[Congressional Record Volume 150, Number 121 (Thursday, September 30, 2004)]
[Senate]
[Pages S10071-S10072]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GREGG (for himself, Mr. Bond, and Mr. Graham of South 
        Carolina):
  S. 2877. A bill to reduce the special allowance for loans from the 
proceeds of tax exempt issues, and to provide additional loan 
forgiveness for teachers who teach mathematics, science, or special 
education; to the Committee on Health, Education, Labor, and Pensions.
  Mr. GREGG. Mr. President, in recent days, much ink has been spilled 
and much rhetoric bandied about on the subject of the 8.5 percent 
interest rate on student loans the Federal Government guarantees to a 
handful of lenders. We all agree that this loophole, which results in 
windfall profits to some lenders and banks, should be ended.
  Only recently have my colleagues on the other side of the aisle even 
acknowledged that this was a problem. It should be noted, that 
Democrats not only created and protected this flawed policy during the 
Clinton administration they failed to correct the problem when they 
were in the majority.
  Republicans have repeatedly demonstrated a commitment to ending the 
exploitation of the 9.5 percent interest rate guarantee. The President 
submitted a budget in February that closed the loophole. House 
Republicans introduced a higher education bill in May that also would 
close the loophole. But Democrats showed no interest in moving either 
of those pieces of legislation. Instead, they have recently offered a 
series of misguided, ineffectual attempts to close the loophole. The 
Kildee amendment that passed the House did not close the loophole--a 
fact even Senate Democrats acknowledge. That amendment prohibited 
discretionary funds from being used to administer the 9.5 percent 
payments or for the payments themselves. The fact that such payments 
are made with mandatory funds under the Higher Education Act renders 
the amendment powerless.
  Similarly, Senator Murray's amendment that was rejected at the Labor-
HHS-Education markup failed to close the loophole for several reasons. 
Her amendment would have allowed lenders to transfer loans within their 
portfolio to continue to receive the 9.5 percent guarantee, a practice 
explicitly criticized in the GAO report on this issue. Worse, her 
amendment would have spent more money than it generated by converting 
savings that accrue over 10 years into discretionary expenditures to be 
spent in a single year, 2005.
  Senator Murray's amendment would also have jeopardized student 
benefits nationwide by preventing nonprofit lenders, which are required 
to pour any extra Federal funds they receive back into the student loan 
program, from legitimately receiving the guarantee. In other words, her 
amendment would have led to increased interest rates and origination 
fees for student borrowers, and the elimination of loan forgiveness 
programs for nurses, teachers, and public safety officers.
  The potential damage did not end there. Because Senator Murray's 
amendment would have disrupted contractual obligations between the 
Federal Government and lenders and note holders, it could have exposed 
the Department of Education to costly litigation and risk a court order 
requiring the payments to be restored.
  Clearly, efforts to end the loophole have been unproductive or worse 
thus far. Today, I hope to transform the debate by introducing the 
Taxpayer-Teacher Protection Act of 2004, along with my colleagues, 
Senators Bond and Graham, and Representative Boehner in the House. This 
legislation will close the loophole for one year and direct the 
resulting savings toward the expansion of teacher loan forgiveness 
programs for math, science and special education teachers in schools 
with large numbers of disadvantaged students, without cutting student 
benefits enjoyed by borrowers who receive loans from nonprofit lenders.
  Specifically, the bill would protect taxpayers by shutting down the 
loophole in 2005 in a way that immediately halts the high subsidies for 
refunding, transfers of loans from tax-exempt to taxable bonds and 
other related transactions. It puts lenders and note holders on notice 
that Congress will permanently and quickly phase out all other aspects 
of the 9.5 percent guarantee without putting the federal government in 
jeopardy of costly litigation. The bill protects student benefits 
provided by non-profit lenders, including 0 percent interest rate 
student loans for on-time completion, lower interest rates for certain 
students and loan forgiveness for teachers, nurses and public safety 
personnel.
  The bill invests the related savings to more than triple teacher loan 
forgiveness to $17,500 for teachers of math, science, and special 
education--disciplines where there are widespread shortages, 
particularly in the inner city and rural communities--who teach in 
high-need schools districts for five years, and who meet the No Child 
Left Behind definition of a highly qualified

