[Congressional Record (Bound Edition), Volume 160 (2014), Part 2]
[Senate]
[Pages 2900-2903]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           STUDENT LOAN DEBT

  Mr. REED. Madam President, what has made America strong is we have 
provided opportunities for individuals to develop their talents. 
Previous generations of Americans have recognized this, and invested in 
higher education accordingly.
  During President Lincoln's time, the Federal Government invested in 
establishing a system of public colleges throughout the Nation. After 
World War II, we opened the doors of postsecondary education to our 
returning veterans under the GI bill. As part of the War on Poverty, we 
enacted the Higher Education Act with the idea that no American should 
be denied the ability to go to college because their family lacked the 
ability to pay for college.
  Senator Pell, my predecessor, with the creation of the Basic 
Educational Opportunity Grant--later named the Pell grant in his 
honor--made the promise of a college education real for millions of 
Americans.
  As part of the student aid programs, we invested in offering low-cost 
loans to create opportunity, spur innovation, and grow our economy. Our 
student loan programs were originally seen as an investment, not a 
profit center or even a cost-neutral proposition.
  Today, our student aid investment aid has been stood on its head. The 
Congressional Budget Office estimates we will be generating revenue 
from student loans through 2024. Student loan debt has become a serious 
threat to our ladder of opportunity--our pathway to progress for this 
generation.
  That is what brings me and my colleagues to the floor today. We must 
turn the tide because too many students are drowning in debt, and it 
has threatened to hold back a new generation of young Americans just 
when they would be forming a household, buying cars or starting a 
business.
  As student loan repayment plans stretch out over 20 years or more, 
this generation will still be paying off student loans when it comes 
time to send their own children to college and perhaps while also 
taking care of their parents in their senior years.
  The bottom line is we know borrowers are struggling. We know the 
government could play a more constructive role in helping them and 
enacting reforms to increase fairness and transparency in this process.
  The Federal Reserve Bank of New York recently reported that 
delinquency rates on student loan debt are increasing even as we see 
decreases in delinquency rates for other types of household debt.
  The cohort default rates for student loans have been increasing. For 
borrowers who entered repayment in 2010,

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14.7 percent had defaulted by 2013, up from 13.4 percent for those who 
began repayments in 2009. It is essential borrowers know about their 
repayment options. That is why Senator Durbin's Student Loan Borrower 
Bill of Rights Act is so important and why I am proud to be a cosponsor 
of his legislation.
  But changing the trend of growing debt and rising defaults is more 
than a student loan servicing issue. We have to provide a real avenue 
to allow individuals straining under the weight of the estimated $1.2 
trillion in student loan debt--many with loans carrying an interest 
rate of 6.8 percent or higher--an opportunity to refinance those loans 
at a lower interest rate. The GAO just reported that on loans made 
between 2007 and 2012, the Federal Government is estimated to make $66 
billion. Clearly, borrowers are paying more than they should, and we 
have to address these college costs.
  But we also have to deal with the issue of giving colleges and 
universities their incentive, their skin in the game, to ensure they 
carefully review their students' loans; that they direct students to 
the lowest cost and the lowest possible amount of loans; that they do 
this in a way which will make them truly responsible and conscious of 
the debt which is accumulated by students. I have been working on 
legislation to require that.
  So I commend Senators Durbin, Warren, and others for what they are 
doing to deal with this issue.
  Madam President, I yield the floor for my other colleagues.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Ms. WARREN. Madam President, I thank Senators Durbin and Reed for 
their extraordinary leadership on this important issue. I also rise 
today to talk about the crushing burden which student debt places on 
our college students and on our economy, and I call on Congress to 
address it.
  The core facts are well known to every family in America. In recent 
decades, college costs have skyrocketed. Adjusted for inflation, a 
young person today pays 300 percent of what their parents paid just 30 
years ago. For millions of young people, the only way to cover this 
tuition cost is to take on huge debt. The average student loan balance 
among 25-year-olds who borrow has grown by 91 percent in just 10 years. 
Total outstanding student loan debt stands at a staggering $1.2 
trillion, and it is getting bigger every single day.
  The problem is made worse by the Federal student loan program, with 
high interest rates which will produce obscene profits for the 
government. The GAO recently projected the government will bring in $66 
billion in profits on its Federal student loans made between 2007 and 
2012--profits which would make a Fortune 500 CEO proud.
  This exploding debt is crushing our young people. More than one third 
of borrowers under the age of 30 have been delinquent for more than 90 
days.
  This exploding debt is also dragging down our economy. With monthly 
loan bills which can easily exceed a mortgage payment, it is no 
surprise that home ownership among 30-year-olds has declined steeply. 
