[Congressional Record (Bound Edition), Volume 146 (2000), Part 16]
[House]
[Pages 23329-23330]
[From the U.S. Government Publishing Office, www.gpo.gov]



                       STUDENT LOAN DEFAULT RATES

  The SPEAKER pro tempore (Mr. Dickey). Under a previous order of the 
House, the gentleman from Texas (Mr. Hinojosa) is recognized for 5 
minutes.
  Mr. HINOJOSA. Mr. Speaker, there is much good news in higher 
education this year and we should take a few moments in the House of 
Representatives to take note of it. This is news for which we can all 
take some credit--the Congress, the Administration, borrowers, colleges 
and universities, lenders, loan guaranty agencies--so it is in that 
spirit that I offer these observations.
  Twenty to 25 years ago, few people left college with student loan 
debt. But today, student loans are a fact of life for millions of 
students and graduates. They have opened the door of opportunity to 
individuals who otherwise would have no options to improve their 
earning potential.
  President Clinton recently announced that the student loan cohort 
default rate is the lowest on record, falling from a high of 22.4 to 
6.9 percent.
  This represents a savings to taxpayers of approximately $7 billion 
over the period from fiscal year 1993 to fiscal year 2000. But more 
importantly, it speaks volumes about the Department of Education's 
program flexibility and willingness to work with borrowers.
  Secretary of Education Riley noted that this record has been achieved 
by ``a robust economy, strong department management, tougher 
enforcement tools authorized by Congress, and stepped up efforts by 
colleges, lenders, guaranty agencies, and others.''
  What makes this even more noteworthy is that the decline in defaults 
came at a time when student loan volume was tripling and educational 
opportunity was expanding to more low-income students, entailing higher 
risks. It is a great achievement.
  The President also recently announced a reduction in interest rates 
for students in the Direct Loan Program who make their first 12 
payments on time. Students have especially welcomed this reduction in 
college costs. Student organization leaders have noted that all 
students benefit when the Direct Loan Program can offer the same kinds 
of repayment incentives as the bank-based Federal Family Education Loan 
Program.
  This encourages healthy competition between the programs, which makes 
students the ultimate beneficiaries.
  This reduction is possible because of the change Congress made in the 
1998 Higher Education Amendments. These changes gave the Secretary the 
authority to offer the same kind of repayment incentives to Direct Loan 
borrowers as exist in the bank-based program.
  Mr. Speaker, I would also like to note that there is a third piece of 
good news in which

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Congress has played an important role. In fiscal year 2000 alone, $4 
billion has been recovered on defaulted loans through vigorous 
collection efforts by the Department of Education and the loan guaranty 
agencies. Congress authorized the use of offsetting Federal income tax 
refunds, wage garnishment, and other methods to aid in the collection 
of these loans.
  What is important, however, is that defaulters also have the 
opportunity to get out of default through loan consolidation and the 
opportunity to repay their loans based on their income. We must never 
burden students with loans they cannot repay, and much of our current 
as well as future savings will be due to the appropriate use of the 
carrot as well as the stick.
  Declining default rates, increased collections, savings produced by 
the direct student loan program--when we combine the fruits of all 
these labors, the end result is that we are saving American taxpayers 
$18 billion.
  Too often we overlook the good news in education and fail to note the 
successes of our legislation and its implementation.
  Let us take a moment here to offer congratulations to all for the 
excellent news coming out of higher education this year.

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