Remarks of the Honorable Ralph Regula, M.C.

Before the House Education and the Workforce Committee
Subcommittee on 21^st Century Competitiveness

Regarding Elimination of the Single Lender Rule for Student Loans

July 22, 2003

Mr. Chairman, thank you for holding this hearing today on the issue of student loan consolidation and for allowing me the opportunity to appear before you on this topic.

I appreciate the opportunity to speak with you about this subject and share with you my goal in introducing legislation to eliminate the single lender rule in student loan consolidation. The bill, H.R. 942, is the Consolidation Student Loan Flexibility Act of 2003.

When the House reauthorized the Higher Education Act in 1998, the bill contained no exceptions for loan holders who wished to consolidate their student loans. As I understand it, however, at the insistence of the Senate during the conference, the provision that precluded one specific group of student loan holders from shopping for the best rates on their loan consolidation was retained in the law, those students with multiple loans from only one lender. This provision has become known at the single lender rule. I believe it is unfair, hence the reason for my legislation, and I ask that in the 2003 reauthorization of the Higher Education Act the exception be removed.

This exception makes no sense and is unfair to this one group of student loan recipients. It has been argued that unscrupulous lending companies would swoop down and take advantage of these naïve students when they are making decisions about managing their student loans. Those supporting the exception said that the students needed to be sheltered, protected. This implies that there is some magical knowledge that is imparted when you receive loans from more than one lender that isn’t received if you get multiple loans from the same lender. It also implies that the graduates, now out in the workforce as teachers, administrators, and professionals, are not smart enough to weigh the options before them and make the best decisions for their situation. I believe that the graduates of schools of higher education ARE capable of deciding what is best for them, whether they received loans from one lending institution or multiple institutions. With interest rates at historic lows, it is unfair to limit the choices that these recent graduates are given.

More than 22 Members of the House agree with me on this position and have cosponsored my bill. Further, this topic has become of interest to other members, as well, who have introduced bills that have similar provisions.

Again, I appreciate your interest in this subject, and I look forward to an informative hearing this morning. When the subcommittee drafts its proposal for the reauthorization of the Higher Education Act, I ask your support in eliminating the single lender exception. Thank you.