[Congressional Record Volume 148, Number 50 (Monday, April 29, 2002)]
[Senate]
[Pages S3496-S3498]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          STUDENT LOAN PROGRAM

  Mr. KENNEDY. Mr. President, I am sure that when all of our colleagues 
travel back to their States and meet with parents and families, they 
are being asked about the increased cost of tuition at the universities 
and colleges across the country.
  I know that is true in my own State of Massachusetts. The average 
fees at the University of Massachusetts, one of our fine universities, 
are going up in excess of $1,000 for this next year.
  Quite frankly, in my part of the country, families are really 
concerned about the economic conditions. I know the economic 
indicators, the GDP indicators, are showing some improvement. Clearly, 
the unemployment figures are not reflecting the real situations of many 
Americans in many parts of the Nation. So many Americans are facing 
lay-offs and those that are finding new jobs are often taking pay cuts. 
As many states cut their higher education budgets, people are wondering 
how they are going to afford the increases in tuition.
  Many of those attending school and recent graduates were very 
perplexed to read the story in the New York Times over the weekend that 
says: ``Bush seeking to squeeze school loan program.''
  The student loan programs offer low-interest loans to full-time 
students. These programs are available to low and middle-income 
families. I have an AP story that says:

       The White House has suggested $5.2 billion savings from 
     Federal student loan programs. The White House Budget 
     Director Mitch Daniels proposed the savings to the House 
     Speaker Dennis Hastert last week. Among Daniels's proposed 
     savings is to require college students and graduates who wish 
     to consolidate their Government-backed education loans to use 
     variable interest rates, a change from the current program.

  I want to share with the Senate what has happened in my own State, 
and it is replicated across the country. Just last year, we had some 
36,000 families consolidate their loans, taking advantage of the lower 
fixed interest rates. It amounts to $1 billion. The average loan in my 
State is $29,000. Let me be very clear, Mr. President. If the proposal 
that is reported in the New York Times goes into effect, it will mean 
$3,000 more for every $10,000 a person owes to the guaranteed loan 
program--$3,000; $10,000 over a 30-year period. That is $10,000 
additional over a 10-year period if that student owes $30,000.
  In my State of Massachusetts, the average consolidated loan is 
$29,000. To do what? According to Mr. Daniels, for the next year, it 
will mean $1.3 billion in savings to the administration evidently so 
they can use it for the tax cut program for wealthy individuals. Talk 
about a financial transfer. This administration is going to balance its 
books at the expense of students. They are talking about $1.3 billion 
from students and middle-income families who will have to pay a 
variable rate on consolidated loans, instead of taking advantage of the 
lower fixed interest rates at the present time. This is an effort to 
effectively fix the system so that students and their families will pay 
more so this administration can afford more in tax cuts.
  Families pay what they can afford in tuition for their children to go 
to school, and depend on the federal loan programs for the remainder of 
the tuition. When it comes time to help repay those student loans, they 
will have to pay higher interest rates, and they ask why. Hard working 
families should get the best deal on interest rate that is available.
  The New York Times article goes on:

       ``The Bush administration is seeking to ease its budget by 
     squeezing $1.3 billion from the Federal student loan 
     program,'' administration and congressional officials say 
     today.

