[Congressional Record Volume 159, Number 94 (Thursday, June 27, 2013)]
[Senate]
[Page S5476]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             STUDENT LOANS

  Mr. REED. Mr. President, let me thank the Republican leader for 
cooperating. We are attempting to move forward legislation with respect 
to student loans. We will shortly reach July 1. At that point, the 
student loan rate for subsidized Stafford loans doubles from 3.4 
percent to 6.8 percent. The legislation I propose would be a 1-year 
extension of the 3.4-percent rate, allowing students, low- and middle-
income students to continue to benefit from a low interest rate.
  Our core principles in advancing this 1-year extension of present law 
are that we believe--and I think this is shared by all of my 
colleagues--that talented students deserve access to a college 
education. They need affordable loans and Pell grants and other 
financial aid. We also believe interest rates should not be set any 
higher than necessary to protect the taxpayer and break even on the 
program; that it should not be a profit center for the Federal 
Government as it is today.
  We also believe very strongly that when students take these loans 
out, particularly the subsidized loans, they deserve predictability. 
They should know how much they will have to repay. So if you are going 
to go for an adjustable rate, there has to be a reasonable cap. In 
fact, my understanding is in the history of the Federal Student Loan 
Program there has either been an adjustable rate with a cap or a fixed 
rate. We have never left students solely at the mercy of the market.
  We provide subsidized loans to students because we believe we have to 
invest in Americans, in their talent, in their ability not only to 
advance their own lives but also to contribute to the greater life of 
America. It should not be a program that is designed to generate 
revenue. The reality is today, wittingly or unwittingly, this program, 
and indeed as would be true for the proposals that have been put on the 
table, is generating huge amounts of profits to the Federal 
Government--it has been estimated more than $50 billion this year. We 
should be investing in the potential of young Americans, not looking at 
them as profit centers to help us reduce the deficit.
  I know there have been great efforts on the part of my colleagues, 
sincere efforts, thoughtful efforts by many--my colleagues Senator 
Alexander, Senator Manchin, Senator King, Senator Harkin--chairman of 
the committee--Senator Warren, Senator Hagan, Senator Franken, Senator 
Stabenow--to come to a long-term solution. There has been a great 
effort, but we are not there yet.
  I think we need, frankly, at least one more year so we can sit down 
and do this correctly. If you look at the proposals that are out there, 
there is a short-run attractiveness because the rates have been 
configured so they look pretty low. But if you follow the rates out, 
within 3 or 4 years they are above the statute, the law that goes into 
effect on July 1. They are above the 6.8-percent rate. It is almost as 
if we are looking back a few years ago--not about student loans but 
about mortgages. There were a lot of people sitting on 5-percent fixed-
rate mortgages and someone walked in and said: Have I got a deal for 
you. I can give you 2 years at 3 percent. It goes up, but don't worry 
because you can readjust it down the road and refinance it.
  We found out because of many circumstances, come 2008-2009, there was 
no getting out. In fact, a lot of people discovered they would have 
been better off sticking with the fixed loan.
  That is an analogy. That is not exactly on point. But if you look at 
all of these proposals, the arc of the increase in interest rates is 
going up. And, by the way, it has not fully incorporated what the 
Federal Reserve has already said publicly. Chairman Bernanke said it 
very clearly, that they are ending quantitative easing. That means one 
thing: Interest rates go up, and they might go up a lot faster than we 
even expect right now.
  I think another important point which is critical is that the 
proposals we have seen so far have not had a cap on them, an adequate 
cap. There has been some discussion we do not need a cap because if you 
consolidate a loan there is a cap built into the consolidation program. 
First of all, there is a problem with that in that except for the 
subsidized Stafford loans, the other federally supported loans start 
accruing interest even while you are still in school so you are 
building up a big mountain of debt. When you consolidate, what you are 
doing, essentially, is stretching out the payments, making a longer 
term which adds more interest. It is like the difference between a 
short-term loan and a long-term loan. You end up paying a lot more 
interest on your house than you do on a 2- or 3-year loan on your car.
  For many reasons, both technical and otherwise, we believe, 
particularly as we are several days from July 1, we need to go ahead 
and give this body the time to deliberate. Frankly, we just passed a 
historic piece of legislation. That was not done in the waning hours of 
the session. It was not done without hearings. It was not done without 
a lot of back and forth. It was not done without a lot of tension on 
the floor. Yet we are proposing fundamental changes to our Federal 
Student Loan Program in the waning hours before a recess.
  Mr. President, 36 Democrats and counting have joined me and Senator 
Hagan to extend this lending rate for 1 more year.
  We have in the past been able to come together. In fact, we adopted 
the 3.4-percent interest rate, fixed rate, in 2007. The vote in this 
Senate was 79 to 12, Republicans and Democrats saying: A good deal for 
students, a low interest rate.

  I think we still have to look for a much better deal than has been 
suggested by some of the proposals. Our proposal for a one-year 
extension is also fiscally responsible because we are offsetting the 
cost of roughly about $4.2 billion by closing a tax loophole--which I 
think should be closed on its own face, but it would allow us to pay 
for this extension for 1 year. I will remind my colleagues that a year 
ago we did precisely the same kind of thing.
  Some would say we have not used the year well enough. But if you 
think about the debate we had on background checks and firearms; if you 
think about this historic debate on immigration; if you think about 
many of the other serious debates we have had, I think we have been 
engaged on this floor decisively. But now it is time, again, to move to 
this education issue and give it the full consideration students and 
families deserve.
  I am disappointed. I am sure my colleagues who are suggesting 
alternative proposals are disappointed. But I am most disappointed we 
cannot at least tell students today: We have your back. You are going 
to be safe for another year, with your loans at 3.4-percent interest. 
And during that time, we have to fix this--and not just simply changing 
around interest rates but addressing how to help borrowers pay down the 
debt that is outstanding. It is a huge problem, a trillion dollar 
problem. What about the incentives for lowering the costs of college? 
What about other structural changes we have to make? They will unlikely 
be made if we somehow sort of leave here with a ``fix'' that 
ultimately, in a very short period of time, raises rates beyond the 6.8 
percent and also takes off the pressure, legitimate pressure for us not 
just to treat one part of the problem but comprehensively deal with the 
issue of the cost of higher education for families.
  With that, I have been asked to propose a unanimous consent.
  The PRESIDING OFFICER. The Senator may proceed.

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