[Congressional Record Volume 155, Number 134 (Tuesday, September 22, 2009)]
[Senate]
[Pages S9626-S9628]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             STUDENT LOANS

  Mr. ALEXANDER. Mr. President, I don't think we can say it too often--
though some people may tire of hearing Republican Senators saying it--
we have too much debt and too many Washington takeovers. Today, we want 
to talk about the latest Washington takeover, the latest huge addition 
to the national debt, which is the voluntary takeover of the Federal 
Family Education Loan Program.
  Rather than describe the situation myself, let me go to the New York 
Times article, on September 14, to paint the picture.

       Between financial rescue missions and the economic stimulus 
     program, government spending accounts for a bigger share of 
     the nation's economy--26 percent--than at any time since 
     World War II. The government is financing 9 out of 10 new 
     mortgages in the United States. If you buy a car from General 
     Motors, you are buying from a company that is 60 percent 
     owned by the government. If you take out a car loan or run up 
     your credit card, the chances are good that the government is 
     financing both your debt and that of your bank. And if you 
     buy life insurance from the American International Group, you 
     will be buying from a company that is almost 80 percent 
     federally owned. Mr. Obama plans to argue, [the Obama 
     administration says], that these government intrusions will 
     be temporary.


[[Page S9627]]


  If that is true, then why is the Obama administration insisting and 
the Democrats in the Senate and the House are insisting that we take 
the Federal student loan program which works very well and turn it 
wholly into a government-run program; borrow a lot more money, maybe 
$500 billion or $600 billion over the next 5 or 6 years, and turn the 
Secretary of Education into a competitor for banker of the year instead 
of educator of the year?
  Just the size of this undertaking is enough to stagger the 
imagination. There are 19 million new student loans every year. They 
are made through 2,000 lenders at 4,421 schools. At 1,600 schools, one 
out of four of the student loans, you can get the money directly from 
the Federal Government. But ever since I was U.S. Secretary of 
Education in the early 1990s, students have preferred their local 
institutions. Now the President comes along and says we are going to 
have a lot of savings, we are going to have $87 billion in savings over 
the next 10 years, so we should end the student loan program as we know 
it and turn it all over to the government and have people stand in line 
at the U.S. Department of Education each year to get 19 million loans.
  The Senator from New Hampshire is the former chairman of the Budget 
Committee, the ranking member of the Budget Committee, perhaps the 
leading Senator in this body on budgetary matters. I would ask him this 
question: Is there really $87 billion in savings over the next 10 years 
which the President and the Democratic majorities should be able to 
spend?
  Mr. GREGG. Let me first congratulate the Senator from Tennessee for 
bringing this matter to the attention of the Senate because if there 
were ever a shell game being played on the American people, this is it.
  The administration has alleged they are going to save $87 billion. 
Then they have gone out with great zeal and enthusiasm and spent every 
cent of it--spent every cent of it. It turns out there is not $87 
billion saved. CBO, when it looks at this and does so in a forthright 
way, using standard accounting procedures which we would use in most 
instances, determines the savings are closer to $47 billion.
  Mr. ALEXANDER. If I may interrupt the Senator for a moment, you mean 
the Congressional Budget Office, whose Director is appointed by the 
Democratic majority, has said that instead of $87 billion in savings, 
it is $47 billion; is that correct?
  Mr. GREGG. That is correct. But they are subject to very arcane 
rules. They came up with the $87 billion using the arcane rules. I 
asked them to look at this in an honest way, using standard accounting 
rules, the same rules used by the Congressional Budget Office for other 
credit events. They concluded that if we use those and were able to use 
those and were not bound by the arcane score-keeping rules--it is not 
their fault, they are bound by law to use a different standard here--
the real savings is $47 billion. That is what they said. They said that 
using the proper accounting methods for looking at this, the true 
savings is $47 billion, which, of course, begs the question of, what 
are you going to use that for? They are going to spend $87 billion, so 
actually they are going to run up a deficit on this whole exercise of a 
lot of money on the taxpayers in the claim that they are saving money.
  Mr. ALEXANDER. This $47 billion, just so I follow this, is the actual 
savings. Let me see if I can understand the figures a little better. 
The government's basic argument here is it can borrow money cheaper 
than banks can borrow money and then re-lend it to students, which is 
true. I think the government can borrow money at one-quarter of 1 
percent. But the government is lending the money to students at about 
6.8 percent depending on the loan. So even if it is $87 billion or $47 
billion over 10 years, doesn't that mean the government is overcharging 
students who are getting student loans and then using that money for 
new programs?
  Mr. GREGG. The Senator is going to the essence of what really drove 
this decision. This is not a decision about saving money, this is a 
decision about spending money. That may seem counterintuitive, but what 
you have to understand is that if the administration could get a score 
from CBO that says they are going to save $87 billion or they are going 
to save $47 billion, then they get to spend that money. So no money is 
being saved--none. The money is being spent on different programs.
  What should have happened here, if they were going to have integrity 
about their proposals, is exactly what the Senator from Tennessee is 
basically suggesting, which is the whole $87 billion should have been 
saved. It should not have been spent, it should have been saved and 
added to reduce the debt.
  There is no reason the government should be making $47 billion off 
our students any more than they should be making $87 billion off our 
students, if they are going to go solely to a Federal direct loan 
program.
  Mr. ALEXANDER. These 19 million loans every year, we know who these 
people are. They are our sons and daughters. They are people in our 
families. Sometimes they have two jobs while they try to go to school. 
Maybe they have no job; they have gotten laid off and they are going 
back to school. They can get a student loan. But the government has 
borrowed the money at one-quarter of 1 percent and loaned it to them at 
nearly 7 percent and is taking that profit, whatever the amount is, and 
spending it on something else.
  Mr. GREGG. The Senator from Tennessee is absolutely right. It truly 
is a cynical act because basically they are claiming savings when they 
are actually creating a capacity to spend more money, which they spend. 
This is Washington-speak at its worst. It reflects the attitude, 
really, of this administration, which is that they are not interested 
in controlling spending or reducing the debt. When they find $87 
billion, which they claim they have--they actually only have $47 
billion--they want to spend it as soon as they can, and they have. This 
spending has already occurred even though the program has not been put 
in place to save this money. They have already outlined how they are 
going to put this money out the door, not using it to reduce the debt.
  But the Senator from Tennessee is right on a second point too. It 
should have been zero. In other words, there is no reason, if you are 
going to take this course of action and you are going to maintain 
intellectual integrity, that there should be any money being spent 
here. The full $47 billion should flow to the benefit of the students.
  Mr. ALEXANDER. I am not ready to say there is $47 billion of savings. 
That assumes the U.S. Department of Education, which makes about a 
fourth of the current student loans in the country--which is 3 million 
loans a year, and it spends about $700 million a year on that--can make 
18 or 19 million student loans a year from the same amount of 
administrative costs. That doesn't sound likely to me. If that is true, 
then even the $47 billion is a wrong number.
  Mr. GREGG. No one is more expert in this area than the Senator from 
Tennessee, having served as one of the leading Governors on the issue 
of education when he was Governor of Tennessee and then going on to be 
the Secretary of Education. He understands how the Department of 
Education works. I certainly subscribe to his view. It does not smell 
right. Clearly, if they are going to increase their activities by this 
size, they are going to have a massive increase in cost.
  Another question on which I would be interested in the thoughts of 
the Senator from Tennessee is, what happens to the students? I know 
some people get a little frustrated just trying to get their driver's 
licenses renewed in this country. Can you imagine having to go find the 
Department of Education and getting a student loan from that 
Department? I would be interested to get the Senator's thoughts on what 
kind of nightmare that is going to be for our students.
  Mr. ALEXANDER. That is a pretty big nightmare. The Senator and I both 
worked on ways of simplifying the Free Application for Federal Student 
Aid or FAFSA. There are millions of individuals and families this year 
in America who have to get this government form, fill it out, and tell 
all about themselves in order to get a Pell grant or apply for a 
student loan, one way or the other. That is very complicated. I have 
been trying to imagine how the U.S. Department of Education, one of the 
smallest departments in the country, which has