Last spring the Federal Reserve raised concerns that rising student 
debt could threaten our overall economic growth.
  Tying students to a lifetime of financial servitude as a condition of 
getting an education does not reflect our values. These students didn't 
go to the mall and run up charges on a credit card. They worked hard, 
and they learned new skills which will benefit this country, help us 
build a stronger middle class, and help us build a stronger America. 
They deserve our support. They don't deserve to be buried in debt.
  To reverse this trend of student borrowing, we need to bring down the 
cost of college. That will not be easy, and it will require everyone--
the government, higher education institutions, and the students 
themselves--to do far more than they do now.
  I am committed to working with Chairman Harkin and my colleagues on 
the Senate HELP Committee to find ways to meaningfully reduce college 
tuition, and I am working closely with many of my colleagues, including 
Senators Durbin, Reed, Schumer, Gillibrand, Murphy, and Brown, who are 
all intensely focused on this issue.
  But our need to reduce the cost of college must not blind us to the 
urgency of addressing the massive debt already crushing our young 
people. The pressure is building, and we must act to provide real 
relief to our students and young graduates now.
  In the coming weeks I will join with my colleagues to introduce 
legislation to do just that--legislation which will allow eligible 
borrowers with high-interest loans to refinance at interest rates which 
are at least as low as those currently being offered to new borrowers 
in the Federal student loan program.
  The idea is pretty simple. When interest rates are low, homeowners 
can refinance their mortgages and big corporations can swap more 
expensive debt for cheaper debt. Even State and local governments have 
refinanced their debts. But a graduate who took out an unsubsidized 
loan before July 1 of this year is locked into an interest rate of 
nearly 7 percent. Older loans run 8 percent, 9 percent, and even more.
  Last year Congress agreed those interest rates were much too high, so 
they lowered them significantly for this year's borrowers. But that 
change does nothing for the millions who are trapped under the old 
high-interest-rate loans. Refinancing those old loans would lower 
interest rates to 3.8 percent for undergraduate loans. The savings 
would vary, of course. For a recent graduate who borrowed the maximum, 
payments would drop by as much as $1,000 a year, and total interest 
could be cut nearly in half. For those who have even older loans, those 
with graduate school loans, and those with loans from private lenders, 
the savings would be even higher.
  The PRESIDING OFFICER. The Senator's time has expired.
  Ms. WARREN. Madam President, I yield back.
  The PRESIDING OFFICER. The Senator from New York.
  Mrs. GILLIBRAND. Madam President, I agree with my colleague from 
Massachusetts. She said it exactly right, as will the other Senators 
who are going to speak on this issue today. I urge Congress to work 
immediately to tackle the mountain of student debt which is crippling 
the lives of young people and weighing down an entire generation.
  The Federal Student Loan Refinancing Act, which I wrote to address 
the growing economic burden facing our graduates and their families, 
basically affords a graduate the same right to refinance their loans as 
already provided to homeowners, corporations, and even governments. 
This legislation would lower interest rates on refinancing student 
loans to 4 percent, saving borrowers thousands of dollars which would 
otherwise be spent purchasing a home or a car or even starting a new 
business.
  In New York State and across the Nation, we are facing a student loan 
debt crisis. Student loan debt is at $1.2 trillion nationwide. 
Americans now owe more on their student loans than they do on their 
credit cards or car loans, holding back our economy and our economy's 
growth. Tens of millions of young people who graduated college and are 
securing their first job are not starting their careers on even ground. 
They are starting them under water, and they have a hard time staying 
afloat when juggling all their bills.
  A New York student who borrows to pay for college now graduates with 
an average of more than $27,000 in student loan debt, according to the 
Federal Reserve Bank of New York. When someone owes upwards of $30,000 
in debt before even earning the first paycheck, it is no wonder young 
people are falling further behind on their payments.
  Providing graduates with the ability to refinance their student 
debt--Federal loans particularly--would lead to the personal savings of 
$14.5 billion nationwide in the first year alone, according to the 
Center for American Progress report. A higher education remains the 
clearest path to our middle

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class. When we price young people out of college, we all pay the price. 
Keeping a high-quality education in New York affordable is simply the 
right thing to do. That is why refinancing Federal student loans should 
be one of Congress's top priorities for college students.
  The magnitude of the problem requires leadership and the solution is 
right in front of us. Now is the time to act. Our Nation's students, 
graduates, and families cannot afford further delay.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Madam President, I thank my colleagues Senator Jack Reed 
of Rhode Island, Senator Elizabeth Warren of Massachusetts, and Senator 
Kirsten Gillibrand of New York for joining us on the floor this morning 
to talk about the student debt crisis and college affordability.
