Fact Sheet: The Clinton-Gore Administration: Making College More Affordable and Accessible for America's Families (8/10/00)
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|   THE CLINTON-GORE ADMINISTRATION: MAKING COLLEGE MORE AFFORDABLE AND   |
|                    ACCESSIBLE FOR AMERICA?S FAMILIES                    |
|                             August 10, 2000                             |
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Today, President Clinton will announce new steps to make college more
affordable for students and parents, and to allow graduates to choose
rewarding careers.  First, he will announce two new steps by the U.S.
Department of Education to lower interest rates on direct student loans for
students who meet their responsibilities by repaying their loans on time.
These changes will save students and parents $600 million, and save federal
taxpayers $5 million, over the next five years.  Second, he will announce
that the Clinton-Gore Administration is proposing a new rule to ease
college debt for teachers in lower-income communities.  Finally, he will
call on Congress to enact his proposals to strengthen education and make
college more affordable, including the College Opportunity Tax Cut, which
will especially help middle-class families.

PRESIDENT CLINTON WILL ANNOUNCE TWO STEPS TO LOWER INTEREST RATES ON DIRECT
STUDENT LOANS.  New incentives will reward students who repay their loans
on time.  Together with other interest rate and fee reductions since the
start of the Clinton-Gore Administration, these incentives will save
students as much as $1,300 on $10,000 in loans.

?    NEW INTEREST REBATE.  First, students and parents borrowing direct
student loans will receive an immediate interest rebate           equal to
1.5 percent of the loan.  Over 1.7 million students a year will receive the
rebate when they borrow, beginning this academic        year (2000-01).
Students and parents must make their first 12 payments on time to keep this
benefit.  The average undergraduate could     save $150 on $10,000 in
loans.  Over a standard ten-year loan, this rebate amounts to an interest
rate reduction of 0.24 percentage points      per year.
?    NEW REFINANCING OPPORTUNITY.  Second, students who consolidate their
loans with the Direct Student Loan program         will receive a new
interest rate that is 0.8 percentage points lower than what they currently
pay, saving a student with $10,000 in loans        over $500.  Over 400,000
students are expected to take advantage of this opportunity.  This lower
rate will apply to loans consolidated         during fiscal year 2001
(October 1, 2000 through September 30, 2001).  Students may consolidate a
single loan or multiple loans.  As with       the interest rebate, students
must make their first 12 payments on time to keep this benefit.
   These new repayment  incentives will:

?    Encourage On-Time Loan Payments.  These repayment incentives are
designed to encourage students to meet their
responsibilities during their first year of repayment.  Data show that the
first year is critical to a lifetime of good habits: students who
make their first 12 payments are only one-fourth as likely to default.  At
the urging of Rep. Clay and Sen. Harkin, Congress authorized      the
Direct Student Loan program to offer repayment incentives in 1998.
?    Save Students Hundreds Of Dollars.  By making the first 12 payments on
time, the average undergraduate borrower could          receive a $150
interest rebate on new loans and save $500 through lower interest on a
consolidation loan.  The average graduate          borrower has $25,000 in
loans and could save $375 and $1,250, respectively.
?    Save Taxpayers Money.  The initiative is expected to save the U.S.
government $5 million over five years because: 1) more            students
will repay their loans on time, and; 2) more students will choose to
convert their guaranteed loans into direct loans, eliminating     federal
subsidies for lenders. A similar lower interest rate on consolidation loans
in 1998 saved the government over $200 million, even    while it saved
340,000 students over $30 million.  (Guaranteed student loans are made by
private lenders in return for federal subsidies    and guarantees against
default; direct loans are made by the U.S. Department of Education.)

THE PRESIDENT ALSO WILL PROPOSE A STEP TO EASE COLLEGE DEBT FOR TEACHERS IN
HIGH-NEED COMMUNITIES.  Today, the U.S. Department of Education will
propose a new rule providing loan forgiveness for teachers in lower-income
areas that have trouble retaining teachers.  The new rule ? which
implements a provision of the Higher Education Amendments of 1998 ? would
forgive up to $5,000 in loans after five consecutive years of teaching in
needy schools, at least one of which must have been 1998-99 or later.
Through 2003, over 25,000 teachers will receive $122 million in loan
forgiveness.  Teachers must not have had either: 1) outstanding student
loans on October 1, 1998, or  2) outstanding loans when they obtained new
loans after October 1, 1998.  This policy will help today?s students afford
college, become teachers in needy areas, and stay for at least five years.
The final rule is expected to take effect on July 1, 2001.
?    Over the next decade, U.S. schools must hire 2 million teachers to
accommodate increasing enrollments and the retirement of many
veteran teachers.  (U.S. Department of Education, Prospectus: The
Educational Excellence for All Children Act, 1999)
?    More than one-fifth of all new teachers leave the profession within
their first three years.  (Ibid.)


