Roundtable discussion with students on student loans at Southern Illinois University in Carbondale, Illinois

Weekly Compilation of Presidential Documents, Sept 18, 1995

September 11, 1995

The President. Is everybody in? For the members of the press corps that came in with me, as you know, I have been doing these roundtable discussions with students and faculty members and others in colleges around the country. And this is the kickoff of a back-to-school week we're doing this year to emphasize the choices that have to be made in Washington in the next 60 days that will affect education. And so I came here to Southern Illinois University.

One of the big issues is what's going to happen to the student loan program and, particularly, the direct loan program which our administration started. So I thought that we should start by having Pam Britton, who is in charge of financial aid here at SIU, talk a little bit about how it works--the direct loan program--and what you're doing here.

So, Pam, why don't you lead it off.

[At this point, Ms. Britton welcomed the President and asked the participating students to introduce themselves. Following the introductions, Ms. Britton explained how important the student loan program is to the students who attend Southern Illinois University.]

The President. Thank you. Let me explain--how many of you come from schools that have the direct loan program? You know the old guaranteed student loan program basically gave banks a 90 percent guarantee if they made a student loan to a student and the student didn't repay. And they got a handsome commission and fee on it. Under the direct loan program, the Government makes the loan directly through a Government institution like a lot of the other Government mortgage institutions. And what we found is that, number one, as Pam said, the loans are going out much faster--much, much faster. There is less paperwork for the college administrators, less paperwork for the students. If the students get the loans on time, then they don't have to go borrow money, what you talked about, short-term loans.

In addition to that, believe it or not, they are less expensive because the fee doesn't get paid. So the Government actually spends less money on them. And best of all, for students that have to borrow a lot of money, unlike the old guaranteed student loan program, there are four different repayment options, including an option to pay the money back as a percentage of your income, so that, for example, if you decide to take a job that you find very rewarding but doesn't pay very much money and you have a big loan, you still can't ever go broke doing it. There's no incentive ever to drop out of school because you can pay the money back as a percentage of your income.

This was a major part of my administration's economic proposal in 1993, and we got it through. And ever since then it's been under assault by the bankers who made the money under the old loan program. It is true that they're worse off. I mean, they lost a lot of business. But the students are better off, the administrators are better off, the Federal Treasury's better off, and the country's better off because now we're going to have more people borrowing money and going to school. But the bankers aren't better off, and they've persuaded the House of Representatives to get rid of the program, go back to the old system. And now it's under assault in the Senate; they'll be voting this week.

So one of the reasons I wanted to come here is to try to galvanize people like you all across the country to ask our Congress to stand up to the special interests that, you know, want their money back and to keep this program, which is working better for you.

I mean, ultimately, the purpose of the loan program is to educate more young people, to make loans--and not-so-young people going back to college, because a lot of people my age are now going back, and they can't do it without student aid.

So I want to hear all of your stories, but Pam told me she had sort of a testimonial--the experience that SIU has had with the direct loan program, and I must say, I hear that everywhere.

I met a young couple in Florida the other day who were both graduated from medical school with $140,000 in student loans between them, and they told us that if it weren't for the direct loan program, which permits them to repay as a percentage of their income--because, see, they're all going to become interns, they won't make a lot of money when they get right out of medical school. They said they would be spending over half of their monthly income repaying their loans. They wouldn't have enough money, literally, to pay for food and rent but for the direct loan program.

So, Pam, why don't you take over now. Let's go around and listen to the other students.

Ms. Britton. Okay. One of our student participants would like to begin by speaking to direct loan issues at her institution. Noemi?

Noemi Rivera-Morales. Mr. President, Ms. Britton, fellow students, good morning. Buenos dias.

The President. Buenos dias

[Ms. Rivera-Morales explained the difficulties she had had in the past in receiving her loan disbursement under the Pell grant program and stated that this year she received her loan within a week of applying to the direct loan program.]