Speeches & Floor Statements

Floor Remarks of U.S. Senator Lamar Alexander (R-Tenn.): Student loan rates

Posted on May 8, 2012

Mr. ALEXANDER. Mr. President, I can understand the Senator from Iowa's concern about the reduction of the prevention and public health fund, which he put in the health care bill. I know he has a longstanding interest in that subject.

 

But let's be clear about this. It is not just Republicans who think that fund isn't the best use of taxpayer money; it is almost all the Democrats on that side of the aisle. In February, the Middle Class Tax Relief and Job Creation Act was passed. It was voted on in the Senate, and every Democrat except six voted to take $5 billion out of the prevention and public health fund we are talking about to pay for it. It is not only the Democrats on that side who have supported taking from the fund, it is the President of the United States.

 

President Obama, in his Fiscal Year 2013 budget proposal, proposed taking $4 billion away from the fund, and then in his 2011 deficit reduction package, he proposed taking $3.5 billion from the fund. So it is a bipartisan proposal. We are a government that is borrowing 40 cents of every $1 we spend. If we are going to spend some money, we have to save some money, at the very least.

 

What we are proposing on the Republican side is the same goal the Democrats have, the same goal that both President Obama and Governor Romney have, which is to take this 3.4-percent interest rate for new subsidized loans, for 40 percent of students who take out loans, and extend it at that rate for another year, while we also take a look at what the long-term prospects could be. We agree on that. We agree that 3.4 percent ought to continue to be the rate on new loans for another year. The President agrees. Governor Romney agrees.

 

We don't agree with Senator Reid's proposal on how to pay for it. We have suggested paying for it by reducing spending in the health care law and reducing it in a way that all but six Democratic Senators have supported or at least from the fund they have supported reducing before and from the fund the President has supported reducing before.

 

Why are we suggesting saving from the health care law? There is a reason for that. It is because those who passed the health care law are overcharging students on student loans in order to help pay for it. Here is why I say that. The government is borrowing money, according to the CBO and the way it scores student loan spending today, at 2.8 percent and loaning it to students at 6.8 percent. The truth is, that 6.8 percent is a pretty good interest rate for a student who is maybe unemployed today. I think my colleague from Tennessee, Senator Corker, was here talking about that earlier. There might be other ways of looking at this spending differently. But the way the Congressional Budget Office scores this spending today, it says the government is borrowing money at 2.8 percent and loaning it at 6.8 percent and that the government is making, in effect, a profit -- that is my word -- because the CBO says that based on the amount of money the government is receiving from the student loans, it makes a profit or a savings of $61 billion over 10 years.

 

What did our friends on the other side do with that $61 billion? The Senator from Iowa very carefully explained that yesterday. They spent it -- all except $10 billion, which they used for deficit reduction. They could not keep their hands off it. They spent $8.7 billion of that excess money from student loans to help pay for the health care law.

 

We are saying that if we are looking for money to keep the interest rate at 3.4 percent, if we are trying to help students, why don't we give back to the students the money we are taking from them to pay for the health care law. We are overcharging students, according to the way the CBO looks at the loans, by $8.7 billion to help pay for the health care law. We propose in our bill to freeze the rate at 3.4 percent, give the students back the money we are overcharging them, and use the excess money -- over $6 billion -- to reduce the deficit, which we need to do at a time when we are borrowing 40 cents of every $1 we spend.

 

That is what the Interest Rate Reduction Act I have proposed does. It freezes it at 3.4 percent and gives back to students the money the government is overcharging them on student loans to pay for it. That is the same bill the House of Representatives passed. If we can get a vote on that here and pass it in the Senate, we can send it to the President, and he could go around the country saying he has worked with the Congress and has produced a way to help students save money.

 

The President needs to also say a couple more things. It is not much money -- $7 a month on average student loans. But this is the political season, and students need to be aware of that. I have talked about tuition going up and student loans going up. But if we do what we have agreed we should do, what the House has already voted to do, and freeze this interest rate on 40 percent of new student loans at 3.4 percent for 1 year, it saves the average student on the average loan $7 a month. That is for 10 years. It adds up eventually to $830, but it is $7 a month. We should talk about the rest of the story too.

 

Mr. President, how much time do I have remaining?

 

The PRESIDING OFFICER. The Senator has 14 minutes.

 

Mr. ALEXANDER. I thank the Chair. The rest of the story is about why tuition is going up. As a result, why are loans going up? There are several reasons. The main reason, which every college president and every Governor knows -- and the Presiding Officer who was the Governor of West Virginia -- college tuition is rising at public universities and community colleges across the country, where three out of four of our students go, is because of Federal Medicaid mandates on States that are soaking up dollars that would otherwise go to the University of West Virginia, the University of Tennessee, the University of Iowa, and other public institutions. Every college President knows that and every Governor knows that. That didn't just start 3 years ago. That was going on when I was Governor 25 or 30 years ago. I even came to Washington and said to President Reagan: You take all of Medicaid and we will take all of kindergarten through the 12th grade education. We want out of this situation every year of having to use State dollars to fund one-third or whatever you think we ought to be paying for Medicaid.

 

If we had made that swap 30 years ago, if the Federal Government had taken over all of Medicaid and the States had taken over all of kindergarten through the 12th grade education, the States would have come out about $4.5 billion ahead. If we made it today, if the Federal Government took all of Medicaid and the States took all of elementary and secondary education, the States would have $92 billion extra to spend. Where would it go?

