[Congressional Record Volume 142, Number 108 (Monday, July 22, 1996)]
[Extensions of Remarks]
[Pages E1334-E1335]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           INTRODUCTION OF STUDENT DEBT REDUCTION ACT OF 1996

                                 ______
                                 

                        HON. WILLIAM F. GOODLING

                            of pennsylvania

                    in the house of representatives

                         Monday, July 22, 1996

  Mr. GOODLING. Mr. Speaker, today I am happy to introduce a bill 
cosponsored by Representatives Greenwood, McKeon, Fattah, Fawell, 
Clinger, and Gekas which corrects a technical problem with the language 
of the Higher Education Act that thwarts competition among lenders in 
the Federal Family Education Loan Program and results in higher costs 
for students in need of unsubsidized student loans.
  The Higher Edcuation Act as interpreted by the U.S. Department of 
Education allows lenders to pay origination fees--3 percent of the loan 
amount--charged a student at the time as subsidized loan is obtained; 
one where the Federal Government pays the interest on the student's 
behalf while in school. Unfortunately, the Department has interpreted 
the language of the Higher Education Act to prohibit lenders from 
paying origination fees--3 percent of the loan amount--charged a 
student if the student obtains an unsubsidized loan one where the 
student is responsible for all the interest.
  The result is that student's obtaining unsubsidized student loans are 
forced to pay higher up-front costs simply because of an interpretation 
that we believe is incorrect.
  Under the bill being introduced today, anyone may pay the origniation 
fees on behalf of the student borrower. This is particularly 
significant in Pennsylvania because of the loan programs administered 
by the Pennsylvania Higher Education Assistance Agency. For the 1995-96 
school year--prior to the Department's ruling on the origination fee 
issue--students and families in Pennsylvania had an extra $2 million 
available for immediate educational expenses due to a special loan 
program which reduced a student's origination fee from 3 to 1 percent. 
More than 36,000 students received this benefit for the 1995-96 school 
year. If we allow the Department of Education's interpretation to 
stand, more than 9,300 students, in Pennsylvania will have to forego 
the benefit of reduced up-front fees and we don't think that should 
happen.
  The great thing about this proposal is that it doesn't cost the 
Federal Government a dime, while student's reap the benefits of 
competition in the student loan program.
  And this doesn't just help Pennsylvania students. Lenders across the 
country can offer to pay a student's origination fees so students have 
more cash to pay for their higher education expenses. Reduced interest 
rates are already being offered by many lenders as a reward for making 
monthly payments on time and this is also a feature offered by the 
Pennsylvania program which helps students save a little money during 
the repayment period. The combined effect of reduced up-front costs and 
lower interest rates during repayment make all student loans more 
affordable and manageable for students.
  I am particularly pleased to include for the Record, a letter from 
the Pennsylvania Association of Student Financial Aid Administrators 
who have expressed their wholehearted support for this legisation. 
These are the people on the front lines in the student financial aid 
office who daily advise adn counsel our college students on ways to 
finance a college education and I am delighted to have their support.

         Pennsylvania Association of Student Financial Aid 
           Administrators,
                                                     July 3, 1996.
     Hon. William F. Goodling,
     House of Representatives,
     Washington, DC.
       Dear Representative Goodling: The Pennsylvania Association 
     of Student Financial Aid Administrators (PASFAA) is a 
     professional organization dedicated to promoting access to 
     higher education by providing financial assistance to those 
     who might otherwise be unable to attend. With more than 550 
     members, the PASFAA membership encompasses virtually every 
     segment of higher education and every component of student 
     financial assistance.
       The purpose of this letter is to express PASFAA's 
     wholehearted support for legislation which would allow for a 
     reduction in the cost of origination fees for borrowers of 
     unsubsidized student loans. Such legislation would enable 
     lenders and guarantors to reduce the up front cost of student 
     loans, thereby increasing the amount of money students would 
     have available to them to meet their educational expenses for 
     the 1996-97 academic year. In doing so, lenders would be 
     providing a direct financial benefit to students without 
     putting a corresponding burden on the federal budget or the 
     taxpayers, making this legislation even more attractive.
       This legislation would provide an immediate benefit to 
     Pennsylvania residents receiving loan assistance through 
     PHEAA's Keystone and Keystone Direct Loan Programs. In 
     addition, lenders nationwide would now have the opportunity 
     to offer low-cost loans by reducing origination fees if they 
     so desire.

[[Page E1335]]

       PASFAA deeply appreciates your support of student aid 
     programs, and looks forward to working with you on this and 
     other legislation designed to benefit college students. If we 
     can be of any further assistance to you, please do not 
     hesitate to contact any of our officers.
           Sincerely,
                                                 Georgia K. Prell,
     PASFAA President.

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