Statement of Administration Policy: H.R. 4986 - Student Default Initiative Act of 1988

(House)
(Williams (D) MT and 11 others)

The Administration fully supports the basic goal of reducing costly student loan defaults, but opposes House passage of H.R. 4986 in its current form.

The President's senior advisers will recommend that the President veto the bill unless it is amended to delete the provision that would (1) eliminate the Secretary of Education's authority to reduce Pell Grant awards when there are insufficient funds to pay for the program costs, and (2) require the Secretary to borrow from the next year's appropriation to fund the current year's awards. This provision would mark a return to the situation, which the Administration and Congress have long since agreed to reject, that led to the accumulation of hundreds of millions of dollars in unfunded shortfalls.

The Administration also objects to other provisions of H.R. 4986, and especially urges deletion of the provision barring the Secretary from use of the authority to limit, suspend, or terminate an institution's participation in the Guaranteed Student Loan program solely because of the institution's excessive default rate.