Speeches & Floor Statements
Posted on May 7, 2012
Mr. ALEXANDER. Mr. President, I am glad I had an opportunity to hear the distinguished Senator from Iowa, who is my friend and the chairman of the Health, Education, Labor and Pensions Committee. I wish to address the same subject he did, but I want to hasten to summarize it at the beginning to say that we agree. By we, I mean Governor Romney, the likely Republican nominee for President, President Obama, the House Republicans, I, and others agree that for the next year we should keep the interest rate on 40 percent of new student loans at 3.4 percent. There is no difference of opinion on that.
What is different is how we propose to pay for it. The distinguished Senator from Iowa has actually outlined the difference of opinion very well. What we are saying, what the Republicans are saying, is that in order to pay for the $6 billion it will cost taxpayers to keep that 3.4 percent interest rate the same for the next year, we want to give to students -- give them back their own money, the money the Democrats are overcharging them on their student loans. The Senator from Iowa went through a very careful explanation on that which was largely correct. He pointed out that at the time the majority decided it would make the Secretary of Education the Nation's leading banker and put him in charge of administering what is becoming to be nearly $1 trillion worth of student debt -- in other words, take it away from banks and make the government the banker -- that there was about $61 billion in "savings." That is from the Congressional Budget Office.
Our friends on the other side of the aisle argued those were unnecessary subsidies to banks. Let's say, for the moment, for the sake of argument, they are correct about that. That $61 billion is money students were paying in interest on their student loans. Wouldn't the logical thing to do be to let the students keep the money? If we truly cared about college tuition going up and student loans rising, wouldn't the thing to do be to say: We have done a big favor to you students -- the government has been overcharging you on your student loans, all 18 or 19 million of you who have student loans -- so instead of the rate of 6.8 percent, which it is for most students, we are going to lower that rate to 5.3 percent.
That is not my number. That is the number the Congressional Budget Office said. We could have that $61 billion our friends on the other side said the government is overcharging students and we could reduce the average loan of about $25,000 to a 5.3-percent rate instead of 6.8 percent and that would save the average student on the average loan about $2,200 over 10 years.
But they didn't do that. They spent it on more government; $10 billion to reduce the debt and $8.7 billion to pay for the health care bill. So what we are saying is in order to freeze this rate at 3.4 percent, let's give to students the money they were paying. Instead of paying for the health care bill, let's reduce the student rates. That is the difference of opinion here.
Of course, our friends on the other side of the aisle have a better way, in their opinion. Not only do they want the students to continue to pay for other government programs, and some money for the health care bill, they want to raise taxes on job creators in the middle of the longest recession we have had since the Great Depression.
Let me go back to the beginning point here. We are talking about something that was reflected very well in the New York Times yesterday. I noticed the Senator from Iowa talked about the New York Times. Here is the national section from yesterday talking about what is going on in California.
Angry about tuition increases and cuts in courses and enrollment, a dozen students at California State University have taken their protest beyond marches...and declared a hunger strike.
The fasting protest was the latest display of anger at the 23 California State University campuses. The system has lost roughly $970 million in state financing since 2008.
The University of California is probably the best public university in the world. It has lost nearly $1 billion in State funding since 2008, and the students are fasting. They are upset about the tuition increases. Why is the tuition increasing? Well, the administrators say if we lose $1 billion from the State for our State universities, the money has to come from somewhere to pay for excellence in our universities, so we increased the tuition. That story has been going on all over the country. Why is that happening?
The President has put this issue on the table. I think we need to discuss it. Why are they fasting in California, protesting tuition increases? In the last year why did State funding for the University of Tennessee and Tennessee's community colleges and Tennessee Tech go down 15 percent last year? The main reason is the Federal Government's health care policies and its Medicaid mandates on States that are soaking up State dollars on Medicaid that would otherwise go to pay for public universities.
