---------------------- Forwarded by Melissa N. Benton/OMB/EOP on 09/04/98
01:28 PM ---------------------------
Total Pages: ____
LRM ID: MNB221
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Washington, D.C. 20503-0001
Friday, September 4, 1998
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Liaison Officer - See Distribution below
FROM: Janet R. Forsgren (for) Assistant Director for Legislative
Reference
OMB CONTACT: Melissa N. Benton
PHONE: (202) 395-7887 FAX: (202) 395-6148
SUBJECT: EDUCATION Amendment(s) on,HR6 Higher Education Amendments
of 1998
DEADLINE: Noon Tuesday, September 8, 1998
In accordance with OMB Circular A-19, OMB requests the views of your
agency on the above subject before advising on its relationship to the
program of the President. please advise us if this item will affect
direct spending or receipts for purposes of the "Pay-As-You-Go" provisions
of Title XIII of the Omnibus Budget Reconciliation Act of 1990.
COMMENTS: These amendments are intended to: (1) reduce the lender
reinsurance rate from 98 percent to 96 percent; (2) set the FFEL
consolidation loan interest rate at Treasury bill plus 2.3 percent (not to
exceed 8.25 percent for loans made on or after October 1, 1998 and before
October 1, 2000); and (3) eliminate the "7-year" aspect of
dischargeability of student loans and other educational debts in
bankruptcy.
DISTRIBUTION LIST
AGENCIES: '
61-JUSTICE - L. Anthony Sutin - (202) 514-2141
118-TREASURY - Richard S. Carro - (202) 622-0650
EOP:
Barbara Chow
Barry White
Wayne Upshaw
Kathryn B. Stack
Lorenzo Rasetti
David Rowe
Robert M. Shireman
Michael Cohen
William H. White Jr.
Broderick Johnson
Doris O. Matsui
Elena Kagan
Justin D. Sullivan
Edward M. Rea
Daniel J. Chenok
Daniel I. Werfel
Robert G. Damus
David J. Haun
John E. Thompson
Alan B. Rhinesmith
Winifred Y. Chang
Brian S. Mason
LRM ID: MNB221 SUBJECT: EDUCATION Amendment(s) on HR6 Higher Education
Amendments of 1998
RESPONSE TO
LEGISLATIVE REFERRAL
MEMORANDUM
If your response to this request for views is short (e.g., concur/no
comment), we prefer that you respond bye-mail or by faxing us this
response sheet. If the response is short and you prefer to call, please
call the branch-wide line shown below (NOT the analyst'S line) to leave a
message with a legislative assistant.
You may also respond by:
(1) calling the analyst/attorney's direct line (you will be
connected to voice mail if the analyst does not answer); or
(2) sending us a memo or letter
Please include the LRM number shown above, and the subject shown below.
TO: Melissa N. Benton phone: 395-7887 Fax: 395-6148
Office of Management and Budget
Branch-Wide Line (to reach legislative assistant): 395-7362
FROM: (Date)
(Name)
(Agency)
(Telephone)
The following is the response of our agency to your request for views on
the above-captioned subject:
_ _ _ Concur
_ _ _ No Objection
_ _ _ No Comment
_ _ _ See proposed edits on pages
_ _ _ Other:
_ _ _ FAX RETURN of ___ pages, attached to this response sheet
Unable to convert ARMS_EXT: [ATTACH.D89]MAIL488726646.226 to ASCII,
The following is a HEX DUMP:
FF57504368040000010A020100000002050000002F1B000000020000371214A16AF17ED5164C92
[page and line numbers refer to Senate version ofH.R.6]
Page 187, insert immediately after line 6 the following (and renumber accordingly):
"(C) in subparagraph (G), by striking out '98 percent' and inserting in
lieu thereof '96 percent' ;".
Automated Records Management System
Hex-Dump Conversion
[page and line numbers_refer to Senate version of H,R,6]
Page 179, insert immediately after line 24 the following (and renumber accordingly):
"(2) CONSOLIDATION LOANS,--Section 428C(c)(I) (20 U,S,C, 1078-3(c)(I))
is amended by adding at the end thereof the following new subparagraphs:
'''(E) A consolidation loan made on or after October I, 1998 and before
October 1, 2000, shall bear interest at a rate that shall, during any 12-month period beginning
July 1 and ending on June 30, be determined on the preceding June 1 and be equal to--
'''(i) the bond equivalent rate of 91-day Treasury bills auctioned
at the final auction held prior to such June I; plus
'''(ii) 2,3 percent;
"except that such rate shall not exceed 8,25 percent.