 

I think I know that a lot of it would go to education -- maybe most of it -- especially to higher education and to public universities. The reason students are fasting and striking in California, when tuition is going up, is because California has reduced spending to its public universities by $1 billion since 2008. What the students don't seem to know is that the reason California has had to reduce spending to its public universities is because Washington has insisted that California, Tennessee, West Virginia, Iowa, and every other State increase their share of spending on Medicaid, and that soaks up the money that would otherwise go to public universities and community colleges.

 

In my own State, last year, Medicaid spending was up 16 percent and higher education spending was down 15 percent. What was the result? Up went tuition 8 percent and up went student loans. So it is a good thing, I suppose, that Democrats and Republicans and Governor Romney and President Obama have all agreed that for 1 year we want to freeze the rate on new subsidized Stafford student loans at 3.4 percent and save the average students who get those new loans $7 a month.

 

What students and families who are struggling to pay for college need to know is that until we repeal this health care law or until we repeal these Medicaid mandates on States, those college tuition rates will be going through the roof. The Kaiser Family Foundation says States, which now spend about 1 out of every 4 State tax dollars on Medicaid, will see a 29-percent increase on average in the next year as the health care law goes into effect. Where do you suppose that 29 percent increase will come from? It will come from the State budgets. The Governor will sit there and choose primarily between spending for community colleges and universities. More of it will go to Medicaid and less to community colleges and universities. So their quality will go down and their tuition will go up. The students will be fasting in California and they will be thinking it is their legislators in California who are the problem, while it is really the legislators in Washington, D.C. who are the problem because they are the ones imposing the Medicaid mandates on states.

 

I have tried to be fair in saying this problem is not an invention of President Obama's and of the new health care law; this has been a trend for 25 or 30 years. But President Obama and the new health care law have made this problem worse. This debate, while it may save students $7 a month in interest payments and while we think the fairest way to do it is to take the money we are overcharging them and give it back to them, this debate at least highlights the issue I hope I hear the President and Governor Romney talk about this fall, which is about who is responsible for rising college tuition and student loan debt.

 

I believe the main person and main group responsible are those who insist on continuing Medicaid mandates on States that soak up the dollars that should be going to public colleges and universities.

 

 

Mr. ALEXANDER. Mr. President, I appreciate the comments and the courtesies of the chairman of the Committee on Health, Education, Labor and Pensions, and I recognize his leadership and his interest in these subjects.

 

The Senator asked the question: who connected health care to student loans? It was the Democrats who connected health care to student loans. Think about this. Here we were debating a new health care law a few years ago, and what happened? The Democrats -- the majority -- said: While we are at it, while we are supposedly fixing health care, we are going to take over the entire student loan program. We are going to take Arnie Duncan, who is a terrific Secretary of Education, and we are going to make him banker of the year, banker of the century, and we will put him in charge of making more than $100 billion in new loans every year to students all over America.

 

So as a part of the health care law, they got rid of the student loan program, most of which was handled by people you would expect to be making loans -- that is, banks -- and put it all in the government. They did that on the theory that the banks were making too much money.

 

It reminds me of people who think that if it can be found in the Yellow Pages, the government ought to be doing it. Autos, student loans -- just put it all in the government.

 

So if we are going to do that, if we are going to connect the two, student loans and banks -- and then the Congressional Budget Office comes along and says: Well, OK, if the government takes over the student loan program, it will save $61 billion, that $61 billion ought to go to the students who are getting the loans. That is my view. That is our view. And the Congressional Budget Office estimates that if we applied that $61 billion savings to student loans, we could have reduced the interest rates to about 5.3?percent and save the average student $2,200 over 10 years.

 

So it wasn't anybody on this side of the aisle who suggested during the health care debate that we ought to suddenly say: While we are at it, let's take over the student loan program.

 

All we are saying today is this: We agree with President Obama, we agree with Governor Romney, and we agree with the House of Representatives that the interest rate for new subsidized Stafford student loans should stay at 3.4 percent for the next 12 months. That will save the average student about $7 a month in interest payments. The only difference we have is how we propose to pay for it. The Democrats want to raise taxes on people and small businesses who are creating jobs while we are still in the midst of the greatest recession since the Great Depression. We say that since the government is borrowing money at 2.8 percent and loaning it to students at 6.8 percent and since the Congressional Budget Office said there was a savings of $61 billion when the Federal Government took over the student loan program and that $8.7 billion of the savings went to pay for the health care law, we ought to take the money the government is overcharging students and use it to pay for keeping this rate lower for another year. That is what we Republicans are saying and is where we have a difference in opinion with the other side.

 

So I hope my colleagues will vote no on the motion to proceed. We have a different proposal that we believe is superior and is the same as the one that passed the House. We would like a chance to offer the Interest Rate Reduction Act and give the students the benefit of our proposal, which will give the overcharged money back to them. We would like to have a vote on that.

 

Therefore, I recommend that we keep the rate at 3.4 percent; that we use the money we recognize as the savings we are taking from students, by overcharging them for student loans, as the best way to pay for it. Hopefully, the majority leader will allow us to consider the Interest Rate Reduction Act that we have proposed.