President Obama did not start this policy -- it has been going on for 30 years -- but he is making it much worse with his health care law. And when it takes effect next year, the Kaiser Family Foundation says that States, which already are spending one out of four of their State tax revenues on Medicaid, will see a 29-percent increase in their spending on Medicaid. What will that do? What that will do is force California, Tennessee, Connecticut, and Iowa to look in their State budgets, to take the money that most likely would have gone for the colleges and community colleges and public universities and instead spend it on Medicaid. Those Federal Medicaid mandates are soaking up money that would otherwise go to public colleges and universities, and as a result of that, universities are raising tuition. As a result of that, loans are up, students are fasting, and the President is on the campaign trail promising to fix it.
Let's talk about his fix. First, it is the political season, so Senators, and all of us, need to listen very carefully when someone begins to stir the crowd about a popular issue, and surely being able to pay for college is a popular issue. We hope all American students who want to have a college degree will be able to go and afford to go to college. Our Federal Government goes to great efforts to make that possible.
Half of the students who go to colleges and universities in America -- there are 6,000 of them -- have a Federal grant or loan to help pay for college. We have more than $100 billion in new loans going out this year from the American taxpayer. That is from people out there working and paying taxes -- the UAW member, the teacher, their taxes are going to loan more than $100 billion to students this year. The amount of money for Pell grants this year is over $41 billion.
The University of Tennessee in Knoxville is a fine campus where the tuition is about $7,400 a year, which is a good bargain at a great university. Almost all the students show up with a $4,000 State scholarship called the HOPE scholarship. For a quarter of the students who are low income, they have Pell grants that carry them above the amount of tuition. State and local governments have made a great effort to try to make it easier for our young people and older people to continue their education, and we want to continue to do that. There is a bipartisan effort on that. Now the specific issue at play here, and the one we are likely to vote on tomorrow, has to do with one type of those student loans, and let's try to put that in perspective.
The Democrats have a version and the Republicans have a version. I offered a version which would pay for it by giving back to students the money the government is overcharging them. The Democrats have one that would raise taxes on people who create jobs. But whatever one passes -- if one were to pass -- would save average students on new loans about $7 a month in interest payments for the next 10 years. That can add up. That could be $83 in a year, $830 over 10 years. But that is what we are talking about, $7 a month in savings or $7 a month in interest payments on the average loan, and that is for 40 percent of the new loans. So if you have a student loan and it is at 3.4 percent, that is not going to change. There are 40 percent who have student loans today that they took out last year at about 3.4 percent. Most everybody else is at 6.8 percent, which is a good deal lower than you could get with a private loan. A private loan is one where you go to a bank and say: I am going to college and I don't have a job so I need to borrow money. You may get it, but they are going to charge you more because you may not be able to pay it back as well as somebody else.
We have agreed on this -- at least we agreed on the policy, but not how to pay for it. The President has agreed on it and Governor Romney agreed on it. For the next year we wish to take 40 percent of new loans and keep them at the 3.4 percent rate, and then later in the year -- earlier next year -- when we look at our entire budget, how much money we have to spend, the size of the debt, which is of great concern to all of us on both sides of the aisle, we will see what we can afford to do. That is the first question.
But I am glad the President has been going to college campuses. I am glad he has raised the issue of student loans and college tuition because as a former Governor of Tennessee who cares deeply about education and as someone who was also U.S. Education Secretary about 20 years ago, I have been trying for 20 or 25 years to get Washington to pay attention to the idea that it is ruining our public colleges and universities where these Medicaid mandates soak up the dollars that ought to go to public colleges and universities. Three-quarters of our students go to public universities such as the University of Tennessee or Iowa or Iowa State or California or the community colleges, which are our secret weapon. And even with the rising tuition, those costs are at least reasonable now. I mean tuition at a community college in Tennessee is about $3,000. Nationally the average tuition for a 4-year public university is about $8,200. It is not easy to find the money for that, but it is still within range.
