[Congressional Record Volume 150, Number 114 (Tuesday, September 21, 2004)]
[Extensions of Remarks]
[Page E1667]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    INTRODUCTION OF THE EMERGENCY LOAN ABUSE PREVENTION ACT OF 2004

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                          HON. DALE E. KILDEE

                              of michigan

                    in the house of representatives

                      Tuesday, September 21, 2004

  Mr. KILDEE. Mr. Speaker, today I am introducing the Emergency Loan 
Abuse Prevention Act of 2004, along with my colleagues, Representatives 
Van Hollen and George Miller. Through a loophole in the Higher 
Education Act, nearly $1 billion in special student loan subsidies will 
be paid by the Federal government to lenders this year, rather than 
used for financial aid for students. This bill closes this loophole and 
requires the savings to be used to increase the maximum Pell grant.
  This antiquated subsidy results from an obscure provision in the 
Higher Education Act and its regulations which provide lenders a 9.5 
percent rate of return on certain student loans. This rate of return is 
excessive when you consider that lenders are guaranteed approximately a 
3.5 percent rate of return on other student loans.
  The 9.5 percent guarantee was established in the high interest rate 
year of 1980. Congress intended for it to phase out of existence 
beginning in 1993. But through a loophole, the guarantee has continued. 
Both the New York Times and the L.A. Times have reported on this 
loophole. The Government Accountability Office (GAO) has issued a 
report which calls for the Department of Education to correct its 
regulations on this matter--an action the Bush Department of Education 
is refusing to take.
  This special subsidy has caused a lost financial opportunity for 
students. Students are bearing the brunt of rising college costs and 
shrinking grant aid. This bill provides an opportunity to correct this 
problem.
  Despite this issue being addressed in the last Presidential Budget, 
the recent reaction by the Bush Administration has been inaction and 
silence. Rather than eliminate the use of this provision through 
immediate regulation, the Bush Administration has let this special 
subsidy triple in the past 3 years. In FY 2001, the 9.5 percent 
guarantee cost American taxpayers approximately $200 million. Now GAO 
and others have estimated that this cost is projected to be nearly five 
times greater this fiscal year. The GAO report estimates that on top of 
this year's near billion dollar cost, growth in the special subsidy 
will cost an additional $2.8 billion in future years, if not halted 
immediately.
  This bill closes the loophole which the Bush Department of Education 
and this Republican Congress has permitted to go unchecked. The 
amendment ends this special subsidy and expends the savings to increase 
the maximum Pell grant for needy students.
  I urge Members to join me and others in supporting this legislation.

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