[Congressional Record (Bound Edition), Volume 150 (2004), Part 14]
[Senate]
[Pages 18891-18893]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          STUDENT LOAN SCANDAL

  Mrs. MURRAY. Mr. President, I come to the floor today to talk about 
this scandal to which the Senator from Massachusetts alluded. It is 
mentioned in the New York Times today, ``Banks and the College Loan 
Loophole.''
  I talk to families all over the State of Washington, and they are 
struggling to pay for college for their kids. They all agree college 
education is far too expensive for many families. You would think the 
Federal Government would be doing everything possible today to make 
college more accessible for all of our families. Sadly, that is not the 
case.
  Last week in the Senate we had a chance to help students to get to 
and get through college. Unfortunately, the majority on the 
Appropriations Committee blocked my commonsense, student-friendly 
proposal. Instead of standing up for students, unfortunately the 
committee stood up for banks and other special interests that have been 
gaming the system for years, at taxpayer expense.
  I am on the Senate floor today to say that students should come 
before special interests. Student loan programs were started to help 
our students. They were not started to line the pockets of lenders. It 
is time to end the taxpayer ripoff that is occurring today and do more 
to help our students afford college.
  Back in the 1980s, interest rates were high. Many people were 
concerned that our lenders would stop making student loans, so Congress 
created a temporary--and I emphasize ``temporary''--measure to keep 
college loans affordable for our students.
  At the time, it worked. Lenders kept making loans, and students were 
able to afford college loans. This was supposed to be, as I said, a 
temporary measure. In fact, it was supposed to be phased out in 1993, 
when interest rates started coming back down. Interest rates came down; 
this subsidy lived on. For the past 11 years, taxpayers have paid these 
lenders far more than they should have. Taxpayers are actually 
subsidizing profitable companies to make loans that are far above 
today's interest rates. Clearly, taxpayers are paying a huge bill while 
special interests are taking the money to the bank.
  Who is paying the price? Our college students. This year we are 
throwing away $1 billion that we could be using to help more students 
go to college. So in the Appropriations Committee last week, I offered 
an amendment to finally stop this taxpayer ripoff. My amendment would 
have used the savings from this ripoff to help 700,000 students get 
another $3,000 for college. It would have helped the parents of 25,000 
low-income students get child care on campus. It would have helped 
another 200,000 students get $800 in grants. It would have helped 
180,000 low-income and first-generation students prepare for college 
through TRIO and GEAR UP. And it would have helped thousands of migrant 
students attend college.
  When I offered my amendment, everybody on the committee seemed to 
agree that this subsidy should end. But when it came time to vote, 
every Republican member voted against my amendment. They voted against 
taxpayers, they voted against students, and they voted against our 
families. They said they wanted to deal with it later. I am here today 
to say that taxpayers are getting ripped off every day we delay. If we 
wait 6 months, as was suggested, taxpayers will lose billions of 
dollars, and students will not get the help they need. The time to do 
this is now.
  I am not willing to waste another dollar that could be in the pockets 
of our students today, and that is why the Senate needs to act now. The 
Government is paying 30 times more than it should for these special 
interest subsidies--30 times more. That is a ripoff.
  This is as if you walk into a college book store and a textbook on 
the shelf costs $100. If that textbook had the same outrageous markup 
as these loans, that student would be paying $3,000 for the same 
textbook. Taxpayers are paying $3,000 for something that only costs 
$100 because of this runaway subsidy, and that is outrageous. There is 
no reason for taxpayers to be paying a markup of 30 times the real 
cost.
  We were all outraged when Halliburton charged taxpayers $45 for a 
case of soda that sells for $7 at the supermarket. Halliburton marked 
those prices up 6 times. Today, lenders are marking up student loans at 
a price 30 times higher than they should. No wonder the Washington Post 
called this a scandal.
  I ask unanimous consent to have the Washington Post editorial on this 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, Sept. 10, 2004]