'" (F) A consolidation loan made on or after October 1, 2000, shall bear
the interest rate described in subparagraph (C),' ,",
Automated Records Management System
Hex-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
[3.1 and lenders pay current 105 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof
Page 182, insert immediately after line 4 the following:
'''(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1, 2000, clause (i)(III) of this
subparagraph shall be applied by substituting "3.1 percent" for "2.8 percent".' .".
Automated Records Management System
Helt-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
[2.3 and lenders pay 25 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof
Page 182, insert immediately after line 4 the following (and renumber accordingly):
"'(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1, 2000, clause (i)(III) ofthis
subparagraph shall be applied by substituting "2.3 percent" for "2.8 percent".'.
"(2) CONSOLIDATION LOAN INTEREST REBATE FEE.--Section
428C(f)(I) (20 U.S.C.I078-3(f)(I)) is amended--
"(A) by striking out 'For' and inserting in lieu thereof '(A) Except as
provided in subparagraph (B), for'; and
"(B) by adding at the end thereof the following new subparagraph:
'''(B) For any month beginning on or after October 1, 1998 and before
October 1,2000, subparagraph (A) shall be applied by substituting ".25 percent" for "1.05
percent".' .".
Automated Records Management System
Hex.Dump Conversion
[page and line numbers refer to Senate version ofH.R.6]
Page 523, insert immediately after line 21 the following new section:
"DISCHAROEABILTY OF EDUCATIONAL DEBTS IN BANKRUPTCY
"SEC. 7990. (a) Section 523(a)(8) of the Bankruptcy Code (II U.S.C. 523(a)(8)) is
amended to read as follows:
'''(8) for an educational benefit overpayment or loan made, insured or guaranteed
by a governmental unit, or made under any program funded in whole or in part by a
governmental unit or nonprofit institution, or for an obligation to repay funds received as an
educational benefit, scholarship, or stipend, unless excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor and the debtor's dependents;'.
"(b) EFFECTIVE DATE.--The amendments made by subsection (a) shall be effective
with respect to any bankruptcy filing by a debtor filed on or after October I, 1998.".
Automated Records Management System
Hex-Dump Conversion
==================== ATTACHMENT 1 ====================
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT: [ATTACH.D89]MAIL488726646.226 to ASCII,
The following is a HEX DUMP:
FF57504368040000010A020100000002050000002F1B000000020000371214A16AF17ED5164C92
[page and line numbers refer to Senate version ofH.R.6]
Page 187, insert immediately after line 6 the following (and renumber accordingly):
"(C) in subparagraph (G), by striking out '98 percent' and inserting in
lieu thereof '96 percent' ;".
Automated Records Management System
Hex-Dump Conversion
[page and line numbers_refer to Senate version of H,R,6]
Page 179, insert immediately after line 24 the following (and renumber accordingly):
"(2) CONSOLIDATION LOANS,--Section 428C(c)(I) (20 U,S,C, 1078-3(c)(I))
is amended by adding at the end thereof the following new subparagraphs:
'''(E) A consolidation loan made on or after October I, 1998 and before
October 1, 2000, shall bear interest at a rate that shall, during any 12-month period beginning
July 1 and ending on June 30, be determined on the preceding June 1 and be equal to--
'''(i) the bond equivalent rate of 91-day Treasury bills auctioned
at the final auction held prior to such June I; plus
'''(ii) 2,3 percent;
"except that such rate shall not exceed 8,25 percent.
'" (F) A consolidation loan made on or after October 1, 2000, shall bear
the interest rate described in subparagraph (C),' ,",
Automated Records Management System
Hex-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
[3.1 and lenders pay current 105 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof
Page 182, insert immediately after line 4 the following:
'''(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1, 2000, clause (i)(III) of this
subparagraph shall be applied by substituting "3.1 percent" for "2.8 percent".' .".
Automated Records Management System
Helt-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
[2.3 and lenders pay 25 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof
Page 182, insert immediately after line 4 the following (and renumber accordingly):
"'(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1, 2000, clause (i)(III) ofthis
subparagraph shall be applied by substituting "2.3 percent" for "2.8 percent".'.
