Transportation, Housing and Urban Development, and Related Agencies Appropriations Act, 2014 -- Continued

Floor Speech

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Mr. REED. Mr. President, as you well know, since you worked awfully hard and very effectively with respect to the issue of student loans, we are about to rush into a complete restructuring of the way we price student loans. I believe this is not the appropriate approach. I think there are some fundamental issues with the student lending program that require a comprehensive approach. I have tried, along with many of my colleagues, to at least extend the 3.4 percent for a year so we can do this systematically and thoughtfully, do it in terms of not just interest rate structures but in terms of incentives to keep college costs down and also to deal with the increasingly difficult issue of the existing loan burdens that students have so they can refinance--not just in the future but families of students struggling today with a huge amount of student debt.

Student debt has exceeded $1 trillion. It has surpassed credit card debt as the second largest household debt that we hold in the United States. In this context, I think we have to go forward and look at this comprehensively.

The bipartisan Student Loan Certainty Act is a product of great effort and very sincere effort to try to deal with this problem. But I do not think it will lead to a long-term stable solution that will benefit students. What I think it will do is shift the costs of these programs increasingly to students. This is not the way it used to be.

The idea that government would generate revenue from student loan programs is a fairly recent one. From the first loan programs we established in the 1950s, the programs were designed as investments, something we paid for and we benefited from through increased productivity, through increased education of our citizens, and increased ability to compete worldwide. It was not designed to generate profits. It was not designed to break even. It was designed to invest in the future of the country through its young men and women.

We invested in education because we understood educational opportunity was directly connected to our prosperity and our security. Indeed, it was the engine that was going to pull individuals up the ranks into the middle class and beyond, and it was going to pull the country forward with increasing prosperity and increasing national benefit.

In response to Sputnik back in the 1950s we created the national defense student loan, what we now know as the Perkins loan, to expand the number of college graduates, especially in the fields of math, science, education, and engineering. Those are the very fields today where we see we need more people--math, science, engineering, and education. Today we call it STEM, a fancy term. Back then it was just math, science, engineering, and education. These were low-cost loans with very generous benefits.

For instance, no interest accrued on the loans while students were in school, and teachers could get these loans forgiven.

In the Higher Education Act of 1965, one of the principal architects was Senator Claiborne Pell, my predecessor. In that act, grants, work-study, and low-cost loans were the three pillars of student financial aid. We gave money to the students without requiring repayments with grants. We had very low cost loans relative to prevailing rates in the country, and then we had a work-study program. Providing more educational opportunity then was seen as a necessity, not a luxury, not something that would be nice to do. And we have all benefited from it.

The productivity of this country today is a direct result of those investments that were made in the 1950s and 1960s. In fact, I suggest, with very rare exceptions, every person in this body benefited. I know I did.

After West Point, which was funded by the government but required at least 5 years of service afterwards, I went to law school. I had to get a loan to help me get through, and I did. In fact, I would also daresay there is nobody in this Chamber today, with very few exceptions, who was without the access to and benefits of very generous student lending that persisted, that was part, that was a fixture of the 1950s, 1960s, 1970s, 1980s.

This notion that we need to educate our young people is even more compelling today than it was in the 1960s and the 1970s.

This is a chart, ``Jobs Requiring at Least Some College Education by 2018.''

In 1973, less than 30 percent of jobs required a college education. You could leave high school--if you had good work habits and good skills--and you could manage to make a living, buy a home, rise up through the ranks of managing production on the floor, and get into management if you were talented, ambitious, et cetera.

Now, you see, by 2018 you are looking at over 60 percent of the jobs, nearly two-thirds, that will require some college. Here we were heavily subsidizing college education. Now we are proposing to say: No, students have to absorb the costs. Families have to absorb the cost. This cannot be a cost to the government in terms of our budget. That logic just doesn't seem compelling to me at all.

We also know not only is college becoming more important in the sense of the jobs that need to be filled, but here is the other reality.

This is the lifetime earnings. You can see there is a huge increase in lifetime earnings with education. As we make it more difficult to go to higher education, we are basically telling people they are not going to earn as much as they could. When we are wondering today about why there is so much inequality in this country, why wages are not going up, it comes back in large part to the fact that we need higher skilled workers, better educated citizens.

