[Congressional Record Volume 143, Number 140 (Thursday, October 9, 1997)]
[Senate]
[Pages S10807-S10808]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS:
  S. 1294. A bill to amend the Higher Education Act of 1965 to allow 
the consolidation of student loans the Federal Family Loan Program and 
the Direct Loan Program; to the Committee on Labor and Human Resources.


          THE EMERGENCY STUDENT LOAN CONSOLIDATION ACT OF 1997

  Mr. JEFFORDS. Mr. President, I rise to introduce the Emergency 
Student Loan Consolidation Act of 1997. This bill will provide 
emergency relief to the nearly 70,000 students nationwide whose efforts 
to consolidate their student loans have been thwarted by the collapse 
of the Department of Education's Direct Loan Consolidation Program. In 
addition this bill makes conforming changes in the Higher Education Act 
to ensure that students who receive the Hope Tax Credit are able to 
receive all of the financial aid to which they are entitled. The 
Emergency Student Loan Consolidation Act of 1997 is the companion bill 
to H.R. 2535 which was favorably reported by the House Committee on 
Education and the Workforce on September 24, 1997, by a bipartisan vote 
of 43-0.
  The rapidly rising cost of attending college is producing students 
with overwhelming student loan debt loads. The College Board reports 
that tuition at 4-year private institutions has risen by 89 percent 
over the past 15 years while median family income has risen by only 5 
percent. Students are responding by borrowing at record levels--in 
fact, student borrowing under Title IV since 1990 exceeds student 
borrowing in the 1960's, 1970's, and 1980's combined. Between 1993 and 
1995, graduate and professional student borrowing increased by over 74 
percent.
  In order to ease the burden of repaying these debts, Congress created 
the student loan consolidation program. This program allows students to 
consolidate their student loans into a single loan that has a variety 
of repayment options. Current law allows students to consolidate all of 
their Direct Student Loans and their Federal Family Education Loan 
Program [FFELP] loans into a Direct Lending Consolidation loan 
administered by the Department of Education. A student may consolidate 
his or her FFELP loans into a FFELP Consolidation Loan but may not 
consolidate his or her Direct Loans into the FFELP Program. As a 
result, borrowers who wish to consolidate both Direct Student Loans and 
FFELP loans into a single loan must go to the Department of Education.
  Last August, the Department of Education announced that it had 
accumulated a backlog of 85,000 applications for consolidated loans and 
would cease accepting new applications until this backlog was 
eliminated. This decision places more than 70,000 students in limbo 
with no place to turn for help. This bill will provide temporary 
authority to allow them to consolidate all of their loans, both FFELP 
and Direct through the FFELP program.
  In addition, this legislation makes technical corrections to the need 
analysis provisions of the Higher Education Act of 1965 to conform with 
changes made to the Tax Code earlier this year which provide students 
and parents with higher education tax credits. The bill addresses an 
oversight in the tax legislation which will result in some students 
receiving reduced student aid under Title IV of the Higher Education 
Act simply because they qualify for and receive the new tax credits. By 
adopting this change to the need analysis formula now, the Department 
can begin the process of revising the student aid application forms 
well in advance of the 1999 academic year.
  Mr. President, I ask unanimous consent that a Washington Post article 
detailing the problems with the loan consolidation program be included 
in the Record.
  I urge my colleagues to support this legisation.

[[Page S10808]]

  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 Education Department Suspends Program for Restructuring Student Loans

                           (By Rene Sanchez)

