Small Business Lending Fund Act of 2010

Floor Speech

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Mr. DURBIN. Mr. President, first, I thank the chairman of the Senate Finance Committee, Senator Baucus of Montana, who just spoke about the bill before us. If you go to any State in America and ask those who own small businesses what their challenges are today, I will guarantee you that in the top one, two or three items, it is access to credit.

This bill, this small business jobs bill, will give access to credit to thousands of businesses across America so they will have money to expand inventory, to expand their business, to expand their employment.

Many of us believe, as Senator Baucus has said, small businesses are key to job growth in America. I cannot explain--I cannot explain--why the Republican Party decided to filibuster this to try to stop us from even bringing this bill to the floor over and over and over. We should have passed this bill months ago. It should have been passed on a bipartisan basis. The Small Business Committee is one of the most bipartisan committees in the Senate. Yet they have resisted it.

I wish to join Senator Baucus in thanking two Republican colleagues who had the courage--and it took political courage--to step up and say: Put an end to this filibuster. We have to help small business. Senator George Voinovich of Ohio and Senator George LeMieux of Florida both stepped up, and because of their courage, we passed this bill yesterday with 61 votes--at least moved it forward, I should say, toward passage, and that is dramatic, positive progress for us when it comes to dealing with this recession.

I also wish to say there was a statement made yesterday. I listened to it in my office. It was the stakeout of the Republican leaders after their luncheon, and I listened carefully as Senator McConnell, the Senate Republican minority leader, as well as Senator Kyl of Arizona, and others in their leadership, came to the microphones right outside this Chamber and said there should be no tax cuts in America--pardon me--there should be no tax increases in America.

They came and said there should be no tax increases in America for anyone. They were focusing on the Bush economic policies that gave tax cuts to the wealthiest Americans, and these Republican leaders said: There should be no tax increases in America.

I wish to say that from my point of view, yesterday the Senate Republican leadership, in front of microphones right outside this Chamber, filed for bankruptcy for the United States of America. If we cannot, in the midst of this recession and with our Nation's deficit, ask for a sacrifice from the wealthiest people in America, then I am afraid we have lost our way.

Let me quote someone who knows a little bit about policy in Washington. His name is David Stockman. I remember David Stockman when I first came to Congress because David Stockman was the budget adviser to President Ronald Reagan. He was the man who guided the President in his thinking about budgets. So, certainly, he has a Republican resume that is pretty strong.

What did David Stockman say about the current state of the Republican Party when it came to these issues of deficits and tax cuts? Here is what he said:

If there were such a thing as Chapter 11 for politicians, the Republican push to extend unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ..... will soon reach $18 trillion.

Stockman said it screams ``out for austerity and sacrifice.'' But, instead, the GOP insists ``that the Nation's wealthiest taxpayers be spared even a three-percentage-point rate increase.''

Well, I know what the Republicans are likely to say in response. They are likely to argue what they have argued for 10 years; that is, if we give a tax break to the wealthiest people in America, then this economy is going to prosper. These wealthy people will spend their money and invest their money in a way that will create jobs, which leads to one very basic question. After 10 years of tax cuts for the wealthiest people in America, where are the jobs? After 10 years of tax cuts for millionaires and those at the highest levels of income, where are the jobs? Eight million Americans are out of work. Another 6 million have basically given up looking for work. We have 14 million unemployed in the worst recession we have ever faced because of Bush economic policies--we have to go back to the Great Depression to see anything worse--and it was based on 10 years of tax cuts for wealthy people. This did not create jobs; it created the biggest debt in the history of the United States.

Let me digress for 60 seconds or so for history. President William Jefferson Clinton left office, turning over the keys to the White House to George W. Bush. What was the state of the economy in America? Well, we had created some 22 million jobs in the previous 8 years. We had a national debt that had been accumulated--a national debt from George Washington through President Clinton of $5 trillion--$5 trillion--and the President said--President Clinton said to President Bush: Welcome to Washington. Good luck in your administration. Let me give you as a starting gift from my administration a $120 billion surplus--surplus in the Treasury--not a deficit but a surplus.

Now, fast-forward 8 years. Now President George W. Bush has had his chance to use his economic policies, and where are we? Well, the national debt has risen from $5 trillion over an 8-year period of time to $12 trillion--more than double during that period of time. How does one more than double the national debt of America in 8 years? Well, let me count the ways.

