[Congressional Record Volume 160, Number 26 (Wednesday, February 12, 2014)]
[Senate]
[Pages S921-S924]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STUDENT LOAN DEBT
Mr. REED. Madam President, what has made America strong is we have
provided opportunities for individuals to develop their talents.
Previous generations of Americans have recognized this, and invested in
higher education accordingly.
During President Lincoln's time, the Federal Government invested in
establishing a system of public colleges throughout the Nation. After
World War II, we opened the doors of postsecondary education to our
returning veterans under the GI bill. As part of the War on Poverty, we
enacted the Higher Education Act with the idea that no American should
be denied the ability to go to college because their family lacked the
ability to pay for college.
Senator Pell, my predecessor, with the creation of the Basic
Educational Opportunity Grant--later named the Pell grant in his
honor--made the promise of a college education real for millions of
Americans.
As part of the student aid programs, we invested in offering low-cost
loans to create opportunity, spur innovation, and grow our economy. Our
student loan programs were originally seen as an investment, not a
profit center or even a cost-neutral proposition.
Today, our student aid investment aid has been stood on its head. The
Congressional Budget Office estimates we will be generating revenue
from student loans through 2024. Student loan debt has become a serious
threat to our ladder of opportunity--our pathway to progress for this
generation.
That is what brings me and my colleagues to the floor today. We must
turn the tide because too many students are drowning in debt, and it
has threatened to hold back a new generation of young Americans just
when
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they would be forming a household, buying cars or starting a business.
As student loan repayment plans stretch out over 20 years or more,
this generation will still be paying off student loans when it comes
time to send their own children to college and perhaps while also
taking care of their parents in their senior years.
The bottom line is we know borrowers are struggling. We know the
government could play a more constructive role in helping them and
enacting reforms to increase fairness and transparency in this process.
The Federal Reserve Bank of New York recently reported that
delinquency rates on student loan debt are increasing even as we see
decreases in delinquency rates for other types of household debt.
The cohort default rates for student loans have been increasing. For
borrowers who entered repayment in 2010, 14.7 percent had defaulted by
2013, up from 13.4 percent for those who began repayments in 2009. It
is essential borrowers know about their repayment options. That is why
Senator Durbin's Student Loan Borrower Bill of Rights Act is so
important and why I am proud to be a cosponsor of his legislation.
But changing the trend of growing debt and rising defaults is more
than a student loan servicing issue. We have to provide a real avenue
to allow individuals straining under the weight of the estimated $1.2
trillion in student loan debt--many with loans carrying an interest
rate of 6.8 percent or higher--an opportunity to refinance those loans
at a lower interest rate. The GAO just reported that on loans made
between 2007 and 2012, the Federal Government is estimated to make $66
billion. Clearly, borrowers are paying more than they should, and we
have to address these college costs.
But we also have to deal with the issue of giving colleges and
universities their incentive, their skin in the game, to ensure they
carefully review their students' loans; that they direct students to
the lowest cost and the lowest possible amount of loans; that they do
this in a way which will make them truly responsible and conscious of
the debt which is accumulated by students. I have been working on
legislation to require that.
So I commend Senators Durbin, Warren, and others for what they are
doing to deal with this issue.
Madam President, I yield the floor for my other colleagues.
The PRESIDING OFFICER. The Senator from Massachusetts.
Ms. WARREN. Madam President, I thank Senators Durbin and Reed for
their extraordinary leadership on this important issue. I also rise
today to talk about the crushing burden which student debt places on
our college students and on our economy, and I call on Congress to
address it.
The core facts are well known to every family in America. In recent
decades, college costs have skyrocketed. Adjusted for inflation, a
young person today pays 300 percent of what their parents paid just 30
years ago. For millions of young people, the only way to cover this
tuition cost is to take on huge debt. The average student loan balance
among 25-year-olds who borrow has grown by 91 percent in just 10 years.
Total outstanding student loan debt stands at a staggering $1.2
trillion, and it is getting bigger every single day.
The problem is made worse by the Federal student loan program, with
high interest rates which will produce obscene profits for the
government. The GAO recently projected the government will bring in $66
billion in profits on its Federal student loans made between 2007 and
2012--profits which would make a Fortune 500 CEO proud.
This exploding debt is crushing our young people. More than one third
of borrowers under the age of 30 have been delinquent for more than 90
days.
This exploding debt is also dragging down our economy. With monthly
loan bills which can easily exceed a mortgage payment, it is no
surprise that home ownership among 30-year-olds has declined steeply.
