Student Loans

Floor Speech

Mr. DURBIN. Mr. President, I listened carefully to the statement made by the Republican leader. He talked about the issue of increased costs for colleges, saying the tuition is going up, and we have a student loan issue coming up with interest rates perhaps doubling. It was interesting when the Republican leader said the root cause of the problem is ObamaCare.

Well, it turns out, if we listen to the statements and speeches from the Republican side of the aisle, if a person's car won't start: ObamaCare. Too many popups on your computer: ObamaCare. Basically, it turns out that every problem in America can be traced to ObamaCare. ObamaCare, of course, is the health care reform act.

The health care reform act said, incidentally, that students in college can stay on their parents' health insurance plan until they reach the age of 26: ObamaCare. It also said those who are receiving prescription drugs under Medicare will pay less: ObamaCare. It went on to say you cannot discriminate against people when it comes to health insurance if they have a preexisting medical condition: ObamaCare. So what we hear from the Republican side of the aisle: Any problem we have in the Midwest including too much rain in the Midwest: ObamaCare. It reaches the point where it strains credibility.

Here is what the problem is. On July 1, the interest rates on subsidized loans double--double--from 3.4 percent to 6.8 percent if we do nothing. The Republicans in the House of Representatives said they have a better plan. It is a plan which the Republican leader in the Senate just spoke to. We are going to move the interest rates--we are going to peg them to the 10-year Treasury bill, and the next thing we know it turns out the interest rate coming out of the Republican bill in the House is higher than 6.8 percent. In other words, if we did nothing as opposed to the Republican plan, students would be better off.

But we have a better idea. We are going to do our best to make sure we preserve the 3.4-percent interest rate on subsidized student loans. Is it important? It is critically important.

Look what is happening to students across America today. A lot of young people listen to their parents, listen to their teachers, and all their friends who say, Go to college, get a degree. It is good advice. Then they sit down to figure out what it is going to cost and it turns out to be pretty expensive. As I look back on my college education--I won't tell my colleagues what my student loans were; they will date me--I was scared to death when I ended up with this huge student loan at the end of law school when I accumulated it all together. At the time I said to my wife, I don't know if we will ever be able to pay this back, it is so big. It was $8,500--$8,500 for college and law school--but it was more than half of my first year's income, to put it in perspective.

Now look at what students are faced with. The average for-profit college costs $30,900 a year in tuition fees. These for-profit schools I will talk about in a minute are the most expensive schools in America. They are the ones trying to lure students into their schools. The biggest ones are the University of Phoenix, which has more students than the combined enrollment of all the big 10 universities; Kaplan University, which is owned by the Washington Post; DeVry University out of Chicago; and a variety of others. They can't wait to see these students coming out of high school and to sign them up for these for-profit schools, the most expensive schools in America. There is something else involved in those schools. They have the highest student loan default rates. They charge the students too much for tuition and they offer them too little by way of education and training. A lot of kids drop out, and even those who finish can't find a job. They default on their student loans for these for-profit schools. But take a look at the cost of education in general. Most students, unless they are lucky, with parents who have a lot of money in the bank, have to borrow money, and if they have to borrow it, the question is, What do they pay when it comes to the interest on the student loans? Private loans--not the government loans but private college loans--can have interest rates up to 18 percent. So unless a person has taken a course in consumer economics or business in high school, that person may not know what the difference is between 3.4 percent interest on a loan and 18 percent interest. Believe me, it is dramatic. Students are faced with this reality.

The question obviously is what is Congress going to do about it? If we are going to continue keeping the interest rate at an affordable level--3.4 percent for student loans--then we are going to have to take action before July 1. If we do nothing, it will double. If we do nothing, students will pay thousands of dollars more in paying off their loans.

How big is student loan debt in America? Student loan debt in America is larger than credit card debt. It is over $1 trillion. It is one of the fastest growing areas of debt in America. As students get encumbered by this debt, obligated by this debt, many don't realize what they are up against.

This is not like any other loan a person can take out. Any loan a person takes out for a car or a house or to buy a washer and a dryer is dischargeable in bankruptcy. If a person's finances go completely in the tank and that person goes to a bankruptcy court, those other loans go away, but not student loans. There are only four things that cannot be discharged in bankruptcy: taxes owed to the government, alimony, child support, and student loans. What it means is the decision made by the 19- or 20-year-old about debt to go to school is a decision for a lifetime. It is going to stick with that person for a lifetime. When the parents sign on as guarantors on these student loans, or grandparents, they are on the hook too. If the student ends up dropping out of school, with plenty of debt and no diploma, they are in a bad situation. They still have to pay off the loans.

What we are trying to do on the Democratic side is to keep the interest rate on these loans as low and affordable as possible. I think that is only reasonable. Why make it any harder for these students and their families? The Republican side, sadly, more than doubles the interest rate on student loans. That is a worthy debate. I know the side I will be on. I think most Americans know what side we should all be on: to try to keep the cost of these loans closer to being under control; to try to keep the interest rate at the 3.4-percent level.

