[Congressional Record Volume 163, Number 173 (Thursday, October 26, 2017)]
[Senate]
[Page S6855]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself, Mr. Durbin, Ms. Warren, and Mr. 
        Murphy):
  S. 2028. A bill to provide for institutional risk-sharing in the 
Federal student loan programs; to the Committee on Health, Education, 
Labor, and Pensions.
  Mr. REED. Mr. President, we all recognize that a postsecondary 
education is required for most family-sustaining, middle-class jobs, 
and that an educated workforce is essential to a modern, productive 
economy. A report by the Georgetown University Center on Education and 
the Workforce found that college-level intensive business services have 
replaced manufacturing as the largest sector in the U.S. economy, and 
that while college-educated workers make up only 32 percent of the 
workforce, they now produce more than 50 percent of the Nation's 
economic output, up from 13 percent in 1967. A college degree also pays 
off, as median annual earnings for bachelor's degree holders were 
$23,000 higher compared to high school graduates in 2014.
  Yet just as there is growing recognition that postsecondary education 
is indispensable in the modern economy, families are being required to 
shoulder growing debt burdens that threaten access to college.
  According to an analysis of student loan debt by the Federal Reserve 
Bank of New York, between 2004 and 2014, there was an 89 percent 
increase in the number of student loan borrowers and a 77 percent 
increase in the average balance size. Today, over 40 million Americans 
have student loan debt.
  This is a growing drag on our economy. As student loan debt has 
grown, young adults have put off buying homes or cars, starting a 
family, saving for retirement, or launching new businesses. They have 
literally mortgaged their economic future.
  We know that student loan borrowers are struggling. A recent 
Department of Education analysis of outcomes for student loan borrowers 
who began their studies in 1995-96 and 2003-04 found that only 38 
percent of the 1995-96 cohort had paid off their loans without default 
after 20 years, and only 24 percent after 12 years. For the 2003-04 
cohort, only 20 percent had repaid their loans without defaulting after 
12 years. Worse, 52 percent of students who attended for-profit 
institutions had defaulted on a student loan within 12 years. Roughly, 
8.5 million borrowers currently have a loan in default.
  We have seen the costs to students and taxpayers when institutions 
are not held accountable. Corthinian Colleges and ITT are two examples 
of institutions that failed their students while benefitting from 
Federal student aid. Their fraudulent business practices eventually led 
to their demise, but not before leaving their students and taxpayers on 
the hook for millions of dollars in student loan debt.
  We cannot wait until an institution is catastrophically failing its 
students before taking action. Institutions need greater financial 
incentives to act before default rates rise. Simply put, we cannot 
tackle the student loan debt crisis without States and institutions 
stepping up and taking greater responsibility for college costs and 
student borrowing.
  That is why I am pleased to introduce the Protect Student Borrowers 
Act with Senators Durbin, Warren, and Murphy. Our legislation seeks to 
ensure there is more skin in the game when it comes to student loan 
debt by setting stronger market incentives for colleges and 
universities to provide better and more affordable education to 
students, which should in turn help put the brakes on rising student 
loan defaults.
  The Protect Student Borrowers Act would hold colleges and 
universities accountable for student loan defaults by requiring them to 
repay a percentage of defaulted loans. Only institutions that have one-
third or more of their students borrow would be included in the bill's 
risk-sharing requirements based on their cohort default rate. Risk-
sharing requirements would kick in when the default rate exceeds 15 
percent. As the institution's default rate rises, so too will the 
institution's risk-share payment.
  The Protect Student Borrowers Act also provides incentives for 
institutions to take proactive steps to ease student loan debt burdens 
and reduce default rates. Colleges and universities can reduce or 
eliminate their payments if they implement a comprehensive student loan 
management plan. The Secretary may waive or reduce the payments for 
institutions whose mission is to serve low-income and minority 
students, such as community colleges, Historically Black Institutions, 
or Hispanic-Serving Institutions--provided that they are making 
progress in their student loan management plans.
  The risk-sharing payments would be invested in helping struggling 
borrowers, preventing future default and delinquency, and increasing 
Pell Grants at institutions that enroll a high percentage of Pell Grant 
recipients and have low default rates.
  With the stakes so high for students and taxpayers, it is only fair 
that institutions bear some of the risk in the student loan program.
  We need to tackle student loan debt and college affordability from 
multiple angles. And we need all stakeholders in the system to do their 
part. With the Protect Student Borrowers Act, we are providing the 
incentives and resources for institutions to take more responsibility 
to address college affordability and student loan debt and improve 
student outcomes. I urge my colleagues to cosponsor this bill and look 
forward to working with them to include it and other key reforms in the 
upcoming reauthorization of the Higher Education Act.
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