Last spring the Federal Reserve raised concerns that rising student
debt could threaten our overall economic growth.
Tying students to a lifetime of financial servitude as a condition of
getting an education does not reflect our values. These students didn't
go to the mall and run up charges on a credit card. They worked hard,
and they learned new skills which will benefit this country, help us
build a stronger middle class, and help us build a stronger America.
They deserve our support. They don't deserve to be buried in debt.
To reverse this trend of student borrowing, we need to bring down the
cost of college. That will not be easy, and it will require everyone--
the government, higher education institutions, and the students
themselves--to do far more than they do now.
I am committed to working with Chairman Harkin and my colleagues on
the Senate HELP Committee to find ways to meaningfully reduce college
tuition, and I am working closely with many of my colleagues, including
Senators Durbin, Reed, Schumer, Gillibrand, Murphy, and Brown, who are
all intensely focused on this issue.
But our need to reduce the cost of college must not blind us to the
urgency of addressing the massive debt already crushing our young
people. The pressure is building, and we must act to provide real
relief to our students and young graduates now.
In the coming weeks I will join with my colleagues to introduce
legislation to do just that--legislation which will allow eligible
borrowers with high-interest loans to refinance at interest rates which
are at least as low as those currently being offered to new borrowers
in the Federal student loan program.
The idea is pretty simple. When interest rates are low, homeowners
can refinance their mortgages and big corporations can swap more
expensive debt for cheaper debt. Even State and local governments have
refinanced their debts. But a graduate who took out an unsubsidized
loan before July 1 of this year is locked into an interest rate of
nearly 7 percent. Older loans run 8 percent, 9 percent, and even more.
Last year Congress agreed those interest rates were much too high, so
they lowered them significantly for this year's borrowers. But that
change does nothing for the millions who are trapped under the old
high-interest-rate loans. Refinancing those old loans would lower
interest rates to 3.8 percent for undergraduate loans. The savings
would vary, of course. For a recent graduate who borrowed the maximum,
payments would drop by as much as $1,000 a year, and total interest
could be cut nearly in half. For those who have even older loans, those
with graduate school loans, and those with loans from private lenders,
the savings would be even higher.
The PRESIDING OFFICER. The Senator's time has expired.
Ms. WARREN. Madam President, I yield back.
The PRESIDING OFFICER. The Senator from New York.
Mrs. GILLIBRAND. Madam President, I agree with my colleague from
Massachusetts. She said it exactly right, as will the other Senators
who are going to speak on this issue today. I urge Congress to work
immediately to tackle the mountain of student debt which is crippling
the lives of young people and weighing down an entire generation.
The Federal Student Loan Refinancing Act, which I wrote to address
the growing economic burden facing our graduates and their families,
basically affords a graduate the same right to refinance their loans as
already provided to homeowners, corporations, and even governments.
This legislation would lower interest rates on refinancing student
loans to 4 percent, saving borrowers thousands of dollars which would
otherwise be spent purchasing a home or a car or even starting a new
business.
In New York State and across the Nation, we are facing a student loan
debt crisis. Student loan debt is at $1.2 trillion nationwide.
Americans now owe more on their student loans than they do on their
credit cards or car loans, holding back our economy and our economy's
growth. Tens of millions of young people who graduated college and are
securing their first job are not starting their careers on even ground.
They are starting them under water, and they have a hard time staying
afloat when juggling all their bills.
A New York student who borrows to pay for college now graduates with
an
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average of more than $27,000 in student loan debt, according to the
Federal Reserve Bank of New York. When someone owes upwards of $30,000
in debt before even earning the first paycheck, it is no wonder young
people are falling further behind on their payments.
Providing graduates with the ability to refinance their student
debt--Federal loans particularly--would lead to the personal savings of
$14.5 billion nationwide in the first year alone, according to the
Center for American Progress report. A higher education remains the
clearest path to our middle class. When we price young people out of
college, we all pay the price. Keeping a high-quality education in New
York affordable is simply the right thing to do. That is why
refinancing Federal student loans should be one of Congress's top
priorities for college students.
The magnitude of the problem requires leadership and the solution is
right in front of us. Now is the time to act. Our Nation's students,
graduates, and families cannot afford further delay.
I yield the floor.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Madam President, I thank my colleagues Senator Jack Reed
of Rhode Island, Senator Elizabeth Warren of Massachusetts, and Senator
Kirsten Gillibrand of New York for joining us on the floor this morning
to talk about the student debt crisis and college affordability.
