[Congressional Record Volume 150, Number 115 (Wednesday, September 22, 2004)]
[Senate]
[Pages S9482-S9483]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STUDENT LOAN SCANDAL
Mrs. MURRAY. Mr. President, I come to the floor today to talk about
this scandal to which the Senator from Massachusetts alluded. It is
mentioned in the New York Times today, ``Banks and the College Loan
Loophole.''
I talk to families all over the State of Washington, and they are
struggling to pay for college for their kids. They all agree college
education is far too expensive for many families. You would think the
Federal Government would be doing everything possible today to make
college more accessible for all of our families. Sadly, that is not the
case.
Last week in the Senate we had a chance to help students to get to
and get through college. Unfortunately, the majority on the
Appropriations Committee blocked my commonsense, student-friendly
proposal. Instead of standing up for students, unfortunately the
committee stood up for banks and other special interests that have been
gaming the system for years, at taxpayer expense.
I am on the Senate floor today to say that students should come
before special interests. Student loan programs were started to help
our students. They were not started to line the pockets of lenders. It
is time to end the taxpayer ripoff that is occurring today and do more
to help our students afford college.
Back in the 1980s, interest rates were high. Many people were
concerned that our lenders would stop making student loans, so Congress
created a temporary--and I emphasize ``temporary''--measure to keep
college loans affordable for our students.
At the time, it worked. Lenders kept making loans, and students were
able to afford college loans. This was supposed to be, as I said, a
temporary measure. In fact, it was supposed to be phased out in 1993,
when interest rates started coming back down. Interest rates came down;
this subsidy lived on. For the past 11 years, taxpayers have paid these
lenders far more than they should have. Taxpayers are actually
subsidizing profitable companies to make loans that are far above
today's interest rates. Clearly, taxpayers are paying a huge bill while
special interests are taking the money to the bank.
Who is paying the price? Our college students. This year we are
throwing away $1 billion that we could be using to help more students
go to college. So in the Appropriations Committee last week, I offered
an amendment to finally stop this taxpayer ripoff. My amendment would
have used the savings from this ripoff to help 700,000 students get
another $3,000 for college. It would have helped the parents of 25,000
low-income students get child care on campus. It would have helped
another 200,000 students get $800 in grants. It would have helped
180,000 low-income and first-generation students prepare for college
through TRIO and GEAR UP. And it would have helped thousands of migrant
students attend college.
When I offered my amendment, everybody on the committee seemed to
agree that this subsidy should end. But when it came time to vote,
every Republican member voted against my amendment. They voted against
taxpayers, they voted against students, and they voted against our
families. They said they wanted to deal with it later. I am here today
to say that taxpayers are getting ripped off every day we delay. If we
wait 6 months, as was suggested, taxpayers will lose billions of
dollars, and students will not get the help they need. The time to do
this is now.
I am not willing to waste another dollar that could be in the pockets
of our students today, and that is why the Senate needs to act now. The
Government is paying 30 times more than it should for these special
interest subsidies--30 times more. That is a ripoff.
This is as if you walk into a college book store and a textbook on
the shelf costs $100. If that textbook had the same outrageous markup
as these loans, that student would be paying $3,000 for the same
textbook. Taxpayers are paying $3,000 for something that only costs
$100 because of this runaway subsidy, and that is outrageous. There is
no reason for taxpayers to be paying a markup of 30 times the real
cost.
We were all outraged when Halliburton charged taxpayers $45 for a
case of soda that sells for $7 at the supermarket. Halliburton marked
those prices up 6 times. Today, lenders are marking up student loans at
a price 30 times higher than they should. No wonder the Washington Post
called this a scandal.
I ask unanimous consent to have the Washington Post editorial on this
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, Sept. 10, 2004]
Student Loan Scandal
There are bureaucratic errors, there is congressional
negligence--and then there are bureaucratic errors and
congressional negligence on a scale so vast that it is hard
to believe they can be accidental. The hundreds of millions
of dollars in unnecessary government payments to the student
loan industry in the past 18 months amount to such a scandal.
