Smarter Solutions for Students Act
Floor Speech
BREAK IN TRANSCRIPT
Mr. DURBIN. Madam President, through the Chair I would like to direct a question to the Senator from Iowa. I respect the leadership he has shown on this issue and so many issues, whether it is health, education, or disabilities. He has been the voice of leadership in the Senate for a long time. I know this is his last term as a Senator, but I also know he still has one big job ahead of him, and he has talked about it--the reauthorization of the Higher Education Act. We are going to hold the Senator to that because we need his voice and leadership in that room or it won't happen.
I saw his leadership on this particular issue. Senator Harkin came to this negotiation with conservative Democrats and Republicans and sat down and said: There are some basics we are going to have to include in this before I will sign off.
I remember this--No. 1, keep the interest rates as low as possible for students so that students and their families don't have an increased burden.
As he said, in the next 2 years--whatever category of a student loan we are talking about--this bill is a break. For undergraduate students, it saves $2,000 in interest over the next 4 years that they otherwise would pay if this bill fails to pass.
The second thing he said: We want a cap on interest rates so that if something unforeseen happens, if all the economic predictors are wrong and the base interest rate on 10-year Treasurys goes up faster than we thought, there will be a cap to protect the students. He insisted on it, and we put it in there. For undergraduate students, it is 8.25 percent. That is a guarantee that it will not go to the high heavens. And 8.25 percent has been a traditional ceiling cap.
The third thing--and I want to make a point of this because it is likely to come up in debate. This is an interesting compromise. We would dream up scenarios. Well, what if we put the cap at this number? What would happen to the interest rates? When it is all over, if we calculate it over 10 years, do we break even? We don't want to make a penny off of students and their families on student loans. We don't. We tried to avoid it.
I think the best effort of the Senator from Iowa netted some $600 million to the Treasury over 10 years. This bill is in the range of $715 million.
BREAK IN TRANSCRIPT
Mr. DURBIN. I am asking a question of Senator Harkin and then I will be happy to yield.
What I would like to put in perspective is $715 million to the Treasury over 10 years. Over a 10-year period of time, CBO estimates the government will make $1.4 trillion worth of student loans. This $715 million, when compared against that, comes out to .005 percent. So we cut it as close as we could.
What does it mean to the students? It means to the students, according to the way they factored it out, that for each loan a student takes out--$2,000, $3,500, whatever it happens to be--there will be on average a surcharge of $2.76. That is what comes to $715 million. So the net result of it is--we would like to bring it to zero; that was our goal. The way this place works, that was hard to achieve. I thank the Senator from Iowa for dedicating himself to those things.
I wish to address him in the form of a question, to be complicit with the rules of the Senate: If we fail to pass the bipartisan approach we are bringing to the floor, what will be the immediate impact on students and families in the United States?
Mr. HARKIN. Again, I thank my friend from Illinois for his great leadership. Before I get right to the answer, I would point out the art of compromise, which we did. The Republican proposal we had before us a few weeks ago raised $15.6 billion over 10 years. So they have compromised a long way too. We have gotten it down to $715 million, over 10 years, from $15.6 billion. The Senator is absolutely right. We are looking at close to $1.5 trillion over the next 10 years, and that kind of puts that $715 million in perspective.
If we don't pass this today, there is one sure effect: Student loans will be almost twice what they would be under this bill--this year, almost twice--for them and their families.
Mr. DURBIN. Interest rates.
BREAK IN TRANSCRIPT
Mr. DURBIN. Mr. President, we are debating student loans. We are here having this debate because of Russia. How did that happen? It was October of 1957. The Russians launched a satellite called Sputnik. We did not have any satellites. We knew they had the bomb, and then they had the satellite. It scared us. It frightened Congress enough that they created the first student loan program. Oh, there were loans given to GIs coming back from the war, but this was a program available to those who were not veterans. They called it the National Defense Education Act. It was all about Americas defense. What they said was: We will loan money to students across America to go to college. I think their rationale was sound. If more Americans went to college and got educated, we would have the engineers and scientists we need to make this a strong nation from a defense point of view and from our economy point of view.
So I thank the Russians for launching Sputnik, and I thank the Congress for creating the National Defense Education Act because a kid from East St. Louis, IL, whose parents had eighth grade educations, got a chance to go to college, and he is standing here today in the Senate.
It was a pretty good deal too. The National Defense Education Act said: You can borrow money to go to school, and you do not have to pay it back until a year after you graduate--10 equal payments at 3-percent interest. I remember these because I was frightened to death in 1969, when I finished law school and added up all my student loans, and they said to me: You owe $8,500. I went home to my wife, and I said: We are doomed. We can't pay that back--$850 a year. It is impossible. It was not impossible. We did it. And many others did too.
What happened as a result of that satellite and that student loan program was a dramatic change in higher education in America in the 1960s and ever since. We democratized higher education. It used to be the only folks who went to college were the sons and daughters of alumni and those who were supersmart and rich. Well, kids like myself got a chance all across America.
