Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. DURBIN. Mr. President, the old adage that sunlight is the best disinfectant is an old adage for one main reason: It is true.

That is why I am introducing the Financial Disclosure to Reduce Tax Haven Abuse Act of 2012, to require candidates for Federal office and certain Federal employees to disclose any financial interest they or their spouse hold that is held in an offshore tax haven.

It might seem ridiculous that we don't already know whether candidates and Members of Congress are using offshore tax havens. However, under current law, those individuals are not required to account for where their financial interests are held.

A January 26, 2012, article in the Los Angeles Times reported that Mitt Romney--a candidate for the Republican nomination for President--failed to disclose a number of accounts in countries with very low tax burdens.

Specifically, according to a review of the candidate's tax returns and financial disclosure statements:

At least 23 funds and partnerships listed in the couple's 2010 tax returns did not show up or were not listed in the same fashion on Romney's most recent financial disclosure, including 11 based in low-tax foreign countries such as Bermuda, the Cayman Islands and Luxembourg.

The Romney campaign called the discrepancies ``trivial.''

But this information is not trivial to the American people's trust in government, and the use of offshore tax havens is not trivial to our economy.

Studies have found that tax offshore tax havens, and other similar loopholes, cost taxpayers $100 billion per year.

I want to commend Senators LEVIN and CONRAD for the work they have done to shine a light on these nefarious practices.

Those two Senators successfully included a provision in the Senate Transportation bill that will give the Treasury Department greater tools to crack down on offshore tax haven abuse. It is an important step forward, but more must be done.

The American people are rightly concerned that the wealthy and well-connected are skirting our laws to avoid taxation, and they deserve to know that the people who hope to represent them in Washington--and those who are trying to attain those positions--aren't cheating the system.

Nothing in this bill impinges on an individual's right to hold financial interests within the global economy. If there is a legitimate reason for a candidate or a Member of Congress or any other individual who files a financial disclosure to hold their money in an account on the Cayman Islands, they should have no problem explaining it to voters. But any individual who has or wants to have the public's trust should be honest about practices they have engaged in that cost the taxpayers they wish to represent billions of dollars every year. This is an important step that we must take to restore the public trust.

Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

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Mr. DURBIN. Mr. President, last week, the Consumer Financial Protection Bureau reported that outstanding student loan debt in America has hit the $1 trillion mark--student loans.

A CFPB official was cited by Bloomberg News saying that ``excessive student debt could slow the recovery of the housing market, as young people repay money for their education rather than buying homes.'' Massive student debt is also affecting consumers' ability to purchase goods and services.

Yesterday, at the Subcommittee on Financial Services and General Government hearing focusing on student debt, Treasury Secretary Geithner came to talk about it. While the overall growth of student indebtedness is troubling, the most pressing concern is private student loans.

Secretary Geithner also recognized that private student loans do not come with any of the consumer protections that Federal loans do. Private student loans are far riskier. Federal student loans have fixed, affordable interest rates--3.4 percent. They also have a variety of consumer protections. The Federal loans have forbearance in times of economic hardship, and they offer manageable repayment options, such as the income-based repayment plan.

Private student loans, on the other hand, often have high variable interest rates--some have been quoted at 18 percent, the kind of rates you are careful about when it comes to your credit--and they have hefty origination fees and a lack of repayment options. Private lenders have targeted low-income borrowers with some of the riskiest, highest cost loans.

In many respects, private student loans are like credit cards--except unlike credit card debt, private student loan debt can never be discharged in bankruptcy. In 2005, Congress changed the bankruptcy laws. I want to make a point here: I voted against it. Congress changed the bankruptcy laws and included a provision making private student loan debts nondischargeable in bankruptcy, except in the rarest of circumstances. I have never found one that qualifies. That means students are stuck with their loans for life.

While the volume of private student loans is down from its peak a few years ago when it accounted for 26 percent of all student loans, private lending is still aggressively promoted by the for-profit college industry. The Project on Student Debt reports that 42 percent of for-profit college students had private loans in 2008, up from 12 percent 5 years earlier. For-profit college students also graduate with more debt than their peers who graduate from public or private and non-private colleges. Many for-profit colleges employ a business model that steers students into private student loans because of the 90/10 rule.

For the record, private for-profit schools can only receive 90 percent of their revenue from the Federal Government. They are the closest darn thing to a Federal agency you have ever seen, except they are making millions of dollars at the expense of the government and unsuspecting students and their families. So to find the 10 percent of nonfederal money, for-profit schools get the students to sign up to pay for 10 percent of their education in private student loans, even if they qualify for Federal loans, which are a much better deal.

The 90/10 rule that requires at least 10 percent of revenue from non-Federal
student aid sources makes this an imperative for many for-profit schools. As a result, many students are encouraged to take up private loans when they are still eligible for Federal loans--even when the lenders know the students are going to default--so schools can comply with the 90/10 rule.

Kari Schaab contacted my office seeking relief from her burdensome student debt. She received a bachelor of arts from the International Academy of Design and Technology, a for-profit college. When she spoke to an admissions representative, she was enrolled almost immediately. Looking back, she says of the school: ``They take whoever is willing to pay.''

