[Congressional Record Volume 142, Number 119 (Wednesday, September 4, 1996)]
[Senate]
[Page S9855]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. COCHRAN:
  S. 2054. A bill to amend the Higher Education Act of 1965 to exempt 
certain small lenders from the audit requirements of the guaranteed 
student loan program; to the Committee on Labor and Human Resources.


         THE HIGHER EDUCATION ACT OF 1965 AMENDMENT ACT OF 1996

 Mr. COCHRAN. Mr. President, today I am introducing legislation 
to provide regulatory relief to small-and medium-sized financial 
institutions and protect the availability of student loans.
  In the Higher Education Amendments of 1992, Congress required 
financial institutions participating in the Federal Family Education 
Loan [EFEL] Program to audit their student loan portfolios.
  Unfortunately, this change did not take into account the impact this 
audit requirement would have on lenders with small student loan 
portfolios. These small lending institutions earn only a few thousand 
dollars annually, while the audit costs as much or more.
  As a result of this prohibitively expensive and unnecessary audit 
requirement, many lenders are selling off their portfolios and leaving 
the FFEL Program altogether.
  The Department of Education has indicated they do not have the 
authority to waive the audit requirement. Further, the Department has 
informed those with loan portfolios of less than $10 million that, 
while they must perform the audits annually, the audit results shall be 
submitted to the Department only upon request. Thus, much of the time 
and money spent on these audits will be wasted.
  The inspector general indicated in its semiannual report that they 
were concerned that the costs of legislatively required annual audits 
may outweigh the benefits. The inspector general has recommended that 
the Department take steps to establish in legislation a threshold for 
requiring these audits.
  My legislation would eliminate the lender audit on institutions with 
portfolios equaling $10 million or less. Without the change in current 
law lending institutions will continue to sell off their portfolios, 
leave the FFEL Program, and reduce the opportunities for our Nations' 
students.
  I urge my colleagues to support this much needed reform.

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