Speeches & Floor Statements
Posted on October 28, 2009
I wish to say a word about a subject which has nothing to do with health care and nothing to do with climate change, which is the other subject I have been in hearings on today, but it is a subject that will affect millions of families in America, and that is the question of going to college and student loans. All of us can imagine the anxious moments in our family lives -- and there are a number of them, including when a baby is born or when the daughter goes out on her first date; when someone is sick; when a child goes off to college. But one of the most anxious moments comes just after the first of every year when, in millions of homes across America, students and their parents wait to see if they have been admitted to college and to which college. The next anxiety comes when they turn to the various options they have to see whether they can afford to go to that college. Fortunately, in America we have the best system of higher education. We not only have the best colleges; we have almost all of the best colleges. We have 6,000 autonomous institutions of one kind or another -- public, private, religious, secular, profit, for-profit -- among which students may choose. Second, even though prices have been going up, we have bent over backward in this country to try to make it possible for the largest number of Americans to attend college. Seventy-seven percent of Americans who attend college -- nearly 20 million -- have a Federal grant or Federal loan to help them do that. So just after January -- and I want to paint this picture -- in homes across America, we have millions of students, millions of families who are waiting for their college admissions and then will turn to the question of: Can I get some help paying the bills. Specifically, we have 14 million -- if next year is anything like last year and the year before -- 14 million of those students who will be going to college on 3,500 campuses who will be borrowing $60 billion through the Federal Family Education Loan Program -- what we call the traditional student loan program. We have two types of loan programs. We basically have one through two thousand lenders, profit and nonprofit, across the country. For example, we have an organization called Edsouth in Tennessee that is nonprofit. It offers a variety of student loan options to Tennessee students. It has five regional outreach counselors to provide college and career planning, financial aid training, college admissions assistance, and financial literacy. It makes 443 presentations at Tennessee schools through college fairs, guidance visits, and presentations. It works with 12,000 Tennessee students to improve their understanding of college admissions and the financial aid process. Last year, Edsouth provided training to over 1,000 school counselors and distributed 1.5 million financial aid brochures. The various lending institutions -- profit and not-for-profit -- are usually in these communities and easy for these 14 million students to get to. There is another group of students -- about a fourth to a third in total -- who choose to go another route in getting a student loan, called direct lending. They borrow directly from the government. This was set up as a pilot program when I was the Secretary of Education in the early 1990s. It was set up to see whether the traditional student loan program, which is through your local bank or nonprofit, was working right, and what was best for students. Students and colleges have voted over the years with their practices. For example, in Tennessee, most Tennessee campuses and most Tennessee students choose the traditional student loan program. At the University of Tennessee, where I was once president, in Knoxville, there are 30,000 students, and 11,000 have a Federal loan. They get that through the traditional loan program, not the government direct loan program. At Maryville College, in my hometown, where my parents went, 824 of 1,100 students have a Federal loan. They get that through the traditional loan program. At Carson-Newman, at Jefferson City, where I am going Friday to help inaugurate a new president, with 2,000 total students, 1,259 have a Federal loan. I can go through each of the institutions in our State. You can see the number of families that any change in the student loan program affects, and if you add the anxiety that comes with receiving your college admission and worrying about whether you can pay the bill -- you can see the problem that causes. The reason I came to the floor is that for those 14 million students -- more or less -- who, in January, February, and March, would be expected to turn to the traditional student loan program, we are about to have a 14-million car pile-up on the interstate highways of American education because of action taken by the U.S. Department of Education. The Secretary of Education -- a man I greatly admire -- has sent a letter to the various schools -- 3,500 or so campuses -- that now use the traditional loan program, and he said you better get ready for the government-run program, and you need to do it because I may not be able to continue to offer the traditional loans. That is a big mistake. I want to point out the reasons. First, there is not time to switch, even according to a New York Times article. [I ask unanimous consent to have printed in the Record the Secretary's letter to the campuses and the New York Times article.] The Secretary's assistant says it takes at least 3, 4 months for colleges to switch their computers around, so instead of offering aid through a traditional program, they offer it through the government direct loan program. There will be a lot of confusion in January, February, March and April. There is not time to switch. Second, the Secretary has gotten ahead of himself. The President has proposed a Washington takeover of the student loan program, but this Washington takeover requires congressional approval. We have more than one branch of government in this town. I know the House of Representatives has passed the President's request, but there’s one more -- the United States Senate has not approved the President's request, and I hope it does not. It is a bad idea. So I hope the Secretary will write another letter and say I have changed my mind, given the lateness of the situation in the year -- we