College Cost Reduction Act Of 2007
Mr. President, the name of the bill before us today is the College Cost Reduction Act, as it has been called. But just as appropriately it might be called ``Restoring the American Dream Act'' because that is exactly what is at stake with…
Mr. President, the name of the bill before us today is the College Cost Reduction Act, as it has been called. But just as appropriately it might be called ``Restoring the American Dream Act'' because that is exactly what is at stake with this critically important bill.
We all know that higher education is the key to success in today's global economy. It is the key to Americans' success as individuals, but it is also the key to America's success as a nation. But over the last 6 years, the cost of college has skyrocketed 40 percent. Meanwhile, the buying power of Federal grant aid has fallen, and too many young students are being forced to turn to private loans with high interest rates.
As a result, college has become a distant, unattainable dream for many Americans. For millions more who are
fortunate to attend college, they graduate with two things: a college diploma and a mountain of debt.
With the bill before us today, we intend to reverse these negative trends. We intend to put a college education and a fair shot at the American dream back within the reach of every American, including those of modest means. We might think of this bill as restoring the ladder of opportunity for millions of Americans.
This is a bipartisan bill with support on both sides of the aisle. I thank Senator Kennedy and Senator Enzi for their bipartisan leadership in getting this bill through committee and getting it to the Senate floor. At the same time, I take pride in the fact that college access for all was one of the six priorities we annunciated last fall.
The crisis in college affordability has grown worse year after year. Year after year, Congress failed to act. Last year, we Democrats said to the American people: You give us the leadership reins and we will chart a new course. We, today, are making good on that promise.
The bill before us will accomplish a number of things. Most importantly, it will increase the maximum Pell grant, and it will increase the income level at which students automatically benefit for the maximum Pell grant. It will encourage public service by providing some loan forgiveness for graduates who go into fields such as teaching, social work, nursing, and service as legal aid lawyers. The bill will give protection to borrowers by capping the monthly payments at 15 percent of discretionary income.
This bill is a classic win-win-win. It is a win for the Government and for students and for taxpayers. For years, we have been concerned about the widespread abuses and excesses within the private student loan industry. What this bill does is cut excess subsidies to the private loan program by $18 billion and channel most of those savings into Pell grants.
Earlier this year, in the fiscal year 2007 joint funding resolution, we were able to increase the maximum Pell grant by $260 to a total of $4,310. That was the first increase in Pell grants in 5 years, since the last time Democrats had the majority and I chaired the Appropriations Subcommittee for Education and Health Programs in 2001.
Now, with the bill before us today, we are pleased to build on that progress by joining with Senator Kennedy and Senator Enzi to boost the maximum Pell grant to $5,100 next year and $5,400 by 2011.
I also wish to salute Senator Kennedy for crafting this Senate bill in a way that is a big improvement over the House bill. The House bill cuts interest rates on all student loans. Well, that is very expensive, and it also provides benefits to many who don't need them, such as upper-income families. The Senate bill concentrates the savings on increasing grant aid to low-income students, while providing some loan forgiveness for graduates who enter teaching, nursing, and other important but relatively low-paying jobs.
Bear in mind that before the increase earlier this year, the value of the Pell grants had been drastically eroded since 2001. I wonder if there are any colleges in America that charge the same amount for tuition as they did 6 years ago. I don't think so. In fact, high school guidance counselors tell me that, for the first time, they are seeing kids giving up their dream of college because they simply can't afford it, even with loans and grants.
I recently received a letter from a constituent from Indianola, IA, county seat of my home county. She told me about her daughter who graduated from college last year. Let me quote from this mother's letter.
We faithfully saved for our daughter's education every
month from the time I knew I was pregnant, even during a six-
month period when my husband was unemployed. Since Rhiannon
needed to attend a specialized college, our savings for her
were not nearly high enough. Last year, Rhiannon's monthly
loan payment suddenly increased to around $700 a month. How
many families can afford to do this? How is this generation
of young adults ever to afford the American Dream to own a
home? This is not good for the future of our economy, for how
will these young people be able to have purchasing power or
be able to afford marriage and children? College educations
must remain a choice for all of our youth in order for our
Nation to compete in this global economy.
