Bill Clinton: “I have introduced into the Congress a bill that I do believe will pass with both Republican and Democratic support--two…”

“I have introduced into the Congress a bill that I do believe will pass with both Republican and Democratic support--two bills--designed to deal with your problem. And let me just talk a little bit about it because you could tell by the clapping that you're not the only person in your fix. The college dropout rate is 2\1/2\ times the high school dropout rate. And an awful lot of people quit because they can't afford to stay. Now, in California this previously was not as big a problem because so many of the institutions were free. But you've got all these economic problems now; that can't be the case anymore. And even if you don't have big tuition you have expensive other--other expenses are significant. So here are the things we're trying to do. First of all, I've asked the Congress to adopt a national service program which would permit young people to earn up to $5,000 a year in credit either before, during, or after college to pay off loans for college expenses by doing important work in the community. It can be done before, during, or after college. Like after college, if someone agreed to be a teacher, for example, or a police officer in an underserved community, they could get $5,000 a year credit for that to pay off their loans. So that's, in effect, a scholarship program in return for national service. In addition to that, I've asked the Congress to totally reform the present student loan program. The present student loan program costs $4 billion a year: $3 billion in unpaid debts and $1 billion in fees to banks and to other people who handle the money for the student loan program. It is amazing the money that's in the student loan program. And there is also no incentive for them to collect on people who won't repay, because the Government guarantees 90 percent of it. So if you borrow $20,000 from a bank and you don't repay it, the Government will give them $18,000, and it will cost them $2,000 to go to court and get it, right? So it's not a good system. What I recommend is that we shift to a system of direct loans by a protected financial entity to be created by the Government to give you lower interest loans, to give you the money you need, and to give it to you on terms that won't frighten you. And here's what I mean--and people would be eligible without regard to their income, and here's how it would work: If you borrowed the money, you would not have to pay it back until you actually go to work. Then, you would be able to decide how you want to pay it back among two choices: You could pay it back on a regular loan repayment schedule, based on how much you borrowed, or if that was too tough and that scares a lot of people, you could pay it back as a percentage of your income so that you would never be required to pay more than a modest percentage of your income. So there would never be an incentive not to take the loan out, because it would always be an affordable percentage of your income. The catch is that we can't afford to lose $3 billion a year. So you'd have to pay it back at tax time. So you couldn't beat the bill, but you would always be able to afford to pay it back, and no one would expect you to pay it back unless you were actually working. This will dramatically change the economics of college financing. Initiatives To Assist the Private Sector”