  Whether it is the $1.3 billion as in the New York Times or the $5 
billion, what they are basically saying is the students and middle-
income families are going to have to pay a good deal more rather than 
taking advantage of the lowest interest rates.
  That is poor education policy. It is grossly unfair to middle-income 
families, and it is clearly not in the national interest. Our national 
interest ought to be to encourage the best and the brightest to 
complete their education, to be involved in the communities of this 
country, and contribute to our Nation's democratic values and its 
economic values.
  How can the administration make that kind of request to the Congress? 
Mr. President, I just want to make it very clear, as far as our 
committee goes, I can say without fear of any contradiction, this 
suggestion will not pass.
  The last time we faced this type of proposal was in 1981 under 
President Reagan who suggested an origination fee which was an 
additional burden on students and their families who were taking out 
student loans. We were unsuccessful in stopping that fee, and I believe 
we will succeed in rejecting the elimination of the fixed rate 
consolidation loans. But I tell my colleagues, how in the world can you 
believe this administration is putting education first when it is 
trying to shortchange the students of this country in an unfair and, I 
think, unwise way?
  Mr. SARBANES. Will the Senator yield for a question?
  Mr. KENNEDY. I will be glad to yield.
  Mr. SARBANES. I must say, when I saw that article, the first thing I 
thought to myself was: They must have figured out some sort of unique 
way to achieve some savings in the college loan program which will not 
affect the beneficiaries of the program. It never occurred to me until 
I read the article, to which the Senator has referred, that they were 
intending to take this money right out of the hide of the 
beneficiaries.
  As I understand it, we have had this program where people can 
consolidate their loans and lock them into place with a fixed interest 
rate. That has helped, as I understand it, to significantly reduce the 
default rate on college loans, if I am not mistaken.
  I think 10 years ago we had a default rate at about 22 percent, and 
now we have cut that rate to, what, about 5 percent?
  Mr. KENNEDY. Five point six percent.
  Mr. SARBANES. Five point six percent.
  Mr. KENNEDY. Under the Clinton administration.
  Mr. SARBANES. That is one of the benefits of providing a rational 
framework for students and their families to address these college 
loans.
  First of all, we have to understand these students are taking on a 
tremendous burden as they move through college in order to get a 
college education. There are many people who argue we are not doing 
enough to help lift that burden. But the notion that we should now add 
to it in this significant manner that the head of the OMB is talking 
about I find outrageous.
  How are these people going to afford this college education?
  We have set up a system which seems to be working pretty well. If 
anything, we ought to provide more assistance, not less. I certainly 
commend the Senator for taking to the floor to underscore this problem. 
I gather they want

[[Page S3497]]

to try to do it in the supplemental appropriations bill, with very 
little consideration of its impact or an opportunity to affect what is 
happening.
  Mr. KENNEDY. The State PIRGs have completed an interesting study. It 
is an independent evaluation on higher education student loan debt. 
Their estimate on the cost to borrowers of switching from a fixed rate 
to a variable rate consolidation loan--this is their estimate, not 
mine--for an average graduate with $16,000 in college debt would have a 
$2,800 increase over the next 10 years and $6,300 if they chose to 
spread their payments over 20 years. If one has $16,000 they would pay 
an additional $2,800--the average loan is $29,000 in my State. Do you 
understand that? Mr. President, $16,000 is just about the national 
average loan. This is not my estimate, this is the estimate of the 
highly regarded and respected national group the Public Interest 
Research Group.
  I do not know how many people are consolidating loans in the State of 
Maryland and the State of Illinois, but I do not think that higher 
rates are what these families deserve. They deserve the best possible 
low interest rates. They are uncertain about their economic future. 
They are planning their life. They have every right to consolidate at 
the lowest interest rates, and now the administration is attempting to 
force them to pay the rate at the time that they originate their loans.
  Mr. DURBIN. Will the Senator yield?
  Mr. KENNEDY. I will be glad to yield.
  Mr. DURBIN. I thank the Senator for raising this issue, and I thank 
the Senator from Maryland for joining us. Roughly two out of three 
college graduates today leave college with a debt. The average debt 
across the United States for all college students is $16,000. That is a 
pretty substantial sum of money for somebody starting out to get their 
first job out of college.
  Mr. SARBANES. Age 21, I might add, or 22, and they are already 
walking out, after getting their education, with a $16,000 average 
debt. A lot of them, as the Senator points out, have more.
  Mr. DURBIN. I might say to the Senator from Massachusetts, the 
experience in Illinois is the same as in his State. Our average student 
loan, as consolidated under this program, is $30,000. What the Senator 
from Massachusetts tells us is that President Bush's administration has 
suggested adding $10,000 in cost to pay back that student loan.

