[Congressional Record Volume 159, Number 77 (Tuesday, June 4, 2013)]
[Senate]
[Pages S3917-S3919]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             STUDENT LOANS

  Mr. DURBIN. Mr. President, I listened carefully to the statement made 
by the Republican leader. He talked about the issue of increased costs 
for colleges, saying the tuition is going up, and we have a student 
loan issue coming up with interest rates perhaps doubling. It was 
interesting when the Republican leader said the root cause of the 
problem is ObamaCare.
  Well, it turns out, if we listen to the statements and speeches from 
the Republican side of the aisle, if a person's car won't start: 
ObamaCare. Too many popups on your computer: ObamaCare. Basically, it 
turns out that every problem in America can be traced to ObamaCare. 
ObamaCare, of course, is the health care reform act.
  The health care reform act said, incidentally, that students in 
college can stay on their parents' health insurance plan until they 
reach the age of 26: ObamaCare. It also said those who are receiving 
prescription drugs under Medicare will pay less: ObamaCare. It went on 
to say you cannot discriminate against people when it comes to health 
insurance if they have a preexisting medical condition: ObamaCare. So 
what we hear from the Republican side of the aisle: Any problem we have 
in the Midwest including too much rain in the Midwest: ObamaCare. It 
reaches the point where it strains credibility.
  Here is what the problem is. On July 1, the interest rates on 
subsidized loans double--double--from 3.4 percent to 6.8 percent if we 
do nothing. The Republicans in the House of Representatives said they 
have a better plan. It is a plan which the Republican leader in the 
Senate just spoke to. We are going to move the interest rates--we are 
going to peg them to the 10-year Treasury bill, and the next thing we 
know it turns out the interest rate coming out of the Republican bill 
in the House is higher than 6.8 percent. In other words, if we did 
nothing as opposed to the Republican plan, students would be better 
off.
  But we have a better idea. We are going to do our best to make sure 
we preserve the 3.4-percent interest rate on subsidized student loans. 
Is it important? It is critically important.
  Look what is happening to students across America today. A lot of 
young people listen to their parents, listen to their teachers, and all 
their friends who say, Go to college, get a degree. It

[[Page S3918]]