[[Page S10072]]

teacher. Such loan forgiveness provides an important recruiting tool 
for local districts to fill teacher shortages, and rewards teachers who 
teach disadvantaged children and children with disabilities, while 
preparing the students in the areas of math and science that are so 
critical to our security and prosperity as a nation.
  The President recently sent us a letter reiterating his desire that 
Congress act quickly to enact legislation to close the loophole. I urge 
my colleagues who are serious about ending this loophole to join me in 
supporting the Taxpayer-Teacher Protection Act of 2004, so that we can 
send it to the President's desk without delay, and send our dollars 
where they belong--benefiting students.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2877

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Taxpayer-Teacher Protection 
     Act of 2004''.

     SEC. 2. REDUCTION OF THE SPECIAL ALLOWANCE FOR LOANS FROM THE 
                   PROCEEDS OF TAX EXEMPT ISSUES.

       Section 438(b)(2)(B) of the Higher Education Act of 1965 
     (20 U.S.C. 1087-1(b)(2)(B)) is amended--
       (1) in clause (i), by striking ``this division'' and 
     inserting ``this clause'';
       (2) in clause (ii), by striking ``division (i) of this 
     subparagraph'' and inserting ``clause (i) of this 
     subparagraph'';
       (3) in clause (iv), by inserting ``or refunded on or after 
     October 1, 2004 and before October 1, 2005,'' after ``October 
     1, 1993,''; and
       (4) by adding at the end the following new clause:
       ``(v) Notwithstanding clauses (i) and (ii), the quarterly 
     rate of the special allowance shall be the rate determined 
     under subparagraph (A), (E), (F), (G), (H), or (I) of this 
     paragraph, or paragraph (4), as the case may be, for a holder 
     of loans that--

       ``(I) were made or purchased with funds--

       ``(aa) obtained from the issuance of obligations the income 
     from which is excluded from gross income under the Internal 
     Revenue Code of 1986 and which obligations were originally 
     issued before October 1, 1993; or
       ``(bb) obtained from collections or default reimbursements 
     on, or interests or other income pertaining to, eligible 
     loans made or purchased with funds described in division 
     (aa), or from income on the investment of such funds; and

       ``(II) were--

       ``(aa) financed by such an obligation that has matured, or 
     been retired or defeased;
       ``(bb) refinanced on or after October 1, 2004 and before 
     October 1, 2005, with funds obtained from a source other than 
     funds described in subclause (I) of this clause; or
       ``(cc) sold or transferred to any other holder on or after 
     October 1, 2004 and before October 1, 2005.''.

     SEC. 3. LOAN FORGIVENESS FOR TEACHERS.