As we impose more costs on students and families to go and get this master's degree or professional degree or doctorate degree or bachelor's degree, the market will tell us the higher the cost, the fewer people will do it. We are essentially telling those people they are locked in wherever they are. They are not going to be the ones who move from that humble abode to the middle-class home and beyond.

That, I think, frankly, is one of the most disturbing aspects that people are facing all across this country, the realization and the fear that their children will not do better than they did. Our parents, all of them, I think, could say with great confidence: I am working hard, I am struggling, but I know my children will do better.

One of the reasons our constituents across this country are saying we are not getting it right is this growing perception and feeling that, no, their children will not do better. By the way, this vote speaks volumes about our commitment to making sure the next generation of Americans does better.

Just look at the numbers. This is how you get well compensated in the United States. Our country is based upon the notion that education is the engine that will pull you forward. That is the way we are going to deal with this notion of inequality of income. That is the American solution. Again, I think as we depart from this tradition we are going to find ourselves in an increasingly difficult situation.

We are essentially asking in the proposal that is before us for low- and middle-income students to assume more of the cost of higher education--and their parents. Some can, but they will have less to invest in other things. Some cannot, and they will miss this train, literally.

Even though in constant dollars the maximum Pell grant--we are still providing grants--is nearly where it was in terms of the 1970s, it is paying for a much lower percentage of the cost of higher education. I think that is an important point to note.

This is not just about the level of Federal support. That is why I have urged us to stop and look at a comprehensive approach. What is happening--these are the Pell grants indicating how they went up dramatically in the 1970s and then tapered off and then finally, based upon President Obama's initiative, I believe, in 2009, they went up again based upon our changing from bank-based lending to a direct lending program. We shifted resources to the Pell grants. The Pell grants have been going up.

What has also been going up is tuition. So when we are talking about the road to opportunity, when we are talking about dealing with this program comprehensively, just simply restructuring rates is not going to get it because this is what we are looking at: average tuition and fees at public and private universities. The green line is the 4-year private. That is shooting up out of sight. But we also know, and this might be anecdotal, those are the schools, the elite schools, if you will, that in many cases provide even an express road to opportunity for so many people. That is why they are so competitive to get into. Those costs are rocketing out of sight.

But just the 4-year public colleges, which used to be the backbone of our whole country where with a modest fee you could get a great education, they are going up. We know from testimony that has been recorded here, a lot of it is because, as we are pulling back from supporting students and their families, guess what, States are doing the same thing.

We had years and years of reduced budgets to our university system which have been reversed in only the last few years by the present Governor. We are pulling back. What happens as a result of that? Tuition goes up.

When we look back to the mid-1970s, if a student got a Pell grant, that student could cover most of the cost of a 4-year education at a State school. Students cannot do that now. What does that mean? They have to borrow. Students have to borrow if they are in a situation where they are relatively low income, very low income, or of modest means.

The consequence of this has resulted in an explosion of borrowing. This is the total FFEL--that is the old name for the lending program--and DL, the direct lending program that is used today for Stafford loans. These are the loan amounts from 1966. At the bottom here, it is very small. It is off the chart. Through the 1970s, it was rather constant. It started to spike up here.

Here is the curve. There is a little bit of a downward spike here, but that might be because people are dropping out. They cannot afford to borrow. I am hearing stories--and my colleagues are hearing stories--of people leaving school. They are saying: What is in it for me? I can't afford to graduate from college with a $25,000 or $50,000 debt and then get a job--or maybe not get a job--that is paying $35,000 a year. I will never get out of that hole.

There has been an extraordinary explosion of lending. As lending has grown, there is more of a need to take steps to curtail the lending or to help students deal with this lending. There is over $1 trillion in outstanding Federal student loan debt that young people are going to have to somehow amortize and pay off through their lifetime.

We have already had studies from the Federal Reserve and leading authorities who say this will delay home acquisition and all the things we thought would happen almost automatically or routinely in this country. A student goes to college, graduates, and then by their late twenties they have done enough in their job to buy a home, start a family, and become a pillar of the middle class. That hope and dream is receding.

