Bank on Students Loan Fairness Act

Mr. President, I am pleased to introduce the Responsible Student Loan Solutions Act with Senator Durbin to offer a long-term approach to setting student loan interest rates.

Congress must take swift action to prevent the doubling of the interest rate on need-based loans on July 1, 54 days away. We also need a new mechanism for setting interest rates on all federal student loans for the long term so that students and taxpayers are protected, and we need to take the time to get it right.

In April, I introduced the Student Loan Affordability Act to keep the rate on subsidized loans at 3.4 percent for the next 2 years. This would give Congress time to debate a long-term solution as part of the reauthorization of the Higher Education Act.

Today, I am introducing legislation with Senator Durbin and Congressman Tierney and Congressman Courtney to overhaul the mechanism for setting the interest rates on federal student loans. Instead of setting a numerical rate in law, which quickly becomes out of sync with the economic and interest rate environment, or locking borrowers into a fixed rate with no opportunity to refinance when rates drop, our proposal will offer adjustable rate loans for students and parents with the protection of a cap on the maximum interest rate that could be charged during periods of high interest rates.

In today's low interest rate environment, the fixed rates for student loans are too high, resulting in student loans generating a profit for the Federal Government. If we would have maintained the variable rate for student loans that was in law before 2006, the interest rate for students in repayment on their loans would be 2.39 percent this year. At today's fixed rates, they will pay 3.4 percent for subsidized loans and 6.8 percent for unsubsidized loans. The Federal Government provides student loans to increase the number of Americans who attain college degrees, not to generate revenue. Yet, according to CBO estimates, the Federal Government will save more than 36 cents for every dollar lent in the student loan programs for fiscal year 2013. CBO projects that the student loan programs will continue to generate savings on the backs of students through fiscal year 2023. We need to change this.

The Responsible Student Loan Solutions Act will offer adjustable rate loans for students and parents with a cap on the maximum interest rate that could be charged to protect borrowers during periods of high interest rates. Interest rates for need-based, subsidized loans will be capped at 6.8 percent. Rates for unsubsidized and parent loans will be capped at 8.25 percent. Rates will be set every year based on

the 91-day Treasury bill plus a percentage determined by the Secretary of Education to cover program administration and borrower benefits. The Secretary must set the rate so that the student loan programs are revenue neutral.

The Responsible Student Loan Solutions Act will also correct an inequity for undergraduate students who qualify for subsidized loans. Currently, a dependent undergraduate student can borrow up to $31,000 total. However, the maximum amount that can be subsidized is $23,000, which means that needy students often have to resort to more expensive unsubsidized loans to finance a part or the remainder of their education costs. The Responsible Student Loan Solutions Act will allow borrowers with demonstrated financial need to have up to the full loan limit in the lower cost subsidized program.

Finally, the Responsible Student Loan Solutions Act will allow borrowers with high fixed-rate federal student loans to refinance those loans into the new variable rate loan with a cap. This could be a real help to borrowers trying to make ends meet, considering that, under current conditions, rates calculated under a bill would be much lower than the fixed rates for unsubsidized loans 6.8 percent, PLUS loans made under the old bank-based program, 8.5 percent, and PLUS loans made through the Federal Direct Loan program 7.9 percent.

We need a multi-faceted approach to solving our student loan debt crisis, which reports from the Federal Reserve and others show is a drag on our economy. We cannot allow this generation of Americans to flounder, unable to buy a home or a car or secure credit or start a family under the weight of student debt.

We need to keep rates low in the short term--that means taking quick action to keep the rate from doubling in July. It also means over the long-term, setting rates in a way that does not add to the growth of student debt. I encourage our colleagues to join Senator Durbin and me in cosponsoring the Responsible Student Loan Solutions Act to put in place a long-term approach to setting student loan interest rates that is fair to students and taxpayers. I also urge our colleagues to support taking immediate steps to reassure students and families that the rate on subsidized loans will not double this July.

Mr. President, on July 1, the interest rate on new federally subsidized student loans is set to double from 3.4 to 6.8 percent. That means unless Congress acts, for millions of young people the cost of borrowing money to go to college will double.

The student debt problem in this country is a quiet but growing crisis. Today's graduates collectively carry more than $1 trillion in debt--more than all the outstanding credit card debt in the whole country. Doubling the interest rate on new student loans will just increase the pressure on our young people.

Keep in mind: these young people didn't go to the mall and run up charges on a credit card. They worked hard, they stayed in class, they learned new skills, and they borrowed what they needed to pay for their education. Their education will improve their opportunities in life, but their education will not just help these students. When they acquire more skills, these students help us build a strong and competitive economy and they strengthen our middle class.

Student interest rates are set to double in less than 2 months, but so far this Congress has done nothing--nothing--to address this problem. Some people say that we can't afford to help our kids through school by keeping student loan interest rates low. But right now, as I speak, the Federal Government offers far lower interest rates on loans, every single day--they just don't do it for everyone.

Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75 percent. But this summer a student who is trying to get a loan to go to college will pay almost 7 percent. In other words, the Federal Government is going to charge interest rates that are nine times higher than the rates for the biggest banks--the same banks that destroyed millions of jobs and nearly broke the economy. That isn't right. And that is why I am introducing legislation today to give students the same deal that we give to the big banks.

The Bank on Students Loan Fairness Act would allow students eligible for federally subsidized Stafford loans to borrow at the same rate the big banks get through the Federal Reserve discount window. For 1 year the Federal Reserve would make funds available to the Department of Education to make loans to students at the same low rates offered to the big banks. This will give students relief from high interest rates while giving Congress a chance to find a long-term solution.

Some may say we can't afford this proposal. I would remind them the Federal Government currently makes 36 cents in profit for every $1 it lends to students. Add up those profits and you'll find next year student loans will bring in $34 billion. Meanwhile, the banks pay interest that is one-ninth of the amount students will be asked to pay. That is just wrong. It doesn't reflect our values. We shouldn't be profiting from our students who are drowning in debt while we are giving a great deal to the big banks. We should be investing in our young people so they can get good jobs and grow the economy, so let's give them the same great deal the banks get.

Some explain that we give banks exceptionally low interest rates because the economy is still shaky and banks need access to cheap credit to continue the recovery. But our students are just as important as banks to a strong recovery, and the debt they carry poses a serious risk to that recovery. In fact, in March of this year, the Federal Reserve said because of the economic impact on family budgets, high levels of student debt pose a risk to our shaky economic recovery.

If the Federal Reserve can float trillions of dollars to large financial institutions at low interest rates to grow the economy, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class.

Let's face it, banks get a great deal when they borrow money from the Fed. In effect, the American taxpayer is investing in those banks. We should make the same kind of investment in our young people who are trying to get an education. Lend them the money and make them pay it back, but give our kids a break on the interest they pay. Let's bank on students.

The Bank on Students Loan Fairness Act is my first stand-alone bill in the Senate. I am introducing this bill because our students are facing a crisis. We cannot stand by and simply watch. This is about our students, our economy, and our values. The Bank on Students Loan Fairness Act is a first step toward helping young people who are drowning in debt. Unlike the big banks, students don't have armies of lobbyists and lawyers. They have only their voices. And they call on us to do what is right.

I thank the Chair.

Mr. President, on July 1, the interest rate on new federally subsidized student loans is set to double from 3.4 to 6.8 percent. That means unless Congress acts, for millions of young people the cost of borrowing money to go to college will double.

The student debt problem in this country is a quiet but growing crisis. Today's graduates collectively carry more than $1 trillion in debt--more than all the outstanding credit card debt in the whole country. Doubling the interest rate on new student loans will just increase the pressure on our young people.

Keep in mind: these young people didn't go to the mall and run up charges on a credit card. They worked hard, they stayed in class, they learned new skills, and they borrowed what they needed to pay for their education. Their education will improve their opportunities in life, but their education will not just help these students. When they acquire more skills, these students help us build a strong and competitive economy and they strengthen our middle class.

Student interest rates are set to double in less than 2 months, but so far this Congress has done nothing--nothing--to address this problem. Some people say that we can't afford to help our kids through school by keeping student loan interest rates low. But right now, as I speak, the Federal Government offers far lower interest rates on loans, every single day--they just don't do it for everyone.

Right now, a big bank can get a loan through the Federal Reserve discount window at a rate of about 0.75 percent. But this summer a student who is trying to get a loan to go to college will pay almost 7 percent. In other words, the Federal Government is going to charge interest rates that are nine times higher than the rates for the biggest banks--the same banks that destroyed millions of jobs and nearly broke the economy. That isn't right. And that is why I am introducing legislation today to give students the same deal that we give to the big banks.

The Bank on Students Loan Fairness Act would allow students eligible for federally subsidized Stafford loans to borrow at the same rate the big banks get through the Federal Reserve discount window. For 1 year the Federal Reserve would make funds available to the Department of Education to make loans to students at the same low rates offered to the big banks. This will give students relief from high interest rates while giving Congress a chance to find a long-term solution.

Some may say we can't afford this proposal. I would remind them the Federal Government currently makes 36 cents in profit for every $1 it lends to students. Add up those profits and you'll find next year student loans will bring in $34 billion. Meanwhile, the banks pay interest that is one-ninth of the amount students will be asked to pay. That is just wrong. It doesn't reflect our values. We shouldn't be profiting from our students who are drowning in debt while we are giving a great deal to the big banks. We should be investing in our young people so they can get good jobs and grow the economy, so let's give them the same great deal the banks get.

