[Congressional Record Volume 142, Number 123 (Tuesday, September 10, 1996)]
[House]
[Pages H10120-H10123]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STUDENT DEBT REDUCTION ACT OF 1996
Mr. GOODLING. Madam Speaker, I move to suspend the rules and pass the
bill (H.R. 3863) to amend the Higher Education Act of 1965 to permit
lenders under the unsubsidized Federal Family Education Loan Program to
pay origination fees on behalf of borrowers, as amended.
The Clerk will read as follows:
H.R. 3863
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Student Debt Reduction Act
of 1996''.
SEC. 2. UNSUBSIDIZED STUDENT LOANS.
(a) Amendment.--Paragraph (1) of section 428H(f) of the
Higher Education Act of 1965 (20 U.S.C. 1078-8(f)(1)) is
amended to read as follows:
``(1) Amount of origination fee.--Except as provided in
paragraph (5), an origination fee shall be paid to the
Secretary with respect to each loan under this section in the
amount of 3.0 percent of the principal amount of the loan.
Each lender under this section is authorized to charge the
borrower for such origination fee, provided that the lender
assesses the same fee to all student borrowers. Any such fee
charged to the borrower shall be deducted proportionately
from each installment payment of the proceeds of the loan
prior to payment to the borrower.''.
(b) Conforming Amendments.--Section 428H(f) of such Act is
further amended--
(1) in paragraph (3), by striking ``the origination fee''
and inserting ``any origination fee that is charged to the
borrower'';
(2) in paragraph (4), by striking ``origination fees
authorized to be collected from borrowers'' and inserting
``origination fees required under paragraph (1)''; and
(3) by adding at the end the following new paragraph:
``(6) Exception.--Notwithstanding paragraph (1), a lender
may assess a lesser origination fee for a borrower
demonstrating greater financial need as determined by such
borrower's adjusted gross family income.''.
(c) Report on Competitive Allocation.--Within 60 days after
the date of enactment of this Act, the Secretary of Education
shall submit to each House of the Congress a legislative
proposal that would permit the Secretary to allocate the
right to make subsidized and unsubsidized student loans on
the basis of competitive bidding. Such proposal shall include
provision to ensure that any payments received from such
competitive bidding are equally allocated to deficit
reduction and to pro rata reduction of origination fees in
both guaranteed and direct student loans.
SEC. 3. STUDY OF LOAN FEES.
(a) Study Required.--The Secretary of Education shall
conduct a statistical analysis of the subsidized and
unsubsidized student loan programs under part B of title IV
of the Higher Education Act of 1965 to gather data on
lenders' use of loan fees and to determine if there are any
anomalies that would indicate any institutional, programmatic
or socioeconomic discrimination in the assessing or waiving
such fees.
(b) Report.--The Secretary of Education shall submit to
each House of the Congress a report on the study required by
subsection
[[Page H10121]]
(a) within 2 years after the date of enactment of this Act.
(c) Statistical Characteristics To Be Studied.--In
conducting the study required by subsection (a), the
Secretary of Education shall compare recipients of loans on
the basis of income, residence location, type and location of
higher education, program of instruction and type of lender.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Pennsylvania [Mr. Goodling] and the gentleman from Michigan [Mr.
Kildee] each will control 20 minutes.
The Chair recognizes the gentleman from Pennsylvania [Mr. Goodling].
{time} 1445
Mr. GOODLING. Madam Speaker, I yield myself what time I may consume
and would preface my remarks by saying, as the last bill, here is
another bill that is a bipartisan bill coming from my committee. Seems
that every day we are here with a bipartisan effort coming from my
committee.
Today we are taking up the Student Debt Reduction Act of 1996. This
bill will allow student loan lenders or any other interested party to
pay the origination fees charged to students who borrow unsubsidized
Stafford Loans. This practice is already allowed for subsidized
Stafford Loans, but a Department of Education ruling has prohibited
this benefit to students who borrow unsubsidized Stafford Loans. By
enacting this bill, we are simply extending the same benefits to
unsubsidized loan borrowers.