First, wage two wars and don't pay for them--wars in Iraq and Afghanistan. Secondly, do something no President has ever done in American history: give tax cuts in the midst of a war. We have all the ordinary expenses of our government, and then we have the added expense of war, and President Bush and his Republicans in Congress said: Well, the answer to that is to cut people's taxes.

Guess what. When you cut taxes, you take money out of the Treasury that otherwise would come in and add to the national debt. Then add a few major programs that President Bush passed and didn't pay for. Medicare prescription Part D is a classic example. Though we in health care reform were required by President Obama to pay for it, the Republicans, facing a change in Medicare, did it without paying for it. They added to the national debt.

So President George W. Bush left office. The $5 trillion debt under President Clinton is now $12 trillion, and he said to President Obama: I won't be able to hand you that surplus that I was given when I took office. Instead, I am handing you a $1.2 trillion debt in the next year. Ten times more than the surplus offered him, he offered to President Obama. President Obama took his hand off the Bible being sworn in as President, and in the first month faced 750,000 Americans newly out of work. Welcome to Washington, President Obama; a little gift from the previous administration. That is what we have.

So now come Senate Republicans, and they say: Well, to get out of this recession, clearly what we need to do is do everything over again that got us into the recession, and the first thing we need to do is cut taxes on the wealthiest people in America. As David Stockman says: If you can't ask a millionaire to give up a 3-percent tax cut in the midst of what we are facing in this Nation--a millionaire--if you can't ask for a sacrifice from those who are most well off in our country, how can you possibly govern in a responsible way?

Senator McConnell introduced a bill this week which spells out exactly what he thinks about the deficit. His bill--a tax cut bill--will add $4 trillion to the national debt. That is $4 trillion unpaid for. Did he raise taxes to give tax cuts to others? No. Did he cut spending to give tax cuts to others? No. He just said $4 trillion of debt, here it is, unpaid for. This is the party of fiscal conservatism? These are the deficit hawks? These deficit hawks have had their wings clipped--clipped by the richest people in America, and that is their position.

If I can transition to another question of debt, it isn't just the debt of our national government, as large as it is, that ought to concern us. There are other debts across America. Americans have $826 billion in credit card debt. Naturally, people are struggling to make ends meet, and they are going to put more debt on their credit cards. They are going to owe more. So $826 billion in credit card debt.

The debt I want to focus on is even larger. The Federal Reserve recently revealed that we passed a milestone in American economic history in June of this year. For the first time in history, American consumers owe more on their student loans than on their credit cards. We have $826 billion in credit card debt and $850 billion in student loan debt. The total national student loan debt is increasing at the rate of $3,000 per second. The average college student in 2008 graduated with over $23,000 in student loans. By the time the students start college this fall, when they graduate, they could easily owe more than $30,000 at graduation.

Growing student loan debt creates a tremendous burden on recent college graduates. Recent graduates have a hard enough time finding a job in today's economy, but they need a job that pays enough to cover their monthly student loan payments. Young adults delay decisions to pursue advanced degrees, buy a home, start a family, because of student loan debt. We want young Americans to be an active engine for our economy, but too many graduates trapped in debt have to worry about the first paycheck and making the first payment on their student loans.

This week, Education Secretary Arne Duncan announced the 2008 student loan cohort default rates. Default rates on student loans across America were 7 percent--up from 6.7 percent last year. The cohort default rate is a snapshot of one group of students, those whose first loan repayments came due between October 1, 2007, and September 30, 2008, and who defaulted on their loans before September 30, 2009. During that time, over 200,000 borrowers defaulted on their student loans within 2 years of leaving college.

I was the beneficiary of a student loan when I went to school. It was called the National Defense Education Act. I couldn't have gone to college and law school without it. My understanding was--at least I felt an obligation to pay off that loan so that future generations could borrow that money and other students would get a chance to go to college. Now we find in this cohort 200,000 students already defaulting within 2 years of leaving college. This shows difficult economic times and the trouble young people are having finding jobs after school.

But a closer look at the data reveals another growing problem. Default rates at for-profit colleges are already far too high and rising. The 2-year default rate at for-profit colleges was 11.6 percent in 2009, up from 11 percent the year before. In comparison, public colleges had an average default rate of 6 percent; nonprofit colleges, 4 percent.

