making sure students can go to college and 
not be burdened with heavy debts themselves, unless and until we do 
that, we will never get out of our deficit situation.
  I do not care what we do around here. You can cut programs, you can 
cut all the things the Government does, but if our productivity does 
not stay high, if we do not have the kind of high paying jobs that are 
going to take us into the next century, forget it. We will not work 
ourselves out of this debt.
  Mr. President, I went to college under a direct loan program, as I 
said. I went up to the window, got a direct loan. I did not have to pay 
it back for about 9 years. I had the GI bill when I went to law school. 
I still had the GI bill available to go to law school. I did not have 
to pay it back. They just gave me money to go to school.
  Well, I think it is time we learned from that. All I can say is I 
understand that the Speaker of the House also went to school under that 
kind of a program. All I can say, if it was good enough for the Speaker 
of the House, it ought to be good enough for students today. It was 
good enough for me, it ought to be good enough for students today, too.
  Here is what is happening in Iowa with the student debt. Right now, 
this is a percentage of financial aid dollars awarded as loans out of 
the total financial aid grants and everything, percent as loans. Here 
at the University of Northern Iowa, at the top, it has gone from 
slightly over 40 percent to almost 60 percent. This is a regent school, 
not a private college. Here is Iowa State, which went from about 34 
percent to 48 percent, my alma mater. That is from 1991 to 1995, not a 
long period of time, 3 to 4 years.
  Here is the University of Iowa, which went from about 28 percent to 
about 38 percent--again in the last 4 years. So what has happened is 
that students are taking on bigger and bigger debt loads, all the time 
making it tougher for them to pay it back.
  Now, it has another impact. Right now, indebtedness for a student 
graduating from the University of Iowa last spring is about $11,278; 
from Iowa State, $14,900; the University of Northern Iowa, $14,681. On 
average they pay about $170 per month for student loans.
  You say that does not sound like much. Sure it does. You know what a 
starting salary for a secondary schoolteacher in Iowa is? About $18,000 
a year. That $170 a month they are paying they could be using to buy a 
home, maybe even to buy a new car, to maybe get their lives going and 
start building our economy. But no, they be will saddled with more and 
more debt to pay for their education.
  Grant aid has declined at our three universities in Iowa. It was 30 
percent in 1990, and now is down to 25 percent.
  Instead of creating more debt per student, why not go after the 
deadbeats who owe about $50 billion to the U.S. taxpayers in nontax 
debt? There is a lot of debt out there that people owe the Federal 
Government. I am not just talking students but a lot of people. We 
ought to go after those rather than hitting the students.
  Finally, I just wanted to bring this to an end and close my remarks 
by showing what it means for an individual. The average loan on a per-
student basis at the University of Northern Iowa, our smallest regent 
school in the State of Iowa, the average loan indebtedness, in 1992 was 
$2,589. Now it is $4,395 per student basis.
  When they graduate, the indebtedness will be $14,641. But this is the 
average debt per student, per year at the University of Northern Iowa; 
not quite doubled, but pretty darned close to doubling in just the last 
4 years.
  So, yes, the debt of the United States is bad. We have to reduce our 
deficit and our total debt. We do want to reach a balanced budget. But 
the way the GOP is going about it with their reconciliation bill, 
especially how they are hitting students, is going to cause more debt 
in our country, less productivity, less ability for us to raise our 
gross national product and get out of this debt. It is almost as if the 
proponents of our reconciliation bill with all of the cuts they have, 
taking away the direct loans for students--it is almost like, ``We are 
in debt, so let's go to debtors prison.''
  That is not the answer. The answer is to provide our people in this 
country with the wherewithal to earn more, make more, climb that ladder 
of opportunity and success, pay more when they earn more so more 
revenue comes into the Government, so we are able to make better 
products and sell better products and compete around the world. That is 
the way. That is the way out of the mess we are in. This GOP proposal, 
I must say in all frankness, is a ``stick your head in the sand'' 
approach to the deficit problems we have in America.
  The Senator from Illinois has it exactly right. By keeping our 
commitment to direct student loans, we are 

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saving a bundle of money. We are making it easier for students to go to 
college. Beyond that, we have to do whatever we can, I believe, to 
point out the hidden taxes in the GOP proposal: The taxes on students, 
the taxes on their parents, and the taxes on the schools. This is a 
direct hit at education in this country. All for what reason? To reduce 
the deficit? No. To pay for a big tax break that might amount to about 
a dollar a day, about a dollar a day for people in upper-income 
brackets. What a foolish waste of money.
  If we want to use our money wisely, put it into education. I thank 
the Senator from Illinois for yielding me this time.
  Mr. SIMON. Mr. President, in the 2 minutes that are remaining, let me 
just thank my colleague and underscore what he is saying. We face, 
really, the same choice we faced right after World War II. The 
Presiding Officer was not here when it was mentioned. The GI bill, 
which we look to now with so much pride, was a matter of great 
controversy. The American Legion wanted the GI bill. The other veterans 
groups wanted a cash bonus. And now we face the same question: A cash 
bonus in a tax reduction or investing money in education?
  I am pleased the Senator from Iowa, along with the Senator from 
Washington, are among those who voted for a balanced budget 
constitutional amendment. Our experience with legislative efforts is 
they last about 2 years and then there is too much political drag.
  The particular difficulty of this approach right now, with the tax 
cut, is without a constitutional amendment, basically the budget 
amendment that we adopted--and in the Budget Committee, I voted along 
with the Senator from Washington for that goal of balancing in 7 
years--but it is like a New Year's resolution on a diet. Only we are 
going to start the diet with a great big dessert called the tax cut.
  What we are saying here is, let us see if we cannot get bipartisan 
agreement to reduce that dessert just a little bit. Let us take $10 
billion of that dessert and put it into education. And we are going to 
have a much better country if we do it. That should not be a partisan 
thing. We ought to be able to agree on that across the aisle and I hope 
we can work something out on that line.
  Mr. HARKIN. If I might just ask the Senator from Illinois, all this 
talk about these tax cuts--what the heck, I will be honest about it, I 
have friends who make over $100,000 a year, because the Senator from 
Illinois is a friend of mine. We are paid more than that every year, 
the Senators. But I have friends who make more than $100,000 a year. I 
will be frank about it. I have not had one person come to me and say 
they need a tax break; not one.
  I would ask the Senator from Illinois, has he had anyone coming to 
him begging for tax breaks?
  Mr. SIMON. I share that experience, including people who make many 
times what the Senator and I make, who tell us this really does not 
make sense.
  Mr. HARKIN. It does not make sense.
  Mr. SIMON. I commend our colleague, Senator Feingold from Wisconsin, 
for leading a fight on this. We are going to have an amendment on this 
on the floor. I hope sounder heads will prevail.
  We all love to hand goodies out. But this is a time for restraint and 
not handing goodies out, and certainly not taking back from educational 
opportunity.
  Mr. President, I see I am getting a signal up there our time is 
expired. I thank my colleague from Iowa again.

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