I don't think this is just another issue. I think this is a defining
issue. Imagine, if you will, what has happened to America since we have
called into question the intrinsic value of owning a home. That used to
be built into our culture, the notion that if you could get beyond the
rental stage and actually buy a home was a smart and good investment in
terms of your neighborhood, your community, and your State.
The mortgage crisis that we went through was a shock to many people.
They paid too much for their homes. They found themselves facing
foreclosure and short sales, and the basic premise has been challenged.
There is more rental property now. People are hedging their bets on the
issue of home ownership.
Now take one of the other pillars of our basic American values, and
that pillar is: You will never go wrong with more education. I learned
that at an early age, and luckily my mom and dad--with limited
educational experience on their own part--pushed me forward into
college and into law school and to finish. They believed that at the
end of the day, I would be better off. Of course, statistics bear that
out.
Now comes the new challenge. The increasing cost of higher education
has driven many families and students deeply into debt. In many cases,
it is impossible for them to pay back their debt.
Senator Reed says it is transformative. There are young people who
have literally had their lives dramatically changed because of debt.
The basic premise is called into question: Is higher education worth
the money? I didn't think I would ever see that as a legitimate topic
for debate in America, but it turned out to be a cover on Time
magazine.
This is not just a matter of the pundits and politicians talking
about it. Average people, working families are talking about it. That
is why we are coming to the floor. We hope to expand our numbers more
and more, and I hope some of the Republicans will join in this
conversation about what to do when it comes to student debt and the
crisis it is creating.
Millions of Americans pursue a college education hoping they will
realize the American dream, but as college tuition, textbooks, and fees
skyrocket students are paying more and more for education and taking on
greater debt to pay for it. Sixty-eight percent of the class of 2012
graduated with some debt. For those students the average debt was
$27,850 a year. For students who attended for-profit schools, the
average debt was close to $40,000, which deserves a special part of
this topic of conversation when we talk about the cost of higher
education.
Americans now collectively hold more than $1.2 trillion in student
debt--more than Americans hold in credit card debt. This has surpassed
credit card debt in America. It goes way beyond higher education. It
goes into a question about personal credit, chances for mobility, and
the future of students who sign for these bone-crushing debt loans.
In his recent State of the Union Address, President Obama said he
wants to work with Congress to see how we can help Americans who feel
trapped by this crushing debt. Several of us are stepping forward and
accepting the President's challenge. I hope more Members will do so as
well.
Late last year Senators Reed, Warren, Boxer, and myself introduced
the student loan borrower bill of rights to spell out in basic terms
the rights of student borrowers and their families in interacting with
Federal and private lenders, loan servicers, and schools. It is amazing
to me that when it comes to mortgage debt there are laws dictating what
you need to be told. When it comes to student debt, there are not
nearly the protections. Younger people who are making these life-
changing decisions about debt deserve to know everything they face and
what they are getting into.
I met a young woman in Chicago recently named Hannah Moore. She
thought she did the right thing. She started off her higher education
by going to community college. She was told that was affordable and
close to home. Do that first. She did it and then she made a fatal
error.
After 2 years at a community college, she enrolled at the Harrington
College of Design in Chicago. If you go to their Web site, you will be
dazzled with the beauty of this school, the faculty, and all the
opportunities. Hannah Moore was dazzled, but this for-profit school
ended up becoming a debt pit for her life.
After she had exhausted all of her Federal loans and started taking
out private loans at the Harrington College of Design, she graduated
with a debt of $124,000, and she could not find a job. At one point she
was working three part-time jobs to pay $800 a month on this debt from
this for-profit school.
Her Federal loan payments are manageable because the Federal program
at least allows her to make payments based on income, but the private
loans this school lured her into--thanks to interest and fees--now
amount to $110,000. Her servicer on these loans refuses to work with
her to find repayment alternatives. She sinks deeper and deeper every
day into debt.
This poor young woman thought she was doing the right thing by going
to school. Today she is so deeply in debt she can't even dream of
buying a house or a car. Her father had to come out of retirement to
help her pay off the loans at this for-profit school, the Harrington
College of Design.
Unfortunately, she wasn't protected with the bill of rights, which I
have introduced and is being cosponsored by my colleagues who have
spoken today, which would have told her don't apply for a private loan
until you have exhausted your government loans.
Government loans have lower interest rates and are more manageable.