There is another aspect of this that gets into the whole accounting issue we have to deal with. CBO looked at these issues and scored them. They indicated that between 2013 and 2023--and that is over the next 10 years--we will generate about $184 billion worth of profit for the Federal Government. It is the difference between what the students are paying us back and what we are using to borrow. It is essentially the difference between our costs and their repayment to us. This is a remarkable shift from investing in students throughout all of these decades--post-World War II--to now essentially being able to generate income from students.

Since 2007, we have been seeing a positive return to the Federal Government on student loans--even from loans made under the old bank-based system--because of the way the interest rates have run, because of our borrowing costs, and because of the costs students have to pay.

Given the fact we are able to generate $184 billion over 10 years, I think we should be able to find our way through to a 3.4-percent rate for at least another year, but that has proven elusive in terms of the votes on the floor.

I think all of this strongly suggests we have a major challenge to reconfigure our student lending system, our grant system, and our work-study system. We have a major challenge in lowering the cost of a college education. Rather than taking off like a rocket, the costs should be coming down. We cannot do that in a matter of 2 or 3 days. It is going to take some comprehensive and coherent work over many weeks and months.

The problem we face in terms of looking forward and making changes is we have locked the interest rate at 6.8 percent under our budget rules. As a result, everything we do has to rotate around 6.8 percent.

The proposals by my colleagues would lower interest rates in the first few years. However, in order to make up for the 6.8-percent assumption in the budget, it would have to raise interest rates in the out-years. For the first several years we are going to provide an increasingly expensive but starting relatively inexpensive--approach to student borrowing. But that has to be made up arithmetically by a higher cost for those succeeding generations.

For example, if you are a senior in high school today, you will do reasonably well--not as well as 3.4 percent, but reasonably well. If you have a younger sibling who is in eighth or ninth grade, he or she will pay for you because those rates--just to make up the gap--will be much higher. We know it will be higher.

I must commend the authors of the legislation who have at least put in a cap for the various lending programs. Originally, as this proposal made its way through the Senate, there were no caps, so rates could have soared to astronomical heights. Still, even with the caps, over the long term the succeeding generations of students--and this is a long-term proposal and not a proposal that has a finite period of time--will have rates that will go up and up and up.

The key aspect that is driving all of this is the assumption that we should not be investing in higher education, as we have for decades, and that we have to have a budget-neutral solution. Rather than saying we can go ahead and do things, such as close tax loopholes, let's move that money into higher education, which I would argue would be beneficial for everyone in the short and long run.

We have been locked into this budget-neutral approach, and there is a $715 million surplus, but it is as close to zero, as far as budget neutrality, as they could get.

I go back to the point of revenue neutral, which means that given the present law of a fixed rate of 6.8 percent for undergraduate loans, 7.9 percent for other loans, we are going to enjoy it now and pay later. That is the essence of the proposal before us. Students could pay much more later.

I also think the idea that we are going to fix this 2 years or 3 years hence is not reasonable because the cost of fixing it goes up with each year. If our principle and our presumption is that it always has to be revenue neutral, there might be some good ideas about fixing it, but where is the money? That is what is going to have to be included to fix it.

I think we can do better. I will be offering an amendment with Senator Warren which will cap this proposal at 6.8 percent for student loans and 7.9 percent for the PLUS family loan--the parent loan--that will be comparable to what the fixed loan rates are today. This way we can at least tell all of our constituents: No student will be worse off--not just over 3 or 4 years--over the next 10 to 20 years, or however long this legislation endures. I think that is something that would be a useful improvement.

We are paying for it by a surcharge for people who are making over $1 million. It is a very small surcharge. We should be able to say: We can find the resources to invest in the future of the country and to support and subsidize students so they can improve their skills, move into the middle class, and move the country forward. We have always done it. We can do it today.

I urge my colleagues to favorably consider the amendment when it is proposed.

Again, there have been extraordinary efforts on the part of many--principled and thoughtful--to try to deal with this issue. I go back to my initial point: If we want to deal with it, we have to have time, and, frankly, we have to have resources. The way this is evolving, we don't have time and we are unwilling, it appears at this juncture, to commit significant resources to solve this problem in a comprehensive and coherent way that will benefit students and families and in the long run will benefit this country.

With that, I yield the floor and note the absence of a quorum.

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