"(2) CONSOLIDATION LOAN INTEREST REBATE FEE.--Section
428C(f)(I) (20 U.S.C.I078-3(f)(I)) is amended--
"(A) by striking out 'For' and inserting in lieu thereof '(A) Except as
provided in subparagraph (B), for'; and
"(B) by adding at the end thereof the following new subparagraph:
'''(B) For any month beginning on or after October 1, 1998 and before
October 1,2000, subparagraph (A) shall be applied by substituting ".25 percent" for "1.05
percent".' .".
Automated Records Management System
Hex.Dump Conversion
[page and line numbers refer to Senate version ofH.R.6]
Page 523, insert immediately after line 21 the following new section:
"DISCHAROEABILTY OF EDUCATIONAL DEBTS IN BANKRUPTCY
"SEC. 7990. (a) Section 523(a)(8) of the Bankruptcy Code (II U.S.C. 523(a)(8)) is
amended to read as follows:
'''(8) for an educational benefit overpayment or loan made, insured or guaranteed
by a governmental unit, or made under any program funded in whole or in part by a
governmental unit or nonprofit institution, or for an obligation to repay funds received as an
educational benefit, scholarship, or stipend, unless excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor and the debtor's dependents;'.
"(b) EFFECTIVE DATE.--The amendments made by subsection (a) shall be effective
with respect to any bankruptcy filing by a debtor filed on or after October I, 1998.".
Automated Records Management System
Hex-Dump Conversion
---------------------- Forwarded by Melissa N. Benton/OMB/EOP on 09/04/98
01:28 PM ---------------------------
Total Pages: ____
LRM ID: MNB221
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Washington, D.C. 20503-0001
Friday, September 4, 1998
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Liaison Officer - See Distribution below
FROM: Janet R. Forsgren (for) Assistant Director for Legislative
Reference
OMB CONTACT: Melissa N. Benton
PHONE: (202) 395-7887 FAX: (202) 395-6148
SUBJECT: EDUCATION Amendment(s) on HR6 Higher Education Amendments
of 1998
DEADLINE: Noon Tuesday, September 8, 1998
In accordance with OMB Circular A-19, OMB requests the views of your
agency on the above subject before advising on its relationship to the
program of the President. Please advise us if this item will affect
direct spending or receipts for purposes of the "Pay-As-You-Go" provisions
of Title XIII of the Omnibus Budget Reconciliation Act of 1990.
COMMENTS: These amendments are intended to: (1) reduce the lender
reinsurance rate from 98 percent to 96 percent; (2) set the FFEL
consolidation loan interest rate at Treasury bill plus 2.3 percent (not to
exceed 8.25 percent for loans made on or after October 1, 1998 and before
October 1, 2000); and (3) eliminate the "7-year" aspect of
dischargeability of student loans and other educational debts in
bankruptcy.
DISTRIBUTION LIST
AGENCIES:
61-JUSTICE - L. Anthony Sutin - (202) 514-2141
118-TREASURY - Richard S. Carro - (202) 622-0650
EOP:
Barbara Chow
Barry White
Wayne Upshaw
Kathryn B. Stack
Lorenzo Rasetti
David Rowe
Robert M. Shireman
Michael Cohen
William H. White Jr.
Broderick Johnson
Doris O. Matsui
Elena Kagan
Justin D. Sullivan
Edward M. Rea
Daniel J. Chenok
Daniel I. Werfel
Robert G. Damus
David J. Haun
John E. Thompson
Alan B. Rhinesmith
Winifred Y. Chang
Brian S. Mason
LRM ID: MNB221 SUBJECT: EDUCATION Amendment(s) on HR6 Higher Education
Amendments of 1998
RESPONSE TO
LEGISLATIVE REFERRAL
MEMORANDUM
If your response to this request for views is short (e.g., concur/no
comment), we prefer that you respond bye-mail or by faxing us this
response sheet. If the response is short and you prefer to call, please
call the branch-wide line shown below (NOT the analyst's line) to leave a
message with a legislative assistant.
You may also respond by:
(1) calling the analyst/attorney's direct line (you will be
connected to voice mail if the analyst does not answer); or
(2) sending us a memo or letter
Please include the LRM number shown above, and the subject shown below.