       The Education Department, long maligned by congressional 
     Republicans who say its management is a mess, has just give 
     its critics new reason to howl.
       The department announced last week that it will not accept 
     any more applications from recent college graduates trying to 
     consolidate or refinance their tuition loans until the 
     contractor it hired for the job clears up an enormous backlog 
     of those requests.
       There are more than 70,000 college students nationwide 
     whose loan payments may soon be in limbo because of the 
     lengthy processing delays, and the waiting list has been 
     growing longer each month. The department said that it had no 
     choice but to suspend the popular program indefinitely in 
     order to begin fixing the problem.
       ``It's a terrible embarrassment,'' said David Longanecker, 
     the assistant secretary for postsecondary education. ``We 
     were falling farther and farther behind, but by doing this we 
     are confident that we'll get on top of the problem soon.''
       The department faced a similar predicament last year when 
     more than 900,000 student aid applications handled by private 
     contractors it hired were delayed because of serious 
     management problems. The incidents are raising new questions 
     about the department's ability to manage its direct lending 
     program, which allows students to get tuition loans straight 
     from the federal government and offers them a range of 
     repayment options.
       Direct lending, one of President Clinton's most important 
     education initiatives, has been under fire from Republicans 
     and many private lenders--who no longer have a monopoly on 
     the nations' massive student loan industry--ever since it was 
     created five years ago. There have been several campaigns in 
     Congress to abolish or severely limit the program, but it is 
     still largely intact, serving more than 1,200 universities. 
     Many college officials say they have been quite pleased with 
     the program so far.
       But to some Republican leaders, the latest trouble is proof 
     that the department is not up to the task of handling the 
     complexities of managing college loans at a time when a 
     record number of students--at last count, more than 7 
     million--depend on them.
       ``From the very start of the program, I doubted the 
     department's ability to become one of the largest banks in 
     this country,'' Rep. William F. Goodline (R-Pa), chairman of 
     the House Committee on Education and the Workforce, said last 
     week. He called the department's inability to consolidate 
     student loans quickly and efficiently ``irresponsible.''
       With tuition costs at most campuses continuing to exceed 
     inflation, and college loan debt soaring, more and more 
     students are taking advantage of new opportunities to 
     restructure their loans over longer periods of time or in 
     ways that are based on what they earn after graduation.
       Education department officials said that often in the last 
     year they have received nearly 150,000 applications a month 
     from students to consolidate loans, a rate that is nearly 
     twice what they said they had expected when the program 
     began.
       But they adamantly reject criticism that direct lending is 
     in shambles.
       ``I can understand the frustration, but I think we have to 
     keep it in perspective,'' Longanecker. ``One reason we have 
     this problem is because of the great popularity of the 
     program.''
       Longanecker said that the department is disappointed with 
     the work of the contractor that it hired last year for the 
     job. Electronic Data Systems, which was founded by 
     billionaire Ross Perot. Longanecker said there were start-up 
     problems in processing student requests, and that ever since 
     the volume of applications has overwhelmed the system.
       Some officials said that it had been taking more than seven 
     months in same cases--an unpaid student loan falls into 
     default after six months--to process applications. Because 
     recent steps to improve performance had only put a small dent 
     in the backlog of applications, Longanecker said the 
     department decided instead to stop taking them for a while.
       ``It was like we were trying to fix a 747 while it was 
     still in their air,'' he said.
       The department has no estimates yet as to when the loan-
     consolidation program will be re-opened. But Longanecker said 
     that he expects it certainly will be before December, which 
     is a peak time for applications from students because that is 
     when the most recent class of college graduates are supposed 
     to start repaying their tuition loans.
       That is hardly satisfying some critics, however. And some 
     lawmakers say they are also losing confidence in how the 
     department chooses its contractors, suggesting that the 
     process does not seem as rigorous as it should be.
       Education Department leaders scoff at much of the criticism 
     coming from Republicans about direct lending, saying that 
     many of them have never wanted the program to succeed anyway. 
     But alarm over the latest management problem extends well 
     beyond Capitol Hill.
       ``Up to now, they've done a pretty good job on this,'' said 
     Terry Hartle, a vice president for the American Council on 
     Education, a Washington group that represents more than 1,500 
     universities. ``But what we have here is a huge embarrassment 
     in one of the president's signature education programs.''
  Mrs. HUTCHISON. Mr. President, Americans should not have to choose 
between love and money. In a country that values families, the Federal 
Tax Code shouldn't punish people for being married. The number of 
unmarried-couple households increased 80 percent from 1980 to 1990, 
according to census figures. The percentage of people who never marry 
has doubled, from 5 percent in the 1950's to 10 percent today.
  Today, I am pleased to introduce legislation with Senators Faircloth 
and Mack that will abolish the Federal income tax marriage penalty. 
Under this legislation, families will have the choice of filing as 
single or married, depending on which method works best for them.
  There is something wrong with a law that imposes higher taxes on 
married people with two incomes than on single people. The hallmark of 
a fair tax system is even-handedness, and the current law flunks this 
test. From 1913 through 1969, the Federal income tax treated married 
couples either better or as well as if single. Since then, progressive 
tax rates have meant that married couples with two incomes have to pay 
more in Federal taxes than they would as individuals. The Congressional 
Budget Office reports that in 1996, more than 21 million married 
couples paid the marriage penalty. The average couple now pays $1,400 
in additional income tax simply because they're married. One thousand 
four hundred dollars could mean six or seven car payments, a family 
vacation, or a computer for the family.
  For example, a single person earning $24,000 a year is taxed at the 
rate of 15 percent. But, by taxing them on their combined income, the 
IRS collects 28 percent in tax from a working couple in which each 
spouse earns $24,000. It is wrong for two people living together to pay 
less taxes than if they were married.
  Because American families increasingly have had two breadwinners, 
instead of one, more Americans are impacted by the marriage penalty. In 
1969, 52 percent of American families had only one bread winner. Today 
that figure is 28 percent.
  Mr. President, under current law, the only way to avoid the marriage 
penalty is not to marry or to leave your spouse if already married. 
This is wrong. We need a Tax Code to encourage marriage, not penalize 
it. This legislation is supported by Americans for Tax Reform and the 
National Taxpayers Union. We are introducing this bill with 34 co-
sponsors, including every Member of the Republican leadership. I am 
very pleased to be working with Senators Faircloth and Mack and I hope 
Members from both sides of the aisle will join us in rectifying this 
unfair tax treatment of married couples.

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