It is rather timely that we should be considering this bill today,
just as millions of students are making their way to college campuses
all across the country. And as they make their way, we are all
painfully aware of their growing concern about paying the bills for
tuition, room and board, books and basic living necessities. This bill
aims to ease some of that concern by getting more cash in the hands of
students.
Madam Speaker, anyone who reads the newspaper or watches television
knows that college costs are a growing concern among families. A recent
GAO study of college costs found that tuition at 4-year public colleges
and universities has increased 234 percent over the last 14 years.
Compare that to median household income which rose 82 percent and the
Consumer Price Index which rose only 74 percent over the same time
period, and it is easy to understand the growing concern over the cost
of a college education.
That is why I am especially pleased that my committee reported out
the Student Debt Reduction Act by a unanimous vote of 34 yeas to 0
noes. This bill fosters competition among student loan lenders which
directly results in monetary benefits to students. For example, a
student who borrows an unsubsidized loan of $6,625 receives an upfront
fee reduction of $198.75. If this same student borrows the maximum
allowed for an unsubsidized loan over 4 years of college, the fee
reduction will amount to $1,053.75. That is cash in students hands that
can be used for educational expenses.
In addition to these savings, this House approved another increase to
the Pell grant program in addition to last year's increase so that
students may receive the highest Pell grant maximum in the history of
the program. This House also approved a $68 million increase for the
work study program so that more students may obtain job related
experience while enrolled in college. Efforts such as these simply
reaffirm our commitment to higher education in this country.
In conclusion, I just want to talk briefly about the impact of this
legislation on students in Pennsylvania. A program to help students and
their families operated for 1 year before the Department of Education
issued its ruling with respect to unsubsidized loans. That programs
helped 36,929 students from families with incomes under $21,000 by
paying a portion of the originating fees. Those students had an extra
$2.1 million to use toward their college education expenses.
In Pennsylvania, the program will continue on for 27,601 of those
students. Unfortunately, without this legislation, 9,328 needy students
who received unsubsidized loans will not be allowed to benefit from the
program and will be forced to pay higher up-front fees. There is no
reason this should happen. We have an opportunity to see that it does
not by voting for the Student Debt Reduction Act.
Madam Speaker, I reserve the balance of my time.
Mr. KILDEE. Madam Speaker, I yield myself such time as I may consume.
Madam Speaker, I rise in support of H.R. 3863, the Student Debt
Reduction Act, even though I continue to have reservations about the
timing of the legislation in light of the upcoming reauthorization of
the Higher Education Act next year.
My colleagues on the other side of the aisle claim this bill corrects
a simple technical problem, but I believe it does much more than that.
This legislation has the admirable intent of reducing college costs for
students, which I am always in favor of, but it also has significant
policy implications for student loan programs which have not been
examined at either subcommittee or full committee levels.
Throughout the country, students and their families are facing
increasing college costs and declining Federal aid. Democrats, Madam
Speaker, have always been supportive of expanding opportunities for all
students in Federal financial aid programs. I, for one, would like to
see the elimination of this loan origination fee altogether and will
make this a priority issue during next year's reauthorization.
Madam Speaker, I am concerned that this bill as written would permit
lenders to pay origination fees for some students but would not provide
this same opportunity for students who receive loans under the direct
loan program. We should have a level playing field in the student loan
arena, and this bill upsets that equal ground, I believe.
Despite its flaws, however, this legislation has the potential, Madam
Speaker, of lowering college costs for students, and I urge my
colleagues to support it.
Madam Speaker, I reserve the balance of my time.
Mr. GOODLING. Madam speaker, I yield myself 30 seconds just to say
that, if there was ever a time to try to level the playing field, it is
now, because the direct lending advocates in the White House have made
it very clear that they are going to do everything they possibly can to
eliminate every other possibility.