       (a) Implementing Highly Qualified Teacher Requirements.--
       (1) Amendments.--
       (A) FFEL loans.--Section 428J(b)(1) of the Higher Education 
     Act of 1965 (20 U.S.C. 1078-10(b)(1)) is amended--
       (i) in subparagraph (A), by inserting ``and'' after the 
     semicolon; and
       (ii) by striking subparagraphs (B) and (C) and inserting 
     the following:
       ``(B) if employed as an elementary school or secondary 
     school teacher, is highly qualified as defined in section 
     9101 of the Elementary Secondary Education Act of 1965; 
     and''.
       (B) Direct loans.--Section 460(b)(1)(A) of the Higher 
     Education Act of 1965 (20 U.S.C. 1087j(b)(1)(A)) is amended--
       (i) in clause (i), by inserting ``and'' after the 
     semicolon; and
       (ii) by striking clauses (ii) and (iii) and inserting the 
     following:
       ``(ii) if employed as an elementary school or secondary 
     school teacher, is highly qualified as defined in section 
     9101 of the Elementary and Secondary Education Act of 1965; 
     and''.
       (2) Transition rule.--
       (A) Rule.--The amendments made by paragraph (1) of this 
     subsection to sections 428J(b)(1) and 460(b)(1)(A) of the 
     Higher Education Act of 1965 shall not be applied to 
     disqualify any individual who, before the date of enactment 
     of this Act, commenced service that met and continues to meet 
     the requirements of such sections as such sections were in 
     effect on the day before the date of enactment of this Act.
       (B) Rule not applicable to increased qualified loan 
     amounts.--Subparagraph (A) of this paragraph shall not apply 
     for purposes of obtaining increased qualified loan amounts 
     under sections 428J(c)(3) and 460(c)(3) of the Higher 
     Education Act of 1965 as added by subsection (b) of this 
     section.
       (b) Additional Amounts Eligible to Be Repaid.--
       (1) FFEL loans.--Section 428J(c) of the Higher Education 
     Act of 1965 (20 U.S.C. 1078-10(c)) is amended by adding at 
     the end the following:
       ``(3) Additional amounts for teachers in mathematics, 
     science, or special education.--Notwithstanding the amount 
     specified in paragraph (1), the aggregate amount that the 
     Secretary shall repay under this section shall be not more 
     than $17,500 in the case of--
       ``(A) a secondary school teacher--
       ``(i) who meets the requirements of subsection (b); and
       ``(ii) whose qualifying employment for purposes of such 
     subsection is teaching mathematics or science on a full-time 
     basis; and
       ``(B) an elementary school or secondary school teacher--
       ``(i) who meets the requirements of subsection (b);
       ``(ii) whose qualifying employment for purposes of such 
     subsection is as a special education teacher whose primary 
     responsibility is to provide special education to children 
     with disabilities (as those terms are defined in section 602 
     of the Individuals with Disabilities Education Act); and
       ``(iii) who, as certified by the chief administrative 
     officer of the public or non-profit private elementary school 
     or secondary school in which the borrower is employed, is 
     teaching children with disabilities that corresponds with the 
     borrower's special education training and has demonstrated 
     knowledge and teaching skills in the content areas of the 
     elementary school or secondary school curriculum that the 
     borrower is teaching.''.
       (2) Direct loans.--Section 460(c) of the Higher Education 
     Act of 1965 (20 U.S.C. 1087j(c)) is amended by adding at the 
     end the following:
       ``(3) Additional amounts for teachers in mathematics, 
     science, or special education.--Notwithstanding the amount 
     specified in paragraph (1), the aggregate amount that the 
     Secretary shall cancel under this section shall be not more 
     than $17,500 in the case of--
       ``(A) a secondary school teacher--
       ``(i) who meets the requirements of subsection (b)(1); and
       ``(ii) whose qualifying employment for purposes of such 
     subsection is teaching mathematics or science on a full-time 
     basis; and
       ``(B) an elementary school or secondary school teacher--
       ``(i) who meets the requirements of subsection (b)(1);
       ``(ii) whose qualifying employment for purposes of such 
     subsection is as a special education teacher whose primary 
     responsibility is to provide special education to children 
     with disabilities (as those terms are defined in section 602 
     of the Individuals with Disabilities Education Act); and
       ``(iii) who, as certified by the chief administrative 
     officer of the public or non-profit private elementary school 
     or secondary school in which the borrower is employed, is 
     teaching children with disabilities that corresponds with the 
     borrower's special education training and has demonstrated 
     knowledge and teaching skills in the content areas of the 
     elementary school or secondary school curriculum that the 
     borrower is teaching.''.
       (3) Effective date.--The amendments made by this subsection 
     shall apply only with respect to eligible individuals who are 
     new borrowers on or after October 1, 1998, and before October 
     1, 2005.
                                 ______