[Congressional Record (Bound Edition), Volume 158 (2012), Part 1]
[Senate]
[Pages 1267-1269]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         LOWERING TUITION COSTS

  Mr. ALEXANDER. Mr. President, since his State of the Union Address, 
President Obama and Vice President Biden have been talking about their 
efforts to help students afford to go to college, which is something we 
are all in favor of.
  The President's proposals include what he calls a higher education 
race to the top. It has a familiar sounding formula. Though, in this 
case, it will impose new rules and mandates and price controls on 
colleges and universities in States. Unfortunately, this race to the 
top is headed in the wrong direction.
  The President should turn around his higher education race to the top 
and head it in the direction of Washington, DC, to help the federal 
government compete for ways to stop adding mandates and costs on States 
that are soaking up dollars and driving college tuition through the 
roof.
  Let me be specific and offer three examples of how a race to the top 
headed toward Washington, DC, could actually help students by saving 
them money on their tuition.
  First, Washington could stop overcharging students on their student 
loans. They are doing that now by borrowing money at 2.8 percent, 
loaning it to students at 6.8 percent, and using the profit to help pay 
for the new health care law and other government programs.
  Second, Washington could help students with lower tuition by 
repealing the new Medicaid mandates on States that take effect in 2014. 
These new Medicaid mandates will further reduce State funding for 
higher education and raise tuition at public colleges and universities, 
which is where approximately 75 percent of students go to college.

[[Page 1268]]