So this will be leveling that playing field that they have positively
piled up rocks and mounds and so on to make sure that any other program
cannot succeed.
Madam Speaker, I yield 3 minutes to the gentleman from Pennsylvania
[Mr. Greenwood, a member of the committee.
Mr. GREENWOOD. Madam Speaker, I thank the chairman of the full
committee for yielding me this time.
Madam Speaker, H.R. 3863, the Student Debt Reduction Act of 1996,
will allow students to receive lower-cost unsubsidized student loans by
permitting lenders in the Federal Family Education Loan Program to
waive or reduce origination fees. The savings to our students may be
the full origination fee, which is 3 percent of the total loan amount.
Since budgetary concerns are paramount today, as they should be, it
is important to note that H.R. 3863 is budget neutral. It will not
increase or decrease the amount of student fee revenues collected and
transmitted to the Federal Government, but it will increase the amount
of funds transmitted to our hard-working middle-class college students
and their families.
Republicans in Congress are working to make college more affordable
for middle-class families struggling to afford their children the
opportunity provided by a college degree, and this bill is an excellent
example of our work.
Madam Speaker, current law states that a lender may charge a student
borrower an origination fee on a subsidized student loan but shall
charge a student borrower of an unsubsidized loan. This bill will close
a loophole in the law by allowing lenders to treat unsubsidized loans
the same as subsidized loans and in the process permit struggling
middle-class families and students the same return as lower-income
borrowers.
Under this bill we will allow the full amount of the student loan to
flow to middle-class students, we can encourage competition among
student loan lenders, and we can guarantee that the type of relief
permitted under a subsidized loan will now be permitted under an
unsubsidized loan.
[[Page H10122]]
This is a commonsense plan to put money in the pockets of students to
pay educational expenses.
Madam Speaker, the bottom line of this bill is fairly
straightforward. It is good business for banks to make these loans.
They are guaranteed by the Federal Government, and they profit from the
interest paid by the students. Because it is good business and
attractive business for the banks, we think this provision will allow
them to compete for the business by offering to waive all or part of
the 3 percent loan And for a student borrowing the maximum amount for 4
years, that thousand dollar difference can mean a great difference in
the ability of that student to have the books and the other resources
needed for their education. For that reason, I rise to support H.R.
3863.
Mr. GOODLING. Madam Speaker, I yield 2 minutes to the gentleman from
California [Mr. Riggs], another member of the committee.
Mr. RIGGS. Madam Speaker, I have to tell my colleagues that I am
genuinely confused with this legislation on the floor today, because I
would have sworn I have been seeing and hearing radio and television
ads in my congressional district and in congressional districts around
the country, of course all held by incumbent Republicans, run by the
AFL-CIO, the big labor bosses of the AFL-CIO based back here in
Washington, who have practically become the campaign arm of the
national Democratic Party and the Clinton reelection campaign, accusing
us of cutting funding for student loans.
So I am genuinely confused. I thought our 7-year plan for balancing
the Federal budget increased taxpayer funding for student loans by 50
percent, or $12 billion, from $24 billion today to $36 billion 7 years
from now.
As the chairman just pointed out, we have increased funding for the
maximum Pell Grant award to the highest level in our country's history.
We have level funded the TRIO Program for college-bound minorities. And
today we bring this legislation, the Student Debt Reduction Act, to the
floor, which allows lenders in the student loan program to pay
origination fees charged to students who obtain unsubsidized, that is
to say a situation where the student is responsible for the interest,
to pay origination fees charged to students who obtain unsubsidized
Stafford loans.
Madam Speaker, this bill is good legislation. It increases
competition in the student loan program, and it lowers costs for
college students, making a college education for all Americans more
accessible and more affordable.