  So one might say to themselves, this must be some national emergency 
that would lead us to the point where we would take a young college 
graduate and say we are going to eliminate a program and heap on 
another $10,000 in debt for them to pay off. The national emergency 
appears to be making permanent the President's tax cut program.
  We did a little analysis on this program recently, and I think the 
Senator from Massachusetts is aware that 65 percent of President Bush's 
tax cut goes to people making over $500,000 a year. So think about this 
for a second. The new college graduate coming out with a debt, in my 
State, of an average $29,000, just got a $10,000 bill to collect money, 
to do what? To give to the average person making over $500,000 a year a 
$39,000-a-year tax break.
  What is wrong with this picture? Why are we not helping the young men 
and women who are going to lead this Nation with their education to 
take the kind of jobs that they need?
  I know the Senators from Maryland and Massachusetts know the 
situation where so many young graduates want to go into teaching, for 
example, and they look at their student loans and say: This is 
impossible. I cannot make enough money as a teacher.
  The Bush administration proposal would make their debt larger. For 
what? To give a tax break, two-thirds of which goes to people making 
over $500,000 a year. This is totally upside down.
  The student loan obligations for students across America have doubled 
within the last 8 years. They are likely to go up in the future. The 
Bush administration proposal, I am afraid, is going to make it even 
more difficult for our sons and daughters and grandsons and 
granddaughters to pursue a higher education.
  Mr. KENNEDY. May I add one point? I would be interested in my 
friend's reaction to this. If someone is receiving a Pell grant, the 
average family income for a Pell grant student is $17,000. These are 
gifted, talented individuals who could qualify for any of our greatest 
universities. Their family income is under $17,000, and the Pell grant 
is available to them. Reading from the Public Interest Research Group's 
analysis, even worse off are the students who depend on the Pell grants 
to finance their education. This would cost the typical Pell grant 
borrower $3,100, almost a thousand dollars more because since they are 
lower income, they have to pay--at the start they are paying higher 
rates.
  So we are talking about students who are gifted and talented, who 
have every kind of asset except a large wallet or pocketbook, who have 
a great deal to contribute to our Nation, and whose family income is 
less than $17,000, people who are going ahead and working. Sixty-three 
percent of the students in this country now who are on scholarship work 
25 hours a week or more. That is extraordinary.
  We wonder why the students are not talking about books and education; 
they are talking about their debts and their obligations. Well, I am 
wondering, if my two friends would not agree, when families of limited 
income, even though their children have the academic gifts and talents 
to go on to education, are going to be forced to say: No, count me out; 
I will just go on, wait on tables, I will park cars, because I am not 
going to put my family through that kind of indebtedness. That is the 
message that will go out with this proposal.
  Mr. DURBIN. Asking the Senator to further yield, I will share with 
him this statistic: 39 percent of college students now graduate with 
debt loads that are termed unmanageable, meaning their monthly payments 
are more than 8 percent of their monthly incomes.
  With this Bush administration change putting more debt on these 
students, it becomes impossible for them to deal with this.
  Mr. KENNEDY. But the Republican response to that is these students 
are going to become lawyers and doctors so they will be able to afford 
it. Would not both my colleagues agree, we have a shortage of 2 million 
schoolteachers in this country? What we are talking about is 
schoolteachers. We are talking about social workers who we are trying 
to help. We are talking about those who would be childcare providers. 
We are talking about police officials and nurses. These are the ones 
who are entering low wage professions, trying to make it and to be 
responsible and pay off their debt. They are the ones who are going to 
find education virtually priced out.
  Mr. SARBANES. Will the Senator yield?
  Mr. KENNEDY. I am glad to yield.
  Mr. SARBANES. The fact is that no other advanced country places as 
much of the burden of obtaining a college education on the individual 
student and the family as we do. We in the Congress have been trying to 
ease that burden through a combination of grants and loans, although we 
have been shifting from grants to loans increasingly over the years. 
Other countries do not do the same thing. Why not? Because they 
recognize the society and the nation benefit from developing the 
talents and the capacities of their young men and women; that it is not 
only the individual who gets the benefit but society gets a benefit 
from educating these people.
  As my colleague from Illinois pointed out, if they walk out of 
college with this huge burden on their back, then obviously they are 
motivated to go to lucrative professions in order to pay off the debt.
  I have talked to young people who have said: I really would like to 
teach but I cannot afford to teach because I have this debt burden that 
I have to pay off. Therefore, they are looking to go into some 
profession where they can make a lot of money. They are lost to the 
teaching profession.
  Now that we have a system in place, we knock out one aspect. My 
understanding is the consolidation of loans has been in effect since 
the Reagan years. I understand it first went into place in 1986, the 
consolidation of loans. It makes good sense. We are always telling 
people they ought to consolidate their loans and we put it into place. 
Now we are taking away from