TO: Melissa N. Benton Phone: 395-7887 Fax: 395-6148
Office of Management and Budget
Branch-Wide Line (to reach legislative assistant): 395-7362
FROM: (Date)
(Name)
(Agency)
(Telephone)
The following is the response of our agency to your request for views on
the above-captioned subject:
Concur
No Objection
______ No Comment
See proposed edits on pages
Other:
FAX RETURN of _____ pages, attached to this response sheet
Unable to convert ARMS_EXT: [ATTACH.D89]MAIL488726646.226 to ASCII,
The following is a HEX DUMP:
FF57504368040000010A020100000002050000002F1B000000020000371214A16AF17ED5164C92
F4741F8A586242AFBA3FF3B2A8094CC293F1216E18022F85515417AAC72249EFDA9DD3582B581F
4AF9627DBA55CC8DDSBSE1878E95DC180D349BA752B5C961BD8D46AAE82EEB5BD4F3D23A946FCF
A9A616FSE6281ADD41213CFOOB3BE8CD288492DD7F91A7A9D3DFD1CB6E4ECECS4C35879A93A880
[page and line numbers refer to Senate version ofH.R.6]
Page 187, insert immediately after line 6 the following (and renumber accordingly):
"(C) in subparagraph (G), by striking out '98 percent' and inserting in
lieu thereof '96 percent' ;".
Automated Records l'.fanagement System
Hex-Dump Conversion
draft 9/3/98 1:00 p.m.
[page and line numbers refer to Senate version ofH.R.6]
Page 179, insert immediately after line 24 the following (and renumber accordingly):
"(2) CONSOLIDATION LOANS.--Section 428C(c)(I) (20 U.S.C. 1078-3(c)(I
is amended by adding at the end thereof the following new subparagraphs:
'''(E) A consolidation loan made on or after October I, 1998 and before
October 1,2000, shall bear interest at a rate that shall, during any 12-month period beginning
July 1 and ending on June 30, be determined on the preceding June 1 and be equal to--
'''(i) the bond equivalent rate of 91-day Treasury bills auctioned
at the final auction held prior to such June 1; plus
'''(ii) 2.3 percent;
"except that such rate shall not exceed 8.25 percent.
'''(F) A consolidation loan made on or after October 1,2000, shall bear
the interest rate described in subparagraph (C).' .".
Automated Records Management System
Hex-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
[3.1 and lenders pay current 105 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof.
Page 182, insert immediately after line 4 the following:
'''(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1,2000, clause (i)(III) of this
subparagraph shall be applied by substituting "3.1 percent" for "2.8 percent".'. ".
Automated Records M
H anagement System
ex-Dwnp Conversion
[page and line numbers refer to Senate version ofH.R.6]
[2.3 and lenders pay 25 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof.
Page 182, insert immediately after line 4 the following (and renumber accordingly):
"'(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1, 2000, clause (i) (Ill) of this
subparagraph shall be applied by substituting "2.3 percent" for "2.8 percent".'.
"(2) CONSOLIDATION LOAN INTEREST REBATE FEE.--Section
428C(f)(1) (20 U.S.C.1078-3(f)(1 is amended--
"(A) by striking out 'For' and inserting in lieu thereof '(A) Except as
provided in subparagraph (B), for'; and
"(B) by adding at the end thereof the following new subparagraph:
"'(B) For any month beginning on or after October I, 1998 and before
October 1,2000, subparagraph (A) shall be applied by substituting ".25 percent" for "1.05
percent". ' .".
Automated Records Management System
Hex-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
Page 523, insert immediately after line 21 the following new section:
"DISCHARGEABILTY OF EDUCATIONAL DEBTS IN BANKRUPTCY
"SEC. 799G. (a) Section 523(a)(8) of the Bankruptcy Code (11 U.S.C. 523(a)(8 is
amended to read as follows:
'''(8) for an educational benefit overpayment or loan made, insured or guaranteed
by a governmental unit, or made under any program funded in whole or in part by a
governmental unit or nonprofit institution, or for an obligation to repay funds received as an
educational benefit, scholarship, or stipend, unless excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor and the debtor's dependents;'.
"(b) EFFECTIVE DATE.--The amendments made by subsection (a) shall be effective
with respect to any bankruptcy filing by a debtor filed on or after October 1, 1998.".