So, Madam Speaker, I am very confused. To hear the rhetoric that has
been coming out of Washington by the national Democratic Party and
their liberal special interest allies, one would be led to believe that
all we have been doing is cutting or gutting taxpayer funding for
student financial aid, when nothing could be further from the truth.
Republicans do care about making a college education more affordable
for our young people. We realize it is a good investment, a farsighted
investment of the taxpayer's dollar. That is why we have made that in
fact a priority in this session of Congress, the rhetoric of our
colleagues notwithstanding.
All I would say in conclusion is that those who want to continue to
maintain that we are cutting taxpayer funding for student financial aid
ought to go back to school because they cannot do their math.
Mr. GOODLING. Madam Speaker, I yield 2 minutes to the gentleman from
Pennsylvania, Chairman Clinger.
Mr. CLINGER. Madam Speaker, I thank the gentleman for yielding me
this time. Let me first commend my distinguished colleague from
Pennsylvania, Chairman Goodling, for bringing this very important
legislation before us today and for his long leadership on education
issues throughout his tenure in Congress. He has made a great
contribution to improving education in this country at all levels.
I also want to recognize my fellow sponsors of the bill, the
gentleman from Pennsylvania, Congressmen Greenwood, Fattah, and Gekas,
the gentleman from California, Mr. McKeon, the gentleman from Illinois,
Mr. Fawell, and others for their commitment to our Nation's students.
I am pleased to share my support for the Student Debt Reduction Act
of 1996. The bill brings together two issues that have had the highest
priority, my highest priority during my 18 years in Congress: education
and debt reduction. There is no greater gift to our young people than
an education. By reducing individual cost to students, we are giving
students the chance to focus on their education instead of how they are
going to pay for it.
Specifically, the bill allows lenders in the student loan program to
pay origination fees charged to students who obtain unsubsidized
Stafford, so-called Stafford loans, and in so doing we are lowering the
cost to students and increasing competition within the student loan
program by making unsubsidized loans an equal player, all while adding
no cost, repeat, no cost to the Federal Government.
So as a Congressman who represents literally countless higher
educational institutions, Penn State, Bucknell, and many others, I know
the overwhelming feelings that are associated with paying for an
education.
This minor and, really, technical change to existing law will help
thousands of students in Pennsylvania and hundreds of thousands of
students nationwide who have been treated unfavorably until this point
in time.
{time} 1500
I am proud to be a cosponsor of the Student Debt Reduction Act, and
urge my colleagues to support it overwhelmingly and make education more
affordable and available for an even greater number of students.
Mr. GOODLING. Madam Speaker, I yield 2 minutes to the gentleman from
Pennsylvania [Mr. English].
Mr. ENGLISH of Pennsylvania. Madam Speaker, it is with great pleasure
that I rise today in strong support of H.R. 3863, the Student Debt
Reduction Act. Access to a college education for young Americans
regardless of background is key to the American dream, but the cost of
higher education is making it harder for many middle-class families to
pay for tuition, and many students end up saddled with a debt burden
that limits ultimately their choices.
I am proud to be a cosponsor of this important legislation introduced
by the chairman of the Committee on Economic and Educational
Opportunities which, in effect, will allow lenders to waive or reduce
the origination fee on unsubsidized Stafford loans by paying the fee
for a student. Lenders are already permitted to pay the origination
fees charged to a student who obtains a subsidized Stafford loan. This
legislation simply extends the same consideration to those borrowers of
unsubsidized loans.
As a result of this legislation, students will find themselves with
more money for educational costs. With the cost of college education on
the rise, that money can be put to good use.
The savings to an individual student may be as much as the full
origination fee of 3 percent of the loan amount. Students will be able
to use their student loans for what they were intended, to pay for a
college education. This legislation encourages competition by loan
providers to the great benefit of students who are able to reduce their
education financing costs.
Madam Speaker, I urge my colleagues to vote in favor of this
important legislation. It provides Congress with an opportunity to give
students the best possible financial aid packages by encouraging
competition between lenders of unsubsidized and subsidized Stafford
loans.
