A r c h i v e d  I n f o r m a t i o n

Prepared Statement by
U.S. Secretary of Education Richard W. Riley
Regarding Student Loan Default Rates
Tuesday, October 5, 1999

Thank you. I'm glad to be here today. Press conferences are never more fun than when I have good news to share.

Today, I am pleased to release the student loan cohort default rate for fiscal year 1997. The national rate is 8.8 percent, the lowest ever. The default rate has declined for seven straight years since its peak of 22.4 percent in fiscal year 1990.

But we don't give up when a student defaults. We work very hard with them to help them re-enter repayment and meet their obligations. In fiscal year 1999, we collected $2.2 billion in defaulted loans, and consolidated another $860 million in defaulted loans to help borrowers manage their debt.

These numbers mean that the overwhelming majority of students are meeting their responsibilities to repay their loans. And the Department is succeeding in its mission of providing our young adults with the financial means to attend college or trade school, while safeguarding taxpayer dollars.

Default rates are more than an indicator of the health of the student aid programs-they also help us strengthen the program. This year, 49 schools with high default rates may lose student aid eligibility.

There is plenty of credit to go around for these successes. Our economy is enjoying the longest peacetime expansion in our history. Wages are up, productivity is rising, and unemployment is at a 30-year low.

Our partners-colleges, trade schools, and lenders and guarantors of student loans-are pioneering new ways to help students understand and meet their obligations.

And, in 1992, Congress provided the Department with new, tougher tools-to minimize loan defaults, increase collections, and remove shoddy schools from the student loan program-and we have aggressively implemented these tools.

Thank you, Greg Woods, the chief operating officer for student financial assistance, and your staff for their hard work. Diane Rogers, who oversaw the student aid programs last year; and David Longanecker, who was the longest-serving Assistant Secretary for Postsecondary Education ever before retiring earlier this summer, also deserve much of the credit for this achievement.

The lower default rate is one of the many ways we have strengthened student aid over the past six years:

• Students have saved nearly $9 billion through lower loan fees and interest rates;

• Taxpayers have saved over $5 billion thanks to the creation of the Direct Student Loan program and smaller subsidies on guaranteed loans; and

• We have expanded student aid opportunities, including providing larger Pell grants; one million work-study opportunities; the new Hope and Lifetime Learning tax credits for higher education and training; and the Gear Up and Trio initiatives to help disadvantaged students prepare for college success.

These are important improvements. However, I am concerned that Congress is writing a budget that undercuts these accomplishments, rather than building upon them.

The House proposal ends dedicated funding for class-size reduction; cuts after-school and reading initiatives; eliminates 64,000 college work-study slots; and provides not one dime to help disadvantaged children succeed in college through Gear Up or to help school districts replace our nation's aging and overcrowded schools.

The Senate proposal, while a bit better in some areas, still eliminates the priority for class size and under-funds vital investments in education. I urge members of Congress to come together on a bipartisan basis to resolve our differences.

Thank you. Now Greg Woods will make his remarks.

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