[Congressional Record Volume 161, Number 133 (Wednesday, September 16, 2015)]
[Senate]
[Pages S6702-S6703]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY:
  S. 2043. A bill to revise counseling requirements for certain 
borrowers of student loans and for other purposes; to the Committee on 
Health, Education, Labor, and Pensions.
  Mr. GRASSLEY. Mr. President, student debt is a big and growing 
concern for millions of American graduates.
  As we look at ways of addressing this problem, it is important to 
keep in mind that about 90 percent of that debt is owed to the Federal 
Government. The Federal Government currently holds more than $1 
trillion of student loan debt. That makes the U.S. Department of 
Education one of the country's largest lenders.
  As such, any solution to the debt problem needs to examine the 
Federal Government's lending practices. Federal banking regulations 
require commercial lenders to confirm a borrower's ability to repay the 
loan. Federal student loans are given without a credit check or any 
analysis of the student's ability to repay the loan in the future. This 
is intentional, since many prospective college students have no credit 
and little or no income, but it also puts all the burden on student 
borrowers to make sure they don't borrow more than they need.
  As a Nation, we have accepted that it makes moral and financial sense 
to assist low-income Americans in accessing higher education 
opportunities, and we do that to the tune of billions of dollars 
through Pell grants, subsidized student loans, and other student aid 
programs. However, while need-based Federal student aid is vital to 
help students who could not otherwise afford to attend college, 
students are able to borrow well in excess of their financial need and 
potentially in excess of what they will be able to repay. So something 
needs to be done about this.
  College financial aid officers are required under law to issue 
Federal loans up to the full amount for which the student is eligible 
even if a financial aid administrator knows a student is borrowing more 
than the student needs and will likely have trouble repaying. Think 
about that. Even if the financial aid administrator knows the student 
plans to put the funds toward an engagement ring or sports car, Federal 
rules say they must issue the loan. If a bank followed the same rules 
as the Federal Government follows for student aid, it would be accused 
of predatory lending.
  There have been lots of suggestions about how to address the student 
debt issue, but if you don't tackle the root of the problem, it is like 
closing the barn door after the horse has gotten out. A good place to 
start is looking at how our current Federal student lending practices 
may be helping to fuel the student debt problem. For example, about 60 
percent of the students at the University of Iowa graduate with debt, 
and their average debt is about $25,000. However, the university 
estimates that of that $25,000 figure, about $13,000--or 60 percent of 
the debt--is debt that was incurred to pay for tuition, room and board, 
and books, and the remainder is for what can be called lifestyle 
expenses. In other words, about 40 percent of the average student debt 
taken out by the University of Iowa student goes toward lifestyle-
enhancing extras.
  The Senate Health, Education, Labor and Pensions Committee will be 
looking at a number of reforms to the student loan program as it drafts 
legislation to reauthorize and reform the Higher Education Act. I know 
that our esteemed Chairman Alexander has in the past proposed giving 
higher education institutions additional tools to reduce unnecessary 
student borrowing. I have worked with Senator Franken of Minnesota on 
some measures to provide more information about college costs when 
students are selecting a college in the very first place, which will 
hopefully encourage more price competition to combat rising tuition.

[[Page S6703]]

