Violence Against Women Reauthorization Act of 2011--Motion to Proceed

Floor Speech

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STUDENT LOAN INTEREST RATES

Mr. DURBIN. Madam President, next month students all over the United States will begin graduating from college. There is a lot of pride in that experience. Family and friends will gather and celebrate. These young graduates are going to be filled with hope and expectation, and gratitude to those who helped them reach this milestone in their lives. But they are also going to be graduating with debt--in some cases massive amounts of debt.

Ninety-six percent of for-profit college students will graduate with a debt of $33,000. Fifteen percent of them--one out of six--will default on their loans within 2 years. There is now more than $1 trillion in outstanding student loan debt. As I have mentioned on the Senate floor several times, a little over a year ago, for the first time in history, student loan debt in America surpassed credit card debt.

One of the reasons there has been such a huge influx is that college costs continue to rise at unsustainable rates. Tuition fees at 4-year schools have rocketed up 300 percent from 1990 through 2011. Over the same period, broad inflation was just 75 percent. Even health care costs rose at half the rate of the cost of higher education.

The average for-profit college costs $30,900 a year in tuition and fees. Private nonprofit institutions are not too far behind. The average tuition and fees run about $26,600. Schools with larger endowments charge even more--upwards of $50,000 to $57,000 in total fees. They use their endowment to give students large financial aid packages, which is admirable, but it has consequences. The elevated sticker price for these schools provides for-profit colleges the cover to raise their prices to similar levels.

Let me remind you, for-profit schools, for-profit colleges in America get up to and more than 90 percent of their revenue directly from the Federal Government. They are 10 percent away from being Federal agencies.

Students graduating this year have one advantage: If they took out Federal subsidized loans, their interest rate is low. In 2007, Congress set interest rates on subsidized Federal student loans for the last several years. Current graduates have low, affordable interest rates on their Federal loans, ranging from 6.8 percent to 3.4 percent, depending on the year they took out the loan.

Graduates next year may not be so lucky. The interest rate goes up to 6.8 percent for all unless Congress acts. That is because these interest rates are set to double for 740 million students across the country on July 1 and will only be changed if Congress acts. That is going to affect 365,000-plus borrowers in my State of Illinois. Each borrower in Illinois will save $1,000-plus over the lifetime of their loan if current interest rates of 3.4 percent continue. Across the State, borrowers will save a total of $387,000.

Every week in my office we hear from students who would be directly affected by interest rate increases. One of them is George Jacobs, a constituent of mine and a graduate of the International Academy of Design and Technology in Chicago, a for-profit college owned by the Career Education Corporation.

Every day of his life, George Jacobs regrets that he ever attended this school. He is 29 years old. His current private student loan balance has ballooned to $107,000. The original loan was $60,000. But with a variable interest rate, George has been paying anywhere from 7 percent to 13.9 percent. Combine that with his Federal loan balance, and his total outstanding student loan debt is $142,000. George is not even 30 years old, and he already has the debt the size of some people's mortgages on their homes. Unlike a lot of his peers who attend for-profit colleges, George has a job in his field of study. His annual salary is $45,000, but since his lender will not let him consolidate his loans, his monthly payment is $1,364. Half of his income goes to pay his loan.

Unfortunately, because of high interest rates, very little of his payment reduces the principal. He does not know when he will possibly pay off this loan. When asked if he has tried to work out a plan with his lender, he says: They won't talk to me. They just don't care.

George was the first in his immediate family to attend college. He did not ask people for advice on financial matters. He trusted the school. George was subjected to high-pressure sales that some for-profit colleges use.

Reflecting on that experience now, George believes the school took advantage of him. He believes the school's primary focus is to identify people they can make money off of. George owes about $29,000 in Federal loans. With low interest rates, his monthly payment is $230 a month on the Federal loans--an amount he says is not a real problem.

He is married, and although he and his wife own a car, he does not think they will ever qualify for a mortgage. He is 29 years old.

George is not the only one affected by the private student loans. His parents are in their fifties. To help George, they cosigned his private student loans. They cannot refinance the mortgage on their home because of George's outstanding debt.

There was a story in the Washington Post about 2 weeks ago of a woman--a grandmother--who now has her Social Security check garnished because she was kind enough to cosign her granddaughter's college loan. Her granddaughter has defaulted. Her grandmother is watching her Social Security check reduced.

