The Administration is strongly committed to working with Congress to
reauthorize the Higher Education Act (HEA) this year. The Administration
has serious concerns with several provisions that are in the bill or likely
to be added, but is encouraged that H.R. 6, as reported by the House
Committee on Education and the Workforce, reflects many of the
Administration's proposals, particularly the authorization for the High
Hopes for College initiative.
Unfortunately, there are a number of highly problematic provisions in the
reported bill, 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 of 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 this Statement of
Administration Policy, the President's senior advisers would recommend that
he veto H.R. 6.
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.
Student Loan Interest Rates. The Administration 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 $2.7
billion of spending 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 (FFEL), and they ignore promising
market-based solutions, such as an auction mechanism, for addressing
concerns expressed by the lender community. A policy that moves toward an
auction mechanism should be part of the interest rate structure.
A budget sequester would raise student loan origination fees -- which are
high -- and reduce Federal mandatory spending across-the-board. Vital
programs such as vocational rehabilitation, foster care and adoption
assistance, and Medicare should not have to bear the cost of lender
H.R. 3330. The Administration strongly opposes H.R. 3330, which may
be offered as an amendment during House consideration of H.R. 6. The
Administration strongly supports properly constructed affirmative action to
achieve the compelling interest of eradicating the effects of
discrimination or promoting the educational benefits of diversity. For
Congress to deny Federal funds to institutions that promote such efforts
would unduly constrain their ability to meet their constitutional
obligations and would be an unwarranted Federal intrusion into the freedom
of public and private institutions to establish their own admissions
Section 458 Funding Reductions. The Administration strongly opposes
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 during fiscal years 1999 to 2003, while increasing administrative
payments to guaranty agencies by roughly $350 million during that period.
These provisions directly threaten the Department's ability to manage the
over $50 billion annual Federal investment in student financial aid by
taking away the funds necessary to carry out vital activities, such as
student aid application processing, student loan default collection, and
urgently needed modernization of student aid delivery systems.
In addition, there are other significant provisions in H.R. 6 that the
Administration will seek to improve during further congressional
consideration. Among these issues are the following.
- H.R. 6 fails to make adequate performance-based reforms to encourage
and reward efficient service delivery by guaranty agencies, and it would
include new and excessive sources of revenue for guaranty agencies. The
Administration is also very concerned that the Department of Education's
authority to advance funds to guaranty agencies for
lender-of-last-resort loans would be eliminated. This would impair the
Department's ability to work with guaranty agencies to ensure students'
access to guaranteed loans under a program that is efficient and
cost-effective for the FFEL program and the taxpayer. The Administration
hopes to work with the Congress to fashion an acceptable compromise that
provides much-needed guaranty agency reform.
- The Administration is 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, and offered the
necessary offsets to finance these fee reductions.
- The bill does not include changes necessary to implement the
President's proposal to allow individuals with unsubsidized student
loans to serve their communities for up to three years without accruing
interest on these loans. Under current law, individuals with subsidized
loans do not accrue interest while receiving a deferment and performing
community service, but those with unsubsidized loans continue to accrue
interest. This proposal is part of the President's call to action to
encourage all Americans to serve their communities.
- H.R. 6 also fails to exclude from taxation any loan balances that
are forgiven after the maximum number of years of income-contingent
repayment. Income-based repayment ensures that borrowers who remain
low-income relative to their debt do not have to carry that burden for
more than 25 years. Saddling them with an additional tax liability is
neither appropriate nor was it ever intended.
- The Administration appreciates the bill's strong support for
postsecondary education programs, but notes that certain proposed
authorization levels are not realistic in the current budget
- The Administration shares the goal of adopting a performance-based
organization (PBO) for the administration of the student aid programs,
but is concerned that H.R. 6 fails to incorporate fundamental components
of the Administration's model legislation for PBOs. That model was
carefully crafted to provide more personnel management and procurement
flexibility than H.R. 6 provides, while ensuring accountability for the
exercise of that flexibility.
- The Administration opposes Title X of H.R. 6 as reported out by the
Committee because these changes to the Age Discrimination in Employment
Act go too far in allowing arbitrary, differential treatment on the
basis of age. However, the Administration understands that the managers
will be proposing new language which should address these concerns. If
those changes are made, the Administration would have no objection to
The Administration looks forward to working with Congress to resolve these
and other issues, such as those articulated in more detailed letters from
concerned departments, as Congress works to reauthorize the Higher
H.R. 6 would increase direct spending; 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