[Congressional Record Volume 143, Number 44 (Tuesday, April 15, 1997)]
[Senate]
[Pages S3199-S3201]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Ms. Moseley-Braun, and Mr. Burns):
  S. 573. A bill to amend the Internal Revenue Code of 1986 to allow an 
income tax deduction for student loan interest payments; to the 
Committee on Finance.


            the loan interest forgiveness for education act

  Ms. MOSELEY-BRAUN. Mr. President, I am pleased to join my 
distinguished colleague from Iowa, Senator Grassley, and my colleague 
from Montana, Senator Conrad Burns, in introducing S. 573, the Loan 
Interest Forgiveness for Education Act, the LIFE Act. One of the major 
forces driving this bill is our growing concern that parents and 
students in this country have access to a quality education without 
amassing enormous student loan bills.
  The cost of college has a direct impact on access to college. The 
more tuition goes up, the more students will be

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priced out of their opportunity for the American dream. Our country 
will suffer the loss of talent and training. We cannot as a nation 
prepare for the 21st century by making it more difficult for our 
children to access higher education.
  This Congress is working hard to eliminate the Federal deficit. In 
part, this is because we know that piling on more debt ultimately 
undermines the ability of the generations that follow us to achieve the 
American dream, and to do what we have done--live better than our 
parents. Mr. President, that is why we are introducing this LIFE bill. 
It will do two things: encourage individuals to go to college, and 
reduce the cost of a college education. I believe very strongly, Mr. 
President, that the way to achieve this dream is to ensure that 
everyone who is in need of financial assistance to attend an 
institution of higher learning has that opportunity. They should have 
the opportunity, as we did, to pursue their dreams.
  It is absolutely essential that we continue to invest in our most 
important asset--our children. That is what the Loan Interest 
Forgiveness for Education Act is all about. The bill will create a 
deduction for qualified student loan interest including expenses for 
interest paid on student loans used to pay postsecondary education 
expenses such as tuition, books, room and board. This bill is similar 
to provisions contained in both the Republican and Democratic 
leadership education bills, S. 1 and S. 12, and is also similar to a 
provision passed by Congress as part of the 1995 Budget Reconciliation 
Act.
  As you may know, President Clinton has proposed a bill to allow a 
$1,500 tax credit per year for the first 2 years of college or a 
$10,000 deduction per person per year for qualified college tuition 
expense. I am glad to see President Clinton focus on investing in 
education for the middle class because it is truly our only hope of 
remaining competitive in this global marketplace. However, I believe we 
should go even further by investing in those working parents too, who 
would otherwise not be able to send their children to college without 
loans.

