Remarks and a question-and-answer session at Los Angeles Valley College in Van Nuys, California - Bill Clinton's speech, May 18, 1993

Weekly Compilation of Presidential Documents, May 24, 1993

In addition to that, I've asked the Congress to totally reform the present student loan program. The present student loan program costs $4 billion a year: $3 billion in unpaid debts and $1 billion in fees to banks and to other people who handle the money for the student loan program. It is amazing the money that's in the student loan program. And there is also no incentive for them to collect on people who won't repay, because the Government guarantees 90 percent of it. So if you borrow $20,000 from a bank and you don't repay it, the Government will give them $18,000, and it will cost them $2,000 to go to court and get it, right? So it's not a good system.

What I recommend is that we shift to a system of direct loans by a protected financial entity to be created by the Government to give you lower interest loans, to give you the money you need, and to give it to you on terms that won't frighten you. And here's what I mean--and people would be eligible without regard to their income, and here's how it would work:

If you borrowed the money, you would not have to pay it back until you actually go to work. Then, you would be able to decide how you want to pay it back among two choices: You could pay it back on a regular loan repayment schedule, based on how much you borrowed, or if that was too tough and that scares a lot of people, you could pay it back as a percentage of your income so that you would never be required to pay more than a modest percentage of your income. So there would never be an incentive not to take the loan out, because it would always be an affordable percentage of your income.

The catch is that we can't afford to lose $3 billion a year. So you'd have to pay it back at tax time. So you couldn't beat the bill, but you would always be able to afford to pay it back, and no one would expect you to pay it back unless you were actually working. This will dramatically change the economics of college financing.

Q. Hi, Mr. President. How are you doing?

The President. I'm fine.

Initiatives To Assist the Private Sector

Q. Okay. My question to you, sir, we have a plant in Van Nuys, the GM plant. I notice a lot of businesses such as that went out of State. What can the Government do to motivate big business to invest in the community college as well as State college and major universities?

The President. That's good. Well, I think first of all, most big businesses will invest more in the education of their employees than ever before because it's in their interest to do so. And I think what I should be doing is trying to figure out ways to give businesses incentives to reinvest in America and in putting Americans to work, and also, if possible, to try to make sure that every State has a chance to keep the manufacturing base.

Now, that affects California in two ways; let me just mention them. In the program that I have asked Congress to adopt, in addition to the tax increases, which you were good enough to ask about--and I'm really glad you gave me a chance just to lay it out because it's not near as bad as everybody thinks it is, is it--there is also a lot of incentives for businesses to reinvest. Small businesses today can expense or write off $10,000 of expenditures every year on their taxes. We've proposed to take that to $25,000. That's a good incentive for the small businesses to hire maybe one more employee. And most new jobs are created by small businesses. So this is a good thing to do.