She was assured she would be able to obtain a position in her field that would help her pay off her student debt. Reflecting on her experience, she said: ``I was young and didn't understand how much I would owe or what the loans were. I trusted them.''

After completing her BA program, she decided that she would pursue a master's in her field. What she found out shocked her. No schools would accept her degree. It was a worthless diploma. With no job, no future in her chosen field, and about $58,000 in debt, she decided to switch careers entirely so that she would be able to pay off her student loans.

She currently attends Oaktown Community College for nursing. She is unable to get a mortgage because of her old student loan debt of $58,000. Worse yet, her parents, trying to help her out, took out $19,000 in loans to help pay her tuition. Her parents are currently in chapter 13 bankruptcy, but that loan won't be discharged.

We need to begin now to address this looming student debt bomb crisis. We need to protect students and prevent more students from stepping into the same traps that have caught so many others.

Today, Senator Tom Harkin and I are introducing the Know Before You Owe Private Student Loan Act of 2012. Here is what it says: It requires the prospective borrower's school to confirm the student's enrollment status, the cost of attendance, and the estimated Federal financial aid assistance before the private student loan is approved. Often, students haven't applied for Federal student aid before they are asked to apply for private student loans, which are not nearly as generous or flexible.

Requiring school certifications also gives the school the opportunity to make students aware of Federal Government student aid options.

The bill requires schools to counsel the student about their options, tell them how the private student loan will affect those options, and what it will cost to repay the loans. Basics.

In addition, schools will be required to inform students about the differences between Federal and private student loans. And the differences are dramatic. This will give students time to weigh their options, make a choice, and be informed.

When students such as Kari contact my office about their student loans, they often don't know the difference between the two types of loans. They said: ``It was just a student loan, Senator.'' Most go on to say that if they had known, they would have thought more carefully about a private student loan and the debt they were incurring.

For those students who do decide to take out a private student loan, the bill requires lenders to provide the borrower with quarterly up-to-date information about their balance and interest rate.

Finally, the bill requires lenders to report information to the Consumer Financial Protection Bureau about how many students are taking out loans and at what rates. There is very little information about private student loans currently available. More information will help Congress and the CFPB effectively inform consumers about these private student loans.

This legislation is supported by a huge coalition of education, student, and consumer organizations. I want to thank Tom Harkin for his work on this bill, especially all of the hard work he has put in on these for-profit colleges.

Mr. President, it is finally dawning on a lot of Members of Congress as they see programs such as ``Frontline'' talking about the for-profit college industry, and as they meet these students who are going to these worthless for-profit colleges--students who are just stacking up debt for a worthless diploma--it is time for our Federal Government to step up. How can we blame a student or their family if they are going to a school where we, the Federal Government, are willing to offer Pell grants and Federal loans? What is a student to think? Well, if it is good enough for the Federal Government to loan money, it must be a good school.

In fact, in many instances--in most instances--these for-profit schools are not good schools. They are not offering a good education. There are exceptions, but too many of them are just bad operations. We subsidize them. Ninety to ninety-five percent of their revenue comes straight from the Federal Government. When they talk about freezing Federal employees' salaries, we ought to freeze the employees at these for-profit schools. They are the closest thing to Federal employees we have--95 percent Federal. We don't hear that from the other side of the aisle. But it is a fact.

I will tell you this: This student loan debt bomb we are facing, which I talked to Secretary of the Treasury Geithner about yesterday, is going to explode on us, just as the subprime market loans did. More and more students are going into default. They can't pay back these student loans, and they are going to face life decisions that will change their futures and the future of the American economy.

We now have 40 percent of students who are making payments on their student loans--40 percent. Sixty percent are not. Some are still in school, I will concede that point, but many of them just can't do it. We pile this debt on, we give them preferred treatment in the Bankruptcy Court so the lenders can't have the debt discharged, and we sit there and watch as the lives of these young people deteriorate.

As one young lady testified at my hearing that she borrowed $37,625 from the Federal government, $40,925 in private loans. She went to the Harrington College of Design in the suburbs of Chicago and ended up with a worthless diploma--worthless. Five years later, her debt is no longer $78,000; it is $98,000. It just keeps going up. She pays $830 a month, and the private student loan debt is exploding right in front of her. She can't pay it. She doesn't know what she is going to do. She said she is going to have to give up the little home she and her husband just bought. It looks pretty desperate for her, and her desperate situation faces her at the age of 32--32.

How do we let this happen? Don't we have an obligation as a government, as a people, to stop this exploitation of children and their families? That is what is going on.

This bill I have put in today will require these schools--all schools--to tell the students first that they have Federal loan eligibility left. It is 3.4 percent, not 18 percent. There is loan forgiveness if they become a nurse or a teacher. It is based on the amount of income they have later in life what their repayment is going to be. If they do get into trouble, they can have a delay in payment without watching their loan just stack up. These are basic things we build into the law to help students. Students and their families ought to know that, and that is what this bill is about.

I commend this bill to my colleagues. I hope they will join Senator Harkin and me. I want to offer this on the Senate floor, and I want some colleagues to go home and face this student loan issue and listen to the families they represent. We are hearing from our Web site, and I invite students and families to come to my official Web site to tell their stories. As we learn what it is all about, we see the need to move on this, and move quickly.

Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

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