[Congressional Record (Bound Edition), Volume 153 (2007), Part 21]
[Extensions of Remarks]
[Pages 28988-28989]
[From the U.S. Government Publishing Office, www.gpo.gov]




   INTRODUCTION OF THE STUDENT LOAN AUCTION MARKET (SLAM) ACT OF 2007

                                 ______
                                 

                          HON. THOMAS E. PETRI

                              of wisconsin

                    in the house of representatives

                      Wednesday, October 31, 2007

  Mr. PETRI. Madam Speaker, today, I am introducing the Student Loan 
Auction Market, SLAM, Act to continue the process of comprehensive, 
structural reform of the guaranteed student loan program. I believe 
this legislation would mark a critical step towards full market-based 
reform of the program and build on the reforms incorporated in the 
bipartisan College Cost Reduction and Access Act, which was recently 
signed into law by President Bush.
  Specifically, the SLAM Act would further efforts to study and pilot 
several market-based reforms, including auction and asset-backed 
securities models. The politically-set subsidy rate to lenders is a 
fundamental flaw in the archaic structure of the guaranteed loan 
program. I believe we can all agree that some type of comprehensive, 
market-based reform will be necessary to ensure the long-term viability 
of the guaranteed loan program and ensure taxpayers' interests are 
better served.

[[Page 28989]]

  My proposal would require the Secretaries of Education and the 
Treasury, in conjunction with the Government Accountability Office, 
GAO, the Office of Management and Budget, OMB, and the Congressional 
Budget Office, CBO, to conduct a joint planning study to determine 
which market-mechanism model for determining lender returns on 
guaranteed loans would best serve borrowers and taxpayers. This study 
would allow the experts to weigh the pros and cons of each proposal and 
determine which option would be most favorable for trial in the pilot 
program.
  The pilot model will be selected by the Secretaries based on key 
criteria, such as ensuring sufficient loan availability to all 
participating institutions, minimizing administrative complexity to 
borrowers and lenders, and reducing the Federal cost if used on a 
program-wide basis. Within 6 months of enactment of this legislation, 
the study group would report its findings to Congress and begin 
implementation of a voluntary pilot program.
  The voluntary, 2-year pilot program will begin in July 2008 and 
incorporate up to 10 percent of the guaranteed loan portfolio, 
increasing up to 20 percent in 2009. To encourage meaningful college 
participation in the pilot, any savings from the increased efficiency 
in the market model will be returned to the institution in the form of 
supplemental, need-based grant aid. Finally, GAO would conduct an 
independent evaluation of the pilot program and report its findings to 
Congress and the Secretaries within 120 days after termination of the 
pilot.
  I believe that both the study and the pilot will provide critical and 
necessary information to Congress on how market-based reforms will 
impact the guaranteed loan program, before such reforms are implemented 
on a program-wide basis. This is a measured and responsible proposal 
that is based on voluntary participation by both colleges and lenders. 
It is something that both supporters and skeptics of the guaranteed 
loan program should embrace.
  Although a much narrower and prescriptive auction pilot was included 
in the College Cost Reduction and Access Act, it has raised significant 
concerns among reform advocates, the Administration, and lenders about 
its feasibility and efficacy. My bill would not alter the Senate pilot 
that was agreed to in conference, but would require a second pilot by 
which to compare outcomes between the 2 models. It is a responsible and 
pragmatic addition to the current auction pilot.
  I encourage my colleagues to support this legislation to further our 
understanding of market-based reform options. Congress should always 
encourage innovation in the administration of our student loan programs 
and continually strive to better serve students and taxpayers.

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