Thursday, June 6, 2013
Reed Speaks on Student Loan Affordability
Mr. President, let me first commend Senator Warren for her very thoughtful discussion on this increasingly important topic of student debt and her efforts to assist us in extending the current interest rate of 3.4 percent while we work on a much longer and much more thoughtful approach to reform. She will be at the heart of those efforts.
July 1 is a little more than 3 weeks away. Unless Congress acts, the interest rate on subsidized student loans will double from 3.4 percent to 6.8 percent, making college more expensive for more than 7 million students across the Nation, including more than 42,000 students in my home State of Rhode Island.
This will hit low- and moderate-income families the hardest. Indeed, 60 percent of dependent subsidized loan borrowers come from families with incomes of less than $60,000, while 80 percent of independent subsidized loan borrowers come from families with incomes below $40,000.
There is no reason to allow this rate to double, and there is no reason to rush to a long-term solution that would actually make the problem worse.
There are several long-term proposals on the table, with substantial differences. The House passed a bill that, according to an analysis by the nonpartisan Congressional Research Service, would leave students worse off than letting the rate double. The President has, in fact, said he would veto this legislation, but if the House bill went into effect it would be worse than doing nothing, which I think is a strong argument to do something other than the House bill.
My Republican colleagues in this body have proposed a long-term solution that would expose students to unchecked interest rates in the future, there would be no cap, and their proposal would have students pay $15.6 billion more in interest payments for deficit reduction. I don't believe student loan borrowers should pay higher interest to reduce the deficit, nor do I think the Federal Government should be generating Federal revenue from student loan programs. We should not be profiting on the backs of these students, particularly as student debt explodes.
I have proposed setting interest rates based on the actual cost of providing the loans with a cap to protect students during periods of high interest rates.
Any long-term solution for student loans should leave students better off in the long run. The Republican proposals do not pass this test.
According to a recent analysis by the Institute for College Access and Success, the Senate Republican proposal would cost students entering college this fall and graduating in 2017 $2,200 more in interest payments. For a freshman starting in the fall of 2018 and graduating 4 years later, the increased interest payment would balloon to $6,700.
Make no mistake, the ``savings'' generated from the Senate Republican proposal means students pay more.
As I have come to the floor to discuss many times, with student loan debt eclipsing credit card debt and auto loan debt, we should take the time to thoughtfully and comprehensively address student debt and college costs.
How we set student loan interest rates is only one part of the solution. We need to address rising college costs as well. If we do not, even with grants and loans, families will be priced out of a college education and out of the middle class.
We need to ask more from States and from colleges and universities. I will be introducing legislation to revitalize the Federal-State partnership for higher education and to make sure colleges and universities have more skin in the game when it comes to student loans. These are big, complex issues, and we should work together to develop bipartisan solutions. But that work--that careful work, that thoughtful work, that thorough work--will take time--more than the 25 days we have between now and July 1.
Right now we can and we must take action to reassure students and families who rely on need-based loans to pay for college that the rate will not double on July 1.
I have worked with Chairman Harkin, Senator Warren, Leader Reid, and many of my colleagues to develop a fully offset 2-year extension of the current student loan interest rate. Instead of charging low- and moderate-income students more for their loans, the Student Loan Affordability Act will keep rates steady while closing loopholes in the Federal Tax Code.
Specifically, the bill would limit the use of tax-deferred retirement accounts as a complicated estate planning tool, close a corporate offshore tax loophole by restricting what is called earnings stripping by expatriated entities, and close an oil and gas industry tax loophole by treating oil from tar sands the same as other petroleum products. These are sensible measures in and of themselves, but when they will allow us to stabilize the student interest rate, they take on even more relevance and I think more importance. We should not be collecting additional revenue from students when we cannot or will not eliminate wasteful spending in the Tax Code, and we should not allow interest rates to double on July 1.
I hope all of my colleagues will support this commonsense 2-year extension that is fair to students and taxpayers, and I urge my colleagues to vote yes on the motion to proceed to S. 953, the Student Loan Affordability Act.
I yield the floor.
Mr. REED. Mr. President, On July 1, the interest rates will double for the most vulnerable students in our society. Access to college, which is fundamental to our growth, our prosperity, and individual advancement will be compromised for 7 million low-and moderate income students in this country.
Republicans have a long-term proposal, but they do not have a long-term solution because it is not just about interest rates, it is about college costs. It is about refinancing the huge amount of debt that families have today--not just families but students--debt they may never be able to pay off. First, we need the time to work on a long-term solution; but, second, we need to reassure vulnerable individuals and families that their rates will not double. Student debt today is the second largest debt for American households. We cannot let it go any further. Their proposal not only will not solve the problem because it doesn't deal with all aspects, but it will increase student debt for borrowers with financial need on July 1.
Instead, I urge passage of our proposal, the Student Loan Affordability Act.