  Third, Washington could stop prohibiting States from reducing 
spending on Medicaid at a time when State revenues and expenditures are 
going down. That forces States to spend money on health care that 
otherwise would be available for higher education.
  Let me talk about each of those three ideas.
  First, this business of overcharging on student loans. I think it 
would come as a big surprise to most students to know that Washington 
is borrowing money at 2.8 percent and loaning it to them at 6.8 
percent, and using the profit to pay for the health care law and for 
other government programs.We have roughly 25 million students attending 
6,000 colleges and universities in America today, and approximately 16 
million of those have Federal loans that allow them to spend that money 
at the school of their choice. Approximately 70 percent of the Federal 
funding made available for our higher education last year--about $116 
billion--went for those student loans. Under the new health care law, 
the Department of Education is going to be borrowing money from the 
Treasury at 2.8 percent and then loaning it to the students at 6.8 
percent. So, the government is actually overcharging 16 million 
students and taking that profit and spending it on new government 
programs, including the new health care law.
  According to the Congressional Budget Office, over the next 10 years, 
here is where the profit goes, approximately: $8.7 billion goes to pay 
for the new health care law; $10.3 billion goes to pay down the Federal 
debt; and $36 billion goes to support other Pell grants. So if we 
really want to help students pay for tuition, why would we not use this 
profit to reduce the interest rate on student loans? CBO says we could 
have reduced the rate from 6.8 percent to 5.3 percent and let the 
students have the savings instead of letting the government have the 
savings. By reducing the interest on student loans that much, students 
would save an average of $2,200 over 10 years. That is a lot of money 
for the average student borrower who has approximately $25,000 in debt.
  I have proposed the idea of legislation that puts a ``truth in 
lending'' label on every one of the 16 million student loans, saying 
this: Beware: Your government is overcharging you on your student loan 
to help pay for the health care law and other government programs.
  Here is a second way Washington could help lower tuition rates. 
Washington could repeal the Medicaid mandates imposed on States that 
take effect in 2014 and will inevitably drive up tuition rates. This is 
how that works. The new health care law requires States to expand and 
help pay for Medicaid coverage. This in turn requires Governors who are 
making up budgets to take money that, otherwise, would likely go for 
higher education and spend it instead on Medicaid.
  According to the Congressional Budget Office, this new expansion of 
Medicaid will cost States an additional $20 billion over 10 years and 
add 16 million more people to Medicaid programs. The CMS Chief Actuary 
says it may add 25 million to the Medicaid Program, costing States even 
more. We know this is going to happen because it has already happened. 
For years Medicaid mandates have been imposing huge costs on States, 
which in turn soaks up money for colleges, and in turn causes tuition 
to go up to replace that money.
  According to the Kaiser Family Foundation, average State funding this 
year for Medicaid increased by 28.7 percent compared to the prior year. 
Where did the money come from? In Tennessee, which had a 15.8-percent 
increase in State spending on Medicaid last year, at the same time 
there was a 15-percent decrease in State spending for higher education. 
That is a real cut, not a Washington cut; that is 15 percent less 
money. That did what? There was a 7.3-percent increase in tuition at 
public universities and an 8.2-percent increase in tuition at community 
colleges to make up for the cuts.
  In California, where the state enrolls 8.3 million Medicaid 
beneficiaries, they are expected to gain 2 million more when the new 
health care law is implemented in 2014. Just over the last year, there 
has been a 13.5-percent decrease in State support for higher education 
in California, along with a 21-percent increase in tuition and fees at 
State universities and a 37 percent increase in tuition at community 
colleges. Most of those students probably do not know that the 
principal reason their tuition is going up is because of the Federal 
health care mandates on the State.
  From 2000 to 2006, spending by State governments on Medicaid 
increased by 62.6 percent. This has been going on long before President 
Obama came into office. I balanced it as Governor in the 1980s. Every 
year I tried to keep education funding at 50 percent of the State 
budgets. In those days the States paid for 70 percent of the cost of 
operating the University of Tennessee or the community college and 
tuition paid for 30 percent of the cost. We had an implicit deal with 
the students that if we raise tuition, we will raise State funding by 
about the same amount. Those days are long gone.
  Medicaid costs on States are the most insoluble part of the budget 
dilemma we have here in Washington. I believe Medicaid either should be 
run 100 percent by the Federal Government or 100 percent by the States. 
I came to Washington and suggested that to President Reagan in the 
1980s. He agreed, but many did not. So it is not new. We should not 
blame President Obama for the fact that this has gone on for 30 years, 
but we ought to hold him responsible for making it worse.
  Here is how he has made it worse in a third way--by a so-called 
maintenance of effort requirement on States as a condition of 
continuing to receive Federal payments under Medicaid. The 2009 
stimulus bill prohibited States from imposing new eligibility 
standards, methodologies, or procedures as a condition of receiving 
Federal Medicaid payments. The new health care law extends the 
maintenance of effort requirements through 2014. So for 5 years, 
throughout this recession, while State revenues are going down, the 
Federal Government in its wisdom has been imposing billions of new 
dollars in Medicaid mandates on States requiring them to spend more on 
Medicaid. And what happens? They must spend less on something else.
  In 2010, New York Lieutenant Governor Richard Ravitch, a Democrat, 
eloquently talked about that problem. He said Medicaid is ``the largest 
single driver of New York's growing expenditures,'' making up more than 
one-third of the State total budget. New York spends twice as much on 
Medicaid as California. He said this spending is expected to grow at an 
annual rate of 18 percent over the next 4 years but that the Federal 
stimulus and health care expansions have made it harder for States such 
as New York and California to cut expenditures because of the strings 
attached. He said:

       These strings prevent States from substituting Federal 
     money for State funds, require States to spend minimum 
     amounts of their own funds, and prevent States from 
     tightening eligibility standards for benefits.

  So while the Federal Government is burdening the States with hundreds 
of billions of dollars in Medicaid liabilities, the President has made 
it worse by forbidding States from tightening their eligibility 
requirements as their economies shrink.
  The administration and Congress have left Governors with little 
choice but to cut in other areas, and that usually turns out to be 
public higher education, where 75 percent of students go to school. So 
why is tuition going up? The biggest reason is us--Congress, Washington 
DC. Instead of pointing the finger at States and colleges, we ought to 
look in the mirror.
  There is another problem with the President's proposals. His 
proposals are not likely to affect many students, and if they do they 
are more likely to hurt them than help them. Here is why that is true. 
Ninety-eight percent of all Federal money made available to college 
students goes directly to the students to spend at one of the 6,000 
institutions of their choice.
  The President's proposals would only affect three programs of campus-
based aid that eventually affects about 2 percent of all students and 
impacts about 2 percent of all the federal money