Automated Records Management System
Hex-Dump Conversion
"
==================== ATTACHMENT 1 ====================
ATT CREATION TIME/DATE: 0 00:00:00.00
TEXT:
Unable to convert ARMS_EXT: [ATTACH.D89]MAIL488726646.226 to ASCII,
The following is a HEX DUMP:
FF57504368040000010A020100000002050000002F1B000000020000371214A16AF17ED5164C92
F4741F8A586242AFBA3FF3B2A8094CC293F1216E18022F85515417AAC72249EFDA9DD3582B581F
4AF9627DBA55CC8DDSBSE1878E95DC180D349BA752B5C961BD8D46AAE82EEB5BD4F3D23A946FCF
A9A616FSE6281ADD41213CFOOB3BE8CD288492DD7F91A7A9D3DFD1CB6E4ECECS4C35879A93A880
[page and line numbers refer to Senate version ofH.R.6]
Page 187, insert immediately after line 6 the following (and renumber accordingly):
"(C) in subparagraph (G), by striking out '98 percent' and inserting in
lieu thereof '96 percent' ;".
Automated Records l'.fanagement System
Hex-Dump Conversion
draft 9/3/98 1:00 p.m.
[page and line numbers refer to Senate version ofH.R.6]
Page 179, insert immediately after line 24 the following (and renumber accordingly):
"(2) CONSOLIDATION LOANS.--Section 428C(c)(I) (20 U.S.C. 1078-3(c)(I
is amended by adding at the end thereof the following new subparagraphs:
'''(E) A consolidation loan made on or after October I, 1998 and before
October 1,2000, shall bear interest at a rate that shall, during any 12-month period beginning
July 1 and ending on June 30, be determined on the preceding June 1 and be equal to--
'''(i) the bond equivalent rate of 91-day Treasury bills auctioned
at the final auction held prior to such June 1; plus
'''(ii) 2.3 percent;
"except that such rate shall not exceed 8.25 percent.
'''(F) A consolidation loan made on or after October 1,2000, shall bear
the interest rate described in subparagraph (C).' .".
Automated Records Management System
Hex-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
[3.1 and lenders pay current 105 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof.
Page 182, insert immediately after line 4 the following:
'''(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1,2000, clause (i)(III) of this
subparagraph shall be applied by substituting "3.1 percent" for "2.8 percent".'. ".
Automated Records M
H anagement System
ex-Dwnp Conversion
[page and line numbers refer to Senate version ofH.R.6]
[2.3 and lenders pay 25 basis point interest rebate fee]
Page 182, line 4, strike out the close quotation marks and the period at the end thereof.
Page 182, insert immediately after line 4 the following (and renumber accordingly):
"'(v) CONSOLIDATION LOANS.--In the case of any loan made
under section 428C on or after October 1, 1998 and before October 1, 2000, clause (i) (Ill) of this
subparagraph shall be applied by substituting "2.3 percent" for "2.8 percent".'.
"(2) CONSOLIDATION LOAN INTEREST REBATE FEE.--Section
428C(f)(1) (20 U.S.C.1078-3(f)(1 is amended--
"(A) by striking out 'For' and inserting in lieu thereof '(A) Except as
provided in subparagraph (B), for'; and
"(B) by adding at the end thereof the following new subparagraph:
"'(B) For any month beginning on or after October I, 1998 and before
October 1,2000, subparagraph (A) shall be applied by substituting ".25 percent" for "1.05
percent". ' .".
Automated Records Management System
Hex-Dump Conversion
[page and line numbers refer to Senate version of H.R.6]
Page 523, insert immediately after line 21 the following new section:
"DISCHARGEABILTY OF EDUCATIONAL DEBTS IN BANKRUPTCY
"SEC. 799G. (a) Section 523(a)(8) of the Bankruptcy Code (11 U.S.C. 523(a)(8 is
amended to read as follows:
'''(8) for an educational benefit overpayment or loan made, insured or guaranteed
by a governmental unit, or made under any program funded in whole or in part by a
governmental unit or nonprofit institution, or for an obligation to repay funds received as an
educational benefit, scholarship, or stipend, unless excepting such debt from discharge under this
paragraph will impose an undue hardship on the debtor and the debtor's dependents;'.
"(b) EFFECTIVE DATE.--The amendments made by subsection (a) shall be effective
with respect to any bankruptcy filing by a debtor filed on or after October 1, 1998.".
