[Congressional Record Volume 153, Number 114 (Tuesday, July 17, 2007)]
[Extensions of Remarks]
[Page E1537]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   COLLEGE COST REDUCTION ACT OF 2007

                                 ______
                                 

                               speech of

                           HON. VIRGINIA FOXX

                           of north carolina

                    in the house of representatives

                        Wednesday, July 11, 2007

  Ms. FOXX. Mr. Speaker, much of the $18 billion in new spending in the 
College Cost Reduction Act doesn't reduce the cost of college, but 
instead consists of new entitlements targeted at people who aren't even 
students. The bill cuts loan interest rates for those who have 
graduated from college--to the tune of $6.2 billion. This is less than 
the amount the bill allocates towards Pell Grants--a form of aid that 
actually goes to students.
  With so many new entitlements in this bill, I am concerned about the 
direction we are headed. Most of these new entitlements are given to 
institutions and to college graduates. The bill creates new TEACH 
Grants at a cost to taxpayers of $375 million. This new entitlement 
gives grants to colleges and universities. It doesn't cut the cost of 
college for students--instead it moves towards creating a system that 
discourages personal responsibility and has no congressional 
accountability.
  For instance, this bill expands a government program to repay the 
education loans of public sector employees. Public sector jobs include 
those in emergency management, government, public safety, law 
enforcement, public health, education, public social work, and public 
interest legal work. The current program repays loans remaining after 
25 years of payment, but the expanded program grants loan forgiveness 
after 10 years of repayment, dramatically decreasing borrowers' 
incentive to pay off their loans.
  Take for example a college graduate working in the public sector and 
making $35,000 a year. If he or she has $20,000 in debt upon 
graduation, this debt would be paid off within 25 years and the Federal 
Government would not have to pay off any remaining balance. But under 
the new terms the federal loan forgiveness comes at 10 years, which in 
this case means a payoff of more than $10,000.
  This is a new $10,000 entitlement that creates incentives which 
directly discourage people in public service jobs from investing their 
own money in college debt. Why would someone pay off his debt at a rate 
any faster than the absolute minimum if he or she knows that in 10 
years the Federal Government will come along and erase the remaining 
balance?
  I want Americans to have access to education, but I don't want this 
access to come at the cost of a new entitlement mentality and increased 
dependence on the Federal Government for meeting the cost of education. 
At a time when we face massive increases in the cost of entitlement 
programs, I question the responsibility of constructing a whole new set 
of entitlements that will saddle future generations with new layers of 
government spending and the higher taxes needed to fund these 
entitlements.
  Education is important for the success of this nation, but giving 
entitlements to institutions and college graduates is not the way to 
lower the cost of college. In fact, heaping helpings of new 
entitlements will do much to undermine our national success as we face 
an impending entitlement crisis in the coming decades.

  Scenario 1: Income-Contingent Repayment for Public Sector Employees 
    Under H.R. 2669, the College Cost Reduction Act (10 Year Period)


               repayment plan for public sector employees

       The Secretary shall forgive the balance due on any loan for 
     a borrower who makes 120 payments (monthly payments over a 
     ten year period) on such loan pursuant to income-contigent 
     repayment. And who is employed, and was employed for the 10-
     year period in which the borrower made the 120 payments, in a 
     public sector job. This includes full-time jobs in emergency 
     management, government, public safety, law enforcement, 
     public health, education (including early childhood 
     education), social work in a public child or family service 
     agency, or public interest legal services (including 
     prosecution or public defense).

----------------------------------------------------------------------------------------------------------------
                                                                        Borrower payments
                        Loan amount                             AGI       (over 10 year        Forgiveness \1\
                                                                             period)        (after the 10 years)
----------------------------------------------------------------------------------------------------------------
$20,000....................................................   $35,000        $20,887 ($174   $10,026 ($30,913
                                                                            monthly, 5.9%)             total)
20,000.....................................................    50,000         24,426 ($204     5,183 ($29,609
                                                                            monthly, 4.9%)             total)
20,000.....................................................    65,000         26,140 ($218  2,838 (28,978 total)
                                                                            monthly, 4.0%)
50,000.....................................................    35,000         28,700 ($239     57,138 (85,838
                                                                            monthly, 8.2%)             total)
50,000.....................................................    50,000         58,700 ($489    16,194 ($74,894
                                                                           monthly, 11.7%)             total)
50,000.....................................................    65,000        $65,350 ($545  7,093 (72,443 total)
                                                                           monthly, 10.0%)
----------------------------------------------------------------------------------------------------------------

             Scenario 2: Under Current Law (25 Year Period)

----------------------------------------------------------------------------------------------------------------
                                                                        Borrower payments
                        Loan amount                             AGI       (over 25 year        Forgiveness \1\
                                                                             period)        (after the 25 years)
----------------------------------------------------------------------------------------------------------------
$20,000....................................................   $35,000        $33,433 ($111  $0 ($33,433 total)
                                                                            monthly, 3.8%)
                                                                         [12,546 more than
                                                                                    10 yr]
20,000.....................................................    50,000         30,230 ($100  0 ($30,230 total)
                                                                            monthly, 2.4%)
                                                                       [5,804 more than 10
                                                                                       yr]
20,000.....................................................    65,000          29,198 ($97  0 ($29,198 total)
                                                                            monthly, 1.8%)
                                                                       [3,058 more than 10
                                                                                       yr]
50,000.....................................................    35,000         71,751 ($239   70,188 ($141,939
                                                                            monthly, 8.2%)             total)
                                                                         [43,051 more than
                                                                                    10 yr]
50,000.....................................................    50,000         77,263 ($257  0 ($77,263 total)
                                                                            monthly, 6.2%)
                                                                         [18,563 more than
                                                                                    10 yr]
50,000.....................................................    65,000         72,996 ($243  0 ($72,996 total)
                                                                            monthly, 4.5%)
                                                                       [9,646 more than 10
                                                                                       yr]
----------------------------------------------------------------------------------------------------------------
\1\ Covers interest incurred, no cap on forgiveness (however, there if a threshold where you would be able to
  pay off your loan during the 10 year period and the forgiveness would not apply)

  

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