[Congressional Record Volume 165, Number 56 (Monday, April 1, 2019)]
[Senate]
[Pages S2120-S2121]
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. 968. 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, with one recent analysis estimating that the typical college
graduate will earn $900,000 more of their lifetime than the typical
high school graduate.
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 and their
financial health. According to an analysis by the Federal Reserve,
student loan debt per capita doubled between 2005 and 2014, rising from
$5,000 to $10,000. 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. The Secretary of
Education just testified before the Senate Labor, Health and Human
Services, and Education Appropriations Subcommittee that 43 percent of
the student loans in the nearly $1.5 trillion Federal student loan
portfolio are in default, more than 30 days delinquent, or negatively
amortized. The Federal Reserve Bank of New York reports that the
balance of defaulted loans now exceeds $120 billion. More than 8
million borrowers currently have a loan in default.
Default is catastrophic for student loan borrowers. Only in rare
instances can the debt be discharged in bankruptcy. The Federal
government has the power to withhold tax refunds, garnish wages, and
even garnish Social Security benefits to collect defaulted student
loans.
We have seen the costs to students and taxpayers when institutions
are not held accountable. Corinthian 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. More recently,
we have seen the closure of Argosy University, South University, and
the Art Institutes, all operated by the Dream Center, leave roughly
26,000 students in the lurch.
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 reintroduce 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--if 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. All stakeholders in the system must do their part.
With the Protect Student Borrowers Act, we are providing the incentives
and resources for
[[Page S2121]]
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.
______