This is not an exceptional case. We have all heard similar stories and received similar letters. Today, with the College Cost Reduction Act, we have an opportunity to address the crisis in college affordability in ways that will make a dramatic difference. As I said, the centerpiece in this bill is the significant increase in the maximum Pell grant and the expansion of Pell grant eligibility. Over the years, the Pell Grant Program has been enormously successful. This is America's largest need-based student grant program, and it has given millions of low-income students the opportunity to attend college, many of them the first in their families to do so.
Over the years, the value of the Pell grant has eroded dramatically. Think about this: Two decades ago, the maximum Pell grant covered 51 percent of the cost of tuition, fees, and room and board at a public 4- year college--51 percent. By the 2004-2005 academic year, it covered only 35 percent of those costs, and it has fallen even more over the last couple of years.
In my State of Iowa, two decades ago, the Pell grants covered 61 percent of the average cost of a public 4-year college tuition, fees, and room and board--61 percent. Today, it covers about a third--about 33 percent--of those same costs.
Without adequate Federal grants, students have had to rely increasingly on student loans, many with very high interest rates. More students and their parents are taking out loans and borrowing larger and larger amounts. Today, more than 60 percent of undergraduates at 4- year colleges take out loans, and the average student loan debt is more than $19,000. Indeed, Iowa students at 4-year colleges and universities graduate with an average of $22,727 in debt--the second highest rate in the country, I might add.
Make no mistake, when students graduate from college with a mountain of debt, this has a major impact on their career choices. For many heavily indebted graduates, pursuing public service careers as teachers, social workers, legal aid attorneys or a host of others becomes out of the question. A recent study found that 23 percent of public college graduates and 38 percent of private college graduates would have an unmanageable level of student debt if they tried to live on the starting salary of a teacher.
The burden of student debt also has a big impact on major life decisions. A student loan survey found the probability of owning a home decreases as the level of student debt increases. Well, that makes sense. In a survey, 30 percent of students said they delayed buying a car because of student loan debt, 21 percent said they delayed having children, and 14 percent said they delayed getting married.
I know of one very talented member of my own staff who, even in his mid 30s, was burdened with tens of thousands of dollars of debt while attending law school. He then got married, he and his wife had a couple of children, and he felt increasingly burdened by the debt. He finally had no choice but to leave his relatively modest-paying Senate job for a more lucrative position in the private sector. He concluded this was the only way he would ever be able to pay off his college loan debt so he could then start saving for his own children's college education. I believe there are more and more young people like that--they want to do public service-type jobs, but with the amount of debt they have, they can't afford to do so.
The College Cost Reduction Act is a sound bill. It is a good bill. What is more, it would not cost the taxpayers a dime. As I said, the bill saved $18 billion by cutting wasteful, excessive subsidies to private lenders, and of that amount $17 billion will be used to fund increases to Pell grants and the income-based loan repayment program, with the remaining $1 billion dedicated to deficit reduction.
Predictably, the private lenders have mobilized a small army of lobbyists to argue that reductions in their subsidies would be devastating to their industry. Well, this simply is not true. The fact is that it is high time we eliminated the waste and gross excesses in Federal subsidies to some of these private lenders. Because of those subsidies, the student loan industry has reaped huge profits and become one of the most lucrative industries in America.
Take Sallie Mae, for example, the Nation's largest student lender-- fantastically profitable, thanks to these overly generous subsidies over the past 30 years. The corporation now is moving forward with plans to sell itself. This corporation that has been loaning money to students now is going to go private, sell itself, with a windfall of some $25 billion. Together, Sallie Mae chairman Albert Lord and their CEO, Tim Fitzpatrick, have collected total compensation--get this, the two of them--of $367 million since 1999. Two people. And we are wondering why students have such high debts. In fact, as the Washington Post reported a short while ago, Mr. Lord, the Sallie Mae chairman, is currently building his own private golf course on 244 acres in suburban Maryland at a cost of up to $15 million. This is the head, folks, of Sallie Mae, the largest student loan industry in America.