EIGHT YEARS OF STUDENT LOAN REFORM.  Today?s announcement builds on eight
years of effort to reform the student loan program and create more
opportunities for college.  The Clinton-Gore record includes:

?    MORE AFFORDABLE LOANS.  In its first budget in 1993, the Clinton-Gore
Administration reduced student loan fees from a         maximum of 8
percent to 4 percent.  Student loan interest rates were reduced in 1993 and
again in 1998.  Last year, the Administration           reduced direct loan
fees to 3 percent and today?s announcement adds an interest rebate equal to
1.5 percent.  In addition, the Direct         Loan program offers discounts
for students who consolidate before entering repayment and who repay
electronically.  Many         guaranteed lenders also offer student
discounts.  All told, students today can save up to $1,300 in interest and
fees over the life of         $10,000 in loans, compared to the cost of
that loan in 1992.
?    THE DIRECT STUDENT LOAN REVOLUTION.  The Direct Student Loan program
has helped more than 5 million students       pay for college since it was
founded in 1994.  It gives students and schools an alternative to
traditional guaranteed student loans,         injecting healthy competition
into the marketplace.
-    Direct student loans help students quickly, simply, and cheaply.  The
program applies free-market principles by raising            capital
efficiently through U.S. bond sales and making loans through competitively
awarded, performance-based contracts with private       firms.  It has
saved taxpayers over $4 billion by eliminating costly bank subsidies.
-    Over 1,200 schools have chosen to join Direct Lending.  It makes about
one-third of federal student loans.
-    A sliding scale allows graduates to adjust their monthly repayments
depending on their income, so they can undertake   public service careers
without fear of being unable to repay their loans.
?    DOUBLING STUDENT AID.  Students will receive nearly $60 billion in
federal grants, loans, and tax credits this year, up from         $25
billion in 1993.  The new Hope Scholarship tax credit provides up to $1,500
in tax relief for the first two years of college and the          Lifetime
Learning credit provides up to $1,000 for juniors and seniors, graduate
students, and adults seeking job training.  Together,        they will save
10 million American families $7.3 billion this year. Over 3.8 million needy
students receive a Pell Grant scholarship of up         to $3,300, a $1,000
larger maximum grant than in 1993.  To help disadvantaged youth prepare for
and succeed in college, the              Clinton-Gore Administration
expanded our investment in TRIO programs by two-thirds and created the new
GEAR UP initiative.
?    HALF AS MANY DEFAULTS.  Seven years ago, more than 22 percent of
borrowers defaulted within two years of entering        repayment; that
rate has fallen for seven straight years and is now a record-low 8.8
percent.  At the same time, collections on defaulted         loans have
tripled from $1 billion to $3 billion under this Administration.
CALLING ON CONGRESS TO INVEST IN AMERICA?S EDUCATION PRIORITIES.   In
February, the Clinton-Gore Administration sent Congress a balanced and
responsible budget that made investments in key education initiatives to
expand college opportunity, raise standards, and invest in what works.
However, the Republican budget:
?    Excludes the $36 billion College Opportunity Tax Cut to make college
more affordable and accessible.  The College Opportunity Tax      Cut would
allow families to deduct up to $10,000 in tuition from their taxable
income, saving them up to $2,800, when it is fully phased-in      in 2003.
?    Denies 600,000 disadvantaged students mentoring, academic support, and
preparation for college through GEAR UP.
?    Ignores the President?s plan to improve teacher quality through $1
billion for standards-based professional development, teacher
recruitment, teacher peer review programs, teacher quality awards, and
professional development for early childhood educators.           Research
shows that teacher quality is a key indicator of student performance.
?    Fails to strengthen accountability and turn around failing schools,
reduce class size, build and modernize 6,000 schools and make
emergency repairs to another 25,000, provide after-school learning
opportunities to over 1 million children, and help bridge the digital
divide.
     Meanwhile, the tax cuts passed by the Congress this year would drain
more than $900 billion of the surplus.  Together with the
substantial tax cuts supported by the Congressional Majority, this would
return America to deficits and leave no money for key        priorities.
At the same time, the Congressional budget would cut domestic priorities
$28 billion below the President's level, an average     cut of 9 percent.
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