Making college affordable should not be partisan. It affects everybody. Just this week, during a news conference in Pennsylvania, Gov. Mitt Romney acknowledged the tough job market new graduates face and expressed support for keeping interest rates low. He said:

I fully support the effort to extend the low interest rate on student loans . ..... temporary relief on interest rates for students ..... in part because of the extraordinarily poor conditions in the job market.

Higher education is not a luxury anymore. It is part of the American dream that many of us bought into and invested in. An educated workforce will make us a stronger nation. By 2018, 63 percent of jobs will require postsecondary education. Keeping debt levels low and manageable for college graduates is essential.

George Jacobs, like so many other students I have spoken about on this floor, is going to spend the rest of his young adult life paying for student loans. There has always been a lot of talk around here about mortgage crises--and rightly so--but think about the 17- and 18- and 19-year-old students signing away their income for the next 30 years before they can even dream of owning a home.

When we get back from the break in about 10 days, we are going to consider legislation on making sure student loan interest rates are manageable. There is more to this issue. We have to deal with the reality the President raised in his State of the Union Address. This spiraling cost of higher education is unsustainable and unfair--fundamentally unfair.

We say to the young people: Get educated for your future.

They follow our advice and walk into the student loan trap. Unfortunately, many for-profit schools are the worst offenders. These schools have enrollment that has grown 225 percent over the past 10 years. According to the Chronicle of Higher Education, the enrollment of for-profit colleges in my State has grown 556 percent over the last 10 years. They enrolled 1.2 million students in 2009. In the 2008 2009 academic year, the GAO found for-profit colleges took in $24 billion in title IV aid; 4-year for-profit schools an average of $27,900 a year before aid, as compared to $16,900 for public 4-year universities.

The chief executives at most of the for-profit schools--parent companies--make many times more than their counterparts in nonprofit schools. Remember, 90 percent-plus of their revenue comes directly from the Federal Government. These are not great entrepreneurs; these are folks who have managed to tap into one of the most generous Federal subsidies in the law.

Five years ago, we gave them a break. In the bankruptcy bill, we said private for-profit schools will be the only private loans in America that are not dischargeable in bankruptcy, which means you carry them to the grave. So the for-profit schools give these private loans to students, and their parents sign up for them. When it is all said and done, they end up saddled with this impossible debt for a lifetime. That is not even to go to the question about whether they are receiving any kind of valuable education in the process.

For-profits, incidentally, spent 21 percent-plus of their expenses on instruction--21 percent on instruction. It was 29.5 percent at public institutions, 32.7 percent at private nonprofit institutions.

USA Today reported that for-profits educate fewer than 10 percent of students, take in 25 percent of all Federal aid to education, and account for 44 percent of defaults among borrowers. Remember those numbers: 10, 25, and 44. They are taking in 10 percent of the students, taking in 25 percent of all the Federal aid to education, and 44 percent of the defaults on student loans are attributable to these for-profit schools.

According to the Project on Student Debt, 96 percent of for-profit college students graduate with some debt, compared to 72 percent of private nonprofit grads, 62 percent of public school grads. The Project on Student Debt also reported that borrowers who graduated from for-profit 4-year programs have an average debt of $33,000, compared to $27,600 at private nonprofits, $20,000 at public schools.

Last year, the Department of Education released a report showing that for-profit schools have a student loan default rate overall of 15 percent, compared with 7.2 percent at public schools, 4.6 percent at private nonprofit schools. If I were to stand before you and talk about any other business in America, heavily subsidized by the Federal Government--beyond 90 percent of all the revenues they take in--that is luring students and their families into unmanageable debt, I would hope both sides of the aisle would stand and say that is unacceptable. How can we subsidize an operation that is causing such hardship on students and their families--a hardship they are going to carry for a lifetime.

George Jacobs, at age 29, is writing off the possibility of ever owning a home because he signed up at one of those for-profit schools in my State.

The Senate HELP Committee also discovered that out of $640 million in post-9/11 GI benefits, a bill we were all proud to vote for, out of the $640 million that flowed to for-profit schools in the last academic year, $439 million went to the largest 15 publicly traded companies. For-profit colleges are receiving $1 out of every $2 in military tuition assistance, according to the Department of Defense, and more than 60 percent of education benefits available to military spouses go to for-profit schools.