So now here we are today, many years later--some 50 years later--and we are talking about student loans for this generation of students. We have many choices before us. I happen to like the National Defense Education Act. I like holding interest rates at 3 percent. I like the payback terms. But the number of students taking out loans and the cost of higher education have reached a point where we cannot do that without some serious commitment of resources at the Federal level at a time when our budget problems do not give us much latitude and much opportunity.
So I sat down with a number of my colleagues--Angus King, a new Senator from Maine, an Independent who sits on the Democratic side; Joe Manchin, a Democrat from West Virginia; Tom Carper, a Democrat from Delaware; and Tom Harkin, who is the chairman of the Health, Education, Labor, and Pensions Committee, and is in charge of this subject matter. That was the Democratic side. On the Republican side: Lamar Alexander of Tennessee, Richard Burr of North Carolina, Tom Coburn of Oklahoma. It is a pretty diverse group.
We hammered out a bipartisan answer to dealing with student loans that will be the last vote today. We will have a series of votes. That, I think, is the right answer because I think we have struck the right balance. There are many of my colleagues in the Democratic caucus who are still opposed to this bipartisan approach. Some of them believe--and I do not quarrel with it--we should go back to the old days of the National Defense Education Act. We should be subsidizing the interest rates. We ought to be putting a substantial amount of money into keeping the cost of higher education low in terms of interest rates.
I do not quarrel with that. I am a beneficiary of that type of approach and philosophy. But we have tried to pass that in the Senate several times with the leadership of Jack Reed of Rhode Island, and we cannot come up with 60 votes. We cannot come up with the supermajority we need to make this a viable alternative.
So now we have to ask ourselves a very basic question: What will we do if we cannot have a subsidized Federal program? Well, I think what we have come up with is a good approach. What we have come up with says basically we are capping the interest rate any student will ever have to pay in undergraduate loans at 8.25 percent--8.25 percent--capped, no matter what happens to interest rates. And we are saying we are going to start at an interest rate that is even dramatically lower than the interest rate paid by students as of this moment. So if you vote against the bipartisan alternative on student loans, you are voting against an effort to bring student loan interest rates down from 6.8 percent to 3.8 percent and you are voting against the cap on interest rates at 8.25 percent. I do not see how that is going to benefit students. If you were offered a new home mortgage, reducing your interest rate by 3 percent, you could not wait to go to closing--right?--because the interest you are going to pay on your home goes down dramatically.
Our bipartisan approach is going to reduce the interest rates paid by 11 million students and for about two-thirds of them by 3 percent. And those who vote no, those who vote no to that approach, are saying: Keep it at 6.8 percent. How can that be good for students or their families? A cap of 8.25 percent on student loans for 10 years is a protection that says to students in the future: The highest interest rate you face is 8.25 percent.
What does it mean in terms of savings? Our approach in the bipartisan bill means if you are an undergraduate student in America, over the next 4 years of your education, you will save between $2,189 and $3,191 in interest not paid--interest not paid.
So those who are going to vote against the bipartisan bill are saying to students: Keep the rate at 6.8 percent. Do not lower it. And pay between $2,000 and $3,000 more in interest over the next 4 years. With friends like that, students and their families--I will not finish the sentence. But people ought to think twice about this. We are giving students a lower interest rate and a guaranteed cap.
It is not just for undergraduates. In the next 4 years, those who are in the graduate loan programs will save over $4,000 in interest with the bipartisan approach; and those in the parent loans will save over $2,000 in interest paid. So for 4 years this is a solid winner.
In the effort of full disclosure and honesty, after 4 years, in the second 4 years, interest rates, we project, will be going up, and the cost of these loans go up.
My position is, let's vote for this now, roll up our sleeves and make sure that 4 years from now we can replace it with something that is as good or better. But why stick people with 6.8 percent, when we can bring the loan rate down to 3.8 percent?
At the end of the day, the groups that are supporting this bill are substantial: the American Council on Education, the American Association of Community Colleges, the National Association of Independent Colleges and Universities, Rock the Vote, the United States Student Association, and the Committee for a Responsible Federal Budget, because, you see, we are not adding to our budgetary woes here.
We found out this program actually generates about $715 million more than the actual cost of loans, as we project them. I wish it were zero. But put it in perspective: $715 million over 10 years against the student loan program that will cost us $1.4 trillion.
My colleague Senator King did an analysis, and I think he calculated it at .005 percent or somewhere in that range.
Mr. KING. Three zeroes.
Mr. DURBIN. So .0005 percent. Do you know what it means to the cost of a student loan--that $715 million I am talking about? Mr. President, on average $2.76 for each loan over the ten year period. So if you borrow $2,000 or $3,000, over the life of the loan you will pay $2.76 more, but you will save $2,000 to $3,000 in interest.
For those who argue that $715 million is a deal killer, it is not. I wish it were zero, but it should not stop us. If you are frustrated with the current situation, if you think there ought to be a different student loan program, work to change it. But do not be supporting a position which raises interest rates on the students who are struggling to get by. Do not be voting against the bipartisan bill that puts a cap on these student loan interest rates.
Let's roll up our sleeves in the next 4 years. Let's make sure we continue affordable interest rates for students.
Mr. President, how much time do I have remaining?
BREAK IN TRANSCRIPT
Source