is good advice. Then they sit down to figure out what it is going to 
cost and it turns out to be pretty expensive. As I look back on my 
college education--I won't tell my colleagues what my student loans 
were; they will date me--I was scared to death when I ended up with 
this huge student loan at the end of law school when I accumulated it 
all together. At the time I said to my wife, I don't know if we will 
ever be able to pay this back, it is so big. It was $8,500--$8,500 for 
college and law school--but it was more than half of my first year's 
income, to put it in perspective.
  Now look at what students are faced with. The average for-profit 
college costs $30,900 a year in tuition fees. These for-profit schools 
I will talk about in a minute are the most expensive schools in 
America. They are the ones trying to lure students into their schools. 
The biggest ones are the University of Phoenix, which has more students 
than the combined enrollment of all the big 10 universities; Kaplan 
University, which is owned by the Washington Post; DeVry University out 
of Chicago; and a variety of others. They can't wait to see these 
students coming out of high school and to sign them up for these for-
profit schools, the most expensive schools in America. There is 
something else involved in those schools. They have the highest student 
loan default rates. They charge the students too much for tuition and 
they offer them too little by way of education and training. A lot of 
kids drop out, and even those who finish can't find a job. They default 
on their student loans for these for-profit schools. But take a look at 
the cost of education in general. Most students, unless they are lucky, 
with parents who have a lot of money in the bank, have to borrow money, 
and if they have to borrow it, the question is, What do they pay when 
it comes to the interest on the student loans? Private loans--not the 
government loans but private college loans--can have interest rates up 
to 18 percent. So unless a person has taken a course in consumer 
economics or business in high school, that person may not know what the 
difference is between 3.4 percent interest on a loan and 18 percent 
interest. Believe me, it is dramatic. Students are faced with this 
reality.
  The question obviously is what is Congress going to do about it? If 
we are going to continue keeping the interest rate at an affordable 
level--3.4 percent for student loans--then we are going to have to take 
action before July 1. If we do nothing, it will double. If we do 
nothing, students will pay thousands of dollars more in paying off 
their loans.
  How big is student loan debt in America? Student loan debt in America 
is larger than credit card debt. It is over $1 trillion. It is one of 
the fastest growing areas of debt in America. As students get 
encumbered by this debt, obligated by this debt, many don't realize 
what they are up against.
  This is not like any other loan a person can take out. Any loan a 
person takes out for a car or a house or to buy a washer and a dryer is 
dischargeable in bankruptcy. If a person's finances go completely in 
the tank and that person goes to a bankruptcy court, those other loans 
go away, but not student loans. There are only four things that cannot 
be discharged in bankruptcy: taxes owed to the government, alimony, 
child support, and student loans. What it means is the decision made by 
the 19- or 20-year-old about debt to go to school is a decision for a 
lifetime. It is going to stick with that person for a lifetime. When 
the parents sign on as guarantors on these student loans, or 
grandparents, they are on the hook too. If the student ends up dropping 
out of school, with plenty of debt and no diploma, they are in a bad 
situation. They still have to pay off the loans.
  What we are trying to do on the Democratic side is to keep the 
interest rate on these loans as low and affordable as possible. I think 
that is only reasonable. Why make it any harder for these students and 
their families? The Republican side, sadly, more than doubles the 
interest rate on student loans. That is a worthy debate. I know the 
side I will be on. I think most Americans know what side we should all 
be on: to try to keep the cost of these loans closer to being under 
control; to try to keep the interest rate at the 3.4-percent level.
  Senator Jack Reed of Rhode Island recently introduced the Student 
Loan Relief and Refinancing Act which would prevent the interest rate 
hike by moving Federal student loans back to a market-based rate as it 
was prior to 2007. Senator Reed's bill would offer adjustable interest 
rates for Federal student loans and parent PLUS loans--with a cap of 
6.8 percent for subsidized loans and 8.25 percent for unsubsidized and 
parent PLUS loans. Rates would be set every year based on the 91-day 
Treasury bill, plus a percentage determined by the Secretary of 
Education to be necessary to cover program administration and borrower 
benefits. The bill is revenue neutral. The bill will help current 
borrowers by allowing those stuck with high fixed-rate Federal student 
loans to refinance their loans into a new variable rate loan with a 
cap. Many students signed up for loans that were a bad deal and they 
want to change them but they are stuck with them, so this Reed bill 
gives them a chance to refinance.
  Congress should consider a long-term interest rate fix, but we need 
to act quickly to stop the interest rates from doubling on July 1. We 
have a good short-term path that will extend the current 3.4-percent 
interest rate for 2 years. The bill is fully paid for by closing three 
tax loopholes.
  Senator McConnell was on the floor here complaining that we are doing 
Tax Code changes to keep the interest rates low. Well, here are a 
couple of the changes he was complaining about.
  Our proposal would include a tax on the oil and gas companies from 
tar sands so they would put more money into the oil spill liability 
trust fund. That is one of the things Senator McConnell said is not 
appropriate. The other one would close a tax loophole that allows non-
U.S. companies to reduce their U.S. tax liability on income from their 
sales in the United States. I do not think that is unreasonable, 
particularly if the money we are getting from that will help subsidize 
a low-interest rate on student loans.

