The interest rate on new direct student loans doubled on July 1. Because Congress failed to act, our lowest income students are now paying twice as much on these loans. And while students are paying more, the federal government is boosting its own profits - $51 billion from our student loan programs in 2013 alone.
This is just plain wrong.
The government is making obscene profits on these loans-profits we can and should cut back to help our kids who are struggling to pay for college. But Republicans have repeatedly blocked our efforts to get a short-term fix that would save students from higher interest rates.
This week, the Senate will vote to fix this problem. The bill, the Keeping Student Loans Affordable Act was introduced by Senators Jack Reed and Kay Hagan. It would drop the rate on direct loans back down to 3.4% for one year, retroactively as of July 1st, and give Congress time to develop a plan to do the three things we really need to do: reform student loan interest rates on new loans, refinance a trillion dollars in existing debt, and lower college costs for all our kids.
Republicans have a different approach. Despite the obscene profits of the current program, they propose to make even more money from students. Their current proposal would bring in an extra billion dollars in profit off the backs of our students. Listen to the numbers. New loans will produce $184 billion in profits for the US government over the next ten years. That includes the 6.8% interest on direct loans, all the borrowing costs, administrative costs and bad debt losses for the program. Let me say that again: the new student loans, including new direct loans at 6.8%, will make $184 billion in profits for the government over the next ten years, and the Republican solution is to increase those profits for the US government. In other words, their solution to the rising interest rate problem is to make the students pay even more.
Some of my colleagues are telling students that these plans are a great deal, but their argument is the same one that was used by the slick operators who sold teaser rate mortgages and the ones who sold "zero-interest" credit cards. Sure, the first couple of years will be cheaper, but they just don't want anyone to look at what happens after that.
Fortunately, our students are smarter than that. They read the fine print. They know that in the end, this debate boils down to simple math - math that our students understand, even if some people in Congress wish that they didn't. Our students sent a letter to Majority Leader Reid and Minority Leader McConnell with a clear message: a bad deal is worse than no deal at all.
Our students need a plan that costs them less money, not one that costs them more.
I talk a lot about math, but the Senate's decision about student loans is a decision about our values, and a decision about how we build a future. Investing in our students will allow them to get good jobs and give them a shot to make it in America, but that same investment will also create new industries and grow the economy for everyone.
We shouldn't treat our students like a profit center. We shouldn't ask them to pay an extra tax to go to school. And we shouldn't try to trick them by shuffling numbers around, hitting them with teaser rates, and declaring that a problem is solved while students just keep paying more and more.
There are real problems in higher education today: skyrocketing college costs, historic levels of student debt, and high borrowing rates. It's going to take time to come to a solution that really works.
There is no magic math that will make student loan profits disappear or make college tuition shrink without some sacrifice. But right now, students are the only ones who are sacrificing. They are giving up the dream of owning a home or being able to retire--just so they can keep paying for college.
Congress can ease the burden on our students-and we should be committed to doing just that, because this is how we build a stronger middle class, this is how we build a better future for our entire country.
It's a first step, but it's a good one. Congress can pass the Keeping Student Loans Affordable Act. It's a short-term patch to keep interest rates on new loans from doubling for one year while Congress develops a plan to reform student loans and to make college more affordable. I support this measure, and I urge my colleagues to do the same.
Thank you madam president, I suggest an absence of a quorum.