What has happened in the last 25 years? I can tell you what happened in my State. I visited with the retiring president of Tennessee Tech University, a fine engineering school. He said two things: One, over the last 3 years State funding for his university -- and for most in Tennessee -- has gone down by 30 percent. That is not a 30-percent reduction in the rate of growth, that is a flat-out cut. And why has that been happening? Well, our current Governor, a Republican, and our former one, a Democrat, have said what I know and every Governor knows: when you make up your State budget and you get down toward the end of it, you make a choice between Medicaid and higher education. And because Medicaid is run from Washington with specific mandates on states, the States end up having a stranglehold put on them, and in effect, if they participate in the program, they are forced to make decisions about eligibility and how much they spend, and there goes the money. There goes the money and it doesn't go to the public colleges and universities, resulting in less money, higher tuition, and more loans.
The fasting students in California -- if I walked up to them today and said: I bet you didn't know that President Obama's health care policies are the reason you are hungry today, they wouldn't believe that. But the fact of the matter is not just the President's policies but the policies over the last number of years have gradually soaked up money that would make the University of California a great university and left it no recourse but to become more efficient, which it should, and to raise tuition, which it is doing.
I will give an example of how much difference this makes. In the early 1980s, I was a young Governor and I was making these budgets up. I would say: Well, about this much goes to K-12 education, and the courts are running prisons, so I will have to put that in, and then the gas tax goes to the highways. And you get down to the end of the budget and you make a choice between Medicaid, the Federal program that States pay about 30 percent of, and education. I was trying to restrict funding for Medicaid and increase funding for education. I could see where we were headed over the next several years.
I went to see President Reagan. I had made an appointment. I saw him in the Oval Office. I said: Mr.?President, let me propose a grand swap. He said: What do you mean, a grand swap? I said: We will take all of K-12 education in the States and you take all of Medicaid. He thought for a moment, and he said that sounds like a pretty good idea. My reasoning was that instead of Medicaid having two masters -- one in Washington and the other among all the different Governors -- if it had one, it would be managed better. If Washington ran Medicaid, Washington would have to pay for it all and make sure that it could be funded.
I thought then, and I still think today, that almost all of the responsibility for kindergarten through the 12th grade belongs as close to the child as possible -- first with the family, then with the classroom, and then with the State. I believe that while there has been some important advocacy from Washington over the last 30 years, if we had made that grand swap 30 years ago, the Medicaid Program would be run better today and our public schools would be performing better today.
We could argue about that, but the one thing we could not argue about is the difference in money. Back then if we made the swap, the States would have come out ahead by about $4.5 billion. In other words, the Federal Government would have taken over Medicaid and the States would have taken over K-12. The States would have given back to the Federal Government the Federal aid for education and keep their Medicaid money. Four-and-a-half billion dollars was the difference in 1981 or 1982.
What would the difference be today if we made such a grand swap? It would be $92 billion. It would be $92 billion of extra money the States would have if today the Federal Government took over all of Medicaid and the States took over all of the responsibility funding for K-12. That would mean in a State such as California where the students are fasting, California would probably have an extra $12 billion or $13 billion. Do you think much of that would go to the University of California to continue its excellence? Sure it would. Would much of it go to Tennessee Tech, the University of Tennessee, and the community colleges? It absolutely would.
What happened over the years is that these well-intentioned Federal health care Medicaid mandates have put a stranglehold on Governors, which is why I said when we were debating the health care law that I thought any Senator who voted for it ought to be sentenced to serve as Governor for 8 years and try to implement it.
I mentioned that last year Tennessee's State funding for higher education went down 15 percent. Guess what. State funding for Medicaid went up 16 percent. So there is a direct relationship: Medicaid up, State funding for public universities down, tuition and loans go up, and that is the real problem we have today.