  The median income for a family of four as reported by the Joint 
Committee on Taxation in 1995 was $49,531. If that household income was 
comprised entirely of wage or salary income and, if that household 
filed a joint return claiming the standard deduction and four personal 
exemptions, the household's income tax liability would have been $4,947 
and a total payroll tax liability of $7,578 resulting in a total tax 
liability of $12,525. When considering the tax liability and the 
limited income of the median household family, a large number of 
American families will not have the extra income to save $80,000 for 
two children to go to college.
  This legislation will focus on those that do not have parents who can 
afford to save for college. Those working parents who can barely afford 
to make ends meet; parents who provide the basics of life such as food, 
clothing, shelter, and medical insurance for their children but do not 
make the extra income to save for college. Even if families could 
afford to save the money to pay for their children's college education, 
income tax liability of many families is not high enough to benefit 
from the President's proposal because neither the $10,000 tax deduction 
nor $1,500 tax credit is refundable.
  Students whose parents are unable to pay for college up front are 
generally the ones who rely more heavily on student loans to pay for 
college and should be given the same type of tax relief as those that 
come from families that can afford to finance the costs of a college 
education from savings. That is why the Loan Interest Forgiveness for 
Education Act, or the LIFE Act, helps not only to improve the life of 
students who might not otherwise have the opportunity to attend 
college, it also helps to improve their life after graduation. These 
students generally have an enormous burden of debt and the interest 
costs impair their ability to get started in life after college. New 
college graduates just beginning their careers all too often have to 
pay a higher percentage of their income in educational loan bills than 
they do in rent.
  I believe we should encourage individuals who cannot afford to pay 
for college to realize that education is a wise investment in their 
future. Although some individuals must incur substantial debt to 
complete their education, the Government should do their part to make 
sure that these students will not suffer because of this decision for 
the next 20 years of their lives.
  The Government uses the Tax Code to help American families buy their 
own homes. It is equally important to use the Tax Code to encourage 
higher education. It is an investment in our children, our economy and 
our future. If a child receives a college education, that person is 
much more likely to be able to afford to purchase a home. The link 
between educational attainment and earnings is unquestionable. 
Statistics show that the average earnings of the most educated 
Americans are 600 percent greater than that of the least educated 
Americans. The Department of Labor estimates that, by the year 2000, 
more than half of all new jobs will require an education beyond high 
school. As we move nearer to the 21st century and into an information-
driven economy, the gap between high school and college graduates is 
growing. A college graduate in 1980 earned 43 percent more per hour 
than a high school graduate. By 1994, that had increased to 73 percent. 
When we reduce access to higher education, we reduce access to the 
American Dream.
  Given the fact that many of the people in the young generation are 
going to be pushed into the ocean of responsibility to pay off our 
national debt, and pay higher Social Security taxes to support us, the 
least that we could do, Mr. President, is to provide them with a life-
preserver. It is the ethical thing to do and the right thing to do. 
This life-preserver that I speak of, Mr. President, is education. By 
supporting this educational initiative we are affording members of this 
young generation and others a chance to arm themselves with knowledge 
as well as enhance their income potential. This is very important 
because most economist agree that education produces substantial 
spillover, which simply means indirect effects, that will benefit 
society in general. Examples cited of such positive spillover effects 
include a more efficient work force, lower unemployment rates, lower 
welfare costs, and less crime. All of these are issues that concern us 
greatly. Furthermore, an educated electorate is said to foster a more 
responsive and effective government. So as you can see this bill is 
very timely.
  This bill comes at a time when the cost of attending an institution 
of higher learning has increased at a rate higher than inflation. In 
the 1980's, for example, the cost of a year's tuition at a publicly 
supported college increased from $635 to $1,454, an increase of almost 
130 percent. And a year's tuition at a private college increased from 
an average of $3,498 to $8,772, an increase of 150 percent. A more 
recent figure can be found in the state of Illinois where, as of 1994, 
students at Northern Illinois University and Illinois State University, 
both public institutions, were paying nearly 96 percent more than the 
increase in the inflationary rate for that same year. The number of 
loans borrowed through the main Federal college loan programs rose by 
nearly 50 percent since 1990, from 4,493,000 in 1990 to 6,672,000 in 
1995. Rapid increases in college tuition force today's students to 
borrow much more than their predecessors did, yet in 1986, the interest 
deduction for student loans was eliminated.
  I am working with the GAO, [Government Accounting Office] to further 
investigate why college tuition is rising so rapidly, and what the 
Federal Government can most appropriately do about this problem. One of 
the arguments against providing up front tax cuts to parents for the 
costs of education is that tuition costs will increase to take into 
account the tax benefit given to parents. However, the Loan Interest 
Forgiveness for Education Act will not increase the cost of tuition 
because the benefit will be received after individuals have graduated. 
This bill will improve the life of college graduates while at the same 
time encouraging them to pay back their student loans.
  We must improve the accessibility of education, so that all Americans 
may receive a higher education, not just the wealthy elite.
  It is a critical matter in terms of the opportunities than this 
generation of

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Americans will have to access and maintain the American dream. The fact 
that Americans depend on people being able to make a living and support 
themselves, and to reach as high as their talents will take them, 
should not be hampered in any way by the limitation of availability of 
educational opportunity because of costs.
  I know that I would not be in the Senate today were it not for 
quality public education and the accessibility of affordable higher 
education. The Chicago Public Schools gave me a solid foundation, and I 
was able to attend the University of Illinois and the University of 
Chicago in spite of the fact of that my parents were working-class 
people. I am committed to seeing that the students of this generation 
and those who follow them have even greater opportunities than I have 
had. I am absolutely determined to ensure that the exploding cost of 
college does not close the door to opportunity for them. Our generation 
has an absolute duty to keep the door open, and to preserve and enhance 
the opportunity for a better life and the American dream for the 21st 
century.
  Certainly this generation should not have to bear a burdensome loan 
portfolio when they graduate that keeps them from making other optimal 
economic choices.
  So, Mr. President, I introduce this legislation. I send it to the 
desk, and I encourage my colleagues to consider cosponsorship of it. I 
hope that by tax day next year we are able to provide those students 
who are going to college and have taken on loans the opportunity to 
have some loan forgiveness once they graduate.
                                 ______