Mr. KILDEE. Madam Speaker, I yield myself such time as I may consume.
Mr. Goodling and I work closely together and we have had a nice
bipartisan spirit out here on two bills. It is regrettable that the
gentleman from California [Mr. Riggs] had to inject a bit of
partisanship in this, attacking, among other things, the AFL-CIO. This
bill is too important to inject those matters into this.
I regret that Mr. Riggs, the gentleman from California, did this. I
want to remind him that he himself voted last year on the
reconciliation bill that left the House for a $10 billion cut in
student loans, including the in-school interest subsidy. So let us try
to get this bill passed.
Mr. Goodling and I worked very closely together. I regret this
injection
[[Page H10123]]
of partisanship. I urge passage of this bill.
Madam Speaker, I reserve the balance of my time.
Mr. GOODLING. Madam Speaker, I yield myself 1 minute, just to again
offer another challenge on this legislation to college and university
presidents by repeating what I said earlier: A GAO study of college
costs found that tuition at 4-year public colleges and universities has
increased 234 percent over the last 14 years, but the median house
income rose only 82 percent and the Consumer Price Index rose only 74
percent. This committee wants to know why the dramatic increases in
college costs, and we want to get a handle on that so that more
students will have an opportunity to attend a 4-year institution and
graduate from a 4-year institution, because the number of dropouts from
4-year institutions has reached an all-time high.
Mr. McKEON. Madam Speaker, today I rise in support of H.R. 3863, the
Student Debt Reduction Act. This legislation, which I cosponsored along
with Chairman Goodling and other House colleagues, allows lenders or
other interested parties to pay the origination fees charged to a
student upon obtaining an unsubsidized Stafford loan.
Currently, lenders are allowed to pay the origination fees on behalf
of students who borrow subsidized Stafford loans. I was quite surprised
to learn that the Higher Education Act, as interpreted by the
Department of Education, did not provide the same benefit for students
borrowing unsubsidized Stafford loans.
I support this legislation for several reasons. Most importantly, it
results in lower costs for students. At a time when students and
parents everywhere are worrying about paying for college, every extra
dollar becomes more and more important. It also specifically prohibits
any discrimination on the part of lenders when offering programs that
reduce a student's origination fees. Lastly, the bill results in
increased competition among lender in the student loan program, at no
increased cost to the Federal Government.
This simple change to the Higher Education Act could mean a great
deal to college students across the country. I urge all of my
colleagues to support the Student Debt Reduction Act.
Mr. ANDREWS. Madam Speaker, I share the laudable goal of H.R. 3863,
to reduce the costs to students of borrowing for educational expenses,
and I applaud the Committee on Economic and Educational Opportunities
for its efforts to achieve this goal by cutting student loan fees. I
would note that student loan origination fees were initially intended
as a temporary measure, and it is high time that we repeal this tax on
borrowing for all students. However, this legislation remains flawed,
because it will create an unpredictable and unequal student loan
system, in which some students will see their loan fees cut, while
other students will receive no benefit.
As originally written H.R. 3863 would have given lenders the
discretion to pay loan origination fees for some borrowers but not
others. In all likelihood, the lenders would waive the fee for the most
affluent students, who are better lending risks, in order to attract
their business. Thus, the most needy students would have been required
to pay more to participate in the same lending programs as affluent
students. Thus, the bill would have created incentives for lenders to
pay the fee for students who are perceived as better lending risks. As
a result, certain institutions would have a competitive advantage over
others. This would have forced smaller lenders out of business, and
might have led to less access to loans for needy students.