Automated Records Management System
Hex-Dump Conversion
"
Total Pages: ____
LRM ID: MNB224
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Washington, D.C. 20503-0001
wednesday, September 9, 1998
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Liaison Officer - See Distribution below
FROM: Janet R. Forsgren (for) Assistant Director for Legislative
Reference
OMB CONTACT: Constance J. Bowers
pHONE: (202)395-3803 FAX: (202)395-6148
SUBJECT: EDUCATION Amendment(s) on HR6 Higher Education Amendments
of 1998
DEADLINE: 4 p.m. Thursday, September 10, 1998
In accordance with OMB Circular A-19, OMB requests the views of your
agency on the above subject before advising on its relationship to the
program of the President. Please advise us if this item will affect
direct spending or receipts for purposes of the "Pay-As-You-Go,' provisions
of Title XIII of the Omnibus Budget Reconciliation Act of 1990.
COMMENTS:
DISTRIBUTION LIST
AGENCIES:
61-JUSTICE - L. Anthony Sutin - (202) 514-2141
118-TREASURY - Richard S. Carro - (202) 622-0650
EOP:
Barbara Chow
Barry White
Wayne Upshaw
Kathryn B. Stack
Lorenzo Rasetti
David Rowe
Robert M. Shireman
Michael Cohen
William H. White Jr.
Broderick Johnson
Doris O. Matsui
Elena Kagan
Justin D. Sullivan
Edward M. Rea
Daniel J. Chenok
Daniel I. Werfel
Robert G. Damus
David J. Haun
John E. Thompson
Alan B. Rhinesmith
Winifred Y. Chang
Arthur W. Stigile
Brian S. Mason
Janet R. Forsgren
Constance J. Bowers
LRM ID: MNB224 SUBJECT: EDUCATION Amendment(s} on HR6 Higher Education
Amendments of 1998
RESPONSE TO
LEGISLATIVE REFERRAL
MEMORANDUM
If your response to this request for views is short (e.g., concur/no
comment), we prefer that you respond bye-mail or by faxing us this
response sheet. If the response is short and you prefer to call, please
call the branch-wide line shown below (NOT the analyst's line) to leave a
message with a legislative assistant.
You may also respond by:
(1) calling the analyst/attorney's direct line (you will be
connected to voice mail if the analyst does not answer); or
(2) sending us a memo or letter .
Please include the LRM number shown above, and the subject shown below.
TO: Constance J. Bowers Phone: 395-3803 Fax: 395-6148
Office of Management and Budget
Branch-Wide Line (to reach legislative assistant): 395-7362
FROM: (Date)
(Name)
(Agency)
(Telephone)
The following is the response of our agency to your request for views on
the above-captioned subject:
Concur
No Objection
No Conunent
See proposed edits on pages
Other:
FAX RETURN of _____ pages, attached to this response sheet
Little-Known Subsidy
"Complements" Guaranty Agencies
The Federal Family Education Loan program includes provisions under which
guaranty agencies ostensibly bear a small portion of the cost of each
defaulted loan. A little-known payment called the collection complement,
however, effectively repays guaranty agencies for their share of default
costs. HereD,s how it works:
A loan with a balance of $1,000 (outstanding principal and
accrued interest) defaults.
The lender submits a claim to their guaranty agency and is paid
$980, or 98 percent of the principal and accrued interest. The guaranty
agency then submits a reinsurance claim to the Department of Education and
is paid $960, or 98 percent of the amount paid to the lender. (Under the
House and Senate HEA Reauthorization bills, this amount would be reduced
to 95 percent beginning October 1, 1998.) Thus, the agency temporarily
loses 2 percent of the amount it paid the lender. (We should note that
agencies generally pay lenders from their reserve funds, which are Federal
property, so even this temporary loss is underwritten fully by the
government. )
Guaranty agencies then collect on the loan:
Agencies are required to charge a fee of up to
18.5 percent to cover their collection costs; this fee is added to the
default balance owed by the borrower. The Department of Education and
many efficient guaranty agencies have collection costs below this level.
Agencies are allowed by statute to retain 27
percent of all collections to cover their costs, even though students only
are charged a maximum of 18.5 percent.
Agencies may retain an additional 2 percent,
called the collection complement, to compensate the agency for the 2
percent risk-sharing deducted from their reinsurance payment from the
Department.
~RMS Email System Page 5 of 5
Thus, if an agency collects $100 a month on the
$1,000 loan discussed above, each monthly payment would be allocated as
follows:
Allocation of Payments
in Borrower Account Allocation of Cash Between Agency and Department
$18.50 applied to collection fee $27 to guaranty agency for collect
retention
$81.50 applied to principal and interest $71 to Department to cover
principal and interest
$2 complement to guaranty agency for recovery of risk-sharing paymen
As the table shows, for each $100 the guaranty agency collects on the
defaulted loan, it retains $27, or 27 percent, plus a $2 complement, for a
total of $29 dollars. The balance of the collection--$71--goes to the
Department.
