I
104TH CONGRESS
1ST SESSION
H. R. 1501
To amend the Federal Credit Reform Act to improve budget accuracy of
accounting for Federal costs associated with student loans, to phase-
out the Federal Direct Student Loan Program, to make improvements
in the Federal Family Education Loan Program, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
APRIL 7, 1995
Mr. ISTOOK (for himself, Mr. BAKER of Louisiana, Mr. BOEHNER, Mr. BONO,
Mrs. CHENOWETH, Mr. DOOLITTLE, Mr. HUTCHINSON, Mr. INGLIS of
South Carolina, Mr. SAM JOHNSON of Texas, Mr. KASICH, Mr. KIM, Mr.
KLUG, Mr. MCINTOSH, Mr. MILLER of Florida, Mr. NORWOOD, Mr. POR-
TER, Mr. SAXTON, Mr. SCARBOROUGH, Mr. TALENT, Mr. WATTS of
Oklahoma, and Mr. WELLER) introduced the following bill; which was re-
ferred to the Committee on Economic and Educational Opportunities,
and in addition to the Committee on Government Reform and Oversight,
for a period to be subsequently determined by the Speaker, in each case
for consideration of such provisions as fall within the jurisdiction of the
committee concerned
A BILL
To amend the Federal Credit Reform Act to improve budget
accuracy of accounting for Federal costs associated with
student loans, to phase-out the Federal Direct Student
Loan Program, to make improvements in the Federal
Family Education Loan Program, and for other pur-
poses.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Student Loan Privat-
ization Act of 1995’’.
SEC. 2. FINDINGS.
The Congress finds the following:
(1) The Federal Direct Student Loan Program
will result in an increase of at least 500 full-time
equivalent employees at the United States Depart-
ment of Education and the hiring of over 15,000
Federal contract employees, assuming full implemen-
tation of the program.
(2) The involvement of private sector financial
institutions and not-for-profit corporations chartered
for the purpose of providing or supporting Federal
student assistance results in increased efficiency,
maintenance of quality of service to students and in-
stitutions, and innovation in and the use of modern
data processing technology.
(3) The Federal Family Education Loan Pro-
gram is subject to excessive regulation resulting in
burdensome administrative requirements for stu-
dents, schools, and other program participants, the
reduction of which would ease administrative bur-
dens and improve program management.
(4) The program costs of the Federal Direct
Student Loan program are inaccurately reflected
under the provisions of the Federal Credit Reform
Act due to the exclusion of accounting for certain
administrative costs associated with the program
under that Act.
(5) The budget scoring of Federal student loans
under the Federal Credit Reform Act led to projec-
tions of savings which are highly unlikely to occur
in reality for the Federal Direct Student Loan Pro-
gram.
TITLE I—REFORMS TO IMPROVE
THE ACCURACY OF THE FED-
ERAL CREDIT REFORM ACT
WITH RESPECT TO BUDGET
SCORING THE COST OF THE
FEDERAL DIRECT STUDENT
LOAN PROGRAM
SEC. 101. AMENDMENTS TO THE FEDERAL CREDIT REFORM
ACT.
Section 502(5)(B) of the Congressional Budget Act
is amended to read as follows:
‘‘(B) The cost of a direct loan shall be the
net present value, at the time when the direct
loan is disbursed, of the following cash flows for
the estimated life of the loan—
‘‘(i) loan disbursements;
‘‘(ii) repayments of principal;
‘‘(iii) payments of interest and other
payments by or to the Government over
the life of the loan after adjusting for esti-
mated defaults, prepayments, fees, pen-
alties and other recoveries; and
‘‘(iv) in the case of a direct loan made
pursuant to a program for which the Office
of Management and Budget estimates that
for the coming fiscal year (or for any prior
fiscal year) loan commitments will equal or
exceed $5,000,000,000, direct and indirect
expenses, including but not limited to the
following: expenses arising from credit pol-
icy and oversight; activities related to cred-
it extension; loan origination; loan servic-
ing; technical assistance; training; program
promotion; payments to contractors, other
government entities, and program partici-
pants; collection of delinquent loans; write-
off and close-out of loans; and an amount
equal to 1 basis point multiplied by the
amount of the total Federal debt obliga-
tions outstanding on the last day of the
Federal 
fiscal 
year 
for 
each
$50,000,000,000 outstanding in such di-
rect loans.’’.
SEC. 102. EFFECTIVE DATE.
The amendment made by section 101 shall apply to
all fiscal years beginning on or after October 1, 1995, and
to statutory changes made on or after the date of enact-
ment of this Act.
TITLE II—PHASE-OUT OF THE
FEDERAL DIRECT STUDENT
LOAN PROGRAM
SEC. 201. PHASE-OUT OF PROGRAM.
Section 453 of the Higher Education Act of 1965 (20
U.S.C. 1087c) (hereinafter in this title and in title III re-
ferred to as ‘‘the Act’’) is amended by adding at the end
the following new subsection:
‘‘(f) PHASE-OUT OF PROGRAM.—
‘‘(1) GENERAL
AUTHORITY.—The Secretary
shall modify or phase-out agreements entered into
with institutions of higher education pursuant to
section 454(a) to implement the phase-out of the
Federal Direct Student Loan Program as specified
in paragraph (2) of this section.
‘‘(2) MODIFICATION OR PHASE-OUT OF AGREE-
MENTS.—In order to ensure an expeditious but or-
derly phase-out of the programs authorized under
this part, the Secretary shall modify or phase-out
agreements entered into pursuant to section 454
with institutions of higher education to achieve the
following results:
‘‘(A) For academic year 1995–1996, loans
made under this part shall represent not more
than 5 percent of new student loan volume for
such year.
‘‘(B) For academic year 1996–1997 and
all subsequent academic years, no loans shall be
made pursuant to this part.
‘‘(3) NEW STUDENT LOAN VOLUME.—For the
purposes of this subsection, the term ‘new student
loan volume’ has the same meaning as under sub-
section (a)(4) of this section.
‘‘(4) MODIFICATION OF SOFTWARE AND SYS-
TEMS FOR PHASE-OUT OF DIRECT LOANS.—The Sec-
retary shall not make system modifications or up-
grades to software used in support of the program
under this part after the date of enactment of this
subsection.
‘‘(5) REGULATIONS GOVERNING PHASE-OUT OF
DIRECT
LOANS.—The Secretary shall promulgate
regulations governing the phase-out of the Federal
Direct Student Loan Program not later than 90