So we shouldn't shed any tears for the private loan companies and their executives. They are doing quite well. Quite frankly, they are going to continue to receive Federal subsidies. They are going to continue to make loans. They are going to continue to make profits. But maybe some of the future CEOs in this industry will have to forgo the luxury of having their own private golf course.
The College Cost Reduction Act is one of the most important pieces of legislation we will consider this year. It will make college affordable for our young people, especially those of modest means. It will go a long way toward ensuring our young people are not overly burdened with student loan debt after they graduate so they can afford to pursue careers that not only benefit them but make the world a better place in which to live. It will put the American dream and that ladder of opportunity once again within the reach of every American.
I urge my colleagues to support this long overdue and vitally important bill. Again, I wish to compliment Senator Kennedy for so many years of leadership on this issue, especially the issue of education and making sure that college is affordable to our lowest-income students. I thank him, I thank Senator Enzi for working together on this bipartisan bill, and, hopefully, before the day ends at not too late an hour, we can pass this bill and give more hope and opportunity to a lot of these young people I see sitting on the Senate floor and to so many other young people throughout America.
Again, I thank Senator Kennedy for his outstanding leadership on this issue.
Yes, I will be glad to.
I thank the Senator for pointing this out. I especially want to underline what the Senator said about the public services for individuals with disabilities and the elderly.
Because of the Olmstead Supreme Court decision, because of what is happening now, as you know, we are moving more and more people out of institutional-based settings and into community-based settings. A lot of these people are going to need some help and personal assistance services to get going so they can earn money and pay taxes.
I often tell the story of my nephew Kelly. Of course, he was injured in the military, so he has always had VA services. But he has a nurse who comes in. He is a paraplegic. He gets up in the morning, a nurse comes in, gets him ready for the day, he goes to work, comes in, and when he gets home at night, someone takes care of him. If it weren't for that, he wouldn't be working and paying taxes. That is, thankfully, because he is in the VA and they do that, but for anybody else who has a disability, they don't get that kind of service.
More and more, we will be working with people, individuals with disabilities, in this sector. A lot of people want to do this. They cannot do this, I say to the Senator, with the mountain of debt they have. They just can't afford to do this work.
The only thing I might disagree with the Senator on, he said this is one of the most important aspects. I think this is ``the'' most important aspect of the bill.
I would say to the Senator, I started my life as a legal aid lawyer. So many low-income families need assistance, just legal assistance with debts, housing, divorces, family problems. They can't afford it. A lot of young people want to become a legal aid attorney. They may not stay there all their lives, but they would like to do this for a few years. It is public service. They get their feet wet right away in a lot of legal work.
I always tell young people in law school: If you really want to figure out what legal work is all about, become a legal aid attorney out of law school. You will get the cases no one else wants. You will get the cases people have given up on. I tell you, that will make you a better lawyer than anything in your lifetime.
A lot of young people want to do this. They cannot do it with the debt they have now.
I hope the Senator doesn't mind if I hold one up for Iowa. This is a teacher in Iowa: average salary, $27,284; average loan debt, $27,727. Here are your monthly payments. Under this bill right now, the relief will be $1,344, and the amount forgiven, $16,057. This is going to be great for teachers, going into teaching in the State of Iowa. I can't speak for what it is like in Massachusetts, but in Iowa we are losing about upwards of a third to half of our teachers in the second or third year because they cannot afford to teach and pay back their loans.
Again, I thank Senator Kennedy for his great leadership. As I said, this, to me, is the core of what we are trying to do with this bill. It is not only to help these students get the Pell grants to go to college but also so they can pursue their dreams and do the kind of work they want to do, not what they are forced to do because they have a mountain of debt.
I yield the floor.