are almost to November -- and the fact that it takes up to 4 months for any college to make a changeover, and because most students will begin to receive their college admissions in January and February, et cetera. I hope the Secretary will say I am going to take a little different approach and work with Congress, recognizing that the Congress has to approve this proposal as well. First, we are going to extend the law that was passed a couple of years ago, which provides emergency financing to back up all of the traditional student loans that are made. That has worked out very well. The institutions participating have paid large fees to the government and students have gotten their loans. We can extend that another year. It doesn't expire until June. Second, the Secretary might say that I am going to work with Congress to make some changes in the existing student loan program to make it right. We can talk about ways to do that. Third, I hope he will say I am going to work with Congress to set up a transition time that is appropriate for any colleges that want to move from the traditional student loan program to the government-run direct loan program. When time comes for us to debate and act on whether there should be a Washington takeover of student loans, I am going to say, no, there should not be. I have a little history here. I think the American people have had enough Washington takeovers -- banks, insurance companies, General Motors, et cetera. The President can argue that he inherited a lot of that. But this takeover is truly voluntary. Nobody is asking the Secretary of Education to become the banker of the year. I would rather he become the Secretary of the year. I think he could do that. I think he is an outstanding Secretary, one of the best appointees -- maybe the best -- of the new President. The Presiding Officer is from Illinois, and he knows Arne Duncan very well. I would like to see him reward teachers and setting higher standards, instead of making 20 million student loans every year. I want him to be the educator of the year, not the banker of the year. Deep in his heart, maybe he wishes that as well. The administration has told us about this latest Washington takeover that is starting next year, and that the nearly 20 million students who want government-run direct loans should all line up at offices designated by the U.S. Department of Education. This will, the argument goes, save taxpayers $87 billion in subsidies that now go to greedy banks. In anticipation, Members of Congress -- we -- have already spent the $87 billion for more Pell grants, community college improvements, and other new programs. That sounds very good. Banks are punished, students are helped and, most important, Congressmen look real good. Here is what they have not told you. Your friendly government, for all this, will overcharge you, the student -- and use the profit to pay for the new programs that make the Congressmen look good. Yes, those of you who borrow student loans -- the 20 million -- the Education Department is going to borrow the money at 2.8 percent from the Treasury and loan it to the students at 6.8 percent, and spend the difference on administrative costs and new government programs. That means a student will spend a few more months or years working to pay off the student loan in order to help pay for someone else's education and help the Congressmen's reelection. There are a few other things the government ought to tell you. The $87 billion isn't real. According to a letter in July from the nonpartisan CBO to New Hampshire Senator Gregg, the savings are closer to $47 billion. If we use the same cost scoring analysis that the CBO required when we passed the Troubled Assets Relief Program, or TARP, the savings I think are less than that, since the government assumes it can make 19 million loans each year for what it now costs to make 4 million loans. Finally, the government needs to disclose to these 20 million students who are thinking about going to college next year that getting your loan will become about as enjoyable as waiting in line for your driver's license. Today there are 2,000 lenders -- banks and nonprofit institutions -- competing to offer government-backed students loans at 4,400 campuses. I mentioned earlier the kinds of services they provide. That is all about to change. There will only be one student loan banker under this proposal, the U.S. Secretary of Education. I wouldn't have wanted that job when I was in that position, and I cannot imagine any Education Secretary wanting that job. There will be no competition to make it easier to get your loan. Imagine 20 million students and families trying to call a Federal call center to make their arrangements to go to college. It is true that during the last 20 years subsidies the government paid to lenders to make student loans were excessive. Congress took steps to correct that 2 years ago. If there is still $87 billion, or $47 billion, in real savings, then the subsidies are too high and we should lower them and give the savings to students, not trick students by overcharging them to pay for more government programs and run up the Federal debt in the process. Seven-eighths of the students who applied for Federal aid using the Free Application for Federal Student Aid had an average loan of about $25,000. Assuming a standard 10-year repayment at 6.8 percent, which is the rate set by Congress, these students would pay roughly $9,400 in interest. But we could use the savings to reduce the interest rate by as much as 1.5 percent -- down to 5.3 -- and those students would pay only $7,100 in interest, a savings of $2,200. If this Washington takeover goes through, every one of the 19 million-plus student loans made in 2010 should carry this warning label: Beware, your Federal Government is overcharging you so your Congressman can take credit for starting a new government program. Enjoy the extra hours you work to pay off your student loan. Mr. President, I see my colleague from South Dakota on the floor and my colleague from Nebraska, so I will conclude. The Secretary of Education should change his mind, withdraw his letter, and work with Congress to extend the temporary law and improve the student loan program and reassure students that they don't have to be anxious about standing in line in January for a loan. I yield the floor.