  I don't think this is just another issue. I think this is a defining 
issue. Imagine, if you will, what has happened to America since we have 
called into question the intrinsic value of owning a home. That used to 
be built into our culture, the notion that if you could get beyond the 
rental stage and actually buy a home was a smart and good investment in 
terms of your neighborhood, your community, and your State.
  The mortgage crisis that we went through was a shock to many people. 
They paid too much for their homes. They found themselves facing 
foreclosure and short sales, and the basic premise has been challenged. 
There is more rental property now. People are hedging their bets on the 
issue of home ownership.
  Now take one of the other pillars of our basic American values, and 
that pillar is: You will never go wrong with more education. I learned 
that at an early age, and luckily my mom and dad--with limited 
educational experience on their own part--pushed me forward into 
college and into law school and to finish. They believed that at the 
end of the day, I would be better off. Of course, statistics bear that 
out.
  Now comes the new challenge. The increasing cost of higher education 
has driven many families and students deeply into debt. In many cases, 
it is impossible for them to pay back their debt.
  Senator Reed says it is transformative. There are young people who 
have literally had their lives dramatically changed because of debt. 
The basic premise is called into question: Is higher education worth 
the money? I didn't think I would ever see that as a legitimate topic 
for debate in America, but it turned out to be a cover on Time 
magazine.
  This is not just a matter of the pundits and politicians talking 
about it. Average people, working families are talking about it. That 
is why we are coming to the floor. We hope to expand our numbers more 
and more, and I hope some of the Republicans will join in this 
conversation about what to do when it comes to student debt and the 
crisis it is creating.
  Millions of Americans pursue a college education hoping they will 
realize the American dream, but as college tuition, textbooks, and fees 
skyrocket students are paying more and more for education and taking on 
greater debt to pay for it. Sixty-eight percent of the class of 2012 
graduated with some debt. For those students the average debt was 
$27,850 a year. For students who attended for-profit schools, the 
average debt was close to $40,000, which deserves a special part of 
this topic of conversation when we talk about the cost of higher 
education.
  Americans now collectively hold more than $1.2 trillion in student 
debt--more than Americans hold in credit card debt. This has surpassed 
credit card debt in America. It goes way beyond higher education. It 
goes into a question about personal credit, chances for mobility, and 
the future of students who sign for these bone-crushing debt loans.
  In his recent State of the Union Address, President Obama said he 
wants to work with Congress to see how we can help Americans who feel 
trapped by this crushing debt. Several of us are stepping forward and 
accepting the President's challenge. I hope more Members will do so as 
well.
  Late last year Senators Reed, Warren, Boxer, and myself introduced 
the student loan borrower bill of rights to spell out in basic terms 
the rights of student borrowers and their families in interacting with 
Federal and private lenders, loan servicers, and schools. It is amazing 
to me that when it comes to mortgage debt there are laws dictating what 
you need to be told. When it comes to student debt, there are not 
nearly the protections. Younger people who are making these life-
changing decisions about debt deserve to know everything they face and 
what they are getting into.
  I met a young woman in Chicago recently named Hannah Moore. She 
thought she did the right thing. She started off her higher education 
by going to community college. She was told that was affordable and 
close to home. Do that first. She did it and then she made a fatal 
error.
  After 2 years at a community college, she enrolled at the Harrington 
College of Design in Chicago. If you go to their Web site, you will be 
dazzled with the beauty of this school, the faculty, and all the 
opportunities. Hannah Moore was dazzled, but this for-profit school 
ended up becoming a debt pit for her life.
  After she had exhausted all of her Federal loans and started taking 
out private loans at the Harrington College of Design, she graduated 
with a debt of $124,000, and she could not find a job. At one point she 
was working three part-time jobs to pay $800 a month on this debt from 
this for-profit school.
  Her Federal loan payments are manageable because the Federal program 
at least allows her to make payments based on income, but the private 
loans this school lured her into--thanks to interest and fees--now 
amount to $110,000. Her servicer on these loans refuses to work with 
her to find repayment alternatives. She sinks deeper and deeper every 
day into debt.
  This poor young woman thought she was doing the right thing by going 
to school. Today she is so deeply in debt she can't even dream of 
buying a house or a car. Her father had to come out of retirement to 
help her pay off the loans at this for-profit school, the Harrington 
College of Design.
  Unfortunately, she wasn't protected with the bill of rights, which I 
have introduced and is being cosponsored by my colleagues who have 
spoken today, which would have told her don't apply for a private loan 
until you have exhausted your government loans.