-- The agency continues to retain the 2 percent complement even after
the initial risk-sharing has been fully offset, For example, on the
$1,000 loan discussed above, the agency risk-sharing totaled $20
($980-$960=$20). Deducting $2 from each of the first 10 $100 monthly
repayments would recoup this $20 "loss"--agencies, however, can continue
to retain the 2 percent complement on all subsequent repayments,
effectively making money on the defaulted loan at the taxpayerO,s expense.
Both the House and Senate reauthorization bills reduce the amount
agencies may retain to 24 percent from 27 percent.
-- Under these bills, the agency would retain $24 of every $100
collected, plus a $5 complement. (The complement increase corresponds
with the increased risk-sharing discussed above,) As a result, the agency
would retain a total of $29, the same amount as under current law.
Under either current law or the House or Senate reauthorization proposals,
guaranty agency risk-sharing is thoroughly undermined by the complement.
Eliminating this provision would create a true incentive for agencies to
prevent defaults, while producing five-year savings of $138 million at 98
percent reinsurance and $347 million at 95 percent reinsurance under OMB
scoring.
July 24, 1998
Budget Service
draft 9/7/98 11:30 a.m.
[page and line numbers refer to the Senate version of H.R. 6]
[elimination of the "complement"]
Page 169, line 15, add "and" at the end thereof,
Page 169, strike out lines 16-21. [? do we want to eliminate this
provision?]
Page 169, line 22, strike out "0+(3)0," and insert "0+(2)0, ".
Page 193, strike out lines 13-23 and insert the following: "O+under this
subsection has deducted from such payments an amount equal to 24 percent
of such payments for use in accordance with section 422B, except that,
beginning on September 30, 2003 [date taken from the bill; shouldnO,t this
be October 1?], this paragraph shall be applied by substituting "23
percent!! for "24 percent .0,; ".
II
Total Pages: ____
LRM ID: MNB224
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Washington, D.C. 20503-0001
Wednesday, September 9, 1998
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Liaison Officer - See Distribution below
FROM: Janet R. Forsgren (for) Assistant Director for Legislative
Reference
OMB CONTACT: Constance J. Bowers
PHONE: (202) 395 -3803 FAX: (202) 395 - 6148
SUBJECT: EDUCATION Amendment(s) on HR6 Higher Education Amendments
of 1998
DEADLINE: 4 p.m. Thursday, September 10, 1998
In accordance with OMB Circular A-19, OMB requests the views of your
agency on the above subject before advising on its relationship to the
program of the President. Please advise us if this item will affect
direct spending or receipts for purposes of the "Pay-As-You-Go" provisions
of Title XIII of the Omnibus Budget Reconciliation Act of 1990.
COMMENTS:
DISTRIBUTION LIST
AGENCIES:
61-JUSTICE - L. Anthony Sutin - (202) 514-2141
118-TREASURY - Richard S. Carro - (202) 622-0650
EOP:
Barbara Chow
Barry White
Wayne Upshaw
Kathryn B. Stack
Lorenzo Rasetti
David Rowe
Robert M. Shireman
Michael Cohen
William H. White Jr.
Broderick Johnson
Doris o. Matsui
Elena Kagan
Justin D. Sullivan
Edward M. Rea
Daniel J. Chenok
Daniel I. Werfel
Robert G. Damus
David J. Haun
John E. Thompson
Alan B. Rhinesmith
Winifred Y. Chang
Arthur W. Stigile
Brian S. Mason
Janet R. Forsgren
Constance J. Bowers
LRM ID: MNB224 SUBJECT: EDUCATION Amendment(s) on HR6 Higher Education
Amendments of 1998
RESPONSE TO
LEGISLATIVE REFERRAL
MEMORANDUM
If your response to this request for views is short (e.g., concur/no
comment), we prefer that you respond bye-mail or by faxing us this
response sheet. If the response is short and you prefer to call, please
call the branch-wide line shown below (NOT the analyst's line) to leave a
message with a legislative assistant.
You may also respond by:
(1) calling the analyst/attorney's direct line (you will be
connected to voice mail if the analyst does not answer); or
(2) sending us a memo or letter
Please include the LRM number shown above, and the subject shown below.