So let's put the numbers in perspective. The default on student loan payments from those graduating from nonprofit colleges nationwide, 4 percent; public colleges, 6 percent; and the default rate at for-profit colleges, 11.6 percent in 2009.

More than one out of every nine students who take out a student loan to attend a for-profit college will default on that loan within 2 years of leaving school, and the results are even worse after 2 years. Since 1995, two out of every five--40 percent of students who attended 2-year, for-profit colleges--defaulted on their student loans. Students at for-profit schools represent less than 10 percent of postsecondary students in America but one-quarter of student loan borrowers and 43 percent of all student loan defaults. Defaulting on a student loan is not just a bad economic experience; it can be a disaster.

For-profit recruitment officials, however, take it very lightly when they explain to young people what the consequences are of default on a student loan. The Government Accountability Office investigated 15 for-profit colleges and found that all 15 colleges misled students, including making false statements about student loans and defaults. One recruiter told a potential applicant:

I owe $85,000 to the University of Florida. Will I pay it back? Probably not ..... I look at life as tomorrow's never promised. Education is an investment. You're going to get paid back tenfold no matter what.

Another recruiter taped by a government investigator said, when the student asked about student loans:

But it's, workable, you know, it's really workable. And the ..... a lot of people have student loans ..... but the best thing about it, it's not like a car note, where if you don't pay they're gonna come after you.

That is a lie, and it is that kind of lie that is leading students into debt that they cannot repay.

Defaulting on a Federal student loan can have dire consequences for these students for the rest of their lives.

Here is what happens if students don't pay back their student loans. First, the loan will be turned over to a collection agency and they will be charged collection costs over and above the loan up to 25 percent. Their wages can be garnished, their tax refund intercepted, and their Social Security benefits withheld. Their defaulted student loan will be reported to a credit bureau and remain on their credit history for 7 years after they pay it off. That means they may not be able to buy a car or a house or take out a credit card. It might even mean they don't get a job if an employer looks at their credit history. They can't take out any more student loans or receive Pell grants to go back to school. They are no longer eligible for HUD and VA loans. They can be barred from the Armed Forces and they might be denied some jobs in the Federal Government.

That recruiter was right about one thing, though: a student loan is not like a car loan. Car loans can be discharged in bankruptcy but not student loans. A borrower can never escape a student loan, whether it is federally guaranteed or a simple private loan for school.

I had a hearing in Chicago about 3 weeks ago on these for-profit schools. I never saw such a crowd in my life. Do you want to know why? This is a big, profitable business. These schools are dragging in billions of dollars in Federal money that is then being loaned to students so they can go to school online or at these so-called for-profit schools. They end up with a worthless degree, if they graduate, deep in debt. They default on the loans and the government loses.

So I went to this hearing with 450 people showing up at this hearing on for-profit colleges.

I didn't expect an amazing turnout. There were picketers on the sidewalk outside the Federal court building. Lo and behold, they were there for me. I went up to the students and said to them: Hi, I am Dick Durbin. I am going up to the hearing. What are you kids doing here? They said: We are students at the Illinois Institute of Art, which is a school in Schaumburg, a suburb of Chicago. They were dressed similar to the people you see on ``Top Chef.'' I don't know the name of the white tunic they wear. I said to them: So you are at this for-profit college. What are you studying? They said: Culinary arts. One said: I want to be a cook and own a restaurant. I said: How much does it cost you in tuition to go to this school?

Well, it is a 2-year course in culinary arts, and the tuition is $54,000. Do you know what the starting pay is for people in a restaurant, a cook? It is about $10 an hour. So I said: Are you concerned about paying back this student loan? The answer was: Yes, but someday I may own a restaurant. Well, they may. These students were misled into believing they were going to get a job to pay them enough to pay back that student loan, but very few will be able to do so. There just isn't that much money in that line of work. I wish we could suspend all the ``Top Chef'' shows on the cable networks for a couple years so kids will stop signing up for $50,000 training courses and borrowing student loans they can never pay back to become the ``top chef.''

For some, I wish them the best, but it is going to be impossible--difficult at least--for them to pay their loan back. For another school that was upstairs, it was $41,000 for the culinary arts degree.

I say to the Presiding Officer, who is also from Illinois, we have something called the City College of Chicago. Do you know what the same culinary arts course, over a 2-year period of time, which is just as good, same course, same training--what it costs in tuition for 2 years? It is $12,000. It is $12,000 to go to a city college, a community college, for culinary arts. But it is $54,000 to go to the Illinois Institute of Art--whatever that is--out in Schaumburg. You may say to yourself that these students are dragging themselves deeply into debt that they may never get out of, and the default rate at for-profit colleges is outrageous. It is double what it is for many other schools across America.