[[Page 1269]]

available for higher education. What the President would propose doing 
includes putting price controls on colleges offering those programs and 
saying that students could not go to the institution if tuition goes up 
too much. So if a low-income student wants to go to the University of 
Tennessee or North Carolina or Michigan and tuition goes up more than 
the Federal Government says it should, mostly because of Federal 
policies, what happens? The student cannot go to the University of 
Michigan or the University of Tennessee or the University of North 
Carolina. Those schools have plenty of applicants. They are going to 
get their students anyway. So the effect will be to make it harder for 
a low-income student to go to the college of his or her choice.
  What should we be doing? I think it is pretty obvious. The taxpayers 
already are generous with support for students going to college. The 
average tuition at a 4-year public institution is $8,200. At a 2-year 
community college, it is $3,000. At private institutions, it may be 
closer to $28,000 or $30,000 a year. To make it easier, there are 16 
million student loans--$116 billion in new student loans last year. 
There are 9 million Pell grants, supported by $41 billion in taxpayers' 
dollars. So half our 25 million college students have a Federal grant 
or loan to help pay for college, and they spend it at one of 6,000 
institutions of their choice.
  Still, the rising cost of tuition is a real problem for American 
families. Tuition and fees have soared over the past 10 years above the 
rate of inflation by 5.6 percent a year at public 4-year institutions. 
This adds up to about a 113 percent increase in tuition over the 
decade.
  Colleges and universities need to do their part to cut costs. I have 
suggested that well-prepared students ought to be offered 3-year 
degrees instead of 4. The president of George Washington University has 
suggested ways that colleges could be more efficient. He said he could 
run two complete colleges with two complete faculties in the facilities 
now used half the year for one. That is without cutting the length of 
student vacations, increasing class size, or requiring faculty to teach 
more. Requiring one mandatory summer session for every student every 4 
years, as Dartmouth College does, would improve institutions' bottom 
line. The GW president said his institution's bottom line would improve 
by $10 to $15 million a year. Those are just two good ideas.
  There is nothing wrong with President Obama's proposal to encourage 
ideas like that, even to give grants and put the spotlight on colleges 
that are trying those things. The Malcolm Baldrige Award for Quality 
Control years ago did a lot to improve quality in business and 
government without spending very much. But mandates and price controls 
on 6,000 autonomous colleges and universities is not the right 
prescription. They are more likely to hurt students than help. They are 
more likely to drive up tuition than lower it. And they are more likely 
to diminish the quality of the best system of higher education in the 
world.
  The reason we have the best system is, for one reason, because 
generally the Federal Government keeps its hands off those autonomous 
colleges, and the second reason is that students can choose among those 
6,000 institutions with the money we make available to them in grants 
and loans.
  Rather than creating new price controls, new mandates, and new 
regulations of the kind that have already pushed tuition higher, I 
suggest the President turn his race to the top around. Instead of 
heading it towards the States and colleges, head it towards Washington, 
DC. Stop overcharging students for their student loans, stop requiring 
States to spend more State dollars on health care at the expense of 
public colleges and universities, repeal the new Medicaid mandates that 
in 2014 will take already-high tuition and drive it even higher, and 
let the Federal agencies compete to see how they can stop adding costs 
that are the main reason college tuition is rising. That would be the 
real race to the top. That is the real way to help students afford 
college.
  Mr. President, I yield the floor. I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  The ACTING PRESIDENT pro tempore. The Senator from Nevada.
  Mr. HELLER. Mr. President, I ask unanimous consent that the quorum 
call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  (The remarks of Mr. Heller pertaining to the introduction of S. 2080 
are printed in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. HELLER. I yield the floor.
  Mr. HATCH. Mr. President, I ask unanimous consent to be permitted to 
speak and give my remarks in full.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The Senator from Utah.

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