Statement by Education & the Workforce Committee Chairman John Boehner on

Final Approval of the Deficit Reduction Act

WASHINGTON, D.C. – U.S. House Education & the Workforce Committee Chairman John Boehner (R-OH) today issued the following statement on the House’s vote to send the Deficit Reduction Act to President Bush:

“The Deficit Reduction Act represents an important first step in addressing the federal government’s fiscal troubles.  Our ability to generate new job opportunities, provide for a strong defense, and meet unforeseen fiscal challenges will be severely compromised if we don’t address the fundamental problem of runaway entitlement spending. 

“Today’s vote demonstrates our willingness to make the difficult choices that ensure we won’t leave our budget woes for our children and grandchildren.  But our real success in this effort will be determined not by what we have done, but what we will do next.  That starts with fundamental budget and entitlement reform.”

The Deficit Reduction Act includes Education & the Workforce Committee-crafted provisions to reform federal student loan programs and shore up the Pension Benefit Guaranty Corporation (PBGC) as part of larger efforts to expand college access for low- and middle-income students and protect the retirement security of workers and retirees.

STRENGTHENING STUDENT LOAN PROGRAMS

The Deficit Reduction Act reauthorizes mandatory spending programs under the Higher Education Act and includes protections for taxpayers coupled with key benefits for students.  The bill generates billions in savings and helps reduce the deficit while directing significant resources to expand college access.

To improve efficiency in the student loan programs, the bill would reduce subsidies paid to lenders, maintain the scheduled move to a fixed interest rate, and make student aid administration more accountable.  This includes the elimination of floor income earnings so lenders will never earn more than their minimum return, a complete and permanent end to Clinton-era loopholes that allowed a 9.5 percent rate of return on some student loans, a reduction in lender insurance against default, and a shift of student aid administrative funding to the more accountable discretionary funding structure, similar to all other administrative accounts at the U.S. Department of Education.

The measure provides key student benefits, including lower loan fees, higher loan limits, and expanded grant aid to low-income high achieving students and particularly those students studying key subjects including math, science, and critical foreign languages.  These reforms will increase financial aid opportunities for the millions of students who attend college each year with the help of the federal student loan programs.

PROTECTING PENSIONS FOR WORKERS & RETIREES

The Deficit Reduction Act would provide the PBGC with additional much-needed financial resources.  The agency currently operates with a long-term deficit of nearly $23 billion, and if the financial condition of the PBGC deteriorates further, the prospect of a multi-billion dollar taxpayer bailout looms large.

While Congress oversees the PBGC, the agency is funded through annual employer premiums rather than tax dollars, but the most common employer-paid premium has not been adjusted since 1991.  The bill increases these premiums, paid by employers for each worker participating in its pension plan, from $19 to $30 per participant, beginning in 2006 – the same increase proposed last year by the Bush Administration.  The bill also increases the premium paid to the PBGC by managers of multiemployer pension plans from $2.60 to $8 per participant, beginning in 2006.  Finally, the legislation establishes an employer-paid termination premium of $1,250 per plan participant for three consecutive years for companies that terminate their pension plans.  The termination premium provision will sunset after five years.

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