[Congressional Record Volume 142, Number 133 (Tuesday, September 24, 1996)]
[Extensions of Remarks]
[Page E1676]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




     ``UNIVERSITY SHOULD PICK BEST LOAN PROGRAM FOR ITS STUDENTS''

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                           HON. DOUG BEREUTER

                              of nebraska

                    in the house of representatives

                      Tuesday, September 24, 1996

  Mr. BEREUTER. Mr. Speaker, this Member highly commends to his 
colleagues the following editorial regarding competition between the 
direct student loan program and the Federal guaranteed student loan 
program which appeared in the Lincoln Journal Star on September 20, 
1996. The popularity of the direct student loan program is forcing 
private sector lenders to offer better deals--such as a prompt-payment 
incentive--to students. This competition is good for lending 
institutions and, most importantly, for students.

            [From the Lincoln Journal Star, Sept. 20, 1996]

       University Should Pick Best Loan Program for Its Students

       * * * Changes made in federal law in 1993 allowed schools 
     to choose a lending program in which students borrow all 
     their money directly from the federal government. Especially 
     at the larger universities across the United States, that is 
     seen as the easiest way and ultimately the cheapest way to 
     proceed.
       Unfortunately, the absence of a prompt-payment feature in 
     the federal lending package means that it is not necessarily 
     the cheapest option for students on this campus this school 
     year. Parents and students have reason to be concerned.
       But they should not rush to the conclusion that this is 
     another example of the government doing what the private 
     sector should be doing and doing it worse.
       Besides demonstrating a new form of public commitment to 
     higher education, and a cheaper form than grants, a federal 
     presence in financial aid is a form of competition for an 
     industry that needed some competition. When there is lively 
     marketing competition, the advantage passes back and forth 
     between the competitors and customers can count on coming out 
     ahead.
       Before Congress authorized a direct lending program, there 
     was no prompt payment program in the private sector. Loan 
     origination fees were typically higher. Banks were collecting 
     another type of middleman fee--federal payment of interest 
     charges while students were in school--without much pressure 
     to sweeten the deal for young borrowers.
       Now, in the words of another financial aid expert on 
     another Nebraska campus, there is ``that very nice tension'' 
     between the people in charge of the government's public 
     lending program and the people in charge in the private 
     sector. The one has to try to match what the other one does. 
     * * *
       Any school's approach to financing a college education 
     cannot be judged a success just because it is the cheapest 
     for taxpayers or because it is generates the least paperwork. 
     Whether through a government program or through partnership 
     with private enterprise, success is only achieved when it is 
     the cheapest choice for students.

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