TO: Constance J. Bowers Phone: 395-3803 Fax: 395-6148
Office of Management and Budget
Branch-Wide Line (to reach legislative assistant): 395-7362
FROM: (Date)
(Name)
.ARMs Email System Page 4 of 5
(Agency)
(Telephone)
The following is the response of our agency to your request for views on
the above-captioned subject:
Concur
No Objection
No Comment
See proposed edits on pages
Other:
FAX RETURN of _____ pages, attached to this response sheet
Little-Known Subsidy
"Complements" Guaranty Agencies
The Federal Family Education Loan program includes provisions under which
guaranty agencies ostensibly bear a small portion of the cost of each
defaulted loan. A little-known payment called the collection complement,
however, effectively repays guaranty agencies for their share of default
costs. HereD,s how it works:
A loan with a balance of $1,000 (outstanding principal and
accrued interest) defaults.
The lender submits a claim to their guaranty agency and is paid
$980, or 98 percent of the principal and accrued interest. The guaranty
agency then submits a reinsurance claim to the Department of Education and
is paid $960, or 98 percent of the amount paid to the lender. (Under the
House and Senate HEA Reauthorization bills, this amount would be reduced
to 95 percent beginning October 1, 1998.) Thus, the agency temporarily
loses 2 percent of the amount it paid the lender. (We should note that
agencies generally pay lenders from their reserve funds, which are Federal
property, so even this temporary loss is underwritten fully by the
government. )
Guaranty agencies then collect on the loan:
Agencies are required to charge a fee of up to
18.5 percent to cover their collection costs; this fee is added to the
default balance owed by the borrower. The Department of Education and
many efficient guaranty agencies have collection costs below this level.
Agencies are allowed by statute to retain 27
percent of all collections to cover their costs, even though students only
are charged a maximum of 18.5 percent.
Agencies may retain an additional 2 percent,
called the collection complement, to compensate the agency for the 2
percent risk-sharing deducted from their reinsurance payment from the
Department.
Thus, if an agency collects $100 a month on the
$1,000 loan discussed above, each monthly payment would be allocated as
follows:
Allocation of Payments
in Borrower Account Allocation of Cash Between Agency and Department
$18.50 applied to collection fee $27 to guaranty agency for collect
retention
$81.50 applied to principal and interest $71 to Department to cover
principal and interest
$2 complement to guaranty agency for recovery of risk-sharing paymen
As the table shows, for each $100 the guaranty agency collects on the
defaulted loan, it retains $27, or 27 percent, plus a $2 complement, for a
total of $29 dollars. The balance of the collection--$71--goes to the
Department.
-- The agency continues to retain the 2 percent complement even after
the initial risk-sharing has been fully offset. For example, on the
$1,000 loan discussed above, the agency risk-sharing totaled $20
($980-$960=$20). Deducting $2 from each of the first 10 $100 monthly
repayments would recoup this $20 "loss"--agencies, however, can continue
to retain the 2 percent complement on all subsequent repayments,
effectively making money on the defaulted loan at the taxpayerO,s expense.
Both the House and Senate reauthorization bills reduce the amount
agencies may retain to 24 percent from 27 percent.
-- Under these bills, the agency would retain $24 of every $100
collected, plus a $5 complement. (The complement increase corresponds
with the increased risk-sharing discussed above.) As a result, the agency
would retain a total of $29, the same amount as under current law.
Under either current law or the House or Senate reauthorization proposals,
guaranty agency risk-sharing is thoroughly undermined by the complement.
Eliminating this provision would create a true incentive for agencies to
prevent defaults, while producing five-year savings of $138 million at 98
percent reinsurance and $347 million at 95 percent reinsurance under OMB
scoring.
July 24, 1998
Budget Service
draft 9/7/98 11:30 a.m.
[page and line numbers refer to the Senate version of H.R. 6]
[elimination of the "complement"]
Page 169, line 15, add "and" at the end thereof.
Page 169, strike out lines 16-21. [? do we want to eliminate this
provision?]
Page 169, line 22, strike out "0+(3)0," and insert "0+(2)0,".
Page 193, strike out lines 13-23 and insert the following: "O+under this
subsection has deducted from such payments an amount equal to 24 percent
of such payments for use in accordance with section 422B, except that,
beginning on September 30, 2003 [date taken from the bill; shou1dnD,t this
be October 1?], this paragraph shall be applied by substituting "23
percent" for "24 percent".O,;".
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