Government loans can be consolidated and in some cases forgiven,
depending on the job you take. She was not told that. She was lured
into a debt trap by a school that just wanted to rake in Federal
dollars at her expense. This is going to standardize policies, such as
how payments are applied to principal and interest so borrowers benefit
instead of banks.
Under the current situation, many students paying back their loans
find that the money is going to the higher interest loans and not to
the lower interest loans; it is not being transferred to their benefit.
The bill requires servicers to have a servicemember and veteran
liaison. Veterans are often victims of these notorious for-profit
schools and other lenders. We also require students to be told of all
of their options, including Federal loans which have better terms and
repayments. Students often have no other choice but to take out loans
to pay for their college education, but this bill says borrowing money
for college doesn't mean you give up your power over your money and
your debt.
I also want to mention something most people don't know. In
bankruptcy court in America today there are only a handful of debts
that cannot be discharged in bankruptcy court: taxes, child support,
alimony, and government and student loans.
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A few years ago, the for-profit industry and private loan industry
engineered into these bankruptcy discharge laws protection for their
own debt. What does it mean? It means if you go to a for-profit school
and take out a private loan, you are literally burdened with that for a
lifetime. The grounds for discharging a student loan debt are some of
the strictest and toughest in America. Students who sign up for this
debt ought to know they are in it until it is paid and that can mean
for a lifetime.
The Wall Street Journal reported some time ago on a grandmother
cosigning a student loan for her granddaughter. The granddaughter
defaulted, and the lender decided to levy on the grandmother's Social
Security payments. That is how outrageous this has become. Sadly, these
students don't realize when they sign on the dotted line at ages 19,
20, and 21, they are signing on for a debt that can trail them for a
lifetime.
That has to change. We have to follow Senator Reed's lead. Senator
Jack Reed has said: These colleges have to have some skin in the game.
If they are going to lure students into student loans well beyond their
ability to repay, let that college and university bear some of the
responsibility for repayment too. I think that is only reasonable.
I thank my colleagues for bringing forth this issue. I thank Senator
Warren. Her partnership in this effort is especially important. Because
of her background in law and finance she is an important part of this
conversation.
We are not going to end with this speech on the floor today by each
of us. Once a week we are going to continue to bring together those in
our caucus--and I hope in the Republican caucus--who believe we have to
address the student debt crisis and come up with a reasonable way for
students to pay for an education that is reasonably priced.
To have these students burdened with the student loan debtor prison
is unacceptable in America today. It is time for us, as a Congress, to
address this issue.
I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts.
Ms. WARREN. Madam President, I would like to speak for another minute
about the issue of refinancing student loans. This is real money back
in the pockets of people who invested in their education; real money
will help young people find a little more financial stability as they
work hard to build their futures, real money that says America invests
in those who get an education.
We don't need to add a single dime to our deficit to pay for this
plan. Right now this country essentially taxes students by charging
high interest rates that bring money into the government while at the
same time we give away far more money through a Tax Code riddled with
loopholes and let the wealthiest individuals and corporations avoid
paying a fair share. We can close those loopholes and put the money
directly into refinancing student loans.
We can start with the Buffett rule, a rule that would limit tax
loopholes for the wealthy and ensure that billionaires pay at least as
much as their secretaries. For every new dollar we bring in by
stitching this loophole, it can go directly into reducing the cost of
student loans for our students. Dollar for dollar we can invest in
billionaires or we can invest in our students. This is about
opportunity.
Our country should offer a helping hand to young people who are
working hard to try to build a future, not a handout to billionaires
who have already made it. Refinancing student loans will not fix
everything that is broken in the higher education system, but it is a
huge step forward.
I was the first person in my family to graduate from college. I went
to a commuter college where the tuition was $50 a semester. I went to a
public law school where I got a great education. I was able to do that
because I grew up in a country that chose investing in kids over
investing in billionaires. I believe in that America, and I believe in
what we can do when we work together to build opportunities for
everyone who busted their tail to get an education.
I yield the floor.
The PRESIDING OFFICER. The Senator from Rhode Island.
Mr. REED. Madam President, again I compliment my colleagues Senator
Durbin, Senator Warren, and Senator Gillibrand on their commitment to
reinvigorating our higher education policy and doing it in an efficient
and cost-effective way so the future generation of students are not so
burdened that they cannot essentially rise up, buy a home, start a
family, and do the things that my generation took for granted because
there was strong support for higher education at every level of
government.
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