  There is room for a lot of innovation in higher education. I don't 
pretend to have all the answers and solutions to the problem of college 
cost and student debt, but I am proposing some very simple, very 
commonsense first steps to empower students with the information they 
need to make sound financial decisions.
  The Higher Education Act already contains a requirement for colleges 
to provide counseling to new borrowers of Federal student loans. 
However, the current disclosures in the law do not do enough to 
encourage students to understand the scope and impact of the debt they 
will face when they graduate.
  I am here on the floor to introduce legislation I have entitled the 
Know Before You Owe Federal Student Loan Act. This bill strengthens the 
current student loan counseling requirement by making the counseling an 
annual requirement before new loans are disbursed rather than just for 
first-time borrowers. My bill then adds several key components to the 
information institutions of higher education are required to share with 
students as part of that loan counseling. Under my bill, colleges would 
have to provide an estimate of the student's projected loan debt-to-
income ratio at the time of their graduation. This would be based on 
the starting wages for that student's program of study and the 
estimated total student loan debt the student will likely take out to 
complete the program. That way, students will have a real picture of 
the student loan payment they will face and whether they will be able 
to afford those payments with their likely future income from whatever 
program they majored in.
  We often hear that statistics show that on average a college degree 
results in higher earnings over a lifetime. However, not all college 
degrees have the same earning potential, and many students will be in 
for a very rude awakening when they graduate and find that what they 
are able to earn with their degree does not match the level of their 
debt. Students deserve to have this information when they are deciding 
how much to borrow, not after they graduate with unmanageable debt.
  This legislation I am proposing will also ensure that students are 
counseled to borrow only the minimum amount necessary to cover expenses 
and informed that they do not have to accept the full amount of the 
loan offered. Students will also be given options for reducing 
borrowing through scholarships, reduced expenses, work study, or other 
work opportunities. Also, not graduating on time can significantly 
increase student loan debt, so students will be counseled on the impact 
of adding an additional year of study to the total indebtedness and how 
they can stay on track to graduate on time.
  Crucially, the bill also requires that a student manually enter 
either in writing or through electronic means the exact dollar amount 
of the Federal direct loan funding the student desires to borrow. The 
current process almost makes borrowing the maximum the default option. 
If you want to borrow less than is offered, you have to ask for less.
  Because the amount of Federal student loans a student is eligible to 
borrow is not limited by the calculation of the financial need or 
ability to repay, it is important that the student make a conscious, 
informed decision about how much to borrow rather than simply accepting 
the total amount of the Federal student loan which the law allows them 
to borrow.
  Many schools already make a concerted effort to counsel students 
against over-borrowing, and such efforts are showing signs of success 
right in my home State of Iowa.
  My alma mater, the University of Northern Iowa, created a program 5 
years ago with the theme ``Live Like a Student.'' The program includes 
workshops and courses designed to educate students on the importance of 
living within their means while they are in school so they need not 
live like a student later in life. As a result, the university has 
lowered average student debt from more than $26,000 to $23,163.
  Grand View University, also in my State, has a financial empowerment 
plan where students and families construct a comprehensive 4-year 
financing plan. Under this plan, borrowing is based on the student's 
future earning potential in the student's field of study. The 4-year 
plan also helps ensure students graduate on time, and tuition increases 
are kept at 2 percent a year over those 4 years.
  Iowa Student Loan, my State-based nonprofit lender, also has a 
program called the Student Loan Game Plan, which is an online 
interactive resource that calculates a student's likely debt-to-income 
ratio. It walks students through how their borrowing will affect their 
lifestyle in the future and what actions they can take now to reduce 
their borrowing. As a result, in the past year 18.2 percent of the 
students who participated decreased the amount they planned to borrow 
by an average of $3,680, saving students $2.1 million in additional 
loan debt.
  My legislation would also require that students receive regular 
statements about their loan while they are in school, just as they will 
when they graduate and start repaying. With just about any other kind 
of loan you can think of, borrowers start receiving statements right 
away and are expected to make payments. With Federal student loans, 
payments are not required until a period of time after graduation and 
no statements are sent out until that time, so students forget about 
the amount of debt they are accruing until they graduate and get their 
first bill.
  What is more, many Federal student loans still accrue interest while 
the student is in school, which will be added to the total loan when 
they start repaying. That means that not only do students forget how 
much debt they have while in school, making them less conscientious 
about living like a student, but their loan may actually be growing 
while they are in school. Students have the option to pay that interest 
while they are in school so that it isn't capitalized into their loan. 
However, few students take advantage of this option. The regular 
statement my bill calls for would encourage this practice so students 
get used to paying some amount toward their loans even before they 
graduate. This will also make students more aware of their borrowing 
and less likely to overborrow each time they take out a new loan.
  A college education generally remains a good investment. However, 
when students' academic dreams become a nightmare upon graduation 
because they borrowed more from the Federal Government than they can 
afford to repay with the degree they earned, they understandably feel 
something is very wrong. The Federal Government, as the lender making 
these loans, has a responsibility to at least ensure that students know 
what they are getting themselves into before they get in over their 
heads. My legislation is intended to deal with that issue.
  I urge my colleagues to support this bill to prevent more students 
from drowning in Federal student loan debt, and I will introduce that 
bill at this particular time.

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