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U.S. House of Representatives Committee on Education and Workforce Hearing on Opening Statement of Chairman John Boehner Good morning. Today's hearing is the latest in our ongoing series of hearings on reauthorization of the Higher Education Act. We're here today to examine the federal consolidation loan program, and how student lending issues fit within our broader goal of expanding access to low and middle income students striving for college. In particular, we have witnesses before us who will help us understand the cost of consolidation loans - the cost to taxpayers, the cost to graduates repaying their loans, and most importantly, the cost to low and middle income students in college today or striving to attend college tomorrow. For the past two years, our committee has been holding hearings, meeting with members of the higher education community, and moving ahead with legislation to meet one central goal: expanding access to higher education for low and middle income students who strive for it. Our proposals for reauthorization of the Higher Education Act will reflect that goal, and today's hearing will help shed light on the role of student loans - and particularly consolidation loans - in our efforts to ensure low and middle income students have access to a higher education. The federal consolidation loan program is different than other student aid programs, because it doesn't provide subsidies to people who are currently students. Rather, it provides billions in subsidies to people who are former students -- graduates who have realized their dream of a college education and have entered the workforce. The program was created to help college graduates repay their student debt. Consolidation loans allow borrowers with multiple loans - held by multiple lenders - to combine their debt into a single, often lower monthly payment. While the program has been largely successful in helping college graduates repay their debt, changes in how the program has been used in recent years raise a number of questions about how the program should operate into the future. A recent report by the General Accounting Office warned that as the program becomes more expensive, Congress needs to consider alternatives. I believe the implication of this report is that if we leave the consolidation loan program on autopilot, the cost could balloon, taking billions of dollars away from the very low and middle income students we are seeking to help. Chief among the topics we will examine today is the issue of interest rates. Unlike other federal student loan programs, the consolidation loan program locks borrowers into a fixed interest rate for the life of the loan. Because interest rates today are the lowest in the history of the federal student loan programs, many graduates are choosing to consolidate their loans simply to lock in these low interest rates. However, the fundamental premise of the program was consolidation, not refinancing. This means consolidation loans were never intended to be a tool to secure low interest rates. When the consolidation loan program began, interest rates were considerably higher than they are today. For example, consolidation loans made before July 1, 1994 had a fixed interest rate that was determined by the weighted average of the loans being consolidated, rounded to the nearest whole percent, or 9 percent, which ever was greater. That means consolidation loans had an interest rate of at least 9 percent. Compare that to today's 3.42 percent interest rate. Clearly when the program began it was not intended to be a tool to secure low interest rates. Yet today's historically low interest rates have resulted in unprecedented growth in the number of consolidation loans, and as a direct result, unprecedented growth in the federal subsidy that is not targeted to helping today's students. We are all aware of the budget realities facing this Congress. With limited resources, we must establish priorities and I believe students should be priority number one. Not just one priority of many, but our first priority. For that reason, I question whether dramatically expanding subsidies to non-students is justified. The consolidation loan program fulfills an important purpose as it exists today, and there are reasonable steps Congress can and should consider to strengthen the program. But any effort to expand it will likely mean reduced resources for the low and middle income students we all hope to assist. If we are targeting our limited resources toward a particular group, I think that group should be students first and foremost. I am eager to hear from our witnesses and their different perspectives on the cost of consolidation loans. In particular, this hearing will help us better understand how federal subsidies are being used in the consolidation loan program, how the fixed interest rate structure is different than the variable rate structure used for other federal student loans, and the overall impact these issues have on our ability to assist current and future students. I would also encourage the witnesses to help shed light on proposals to change the consolidation loan program. I think everyone would agree this program has been successful in its mission to help college graduates repay their loans. I oppose weakening the consolidation loan program, but I also oppose isolating it from positive change at the expense of low and middle income students. We should ask whether it would be best to maintain the program as it exists today, or make changes to the program in order to address questions about how the program itself has changed in recent years. We should ask whether it would be prudent to expand subsidies to non-students as some have proposed, bearing in mind that a massive expansion of this program could take resources away from the low and middle income students the Higher Education Act was created to serve. I look forward to a detailed discussion on this issue, and I am hopeful that this hearing will help us find the right balance as we look to reform the federal student aid programs and strengthen the Higher Education Act on behalf of current and future students. With that, I would yield to Mr. Miller for any opening statement he may have. |