[Congressional Record Volume 141, Number 162 (Thursday, October 19, 1995)]
[Senate]
[Pages S15297-S15298]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                STUDENT LOANS AND BUDGET RECONCILIATION

  Mrs. KASSEBAUM. Mr. President, the other evening, the majority 
leader, Senator Dole, spoke about the opportunities which the GI bill 
provided to thousands of Americans following World War II. Enactment of 
the GI bill in 1944 marked the beginning of Federal efforts to open the 
door to postsecondary education for individuals who would otherwise be 
unable to attend. Over the past 50 years, the scope and variety of 
Federal student aid programs have expanded considerably. Today, any 
student in need of financial help can obtain it.
  My reason for addressing the Senate now is to dispel the notion that, 
somehow, all this will change if Congress enacts student loan changes 
as part of the budget reconciliation bill. Unfortunately, 
misconceptions about this legislation are widespread, and I believe it 
is important to set the record straight.
  A few weeks ago, the Senate Committee on Labor and Human Resources 
reported its portion of this legislation, providing Federal student 
loan savings of $10.85 billion over 7 years. Because the Federal 
student loan program is one of the few mandatory spending programs 
under the jurisdiction of the Labor and Human Resources Committee, it 
was the only place we had to turn in order to comply with our 
instruction.
  Granted, $10.85 billion is a substantial sum over 7 years. However, 
to hear some describe our package, one would assume that it spells the 
end of higher education as we know it. Mr. President, that is simply 
not the case.
  Federal student loan programs were established to assist students and 
their parents in financing postsecondary education. These programs have 
been successful in achieving that goal. Approximately $26 billion in 
loan funds have been made available this year. The figure will grow 
next year. Even if the Labor Committee package is approved intact, that 
volume will grow.
  The reason is that the savings in this package were achieved without 
restricting a student's ability to borrow. In short, there is nothing 
in the package which limits the amount of loan funds available. Loans 
will continue to be available to all who qualify. There is nothing in 
the package which limits the ability of a student to qualify for a 

[[Page S 15298]]
Federal loan. The rules are exactly the same as they have been.
  There is nothing in the package which increases the cost of the loan 
to a student who is in school. The only direct cost to students 
included in the package applies to new borrowers after they leave 
school. At that point, they will continue to be able to defer loan 
payments for 6 months--the so-called grace period--but the Federal 
Government will no longer subsidize interest payments during that 
period of time.
  That, I believe, Mr. President, is reasonable. This package was 
developed with the clear intention of minimizing costs to students. I 
believe that purpose was accomplished. It is, therefore, particularly 
disturbing to me that students and their families are being 
intentionally misled about the impact of the proposed changes. I fear 
that this misinformation will discourage some students from even 
exploring postsecondary education, and that, I believe, would be a real 
tragedy.
  I would like to explain briefly how the $10.85 billion in savings is 
achieved. First of all, about $4 billion of the savings comes from 
reductions to entities involved in the guaranteed loan program, such as 
banks and guaranty agencies.
  The elimination for new borrowers of the interest subsidy during the 
6-month grace period achieves about $2.7 billion in savings over that 
7-year period. This change would mean an extra $1.89 a month for an 
undergraduate who borrows $5,500 in 1 year. At most, it would mean an 
additional $22.50 a month for a graduate student who has borrowed the 
$65,000 maximum through his or her college career.
  Capping the direct loan program at 20 percent of loan volume produces 
about $1.5 billion in savings. Additional savings are achieved through 
the elimination of fees paid to schools and alternative originators for 
direct loan administration. Whatever one may believe about the merits 
or demerits of direct lending, the fact remains that the way a loan is 
delivered has absolutely nothing to do with the ability of students to 
borrow or with the amounts they may borrow. The terms and conditions of 
direct loans are identical to those of guaranteed loans. There is no 
difference to the students at that juncture. To suggest that paring 
back the direct loan program will deprive students of loan funds or 
make those funds more expensive is plainly inaccurate. The one 
advantage, at this point, of direct loans and direct lending is that it 
makes a loan available immediately.
  It does expedite the process of obtaining a loan by a student. As far 
as any difference in the loans being more expensive, that is certainly 
not the case.
  The package also calls upon postsecondary education institutions to 
participate in achieving savings by imposing a fee equal to 0.85 
percent of the amount of Federal loans made available to their 
students. This proposal produces about $1.9 billion over 7 years.
  Some have argued that these costs will be passed directly on to the 
students rather than being absorbed through the efficiencies in other 
school operations. Perhaps that will be the case. Even if the entire 
cost is passed on to the student, it would amount to an average of $20 
to $25 per student per year. That is at the high end. Others would be 
about $11 to $12 to $13 per year.
  Finally, approximately $700 million in savings is achieved by 
increasing the interest rate and the interest rate cap on parent loans.
  When one looks beyond the hype to see the facts, Mr. President, it is 
clear that this reconciliation package does not spell disaster for 
secondary education in this country. Blaming a Republican Congress for 
reducing access to postsecondary education by increasing its costs may 
be convenient, but it does not explain away the fact that college 
tuitions have been growing at a rate surpassing inflation for well over 
a decade. That is what has caused such enormous problems for students 
and their families, is the escalating cost of college education due to 
increased tuition.
  Figures recently released by the college board show an average 
tuition increase this year of 6 percent, more than double the inflation 
rate. Average tuition in fees at a 4-year public institution are 
$2,860. For a 4-year private institution, these costs average $12,432.
  Mr. President, another 6-percent increase in those amounts next year 
would mean an additional per-student cost ranging from $171 to $745, 
presenting far more serious problems for students and their families 
than anything in this reconciliation package.
  Federal student aid is simply not going to be able to pick up the 
slack in such an environment, nor is that a role for which it was 
intended. That is what I think we need to understand, Mr. President.
  There is not anything in the reconciliation package regarding student 
loans that I suppose we would be comfortable with. On the other hand, 
it is not the tragedy that is being portrayed. I think it is very 
important that students and their families understand that.
  No one relishes the task of cutting back. It is much easier to build 
upon the expensive policies that have brought us to our current budget 
problems in the first place. However, one can prune the branches 
without killing the tree. It is a disservice to the American taxpayers 
to suggest otherwise.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. Under the previous unanimous consent, the 
Senator from Minnesota is recognized.
  Mrs. KASSEBAUM. I wonder if the Senator from Minnesota would yield 
for a few moments for some unanimous-consent requests.
  Mr. WELLSTONE. I am happy to yield to the Senator.

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