  Government loans have lower interest rates and are more manageable. 
Government loans can be consolidated and in some cases forgiven, 
depending on the job you take. She was not told that. She was lured 
into a debt trap by a school that just wanted to rake in Federal 
dollars at her expense. This is going to standardize policies, such as 
how payments are applied to principal and interest so borrowers benefit 
instead of banks.
  Under the current situation, many students paying back their loans 
find that the money is going to the higher interest loans and not to 
the lower interest loans; it is not being transferred to their benefit.
  The bill requires servicers to have a servicemember and veteran 
liaison. Veterans are often victims of these notorious for-profit 
schools and other lenders. We also require students to be told of all 
of their options, including Federal loans which have better terms and 
repayments. Students often have no other choice but to take out loans 
to pay for their college education, but this bill says borrowing money 
for college doesn't mean you give up your power over your money and 
your debt.
  I also want to mention something most people don't know. In 
bankruptcy court in America today there are only a handful of debts 
that cannot be discharged in bankruptcy court: taxes, child support, 
alimony, and government and student loans.
  A few years ago, the for-profit industry and private loan industry 
engineered into these bankruptcy discharge laws protection for their 
own debt. What does it mean? It means if you go to a for-profit school 
and take out a

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private loan, you are literally burdened with that for a lifetime. The 
grounds for discharging a student loan debt are some of the strictest 
and toughest in America. Students who sign up for this debt ought to 
know they are in it until it is paid and that can mean for a lifetime.
  The Wall Street Journal reported some time ago on a grandmother 
cosigning a student loan for her granddaughter. The granddaughter 
defaulted, and the lender decided to levy on the grandmother's Social 
Security payments. That is how outrageous this has become. Sadly, these 
students don't realize when they sign on the dotted line at ages 19, 
20, and 21, they are signing on for a debt that can trail them for a 
lifetime.
  That has to change. We have to follow Senator Reed's lead. Senator 
Jack Reed has said: These colleges have to have some skin in the game. 
If they are going to lure students into student loans well beyond their 
ability to repay, let that college and university bear some of the 
responsibility for repayment too. I think that is only reasonable.
  I thank my colleagues for bringing forth this issue. I thank Senator 
Warren. Her partnership in this effort is especially important. Because 
of her background in law and finance she is an important part of this 
conversation.
  We are not going to end with this speech on the floor today by each 
of us. Once a week we are going to continue to bring together those in 
our caucus--and I hope in the Republican caucus--who believe we have to 
address the student debt crisis and come up with a reasonable way for 
students to pay for an education that is reasonably priced.
  To have these students burdened with the student loan debtor prison 
is unacceptable in America today. It is time for us, as a Congress, to 
address this issue.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Ms. WARREN. Madam President, I would like to speak for another minute 
about the issue of refinancing student loans. This is real money back 
in the pockets of people who invested in their education; real money 
will help young people find a little more financial stability as they 
work hard to build their futures, real money that says America invests 
in those who get an education.
  We don't need to add a single dime to our deficit to pay for this 
plan. Right now this country essentially taxes students by charging 
high interest rates that bring money into the government while at the 
same time we give away far more money through a Tax Code riddled with 
loopholes and let the wealthiest individuals and corporations avoid 
paying a fair share. We can close those loopholes and put the money 
directly into refinancing student loans.
  We can start with the Buffett rule, a rule that would limit tax 
loopholes for the wealthy and ensure that billionaires pay at least as 
much as their secretaries. For every new dollar we bring in by 
stitching this loophole, it can go directly into reducing the cost of 
student loans for our students. Dollar for dollar we can invest in 
billionaires or we can invest in our students. This is about 
opportunity.
  Our country should offer a helping hand to young people who are 
working hard to try to build a future, not a handout to billionaires 
who have already made it. Refinancing student loans will not fix 
everything that is broken in the higher education system, but it is a 
huge step forward.
  I was the first person in my family to graduate from college. I went 
to a commuter college where the tuition was $50 a semester. I went to a 
public law school where I got a great education. I was able to do that 
because I grew up in a country that chose investing in kids over 
investing in billionaires. I believe in that America, and I believe in 
what we can do when we work together to build opportunities for 
everyone who busted their tail to get an education.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. REED. Madam President, again I compliment my colleagues Senator 
Durbin, Senator Warren, and Senator Gillibrand on their commitment to 
reinvigorating our higher education policy and doing it in an efficient 
and cost-effective way so the future generation of students are not so 
burdened that they cannot essentially rise up, buy a home, start a 
family, and do the things that my generation took for granted because 
there was strong support for higher education at every level of 
government.

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