[Congressional Record Volume 142, Number 108 (Monday, July 22, 1996)]
[Extensions of Remarks]
[Page E1332]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        ENDING STUDENT SUBSIDIES

                                 ______
                                 

                        HON. JOHN J. DUNCAN, JR.

                              of tennessee

                    in the house of representatives

                         Monday, July 22, 1996

  Mr. DUNCAN. Mr. Speaker, I recently received a copy of an article 
that was written by Ross Booher and Kevin W. Jones entitled, ``Ending 
Student Subsidies''. One young man is currently attending the 
University of Tennessee Law School, and the other is just entering. 
Both Ross and Kevin are not only excellent students, but they are 
citizens who I am certain will contribute greatly to our society and 
its future.
  I request that a copy of this article, ``Ending Student Subsidies'' 
be placed in the Record at this point, so I can call it to the 
attention of my colleagues and other readers of the Record.

        [From the Chronicle of Higher Education, Nov. 24, 1995]

                        Ending Student Subsidies

                 (By Ross I. Booher and Kevin W. Jones)

       Although college lobbyists apparently have persuaded 
     Congress to abandon plans to eliminate the federal interest 
     subsidy on guaranteed student loans this year, lawmakers are 
     likely to scrutinize the program again in the future as they 
     search for ways to cut wasteful government spending. We urge 
     them to do so. Even though we are students who currently 
     enjoy the benefits of this taxpayer largess, we believe that 
     the interest subsidy should be dropped, American taxpayers 
     spend almost $2.5-billion a year for interest on guaranteed 
     loans while the borrowers are students and for six months 
     after they graduate. The borrowers never repay any of this 
     interest.
       We believe that this subsidy amounts to a taxpayer-financed 
     gift to people who neither need it nor deserve it. 
     Eliminating the subsidy would not make student loans or a 
     college education less available, because the loans 
     themselves still could be obtained. Further, the maximum 
     amount that could be borrowed would remain the same; students 
     would not pay any interest while they were in school; and 
     they would continue to have a six-month grace period after 
     graduation before the began repayment. The only change we 
     suggest is that once students begin repayment, they pay all 
     the interest that has accrued. The interest should be added 
     to the student's debt, not to the national debt.
       We believe that students, and everyone else, would be 
     better served by a stronger economy. We are willing to 
     ``sacrifice,'' not out of altruism, but because we and 
     everyone else will benefit from a national economy not bogged 
     down by federal debt. According to the U.S. Treasury 
     Department's latest estimates, the federal government is 
     nearly $5-trillion in debt. Unless we cut all but the most-
     essential spending the interest on the national debt alone 
     will soon consume almost all federal tax revenue. This 
     scenario augurs ill for the schooled and unschooled alike? 
     All federally financed programs would be endangered.
       Many who oppose ending the subsidy fear that, without it, 
     students from lower-and even middle-income backgrounds will 
     be unable to afford higher education. This fear is unfounded. 
     Students who are willing to borrow money to pay for college 
     still would be able to do so, but, as the people who benefit 
     from the loan (and the education), they simply would have 
     more to repay after graduation. Isn't it reasonable for the 
     recipient of education to have to pay for it, particularly 
     when the financial rewards of college continue to far 
     outweigh the costs?
       The U.S. Department of Education calculates that 
     eliminating the federal interest subsidy would increase the 
     loan repayment of an undergraduate student who chooses to 
     borrow the maximum amount available during his or her 
     undergraduate year by about $69 per month during the standard 
     10-year repayment period. Even this, the highest possible 
     increase, would easily fit into the budget of most college 
     graduates--who, according to the most recent census data 
     available, earn $1,039 per month more than the average high-
     school graduate. The vast majority of undergraduates, 
     however, borrow far less than the maximum loan amount, and 
     thus the increases in their payments would be smaller.
       What about more-expensive graduate and professional 
     degrees, such as those in medicine and law? Will students be 
     able to afford them without the interest subsidy? Again, the 
     answer is yes, The Department of Education calculates that 
     eliminating the interest subsidy would increase the payments 
     of the average student who receives Ph.D., and who chooses to 
     borrow the maximum amount available, by about $382 per month 
     during the standard 10-year repayment period. This is a great 
     deal of money, but, according to the U.S. Census Bureau, the 
     average Ph.D. recipient earns $3,853 per month and the 
     average recipient of a professional degree earns $4,961 per 
     month. The comparable figures for people with a bachelor's 
     degree and people with a high-school diploma are $2,116 and 
     $1,077, respectively.
       Looking at the big picture, those who borrow the maximum 
     among of $138,500 to obtain a doctoral degree enable 
     themselves to earn an average of $1.4-million more during 
     their lifetime than the average high-school graduate. 
     Recipients of a professional degree in fields such as law and 
     medicine earn, on average, a staggering $2.2-million more 
     than the average high-school graduate.
       Organizations lobbying to preserve the interest subsidy, 
     such as the American Medical Student Association and the 
     Student Osteopathic Medical Association, point out that, in 
     the years immediately following graduation, many people who 
     earn a graduate or professional degree earn very little 
     relative to the amount of debt they have incurred. According 
     to the A.M.S.A., medical doctors can earn an average of about 
     $2,500 per month during residency training. The A.M.S.A. 
     currently argues that it is difficult to make payments on a 
     $100,000-plus student loan with such a salary.
       For this very reason, the government provides the option of 
     temporarily or permanently making payments on a 30-year 
     repayment schedule. This method dramatically lowers monthly 
     payments, by spreading them out over a longer period. When 
     borrowers complete their postgraduate training and begin to 
     realize the financial rewards of their education investment, 
     they may choose to return to the standard 10-year repayment 
     schedule, thus lowering the total interest they will pay. We 
     believe that this option makes eliminating the subsidy 
     relatively painless, even for those whose earnings are not 
     very high immediately after they receive their advanced 
     degree.
       Some supporters of the interest subsidy point out that not 
     all jobs requiring a college education pay the Census 
     Bureau's ``average salary.' Wouldn't losing the interest 
     subsidy hurt students who choose to incur student-loan debts 
     and then enter occupations that pay very little? Again, 
     provisions already are in place to address that concern. 
     First, most students now begin repaying their loans six 
     months after they graduate, but longer deferments are granted 
     for a variety of reasons--including unemployment, a return to 
     full- or half-time student status, acceptance of an academic 
     fellowship, and economic hardship. Further, if graduate serve 
     in a public-service position (for instance, as a nurse, 
     public-school teacher, member of the armed forces, or peace 
     Corps or Vista volunteer), their loans may be partially or 
     completely paid by taxpayers--who receive obvious benefits 
     from the graduates' service.
       What about students who borrow because they want to attend 
     an expensive private college or university, but then decide 
     to enter a low-paying field not included in the public-
     service category above? Such students may find that, in a 
     world of limited resources, they cannot always have 
     everything they want: They may have to choose between 
     pursuing a low-paying career and attending an expensive 
     college.
       Of course, they may decide that they want to do both badly 
     enough to be willing to take out student loans and accept a 
     30-year repayment schedule and a lower standard of living. If 
     that is their choice, it should be their responsibility to 
     cope with the consequences, not that of the American 
     taxpayer.

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