I am glad the President has put this issue on the table. I am glad he is talking about it, and I hope Governor Romney talks about it. I hope what they agree to do is either to repeal the health care law or to repeal the Medicaid mandates and give States more flexibility. We can't pass a law in Washington, as we did 3 or 4 years ago with the stimulus, and say we are going to give you more Medicaid money, but, Mr. Governor and Ms. Legislator, you can't reduce State funding on Medicaid.
Lieutenant Governor Ravitch of New York, a Democrat, wrote an excellent article in the Wall Street Journal. At the time it said: If you tell New York that at a time when we are reducing revenues and say we have to keep spending on Medicaid, we have to cut something else, and the State University of New York gets cut. So New York cuts the State University of New York, tuition goes up, loans go up, and students are protesting.
It is not just the student protests that I worry about. We are at a time in our history when we are in a serious brain-power competition around the world. We have a lot of Chinese scholars who go from American universities home to their universities. In a bipartisan way -- and the Senator from Iowa and I were part of it -- we passed something called the America Competes Act a few years ago and reauthorized it so we could properly fund science and our innovation. Government-sponsored research has been an important part of our job growth over the last 30 or 40 years. Where is that done? It is done in our national laboratories or our great research universities.
Well, at least half of our great research universities are public universities, such as the University of California, the University of Michigan, the University of Tennessee, the University of Connecticut. If we keep cutting government-sponsored research and the quality of those universities, our job growth won't be nearly as good in the future.
Here is another example of how much that has changed over the years. Thirty years ago in Tennessee, the State paid 70 percent of the cost of a student to attend a State university and the student paid 30?percent. We had an implicit agreement between the government and the student, and we said: If we increase your tuition, we will increase the State contribution by the same percentage. So we kept it at about 70 and 30, and it made it possible for a lot of students to go to college. What is it today? It is 30 and 70. It is upside down. Thirty?percent of the support for colleges and universities comes from the State government and nearly 70 percent comes from the students. Why is that? The main reason is Federal health care mandates that put an unrealistic amount of money on top of States, and it is about to get worse.
I mentioned earlier the Kaiser Family Foundation, which estimates that next year States that are already spending $1 out of every $4 for Medicaid will see a 29-percent increase in Medicaid funding. This fast will have to go on a lot longer in California if that is going to happen. We can't cut $1?billion out of the University of California every 3 years and have it remain the best public university in the world. It is just not going to happen. And we can't raise tuition 6?percent or 8?percent every year and make college available to the large number of students that would like to go.
So I am glad the President and our friends on the other side in this political year have raised the issue of rising tuition and student loans. We agree on the little issue before us. We would all like to take that 3.4?percent interest rate and extend it for a year. That costs $6 billion. That would affect new loans and only 40?percent of the students. But we agree on that, the President agrees, and Governor Romney agrees. That is not an issue. The issue is, do we raise taxes on job creators or do we give back to students some of the money we are continuing to overcharge them on student loans? That is the issue. The larger question -- and one that I hope we all address this year in our debates and that the President and Governor Romney address in their debates -- is, What about the future of our public colleges and universities, where three out of four American college students go? How are we going to maintain their quality and maintain the opportunity for access to them if we continue to impose Medicaid mandates on States that soak up the money that ought to be going for excellence in higher education and the greatest amount of opportunity for students by keeping tuition rates low? That is the real issue.
While President Obama is not responsible for what went on before he became President, he has made that condition much worse. If he is going to bring this up on the campaign trail, I hope he tells the rest of the story, which is that he and his health care and Medicaid mandate policies are a principal part of the reason and I would say the main cause going back over the years as to the reason California students are fasting, Tennessee students saw an 8-percent increase in tuition, and all across the country college presidents know very well that the reason there have been such reductions is because of Federal Medicaid mandates.
I hope we have an opportunity tomorrow to vote not only on the Democratic proposal to keep student loan rates at 3.4?percent but also on the Republican interest rate reduction act that I have proposed, which would also keep the rates at 3.4?percent but pay for it by stopping the overcharging of students to help pay for the health care law.