  This bill is a temporary solution, I understand. But it is going to 
save students in States like my State of Illinois a thousand dollars--
at least a thousand dollars--by keeping the interest rate low in terms 
of what they will pay back over a lifetime.
  The complicated proposal that came out of the House of 
Representatives--the Republican proposal--as I said, will more than 
double the interest rates students are going to face. Parents are going 
to have to have a higher liability on the loans they sign up for for 
the students in their family, and that, to me, is not a good outcome 
either.
  There has been a proposal that has been pushed by some of my 
Republican colleagues--Senators Coburn, Burr, and Alexander--which 
would adjust interest rates annually for both subsidized and 
unsubsidized loans, and it would be, like the House Republican bill, an 
increase of 3 percent over the 10-year Treasury rate. There are no 
caps, incidentally, on where that interest rate is going to go. So the 
students could have a liability much greater in the future.
  Here is what it boils down to: If you believe education is 
important--and I think everyone does--if you believe college education 
is a ticket for a better life and a better opportunity to contribute to 
this country--and most people do--we want to make sure it is affordable 
for students from working-income homes and middle-income homes. That is 
why we want to keep this interest rate low. The Republican proposals--
all of the Republican proposals--dramatically raise the student loan 
interest rate beyond the level the Democrats are pushing for.
  We have heard a lot of comment on the floor. There will be a lot of 
debate on the floor about a lot of other issues--the IRS and other 
things such as that. They are all worthy issues worth talking about. 
But if you talk to the average family in my home state of Illinois or 
around the country, they are going to tell you that something like a 
student loan debate is much more important to them.
  We want to be on the side of working to help middle-income and those 
families who are working for a living, to give those families a chance 
to send their sons and daughters to college to have a better life in 
the future and not burden them with a loan that is impossible for them 
to pay back.

[[Page S3919]]

  I want to close by saying a word about one category of schools I 
mentioned earlier, the for-profit schools. We have in our country not-
for-profit schools that include private colleges and universities as 
well as public colleges and universities. Then there is a for-profit 
sector of higher education. I mentioned the leaders earlier--the 
University of Phoenix, Kaplan, and DeVry. Those are three of the 
biggest in the United States.
  Currently, our Federal Government is subsidizing these for-profit 
schools in ways most taxpayers would not believe. Right now what these 
schools are bringing in is 75, 80, 85, and 90 percent of their revenue 
directly from the Federal Treasury. In other words, students come in 
and turn over their Pell grants, sign up for their government loans, 
and all of this government money flows into these for-profit schools.
  Many of these schools offer valuable courses, but many of them are 
worthless. Many of them, unfortunately, burden these young people with 
debt and offer them nothing by way of education or training so they can 
have a better life. As a result, the students end up with a mountain of 
debt they cannot pay back and they default on the debt. Here are the 
numbers to keep in mind: There are three basic numbers which explain 
the for-profit education industry in America.
  Twelve. Twelve percent of high school graduates go to for-profit 
schools.
  Twenty-five. Twenty-five percent of all the Federal aid to education 
goes to for-profit schools; over $30 billion a year to for-profit 
schools. They would be the ninth largest Federal agency if you took 
for-profit schools in the private sector by themselves; over $30 
billion. They would be the ninth largest, but they are private 
companies, for-profit companies.
  The third number to remember is 47. Forty-seven percent of all the 
student loan defaults are by students in for-profit schools. That 
number tells the story. These poor students are being loaded with debt, 
and they are being given an education that is not worth it. At the end, 
they cannot pay back their debt and they default on those debts. That 
is the reality of where we are today. In a few weeks--July 1--if we do 
nothing, interest rates on loans at all schools for government loans 
are going to double. If we do something, we can continue to protect 
students. But, in addition to that, we have to do something about 
higher education and what is happening there. It is not just the for-
profit schools, many of which are ripping off these students. It is the 
overall cost of higher education. It is going beyond the reach of 
average families across America.
  I look back to my own life experience and, thank goodness, I had a 
chance to borrow the money and go to school, get an education, and end 
up, as I say, with a full-time government job. But the bottom line is, 
other people deserve the same opportunity. And if you are not from a 
wealthy family, you should be able to borrow the money to be able to 
get through school and make a success of your life.
  Let's do our part here. Let's stand behind the working families. 
Let's support the Democratic approach, which will keep the interest 
rates at 3.4 percent. Let's reject the Republican approach that would 
more than double these interest rates on these students and their 
families. Let's give these young people a fighting chance to get a good 
education and an opportunity to prosper in this great Nation.
  Mr. President, I yield the floor and suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The 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 ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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