Statement of Administration Policy: H.R. 2544 - Public Service Education Assistance Act of 1989

(House)
(Gilman (R) NY, Ford (D) MI, and Sikorski (D) MN)

The Administration strongly opposes section 3 of H.R. 2544, and objects to House passage of the bill. Pursuant to section 3, agencies would be authorized to repay up to $6, 000 a year (and $40, 000 in total) of amounts owed by an employee for Federal educational loans. This loan repayment would be in exchange for a minimum three years of Federal Government service by these employees. If H.R. 2544 were presented to the President with section 3, the Secretary of Education would recommend disapproval of the bill.

Section 3 is extremely objectionable because:

—  as the Congressional Budget Office has reported, there is no evidence to indicate that the offer of loan repayment will result in better quality applicants for Federal service.

—  Federal costs in the first year alone could range from $19 million to $96 million, depending on whether agencies repay employee obligations each month or in a lump sum. Over five years, Federal cumulative costs could range from $225 million to $499 million (if agencies choose to pay the full obligation within three years).

—  it would allow, for the first time, cancellation of Guaranteed Student Loans (GSLs), setting a costly precedent. Because of the size of the GSL program (over $10 billion in new loans guaranteed each year, with $52 billion in guaranteed loans outstanding), the potential cost to the Government is substantial.

—  it is likely to provide a windfall for some employees, because of the generous agency repayment amounts combined with the short period of service required. This would be true especially for those who complete the minimum three years and then leave Federal service.

The Administration urges that H.R. 2544 not be considered under suspension of the rules, and that the bill be amended to delete section 3.