[[Page S9628]]

in its higher education part of its division simply a mechanism for 
sending money out--Pell grants, paying bills--how it is going to make 
19 million new loans a year.
  In my State of Tennessee, the nonprofit provider of student loans, 
one of the 2,000 lenders that exist in the country to serve students in 
New Hampshire or everywhere--these are some of the things they do. They 
have five regional outreach counselors to canvass Tennessee to provide 
college and career planning; they made 443 presentations through 
college fairs; they worked 12,000 students to improve their 
understanding of college admissions and financial aid; they provided 
training to over 1,000 school counselors so they could work with 
students; they sent out 1.5 million financial aid brochures for 
Tennessee students. I cannot imagine the Department of Education having 
the capacity to do that.
  I think the Senator is right. I think we are going to see long lines 
of very upset students, starting in January--because that is when they 
start filling out those forms--saying: What has happened here? I have 
to line up at the U.S. Department of Education to get my student loan, 
19 million of us?
  Mr. GREGG. I think the Senator from Tennessee has hit one of the core 
issues here, independent of the fact that this is just a scam to create 
more room to spend more money to spend on other programs, and it is 
scamming the students by hitting them with $47 billion of interest 
payments which they should not have to pay if this is followed. But the 
Senator has raised another valuable question here, which is obviously 
students were reasonably comfortable with the system the way it worked 
because 75 percent of the students had opted to pursue the private 
sector loan process. Granted it was a little more expensive for them--
not dramatically by student; obviously cumulatively it was, but not 
dramatically by student. But I think they took that option because it 
was so much more convenient.
  In our society, which is reasonably capitalistic--but becoming less 
so under this administration; obviously we are moving down the road 
toward a Socialist state--but independent of that, people often pay a 
little more for the convenience of it, for the convenience of having an 
efficiently delivered loan, for the convenience of knowing whom to talk 
to when you have a problem, for the convenience of basically being able 
to go get answers quickly to your questions. Essentially, that is what 
these higher education authorities created in every State. Tennessee 
has one. New Hampshire has one. They are really good people. They are, 
for the most part, except for their executive director, volunteers. 
Their purpose is to make sure students have very prompt access to 
student loans which are significant enough for them to pay for their 
education and that it is also done in a way that is convenient so they 
do not have to end up just getting lost in a massive bureaucracy. I 
suspect every congressional office is going to have to become a massive 
clearinghouse for student loan problems. We don't have that now. We 
have problems with a lot of programs and agencies, but student loans is 
not one of them.
  It really is a big issue of the marketplace having voted with their 
feet, so to say. The students in this country voted to use the 
guaranteed loan system, pay a little bit more for the purposes of the 
convenience they were being given by having that sort of easy access 
and substantive information right at hand, versus going to the 
government and getting overwhelmed by a government bureaucracy which is 
often indifferent to consumer issues and is difficult to deal with.
  Mr. ALEXANDER. I appreciate the comments of the Senator.
  In President Obama's address to us on health care the other day, he 
said:

       My guiding principle is and always has been, the consumers 
     do better when there is choice and competition. That is how 
     the market works.

  I guess he means except when we are talking about student loans.
  Twenty years ago, we set up a system to give people a choice, and, as 
you said, they voted with their feet. This past year, 14 million 
students made a choice to be under the regular student loan program. 
They are at 4,000 campuses, went to 2,000 lenders, they got a lot of 
extra services, I assume, or they could have come to the Department of 
Education, which about 4.5 million students chose to do. The Senator 
has made it clear that the excuse for doing--but, well, let me say 
this.
  I guess the Senator has heard many times the President and people on 
the other side of the aisle say: Well, we inherited this problem. The 
reason we own General Motors, or 60 percent of it, is because we 
inherited it from President Bush. Or: The reason we are dealing with 
the American International Group Insurance Company is because we 
inherited that problem. Or: The reason we had to take over the banks is 
we inherited that problem.
  Well, this is a completely voluntary Washington takeover, if I am not 
mistaken.
  Mr. GREGG. The Senator is once again correct. There is a macro issue 
of economics here. Although it is tangential to the Senator's primary 
concern, which is the very legitimate concern of: Why are we taking all 
of this money from students if we are going to do this type of program? 
And why are we spending all of this money even before we take it in? 
And why are we putting students through having to stand in line like at 
the DMV to get a loan?
  There is a macro issue here, which is for the government to take over 
all of this debt means we are going to add $500 billion to $600 billion 
to the government ledger. We are now nowhere near that in the student 
loan area because we are not primarily responsible for the debt.
  As a result, you are going to have some significant crowding out. It 
could easily aggravate our ability to borrow money for the purposes of 
financing these massive deficits the President wants to run, the 
trillion-dollar deficits every year for the next 10 years that are in 
the budget.
  I do not think it will be a massive issue, but it will be a 
significant issue. It could affect the rate of interest which we have 
to pay as a government. It could affect other nations looking at us and 
saying: Do we have too much debt on our books?
  Most of this debt will go into a revolving fund, and hopefully it 
will be repaid, as it is traditionally. But the initial debt will still 
have to be put on the books at some point.
  Mr. ALEXANDER. Well, I thank the Senator. I think what we have seen 
is getting to be too familiar around here, an action by the 
administration, another Washington takeover, more debt, to the tune of 
$500 billion or $600 billion, more debt. You said on the $87 billion or 
$47 billion spending of money we do not really have.
  Mr. GREGG. Well, the $87 billion is what has been spent. That is what 
they are going to spend.
  Mr. ALEXANDER. They are going to spend the $87 billion. As you have 
eloquently said: There is no $87 billion. That adds to the debt.
  Then there is the problem of 19 million students lining up at the 
Department of Education to get their student loans starting in January. 
Perhaps we need a piece of truth-in-lending legislation that would go 
on every student loan application that says: Congratulations. Your 
government is making you a student loan. We borrowed it at one-quarter 
of 1 percent, and we are going to loan it to you at 6.8 percent, and we 
are going to spend twice that much on new programs that we thought of 
while we take over the entire student loan program.
  Mr. GREGG. I would say the Senator from Tennessee has hit on a very 
appropriate disclosure issue that should be on every one of those 
loans.
  Mr. ALEXANDER. Unless the Senator from New Hampshire has further 
comments, I yield the floor.
  Mr. GREGG. I appreciate the courtesy of the Senator from Tennessee.
  The ACTING PRESIDENT pro tempore. The Senator from Tennessee.
  Mr. ALEXANDER. How much time is remaining?
  The ACTING PRESIDENT pro tempore. There is 9\1/2\ minutes.
  Mr. ALEXANDER. Please let me know when 1 minute remains.

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