Archived - Letter on HR 6 from Secretary Riley to the Speaker

Archived Information

Reauthorization of the Higher Education Act

Honorable ________
U.S. House of Representatives
Washington, DC 20515

Dear _______:

I am writing to convey my views on some of the more significant provisions of H.R. 6, the "Higher Education Amendments of 1998," a bill that you will be considering on the House floor in the near future.

I am glad to see progress being made on the reauthorization of the vitally important Higher Education Act of 1965 (HEA), and am very pleased that H.R. 6 reflects many of the Administration's proposals, in particular the Administration's High Hopes initiative. However, H.R. 6 fails to address adequately major policy issues addressed by the Administration's reauthorization proposals, including issues concerning student loan interest rates and fees, the guaranty agency financing system, teacher education, ways to reduce the administrative burden on high-performing schools, and ways to improve the integrity of the student aid programs. I look forward to working with you to develop mutually acceptable provisions on these and other issues.

Unfortunately, there are a number of highly problematic provisions in the bill as reported by the House Committee on Education and the Workforce, such as the repeal of funding for the National Board for Professional Teaching Standards, a change to the student loan interest rate structure that provides excessive profits to lenders and requires unnecessary new spending, and significantly increased payments to guaranty agencies and insufficient funding for the Department of Education to manage effectively all the student aid programs. Further, the Administration understands that provisions may be added to the bill that are also strongly objectionable, such as an amendment to incorporate the text of H.R. 3330, the so-called Anti-Discrimination in College Admissions Act of 1998. Overall, if such provisions are in the bill as presented to the President, particularly in light of other concerns raised in the Statement of Adminstration Policy on this bill, the President's senior advisers would recommend that he veto H.R. 6.

My concerns on these issues are described in greater detail below, and further analysis of H.R. 6 is also included in the attachment to this letter.

Student loan interest rates and fees: I am pleased that H.R. 6 includes the Administration's proposal to lower interest rates for students. However, I cannot accept the bill's provisions that would provide lenders with excessive profits and require taxpayers to finance those profits through an additional $2.7 billion subsidy to lenders over five years. Most of the additional spending of $2.7 billion is not offset in the bill and therefore would trigger a possible sequester of several entitlement programs specified in law. Statutorily set lender subsidies are not necessary to ensure access to Federal Family Education Loans (FFELs), and they ignore promising market-based solutions, such as an auction mechanism, for addressing concerns expressed by the lender community. Other proposals to introduce an auction mechanism into the FFEL Program are under discussion, and we look forward to working with Congress to resolve the interest rate issue in a way that protects students and taxpayers.

I am also very disappointed that H.R. 6 does not lower origination fees for students. The Administration proposed to lower the fees by one percentage point for all borrowers, and to phase them out entirely for borrowers of subsidized loans. These fee reductions could be funded from resources that would be made available through the guaranty agency reforms proposed by the Administration.

Section 458 funding reduction and guaranty agency financing: I strongly oppose provisions in H.R. 6 that would reduce administrative funds available to the Department of Education under section 458 of the HEA by more than $220 million over FY 1999-2003 while increasing administrative payments to guaranty agencies in the FFEL Program by roughly $350 million for FY 1999-2003. This increase is excessive and counterproductive; guaranty agencies already receive revenues sufficient to carry out their functions. Since the bill would raise section 458 funding by only $130 million over the same period, the balance of the increased payments to guaranty agencies would necessarily come from the Department's administrative funds. These provisions would directly threaten the Department's ability to manage effectively the over $50 billion annual Federal investment in student financial aid, undermining such vital activities as student aid application processing, student loan default collection, and the urgently needed modernization of student aid delivery systems.

As evidenced by the Administration's proposals, I support reform of the guaranty agency system in the FFEL program. However, I am deeply concerned that the reforms proposed in H.R.6 fail to make adequate performancebased reforms to encourage and reward efficient service delivery by guaranty agencies, and would include new and excessive sources of revenue for guaranty agencies. The Administration is also very concerned that the Department of Education's ability to advance funds to guaranty agencies for lender-of-last-resort loans would be eliminated in H.R. 6, impairing the Department's ability to ensure students' access to FFELs. Additional concerns are identified in the attachment. I look forward to working with the Congress to fashion an acceptable compromise that provides much-needed guaranty agency reform.

National Board for Professional Teacher Standards: I strongly oppose the elimination of funding for the National Board for Professional Teaching Standards. The National Board recognizes and rewards excellent teachers who thereby become an observable standard of excellence to which other teachers can aspire. Upgrading the teaching corps and raising teaching standards in this way is a key element necessary for long-term improvement in student achievement. Our other strong objections to provisions in H.R. 6 regarding teacher education are included in the attachment.

H.R. 3330: I understand that H.R. 3330 may be offered as a floor amendment to H.R. 6. The Attorney General and I explained our very strong opposition to the provisions of H.R. 3330 in a separate letter to Congress.

Pay-As-You-Go Scoring: The Omnibus Budget Reconciliation Act requires that all revenue and direct spending legislation meet a pay-as-you-go requirement. That is, no such bill should result in an increase in the deficit, and, if it does, it will trigger a sequester if not fully offset. H.R. 6 would increase direct spending and, therefore, is subject to the pay-as-you-go requirements of the Omnibus Budget Reconciliation Act of 1990. The bill does not contain provisions to fully offset this increase in outlays. Therefore, if the bill were enacted, its deficit effects could contribute to a sequester of mandatory programs. OMB's preliminary scoring of this bill is that it would increase outlays by $2,061 million during FYs 1998-2003:

Fiscal Year 1998 1999 2000 2001 2002 2003 1998-2003

Outlays (In millions of dollars) -$281 $308 $460 $479 $520 $575 $2,061

The Office of Management and Budget advises that there is no objection to the submission of this report to the Congress, and that enactment of a version of H.R. 6 that contains provisions described above regarding the student loan interest rate structure, section 458 funding, National Board for Professional Teaching Standards, and H.R. 3330, would not be in accord with the program of the President.

Sincerely yours,

Richard W. Riley

Attachment

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Fiscal Year	1998	1999	2000	2001	2002	2003	1998-2003
Outlays (In millions of dollars)	-$281	$308	$460	$479	$520	$575	$2,061