The loans in question, established in 1980, are guaranteed by
the government at 9.5 percent. Yet most students are paying
interest rates of 3.5 percent or less. The difference--all
taxpayers' money--is pure profit for the companies that have
taken advantage of a loophole in the law.
According to a recent report by the Institute for College
Access and Success, a nonprofit education think tank,
Congress had actually intended to end in 1993 the 9.5 percent
loan guarantee, one of many programs that provide incentives
for institutions to lend to students. In May 2003, one
company, Nelnet Inc., wrote to the Education Department to
confirm its intention to expand its holdings of old loans
with the 9.5 percent interest rate. Nelnet received no answer
from the department for a year, during which time the
department continued paying the company. In June of this
year, the department replied inconclusively--at which point
the company's stock price climbed 20 percent. Although Nelnet
is the largest holder of loans guaranteed at 9.5 percent--and
its holdings of such loans have increased by 818 percent
since January 2003--it is only one of many such lenders.
According to a preliminary Government Accountability Office
report, commissioned by Reps. Chris Van Hollen (D-Md.) and
Dale E. Kildee (D-Mich.), 37 lenders receive payments for
loans with guaranteed interest rates of 9.5 percent, at a
government cost of $1 billion annually, and the volume of
such loans is rising.
Why wasn't the loophole shut long ago? Education Department
officials argue strenuously that only a two-year regulatory
process could have done so, and they didn't initiate one,
they say, because they thought Congress would deal with it.
Congressional Republicans say they expected to deal with the
problem in a comprehensive higher education bill, but that
has failed to pass (and in any case the proposed language
would not have ended all the payments). Yet, other solutions
could have been found: In the wake of revelations about the
scale of the payments, the House yesterday passed an
amendment to an appropriations bill, offered by Mr. Van
Hollen and Mr. Kildee, that would close the loophole
completely, albeit temporarily. (Of course, there is no
guarantee it will become law.) And one former Education
Department general counsel has written to the secretary of
education, Roderick R. Paige, arguing that the loophole could
have been closed immediately if officials had wished to do
so.
There could be other explanations for their reluctance. One
is that the president of Nelnet, Don R. Bouc--who has called
for the loophole to be shut and the money to be better used--
is well-connected enough to have been appointed to Mr.
Paige's advisory committee on student financial assistance.
Here is another: According to a report in the Chronicle of
Higher Education, Nelnet is the second-largest contributor to
congressional campaigns in the student loan history, beaten
only by industry giant Sallie Mae. Over the past 18 months,
the student loan industry has contributed about $750,000 to
the 49 members of the House Committee on Education and the
Workforce, of which $136,000 has gone to the committee
chairman, Rep. John A. Boehner (R-Ohio), and $175,000 to Rep.
Howard P. ``Buck'' McKeon (R-Calif.), chairman of the
subcommittee on higher education. Mr. Boehner's spokesman
vehemently denies any connection between the contributions
and the issue and maintains that the committee's bill would
have fixed the problem, which was mentioned in the
president's latest budget. Still, it is difficult to
understand, given the sums involved, why neither Mr. Paige
nor Congress made this a higher priority.
[[Page S9483]]
For nearly a decade we have argued that Congress should
reduce subsidies for banks that lend to students, and instead
expand the direct-loan program, which provides about a
quarter of student aid--or else reform the system to make it
harder to manipulate. This scandal provides an excellent
reason to look again at these questions.
The PRESIDING OFFICER. The time of the Senator has expired.
Mrs. MURRAY. I ask for an 2 additional minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mrs. MURRAY. Mr. President, the Senator from Massachusetts asked
unanimous consent to have the New York Times editorial from today
printed in the Record. It clearly laid out the case for what is
happening today to taxpayers who are paying a tremendous price. And who
is losing? It is our students.
We have to stop overcharging the American people. We still have time
to do it this year and help students get to college at a time when we
all know tuition rates are rising. We need to give more to get more
students there.