To address these concerns about potential discrimination among
students and schools, I offered an amendment in committee, which I was
pleased was adopted, to help prevent this possible unintended
consequence of H.R. 3863. My amendment makes clear that lenders cannot
vary the fee that they charge to student borrowers based on their
credit risk. Additionally, my amendment gives the lender some
discretion to further cut the origination fee for some student
borrowers if they, in fact, show a greater need. Lenders, thus, are
prohibited from discriminating against lower-income students and are
empowered to offer them further assistance at their discretion.
Unfortunately, the bill as currently written would permit lenders to
pay origination fees for some students, but would not provide the same
opportunity for cost savings to students who receive loans under the
Direct Loan Program. The result will be discrimination among students
based on the program from which they receive their student loans.
Students, colleges and universities, and the taxpayers are best
served if there is free, open competition and choice. Competition means
that students and families can evaluate all the different loan options
available to them and make the choice that is best for them. To ensure
free competition in the student loan arena, the basic ground rules
should be equal for all kinds of loans.
Loan fee cuts must be applied equitably to benefit students without
regard to whether their institution participates in the Federal Family
Education Loan Program [FFEL], the Direct Loan Program, or both. It is
important to keep terms and conditions as nearly the same as possible,
both to provide a level playing field so that students and institutions
continue to benefit from the healthy competition that currently exists
between the two programs, and to ensure that students in equivalent
financial situations are treated equally. We should not only reduce the
fees on the bank- and guaranty agency-based unsubsidized loans, but we
should also extend that fee reduction to students who receive direct
loans.
If it is a good idea to reduce these fees for students who borrow
from banks or from guaranty agencies, then it is an equally good idea
to extend that same opportunity to all students who would borrow from
the Direct Student Loan Program. This committee has the opportunity to
provide relief to all students, regardless of where they get their
loan, while achieving our goal of a balanced Federal budget.
Cutting fees will help students who are faced with rising college
costs and declining Federal aid. Over the past 15 years--1980-95--
tuition at private 4-year higher education institutions has increased
by 89 percent and at public 4-year institutions by 98 percent. In the
same period of time, median family income has increased by 5 percent
and student financial aid per student has increased by 37 percent.
Clearly the ability of students and their families to pay for higher
education has diminished significantly. Student financial aid has
clearly not kept pace with rising costs. In the mid-1970's about 76
percent of the financial aid which students received from Federal
programs was grants and 21 percent was loans. In the mid-1990's the
proportions have been reversed, with 26 percent of the Federal student
aid in grants and 72 percent in loans.
Another problem with H.R. 3863 is that guaranty agencies could take
the so-called excess reserves accumulated from students who have
already borrowed money, draw down those excess reserves in order to
help finance this cut in the fees, and in effect, use the money paid by
a student 5 years ago under a fee to help reduce the fee for a student
who borrows next year. Banks would not have that same opportunity to
get capital at basically no cost, nor would the Federal Government. In
order to level that playing field, we should cut loan fees for all
students, whether they borrow from a guaranty agency, a bank, or the
Federal Government through direct lending.
To pay for fee reductions for all students, regardless of where they
get their loan, we should apply savings already identified in the
budget process but not yet used: recovery of these excess guaranty
agency reserve funds and an increase in the lender loan fee. We have
already concluded in our budget process that lenders and guaranty
agencies are in a better position to bear these costs than students
are.
In summary, under H.R. 3863, students who take out an unsubsidized
loan from a guaranty agency or a bank get a fee cut, which will lower
their cost of borrowing for school. Yet their next-door neighbors on
campus, with the same family income and the same tuition, who happen to
receive their loan through the Direct Loan Program, are not offered the
same savings. This inequity makes no sense, and it is a serious flaw in
the legislation.
Mr. GOODLING. Madam Speaker, I yield back the balance of my time.
Mr. KILDEE. Madam Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Ms. Greene of Utah). The question is on the
motion offered by the gentleman from Pennsylvania [Mr. Goodling] that
the House suspend the rules and pass the bill, H.R. 3863, as amended.
The question was taken.
Mr. GOODLING. Madam Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 5 of rule I and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________