[[Page S3498]]

people another support to try to help with higher education.
  Mr. KENNEDY. The Senator is quite correct. There is a very 
interesting statistic for those who enter medical school. 85 percent of 
medical students want to become general practitioners. They care about 
patients and want to be there on the front line treating the families 
of America. However, they end up borrowing so much to pay for their 
school costs that they need to enter specialization because of the 
salary differences at the very time we need more general practitioners.
  I draw the attention of my colleagues to the chart and what has 
happened with grants and loans. My colleagues remember the great 
debates held on providing greater access to higher education for all 
Americans, those national debates go back to 1960. President Kennedy 
believed the size of your pocketbook should not determine what 
university a student attends, only your qualifications should determine 
where you could attend school. Grants, some loans, work-study programs, 
summer employment should add up to the cost of your tuition and fees. 
All of those match together in an economic package so a student can 
successfully go to the school of their choice.
  I was in the Education Committee when Secretary Bennett said: Too 
bad. Those families can go where the loans will take them. That is our 
view of this Republican administration. That is the attitude. We do not 
want to limit opportunity. I know where that is in the Record.
  We have seen the buying power of grants fail to keep up with the 
costs of college. The neediest children are forced to take out loans. 
Now we find at a time when these young students and graduates are 
trying to take advantage of refinancing their loans, we are hearing the 
administration saying: No, we need another $1.3 billion for our tax 
program so we are going to force students to wait and see what the 
interest rate will be every year instead of locking in at a fixed rate. 
That is regrettable.
  I draw another chart to the attention of my colleagues. This is a 
women's issue. Education is one way that we can help women close the 
earnings gap. When you deny women the opportunities to continue 
education, you continue a perpetuation of the notable disparity taking 
place. Women, like their male counterparts, increase their earnings 
when they increase their education.
  Once you put the economic binds by effectively denying people the 
ability to discharge debt, this will work against women students. We 
see it already. We will see it even grow over the period of time.
  Mr. DURBIN. Will the Senator yield?
  Mr. KENNEDY. I yield.
  Mr. DURBIN. The Senator was part of an effort that many joined with 
President Bush: Leave no child behind. The idea was to improve the 
quality of education across America, to make certain, with 
accountability, that schools were graduating students who had the basic 
wherewithal to succeed in society.
  One of the linchpins was to improve teachers in the classroom.
  I would like the Senator from Massachusetts to tell me if I recall 
this correctly. Are we moving through President Bush's bill to a point 
where more and more teachers have to be certified in that they are 
going to teach in schools? In other words, you cannot be the gym 
teacher who says, I will teach biology. You have to stand in front of 
the classroom with students.
  We are passing bills saying, teachers, we want you to stay in school, 
get more advanced degrees, and be more valuable in the marketplace but 
come back to the classroom. And now the Bush administration, months 
later, comes in and increases the cost of education for those who 
aspire to be those quality teachers. There is a disconnect.
  Mr. KENNEDY. The Senator is absolutely correct. It is a powerful, 
powerful argument. We are trying to make sure we are going to have a 
well-qualified teacher in every classroom. More and more young people 
who are entering teaching are saddled with enormous debt burden. As a 
national objective, have a well-qualified teacher in every classroom. 
How can these young professionals afford to pay off their loans when we 
know that too many teachers are underpaid.
  And the Senator quite rightly points out that will require tens of 
thousands, hundreds of thousands, of teachers to get certification and 
to go back to universities and colleges, community colleges, to get 
these certifications.
  This kind of activity is going to make it that much more expensive, 
that much more of a disincentive to go into teaching. That is 
enormously important and significant. I thank my colleague for bringing 
this critical fact to the floor.
  I see my friend from Rhode Island who has been such a leader in 
education, and follows a very proud tradition in his state. We give 
fair notice to the administration that we are going to do everything we 
possibly can legislatively do to make sure this does not take place. We 
want to keep as many low-cost options for borrowers as possible to make 
sure that more people are getting college degrees. We will have more to 
say about this in the very near future.
  I yield the floor and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Kennedy). Without objection, it is so 
ordered.
  The Senator from Illinois is recognized.
  Mr. DURBIN. I thank the Chair.
  (The remarks of Mr. Durbin pertaining to the introduction of S. 2393 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. DURBIN. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent the order for the 
quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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