This is significant. We capped Federal aid to for-profit schools at 90 percent of their revenue, but we created an exception for the GI bill. So some of them are up to 95 percent Federal subsidy and still we have these terrible results and terrible indebtedness.

Students at for-profit colleges have lower success rates than similar students in public and nonprofit colleges, including graduation rates, employment outcomes, debt levels, and loan default rates. Yet the Department of Defense is paying more to for-profit schools for the GI bill than public and nonprofit institutions.

I wish to have printed in the Record, along with my remarks, an article that appeared in the Wall Street Journal on Wednesday, April 18. It tells the story of Jodi Romine, who between the ages of 18 and 22 took out $74,000 in students loans. She attended Kent State University, a public university in Ohio. It seemed like a good investment at the time. But now it is going to delay her career, her marriage, and her decision to have children.

Ms. Romine's $900-a-month loan payments eats up 60 percent of the paycheck she earns as a bank teller in South Carolina, the best job she could get after graduating from college.

Her fiancé spends 40 percent of his paycheck on student loans. They each work more than 60 hours a week and volunteer where they can to help the local high school's football and basketball teams. Ms. Romine works a second job as a waitress, making all her loan payments on time. She cannot buy a house. They cannot visit their families in Ohio as often as they would like or spend money to even go out.

Plans to marry or have children are on hold, says Ms. Romine, ``I am just looking for some way to manage my finances.'' This is an indication of a debt crisis that is coming. It is different, I would agree, than the mortgage debt crisis we faced. Smaller in magnitude, perhaps, but no less insidious and no less of a problem for us when it comes to the growth of our economy.

I have a couple bills pending. One of them goes to a very basic question: Should any college, public, private, profit, nonprofit, be allowed to lure a student into a private student loan when they are still eligible for government loans? In other words, should that not be one of the causes for a discharge in bankruptcy? It is fraud. It is fraud to say to that student: You have to take out this private student loan, even though the school knows that student is still eligible for low-interest rate accommodating Federal loans. They are luring them into a debt that is unnecessary and a debt which is crushing, in some circumstances.

At the very minimum, that should be considered fraud in a bankruptcy court, and that debt should be dischargeable in bankruptcy because of the failure of the school to disclose that the student still has eligibility for a Federal loan.

Secondly, I know I am probably crying in the wilderness, but I still find it inconceivable that the only private sector business loan in America that is not dischargeable in bankruptcy goes to these heavily subsidized for-profit schools. First, we lured them with Federal money--90 percent-plus--and then we turn around and say: And we will protect you. When the student who is likely to default ends up defaulting, we will make sure they still have the debt, carrying it to the grave. What were we thinking to give this one business this kind of fantastic Federal subsidy and this kind of amazing support in the Bankruptcy Code?

I ask unanimous consent to have printed in the Record, along with that article from the Wall Street Journal, a recent article from Barron's of April 16.

There being no objection, the material was ordered to be printed in the Record, as follows:

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Mr. DURBIN. They identified those who were offering these private student loans. The major players in the private nongovernment-backed student loan market: SLM let me translate--formerly known as Sallie Mae, Discover Financial Services, Wells Fargo, and PNC Financial Services. Even with the defaults, if there are defaults on these loans, these loans are protected because they continue forever.

I do not know if my colleagues will join me in this, but all I ask them to do is go home and please talk to some of the families in their States, and they will find this student loan crisis is not just something manufactured by politicians; it is real, and we are complicit in it. When we allow low-performing and worthless schools to receive Federal aid to education, students and their families are lured into believing these are real schools.

Go to the Internet and put in the words ``college'' or ``university,'' click the mouse and watch what happens. You will be inundated with ads from for-profit schools. Some of them will tell you: Go to school online. One of them ran a television ad here in Washington--I think they have taken it off the air now--that showed this lovely young girl who was in her bedroom in her pajamas with her laptop computer on the bed. The purpose of the ad was: You can graduate from college at home in your pajamas. It is a ruse. It is a farce. It is a fraud.

Many times these schools offer nothing but debt for these students. The students who drop out get the worst of the circumstances. They do not even get the worthless diploma from the for-profit schools; all they get is the debt. That is not fair. If we have a responsibility--and I think we do--to families across America, for goodness' sake, on a bipartisan basis, we should step up and deal with the student debt crisis and the for-profit schools that are exploiting it.

I yield the floor.

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