(Washington, D.C.) – On behalf of its more than one million members and supporters, the Council for Citizens Against Government Waste (CCAGW) today made several recommendations to reform the Higher Education Act (HEA).  The House Education and Workforce Subcommittee on 21^st Century Competitiveness meets today to mark-up H.R. 609, the College Access and Opportunity Act of 2005, which will re-authorize the HEA.

CAGW recently released a report, “The Direct Loan Program Flunks Out,” that reveals how the Federal Direct Loan Program (FDLP) has not lived up to its expectations of saving taxpayers money.

 “The subcommittee needs to make sure that our tax dollars are spent wisely,” CCAGW Vice President for Government Affairs Elizabeth Wright said.  “The FDLP has a negative balance of $13 billion.  The program is in deep financial trouble and Congress should reject any attempts to artificially prop it up by taking more money from taxpayers or private lenders.  Instead, Congress needs to provide a process in the re-authorization that will monitor FDLP and eliminate the program if it continues to be inefficient and lose money.” 

Wright made the following recommendations for the reauthorization the HEA.

• Reject the Student Aid Reward Act of 2005 (H.R. 1425).  Often called STAR, Congress should not make the act part of the re-authorization.  Taking money from the Federal Family Education Loan Program (FFELP) and giving it to FDLP will not save the direct loan program.  Considering that FDLP is already losing money, it would be unwise to provide more tax dollars that could be spent carelessly.
• Change the current fixed rate for consolidated loans into a variable rate.  The GAO and several other reports have shown that allowing graduates to combine their school loans into a fixed rate will cost taxpayers approximately $14 billion at current interest rates and could cost as much as $48 billion if interest rates climb.
• Make permanent the provision in the Taxpayer-Teacher Protection Act (P.L. 108-409) that eliminates a federally-backed loan subsidy that allowed some lenders to earn a guaranteed 9.5 percent rate of return on new loans.
• Change funding for student aid administration from mandatory funds to a single discretionary account, which will improve accountability and simplify oversight.

“As Congress re-authorizes the HEA, CCAGW hopes Congress will keep taxpayers, as well as students, in mind.  Millions of students depend on college loans to get their degree but millions more taxpayers are assisting them in getting their degrees.  Congress needs to make sure these funds are carefully and wisely spent,” Wright concluded.

The Council for Citizens Against Government Waste is the lobbying arm of Citizens Against Government Waste, the nation's largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government.