Some explain that we give banks exceptionally low interest rates because the economy is still shaky and banks need access to cheap credit to continue the recovery. But our students are just as important as banks to a strong recovery, and the debt they carry poses a serious risk to that recovery. In fact, in March of this year, the Federal Reserve said because of the economic impact on family budgets, high levels of student debt pose a risk to our shaky economic recovery.

If the Federal Reserve can float trillions of dollars to large financial institutions at low interest rates to grow the economy, surely they can float the Department of Education the money to fund our students, keep us competitive, and grow our middle class.

Let's face it, banks get a great deal when they borrow money from the Fed. In effect, the American taxpayer is investing in those banks. We should make the same kind of investment in our young people who are trying to get an education. Lend them the money and make them pay it back, but give our kids a break on the interest they pay. Let's bank on students.

The Bank on Students Loan Fairness Act is my first stand-alone bill in the Senate. I am introducing this bill because our students are facing a crisis. We cannot stand by and simply watch. This is about our students, our economy, and our values. The Bank on Students Loan Fairness Act is a first step toward helping young people who are drowning in debt. Unlike the big banks, students don't have armies of lobbyists and lawyers. They have only their voices. And they call on us to do what is right.

I thank the Chair.

Mr. President, as Chairman of the Committee on Veterans' Affairs, I am proud to introduce the Veterans' Compensation Cost-of- Living Adjustment Act of 2013. I am also pleased to be joined by Ranking Member Burr and all of my colleagues on the Committee on Veterans' Affairs in introducing this important legislation. I look forward to our continued work together to improve the lives of our Nation's veterans.

Effective December 1, 2013, this measure would direct the Secretary of Veterans Affairs to increase the rates of veterans' compensation to keep pace with a rise in the cost-of-living, should an adjustment be prompted by an increase in the Consumer Price Index, CPI. Referred to as the COLA, this important legislation would make an increase available to veterans at the same level as the increase provided to recipients of Social Security benefits.

Last year, I was proud to cosponsor the Veterans' Compensation Cost- of-Living Adjustment Act of 2012, which provided a 1.7 percent increase in veterans' compensation. The annual COLA legislation is so important because it impacts vital benefits, including veterans' disability compensation and dependency and indemnity compensation for surviving spouses and children. In fiscal year 2014, it is projected that over 4.2 million veterans and survivors will receive compensation benefits.

As a longstanding advocate of our Nation's veterans, I understand the critical nature of these benefits as many recipients depend upon these tax-free payments to feed their families,

heat their homes, pay for prescription drugs, and to provide for the needs of spouses and children. We have an obligation to the men and women who have sacrificed so much to serve our country and who now deserve nothing less than the full support of a grateful Nation. The COLA brings us one step closer to fulfilling our Nation's promise to care for our brave veterans and their families.

We also must continue to ensure that these benefits are not diminished by the effects of inflation. For this reason, I strongly oppose the President's proposal to adopt the chained CPI. I am joined in opposition by nearly every major veterans' organization in America. The Gold Star Wives, The American Legion, Veterans of Foreign Wars, Disabled American Veterans and many, many more all oppose the chained

Mr. President, as the Chairman of the Veterans' Affairs Committee, I am committed to ensuring we provide our Nation's veterans the opportunities they need to successfully transition back to civilian life. One of the programs afforded to veterans to assist them during this difficult time is the Department of Veterans Affairs' work-study program.

VA's work-study program provides veterans participating in several VA educational, vocational, and rehabilitation programs the opportunity to work alongside school certifying officials and State and Federal employees to assist veterans with VA benefits and services. In fiscal year 2012, this program assisted more than 10,000 veterans, who received approximately $25.7 million in work study payments. Under current law, this program is set to expire this year.

I am proud to introduce legislation that would extend VA's work-study program for three more years. This legislation would allow veterans to continue doing such important activities as conducting outreach programs with State Approving Agencies; working with a National Cemetery or a State Veteran's Cemetery; assisting in caring for veterans in State Homes; and working with school certifying officials, claims processors, and other state and federal employees to provide much needed benefits and services to our Nation's heroes.

VA has determined work-study participants do not have the authority to work in congressional offices, despite their successful service in such offices in the past. These veterans were critical to Congress' efforts to understand the needs of our Nation's veterans. They used congressional resources and personal experience to help veterans access earned benefits and services. This legislation would allow veterans to work in congressional offices to assist other veterans with casework issues, help congressional staff address the unique challenges facing our newest generation of veterans, and develop the knowledge and experience needed to successfully transition into the civilian workforce.

Our veterans have sacrificed so much in defense of this country. They deserve a seamless transition when they look to return to civilian life. This legislation would expand a program that has been so vital in preparing veterans to succeed in the civilian workforce.

Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

I thank the Chair.

(The remarks of Ms. Warren pertaining to the introduction of S. 897 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')