[Congressional Record Volume 153, Number 27 (Tuesday, February 13, 2007)]
[Extensions of Remarks]
[Page E340]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       INTRODUCTION OF THE STUDENT AID REWARD (STAR) ACT OF 2007

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                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                       Tuesday, February 13, 2007

  Mr. PETRI. Madam Speaker, today I am again joining with my colleague, 
Chairman George Miller, to reintroduce our Student Aid Reward (STAR) 
Act, which would provide billions of dollars in additional aid to 
students at no additional cost to taxpayers. Now, more than ever, 
millions of low and middle-income families are struggling to help their 
children attend college in the face of rising tuition costs and limited 
financial assistance. The STAR Act is a fiscally-responsible plan that 
could help make college more affordable and accessible for these 
students.
  The STAR Act is rooted in my longstanding belief that we have a 
fundamental obligation to our constituents to eliminate waste, fraud, 
and abuse in government spending wherever it exists. Our legislation 
would encourage colleges and universities to utilize the less expensive 
of the federal government's two main student loan programs. In doing 
so, the Congressional Budget Office (CBO) estimates that the STAR Act 
would save taxpayers $13.4 billion in wasteful subsidies--which would 
instead be devoted to increase student aid to low and middle-income 
students who need it most.
  The real opportunity in this legislation is that it would allow for 
an increased investment in education while not costing taxpayers a 
single penny more. In fact, under the STAR program, there would be 
enough savings not only to return half to schools that switch to the 
more cost-effective program, but also to provide an additional 25 
percent of those savings to schools that were previously enrolled in 
the cost-effective program and thus already saving taxpayers money. The 
final 25 percent would be devoted towards deficit reduction.
  All these savings are to be made possible due to the startling 
difference in the cost between the two federal student loan programs. 
For the current fiscal year, the Federal Family Education Loan (FFEL) 
program costs more than the exact same loan administered under the 
Direct Loan (DL) program. According to President Bush's 2008 education 
budget, student loans made through the more expensive program in 2007 
cost $3 more for every $100 lent than the same loans made with U.S. 
Treasury funds.
  Beyond the Office of Management and Budget, other budget experts 
continue to confirm this cost difference. Earlier this week, the 
Congressional Budget Office released a score that projected savings 
from this amendment in the amount of $13.4 billion over the next 10 
years--and that's if only 15 percent of colleges choose to participate 
in the Student Aid Reward program by switching from the FFEL to the DL 
program. Those savings would be even more substantial with increased 
participation.
  It is important to note that the STAR Act would not mandate that 
schools select the most cost-effective program, although we hope that 
they would. Under this bill, each college retains their ability to 
choose their student loan program. Those who choose to be more 
responsible with taxpayers money would be rewarded with a portion of 
the savings. Those that decide to continue with the more expensive 
program face no penalties, other than a missed opportunity to use 
taxpayer savings to boost their students' Pell Grants. Furthermore, 
each school would have the choice to leave the STAR program at the end 
of their 5-year contract if they are not satisfied with the results for 
their students.
  A critical component of this program is that it is budget neutral. 
Any reward payments to schools are contingent upon actual taxpayer 
savings that year. We are confident that these savings not only exist, 
but amount to several billion dollars annually. Both the CBO and OMB 
continue to confirm this year after year.
  The overarching reason that the FFEL program is so much more 
expensive than the DL program is the excessive subsidies paid to 
lenders each year to issue loans. As all lenders are guaranteed the 
exact same subsidies, regardless of their costs and efficiency, lenders 
do not compete for the benefit of taxpayers, only among themselves for 
market share. This practice is not only unnecessary but it is 
irresponsible--especially when the DL program has no similar costs.
  The taxpayers not only pay interest subsidies to private lenders, 
they also subsidize the 13 guaranty agencies that purchase loans from 
the lenders after a certain period of time has passed. This is also a 
wasteful practice--especially when the DL program has no similar cost.
  I would like to reiterate that this legislation would in no way 
mandate that schools choose the DL program over the FFEL program, or 
even that the DL program will always necessarily be the most cost-
effective program. Instead, the legislation stipulates that the 
Secretary of Education shall determine each year which program is most 
cost-effective to taxpayers and that schools who participate in that 
program receive some of the savings. The Secretary would do this by 
making use of the best data available each year.
  Madam Speaker, I believe that as stewards of taxpayers' money, 
Congress should always seek to make government more efficient and more 
accountable. Our legislation is smart policy: voluntary for schools, 
fiscally-responsible, and would provide over $10 billion in additional 
aid over the next 10 years. I encourage my colleagues to join Rep. 
Miller and me in cosponsoring this legislation.

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