I warn the Senate, the clock is ticking. Every Member of the Senate
has to decide if they stand with students and families and taxpayers,
or if they are going to stand with the special interests. Millions of
students and millions of families are waiting for this answer. We have
to stop the special interest subsidy today.
Mr. President, I yield the floor.
Mr. KENNEDY. Mr. President, I understand we have a colleague who is
on her way to the floor. I ask unanimous consent she be entitled to 5
minutes and that we have 5 additional minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. I ask the Chair to remind me when I have 1 minute left.
I ask the Senator from the State of Washington, does she not agree
with me that this administration has the power to do something about
this, and could do something about it today, this giveaway that is
written about in the prominent national newspapers as a giveaway to the
banks? Does she agree with me that the Department of Education has said
we don't have the authority, we don't have the power, we don't have the
legal ability to do something about it? Yet we have the General
Accounting Office report:
Family education loan program, statutory and regulatory
changes could avert billions--
Hear that? Billions--
. . . in unnecessary Federal subsidy payments.
On page 8:
We disagree with the department's characterization of their
authority.
It seems to me, if this President were interested in protecting
middle-income families, in avoiding the kind of continued wasteful
subsidy and giveaway to the banks, that the President, the Department
of Education, this administration, could do something and do something
today.
Would the Senator be willing to express an opinion on that?
Mrs. MURRAY. Mr. President, the Senator from Massachusetts is
absolutely correct. The Department of Education could end this today
with a simple rulemaking procedure. Instead they are pointing fingers,
saying Congress has to do it. Congress had the opportunity in the
Appropriations Committee last week. They said, no, we have to wait for
an authorization 6 months from now. Every month that goes by we lose
billions of dollars in taxpayers' money and thousands of students don't
get access to college. We don't need any more fingerpointing on this.
I think the Senator would agree that we don't need the Department of
Education pointing to Congress and Congress pointing to the Department
of Education. We need to stop this now. The Department of Education can
do it by rulemaking and we can do it on any bill that comes before us.
But we need to do it and we need to do it quickly.
Mr. KENNEDY. I thank the Senator for her comments.
On August 27, Sally Stroup, Assistant Secretary for Education, said,
``I don't think we have the legal authority to stop them.''
They made no effort to try to stop them. Senator Murray is leading
the fight in the Appropriations Committee to try to save the taxpayers
and save middle-income families who are stretched with their tuition.
Now we have the General Accounting Office saying they do have the
power.
I wonder if the Senator would agree with me that we see a whole
pattern from this morning's newspapers about how the administration is
effectively right in the tank for the powerplants with regard to
mercury, coal-fired powerplants, and is now with the bank on student
loans. We have seen it with regard to the HMOs. I am wondering who is
going to stand up for working families and who is going to stand up for
middle America.
Mrs. MURRAY. Mr. President, the Senator from Massachusetts is
absolutely right. This is outrageous. We have the Department of
Education pointing fingers at Congress when they can make a ruling and
stop this practice today. According to all accounts, the delay of this
is costing billions of dollars. If we wait for Congress to act on
reauthorization of the act 6 months or longer from now, taxpayers are
going to lose $2.8 billion in interest payments. We are in the Senate
where we know that access to Head Start is critical, we know access to
college is critical, and we know that $2.8 billion sent to the bank
today means students are not getting higher education.
Mr. KENNEDY. Mr. President, when we made the commitment of No Child
Left Behind, we thought we were including all children. When this body
committed to Medicare, we didn't say we are going to leave some senior
citizens out; we said all seniors. When we made a commitment to voting
rights, we said voting rights for all Americans. When we made our
commitment to all children in this country, we meant all children.
There it is. This is not disputed. We are failing more than 4 million
children. That is unacceptable, particularly when we find that this
administration is looking out for their special interests.
I think we have an opportunity to change that on election day, and
hopefully will.
I thank the Senator.
I yield the floor.
The PRESIDING OFFICER. Who seeks recognition?
The Senator from North Dakota.
Mr. CONRAD. Mr. President, how much time do I have?
The PRESIDING OFFICER. The Senator has 5 minutes.
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