                          Student Loan Scandal

       There are bureaucratic errors, there is congressional 
     negligence--and then there are bureaucratic errors and 
     congressional negligence on a scale so vast that it is hard 
     to believe they can be accidental. The hundreds of millions 
     of dollars in unnecessary government payments to the student 
     loan industry in the past 18 months amount to such a scandal. 
     The loans in question, established in 1980, are guaranteed by 
     the government at 9.5 percent. Yet most students are paying 
     interest rates of 3.5 percent or less. The difference--all 
     taxpayers' money--is pure profit for the companies that have 
     taken advantage of a loophole in the law.
       According to a recent report by the Institute for College 
     Access and Success, a nonprofit education think tank, 
     Congress had actually intended to end in 1993 the 9.5 percent 
     loan guarantee, one of many programs that provide incentives 
     for institutions to lend to students. In May 2003, one 
     company, Nelnet Inc., wrote to the Education Department to 
     confirm its intention to expand its holdings of old loans 
     with the 9.5 percent interest rate. Nelnet received no answer 
     from the department for a year, during which time the 
     department continued paying the company. In June of this 
     year, the department replied inconclusively--at which point 
     the company's stock price climbed 20 percent. Although Nelnet 
     is the largest holder of loans guaranteed at 9.5 percent--and 
     its holdings of such loans have increased by 818 percent 
     since January 2003--it is only one of many such lenders. 
     According to a preliminary Government Accountability Office 
     report, commissioned by Reps. Chris Van Hollen (D-Md.) and 
     Dale E. Kildee (D-Mich.), 37 lenders receive payments for 
     loans with

[[Page 18892]]

     guaranteed interest rates of 9.5 percent, at a government 
     cost of $1 billion annually, and the volume of such loans is 
     rising.
       Why wasn't the loophole shut long ago? Education Department 
     officials argue strenuously that only a two-year regulatory 
     process could have done so, and they didn't initiate one, 
     they say, because they thought Congress would deal with it. 
     Congressional Republicans say they expected to deal with the 
     problem in a comprehensive higher education bill, but that 
     has failed to pass (and in any case the proposed language 
     would not have ended all the payments). Yet, other solutions 
     could have been found: In the wake of revelations about the 
     scale of the payments, the House yesterday passed an 
     amendment to an appropriations bill, offered by Mr. Van 
     Hollen and Mr. Kildee, that would close the loophole 
     completely, albeit temporarily. (Of course, there is no 
     guarantee it will become law.) And one former Education 
     Department general counsel has written to the secretary of 
     education, Roderick R. Paige, arguing that the loophole could 
     have been closed immediately if officials had wished to do 
     so.
       There could be other explanations for their reluctance. One 
     is that the president of Nelnet, Don R. Bouc--who has called 
     for the loophole to be shut and the money to be better used--
     is well-connected enough to have been appointed to Mr. 
     Paige's advisory committee on student financial assistance. 
     Here is another: According to a report in the Chronicle of 
     Higher Education, Nelnet is the second-largest contributor to 
     congressional campaigns in the student loan history, beaten 
     only by industry giant Sallie Mae. Over the past 18 months, 
     the student loan industry has contributed about $750,000 to 
     the 49 members of the House Committee on Education and the 
     Workforce, of which $136,000 has gone to the committee 
     chairman, Rep. John A. Boehner (R-Ohio), and $175,000 to Rep. 
     Howard P. ``Buck'' McKeon (R-Calif.), chairman of the 
     subcommittee on higher education. Mr. Boehner's spokesman 
     vehemently denies any connection between the contributions 
     and the issue and maintains that the committee's bill would 
     have fixed the problem, which was mentioned in the 
     president's latest budget. Still, it is difficult to 
     understand, given the sums involved, why neither Mr. Paige 
     nor Congress made this a higher priority.
       For nearly a decade we have argued that Congress should 
     reduce subsidies for banks that lend to students, and instead 
     expand the direct-loan program, which provides about a 
     quarter of student aid--or else reform the system to make it 
     harder to manipulate. This scandal provides an excellent 
     reason to look again at these questions.