The growing levels of student loan debt and the increase in defaults are undermining our economic recovery. Instead of contributing to the economy, many graduates and former students are doing all they can to dig out of debt.

While high tuition levels and student debts are a problem across higher education, I am particularly troubled by these for-profit colleges. Low-income students come to these colleges in droves, lured by promises of high-paying careers and flexible courses. Did you see that ad on cable TV saying you can get a college degree in your pajamas? It shows this beautiful young girl in her pajamas saying: I am going to college in my pajamas.

Here is an alert to young people across America: You are not going to earn a college degree in your pajamas. You have to dress up and be part of the world and go to school. I understand that you can go online, and for many
people that is a great way to go to school, but it takes more than lounging around the house and going online and ending up with a worthless degree. One of the persons who testified in our hearing was a young girl who is a graduate in law enforcement from the Westwood College. Ever heard of it? I haven't. She went to school there in Chicago; it took her 5 years. She got a bachelor's degree in law enforcement because she wanted to work for the Chicago Police Department or the Sheriff's Department. She wanted to be a professional there and she would have a bachelor's degree. They laughed at her when she showed them that degree. Westwood College? They didn't even accept or recognize it. There she sat, after 5 years of education, with a worthless degree. Do you know what it cost her? It cost $86,000 in student loans. That is how much she owed for that worthless degree. Now she cannot get a Federal student loan to go to a community college. She cannot get a Pell grant. She is paying $600 a month and living in her parents' basement.

That is the reality of life for these young people who are lured into these for-profit colleges. What are the biggest recipients of Federal loans in America today when it comes to those colleges? No. 1, University of Phoenix, the Apollo Group. How many undergraduate students do they have? They have 480,000 undergraduate students--more than the combined undergraduate enrollment of the entire Big Ten schools. No. 2, Kaplan; No. 3, DeVry; No. 4, Penn State University, which offers online courses. They are taking out the lion's share--25 percent--of all Federal student loans for education help to for-profit colleges and have 43 percent of the student loan defaults. It tells the story.

Low-income students don't know any better. They are signing up for courses with promises that can't be kept. I went to the Web site of Roosevelt University, an established college in Chicago, to look up some information, and I was bombarded with ads from these for-profit schools. I called the President of the school and said: Chuck, have you looked at your own Web site? You can't find Roosevelt on there. There's Argosy and Corinthian and all these things thrown at you. Imagine a young person who is trying to decide where to go to school.

It is time to look at risk sharing when it comes to student loans. These for-profit colleges ought to be on the hook. If they are going to lure young people into debts they can't pay, they ought to have some skin in the game and say: If there is going to be a default, we are going to pay a price too. Secondly, I am sick and tired of these schools that are not accredited and are being given money for Federal student loans. If your school is not accredited and if your hours cannot transfer to another school, you should not receive Federal loans. Students should not have to go through a research investigation to decide whether a school is accredited. That is not their job and should not be. It ought to be our job as a requirement. We ought to say that if you want to qualify for Federal aid for education, you have to be an accredited school. If it is a phony school, you don't get Federal money. That ought to be the basics.

Today, school officials are working with incentives, incidentally, that push companies to bring in the highest volume of financial aid, which means they will sign up anybody who can qualify. They don't care if you can read or write. Literally, they will put you on as one of their students earning a baccalaureate degree, and they will get the money from the Federal Government. Incidentally, they complained recently because we capped how much Federal money a for-profit college can receive of their revenues at 90 percent--and they complained. Colleges that have burdened students with this debt, without giving them the skills and credentials, should share a piece of this default risk. Maybe then the colleges would focus less on bringing in as many students as possible, at the highest tuition as possible, and focus more on preparing students to succeed. We need to seriously consider this risk sharing, as well as other ideas to bring student loan debt defaults under control. I look forward to working with my colleagues.

Look at your own States. For those of us who have voted reflexively for Federal student loan increases and Pell grants, the party is over. I will not stand by and watch billions in taxpayers' money funneled into for-profit schools that heap debt on the students and fail to give them the training and degree they need to succeed in life. It is time to bring this to an end.

I yield the floor.

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