Senator Jack Reed of Rhode Island recently introduced the Student Loan Relief and Refinancing Act which would prevent the interest rate hike by moving Federal student loans back to a market-based rate as it was prior to 2007. Senator Reed's bill would offer adjustable interest rates for Federal student loans and parent PLUS loans--with a cap of 6.8 percent for subsidized loans and 8.25 percent for unsubsidized and parent PLUS loans. Rates would be set every year based on the 91-day Treasury bill, plus a percentage determined by the Secretary of Education to be necessary to cover program administration and borrower benefits. The bill is revenue neutral. The bill will help current borrowers by allowing those stuck with high fixed-rate Federal student loans to refinance their loans into a new variable rate loan with a cap. Many students signed up for loans that were a bad deal and they want to change them but they are stuck with them, so this Reed bill gives them a chance to refinance.

Congress should consider a long-term interest rate fix, but we need to act quickly to stop the interest rates from doubling on July 1. We have a good short-term path that will extend the current 3.4-percent interest rate for 2 years. The bill is fully paid for by closing three tax loopholes.

Senator McConnell was on the floor here complaining that we are doing Tax Code changes to keep the interest rates low. Well, here are a couple of the changes he was complaining about.

Our proposal would include a tax on the oil and gas companies from tar sands so they would put more money into the oil spill liability trust fund. That is one of the things Senator McConnell said is not appropriate. The other one would close a tax loophole that allows non-U.S. companies to reduce their U.S. tax liability on income from their sales in the United States.

I do not think that is unreasonable, particularly if the money we are getting from that will help subsidize a low-interest rate on student loans.

This bill is a temporary solution, I understand. But it is going to save students in States like my State of Illinois a thousand dollars--at least a thousand dollars--by keeping the interest rate low in terms of what they will pay back over a lifetime.

The complicated proposal that came out of the House of Representatives--the Republican proposal--as I said, will more than double the interest rates students are going to face. Parents are going to have to have a higher liability on the loans they sign up for for the students in their family, and that, to me, is not a good outcome either.

There has been a proposal that has been pushed by some of my Republican colleagues--Senators COBURN, BURR, and ALEXANDER--which would adjust interest rates annually for both subsidized and unsubsidized loans, and it would be, like the House Republican bill, an increase of 3 percent over the 10-year Treasury rate. There are no caps, incidentally, on where that interest rate is going to go. So the students could have a liability much greater in the future.

Here is what it boils down to: If you believe education is important--and I think everyone does--if you believe college education is a ticket for a better life and a better opportunity to contribute to this country--and most people do--we want to make sure it is affordable for students from working-income homes and middle-income homes. That is why we want to keep this interest rate low. The Republican proposals--all of the Republican proposals--dramatically raise the student loan interest rate beyond the level the Democrats are pushing for.

We have heard a lot of comment on the floor. There will be a lot of debate on the floor about a lot of other issues--the IRS and other things such as that. They are all worthy issues worth talking about. But if you talk to the average family in my home state of Illinois or around the country, they are going to tell you that something like a student loan debate is much more important to them.

We want to be on the side of working to help middle-income and those families who are working for a living, to give those families a chance to send their sons and daughters to college to have a better life in the future and not burden them with a loan that is impossible for them to pay back.

I want to close by saying a word about one category of schools I mentioned earlier, the for-profit schools. We have in our country not-for-profit schools that include private colleges and universities as well as public colleges and universities. Then there is a for-profit sector of higher education. I mentioned the leaders earlier--the University of Phoenix, Kaplan, and DeVry. Those are three of the biggest in the United States.

Currently, our Federal Government is subsidizing these for-profit schools in ways most taxpayers would not believe. Right now what these schools are bringing in is 75, 80, 85, and 90 percent of their revenue directly from the Federal Treasury. In other words, students come in and turn over their Pell grants, sign up for their government loans, and all of this government money flows into these for-profit schools.

Many of these schools offer valuable courses, but many of them are worthless. Many of them, unfortunately, burden these young people with debt and offer them nothing by way of education or training so they can have a better life. As a result, the students end up with a mountain of debt they cannot pay back and they default on the debt. Here are the numbers to keep in mind: There are three basic numbers which explain the for-profit education industry in America.

Twelve. Twelve percent of high school graduates go to for-profit schools.

Twenty-five. Twenty-five percent of all the Federal aid to education goes to for-profit schools; over $30 billion a year to for-profit schools. They would be the ninth largest Federal agency if you took for-profit schools in the private sector by themselves; over $30 billion. They would be the ninth largest, but they are private companies, for-profit companies.

The third number to remember is 47. Forty-seven percent of all the student loan defaults are by students in for-profit schools. That number tells the story. These poor students are being loaded with debt, and they are being given an education that is not worth it. At the end, they cannot pay back their debt and they default on those debts. That is the reality of where we are today. In a few weeks--July 1--if we do nothing, interest rates on loans at all schools for government loans are going to double. If we do something, we can continue to protect students. But, in addition to that, we have to do something about higher education and what is happening there. It is not just the for-profit schools, many of which are ripping off these students. It is the overall cost of higher education. It is going beyond the reach of average families across America.

I look back to my own life experience and, thank goodness, I had a chance to borrow the money and go to school, get an education, and end up, as I say, with a full-time government job. But the bottom line is, other people deserve the same opportunity. And if you are not from a wealthy family, you should be able to borrow the money to be able to get through school and make a success of your life.

Let's do our part here. Let's stand behind the working families. Let's support the Democratic approach, which will keep the interest rates at 3.4 percent. Let's reject the Republican approach that would more than double these interest rates on these students and their families. Let's give these young people a fighting chance to get a good education and an opportunity to prosper in this great Nation.

Mr. President, I yield the floor and suggest the absence of a quorum.

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