  The PRESIDING OFFICER. The time of the Senator has expired.
  Mrs. MURRAY. I ask for an 2 additional minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. MURRAY. Mr. President, the Senator from Massachusetts asked 
unanimous consent to have the New York Times editorial from today 
printed in the Record. It clearly laid out the case for what is 
happening today to taxpayers who are paying a tremendous price. And who 
is losing? It is our students.
  We have to stop overcharging the American people. We still have time 
to do it this year and help students get to college at a time when we 
all know tuition rates are rising. We need to give more to get more 
students there.
  I warn the Senate, the clock is ticking. Every Member of the Senate 
has to decide if they stand with students and families and taxpayers, 
or if they are going to stand with the special interests. Millions of 
students and millions of families are waiting for this answer. We have 
to stop the special interest subsidy today.
  Mr. President, I yield the floor.
  Mr. KENNEDY. Mr. President, I understand we have a colleague who is 
on her way to the floor. I ask unanimous consent she be entitled to 5 
minutes and that we have 5 additional minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KENNEDY. I ask the Chair to remind me when I have 1 minute left.
  I ask the Senator from the State of Washington, does she not agree 
with me that this administration has the power to do something about 
this, and could do something about it today, this giveaway that is 
written about in the prominent national newspapers as a giveaway to the 
banks? Does she agree with me that the Department of Education has said 
we don't have the authority, we don't have the power, we don't have the 
legal ability to do something about it? Yet we have the General 
Accounting Office report:

       Family education loan program, statutory and regulatory 
     changes could avert billions--

  Hear that? Billions--

     . . . in unnecessary Federal subsidy payments.

  On page 8:

       We disagree with the department's characterization of their 
     authority.

  It seems to me, if this President were interested in protecting 
middle-income families, in avoiding the kind of continued wasteful 
subsidy and giveaway to the banks, that the President, the Department 
of Education, this administration, could do something and do something 
today.
  Would the Senator be willing to express an opinion on that?
  Mrs. MURRAY. Mr. President, the Senator from Massachusetts is 
absolutely correct. The Department of Education could end this today 
with a simple rulemaking procedure. Instead they are pointing fingers, 
saying Congress has to do it. Congress had the opportunity in the 
Appropriations Committee last week. They said, no, we have to wait for 
an authorization 6 months from now. Every month that goes by we lose 
billions of dollars in taxpayers' money and thousands of students don't 
get access to college. We don't need any more fingerpointing on this.
  I think the Senator would agree that we don't need the Department of 
Education pointing to Congress and Congress pointing to the Department 
of Education. We need to stop this now. The Department of Education can 
do it by rulemaking and we can do it on any bill that comes before us. 
But we need to do it and we need to do it quickly.
  Mr. KENNEDY. I thank the Senator for her comments.
  On August 27, Sally Stroup, Assistant Secretary for Education, said, 
``I don't think we have the legal authority to stop them.''
  They made no effort to try to stop them. Senator Murray is leading 
the fight in the Appropriations Committee to try to save the taxpayers 
and save middle-income families who are stretched with their tuition. 
Now we have the General Accounting Office saying they do have the 
power.
  I wonder if the Senator would agree with me that we see a whole 
pattern from this morning's newspapers about how the administration is 
effectively right in the tank for the powerplants with regard to 
mercury, coal-fired powerplants, and is now with the bank on student 
loans. We have seen it with regard to the HMOs. I am wondering who is 
going to stand up for working families and who is going to stand up for 
middle America.
  Mrs. MURRAY. Mr. President, the Senator from Massachusetts is 
absolutely right. This is outrageous. We have the Department of 
Education pointing fingers at Congress when they can make a ruling and 
stop this practice today. According to all accounts, the delay of this 
is costing billions of dollars. If we wait for Congress to act on 
reauthorization of the act 6 months or longer from now, taxpayers are 
going to lose $2.8 billion in interest payments. We are in the Senate 
where we know that access to Head Start is critical, we know access to 
college is critical, and we know that $2.8 billion sent to the bank 
today means students are not getting higher education.
  Mr. KENNEDY. Mr. President, when we made the commitment of No Child 
Left Behind, we thought we were including all children. When this body 
committed to Medicare, we didn't say we are going to leave some senior 
citizens out; we said all seniors. When we made a commitment to voting 
rights, we said voting rights for all Americans. When we made our 
commitment to all children in this country, we meant all children.
  There it is. This is not disputed. We are failing more than 4 million 
children. That is unacceptable, particularly when we find that this 
administration is looking out for their special interests.
  I think we have an opportunity to change that on election day, and 
hopefully will.
  I thank the Senator.
  I yield the floor.
  The PRESIDING OFFICER. Who seeks recognition?
  The Senator from North Dakota.
  Mr. CONRAD. Mr. President, how much time do I have?

[[Page 18893]]

  The PRESIDING OFFICER. The Senator has 5 minutes.

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