[Congressional Record Volume 147, Number 54 (Thursday, April 26, 2001)]
[Extensions of Remarks]
[Pages E659-E660]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        AFFORDABLE STUDENT LOANS

                                 ______
                                 

                           HON. GEORGE MILLER

                             of california

                    in the house of representatives

                        Thursday, April 26, 2001

  Mr. GEORGE MILLER of California. Mr. Speaker, I rise today in support 
of the Affordable Student Loan Act, which I am introducing today. 
Student loans--like Pell grants and work-study jobs--are essential to 
providing all Americans with the opportunity to earn a college degree.
  Now more than ever, a college education is one of the best 
investments of a lifetime. In the workplace, a college degree is worth 
75 percent more than a high school diploma, or $600,000 over a career.
  Our children should pursue their academic dreams, but the loan 
burdens we ask them to shoulder are increasingly troubling. Student 
loan volume has more than doubled over the last seven years to $35 
billion a year.
  The average student loan debt at four-year public colleges is 
$12,000. At four-year private colleges, it is $14,300. College 
graduates with high loan debts may think twice about entering public 
service, be more likely to default, and delay the purchase of their 
first home.
  To make matters worse, the Federal Government needlessly raises the 
cost of student loans by charging a fee of up to 4 percent of the loan 
principal. Students borrowing $1,000 actually receive as little as 
$960. However, they will still be expected to repay the full $1,000, 
plus interest.
  Nearly all of these fees--up to 3 percent on guaranteed student loans 
and up to 4 percent on direct student loans-- are origination fees, 
enacted in 1981 to reduce the deficit. Because their only purpose is to 
raise revenue, the fees are often called ``the student loan tax.'' They 
do not pay for administrative costs or serve any program purpose.
  Nor are the fees necessary to limit the federal cost of student 
loans. For example, on direct student loans, the Federal Government 
will ``earn'' more than $5 for every $100 in loans made this year, even 
after paying for all administrative and default costs. If Congress 
eliminated on all fees, students would still pay a surcharge--rather 
than receive a subsidy--on loans through the Direct Student Loan 
program this year.
  Students who borrow guaranteed loans also pay up to I percent 
insurance fee into reserve funds to pay future default costs. Because 
these reserve funds are larger than necessary to pay for defaulted 
loans, the large majority of guaranty agencies waive this fee.
  Finally, eliminating the fees will benefit all students. Over the 
last two years, the Department of Education reduced interest rates and 
fees on its direct student loans to match terms available from banks on 
federally guaranteed

[[Page E660]]

student loans. The lower rates will save students over $1 billion over 
the next five years, reduce defaults, and treat students in both the 
direct and guaranteed loan programs fairly.
  In response, a group of financial institutions sued Education to make 
direct loans more expensive for students and drum up business for their 
own student loans. The legislation I am introducing today will promote 
stability in the loan programs by resolving this dispute and benefiting 
students in both programs. It will leave students and schools free to 
choose among the programs based upon the quality of service they offer.
  Now is the time to end the student loan tax. The Affordable Student 
Loans Act will save the typical student roughly $400 on their loans and 
make college more affordable for students in both loan programs. I urge 
my colleagues to join me in supporting this important legislation.

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