U.S. Senator Lamar Alexander (R-Tenn.), the senior Republican on the Senate education committee and former U.S. Secretary of Education, said Monday that Senate Democrats’ proposal “raises individual income taxes by $72 billion and could add up to $420 billion in new federal debt to offer a $1-a-day subsidy for some old student loans.”
“The Senate Democrats’ proposal is a partisan, political stunt,” Alexander said. “The Senate should send this proposal to the Senate education (HELP) committee which is in the midst of a bipartisan reauthorization of the higher education act, the kind of serious discussion that produced last year’s law that cut nearly in half interest rates for all NEW undergraduate student loans.”
“Republicans are ready to offer and debate our proposals to create more good jobs and to create better schools which mean better jobs,” he continued.
In a speech delivered on the Senate floor, Alexander said the average college graduate with a four year degree has $27,000 in loan debt and, based on data provided by the Congressional Research Service, refinancing that level of debt under the Democrats’ proposal would save the borrower about $1 a day. The bill would, at the same time, cost taxpayers $72 billion in higher income taxes and could add as much as $420 billion in federal debt.
The bill does nothing for current or future students.
The Senator’s remarks, as prepared, are below:
Last year Congress and the President worked together in a bipartisan way to cut nearly in half interest rates on all new undergraduate student loans at no cost to taxpayers.
This week Senate Democrats would interrupt a similar bipartisan committee process reauthorizing the Higher Education Act and instead conduct a partisan political stunt on the Senate floor that would raise individual income taxes and increase the federal debt in order to give former students with old loans a subsidy that, based on data provided by the Congressional Research Service, is worth about $1 a day.
College graduates don’t need a $1 a day subsidy to help pay a $27,000 loan. They need a good job.
Eighty-five percent of students with loans are undergraduate students. Overall, undergraduate students have an average federal loan debt of $21,600 when they graduate.
Of those, graduates with a four-year degree have an average federal loan debt of $27,300.
Republicans are prepared to offer and debate our proposals to create more jobs.
Republicans are also ready to debate our proposals for better schools. Better schools mean higher college graduation rates and that means better jobs. The best way to prepare students to complete college in four years or less and really reduce college costs is to raise standards, improve tests, fix failing schools, and evaluate and reward outstanding teachers.
Democrats want a National School Board to do this, Republicans want to fix No Child Left Behind and reverse the trend to a National School Board. These competing proposals have been thoroughly considered by the Senate and House education committees and are ready for floor debate—action that is seven years overdue since No Child Left Behind expired in 2007.
Republicans therefore propose using this week to debate how to create more good jobs and better schools.
Send the student loan debate back to the Senate education committee to continue the same kind of rigorous, bipartisan discussion that produced last year’s reduction of interest rates on all new student loans.
Interrupting the bipartisan, regular order of the senate for three days for a partisan political stunt to debate a $1-a day subsidy for former students is one more example of why the American public has lost confidence in the leadership of the United States senate.
Unfair to students, taxpayers, and future generations
The Senate Democrat proposal is unfair to students because it treats former college students who have old loans better than current students or new students. It does this by freezing into place interest rates on old loans while rates on new loans may rise when market prices rise.
The Senate Democrat proposal is unfair to taxpayers for two reasons. First, it increases individual income taxes by $72 billion.
Second, you may have heard that the government profits off student loans. In fact, the reverse is true. When we use the accounting system that the Congressional Budget Office says we ought to use, the student loan program actually costs taxpayers $88 billion over ten years.
The accounting system that the government uses doesn’t fully take into account the risk that students won’t pay back their loans.
Finally the Senate Democrat proposal is unfair to future generations because it could add as much as $420 billion to the already out-of-control federal debt. It does this by allowing private loans to be turned into public debt. Recently, the Congressional Budget Office warned that interest on the federal debt in ten years will rise from $227 billion to $876 billion, an amount greater than the entire cost of our nation’s national defense.
The $1-a day subsidy to some students from the Democrat proposal does not justify this unfairness to other students, taxpayers and future generations.
The Real Problem, and Real Solutions With Student Loans
The real problems with student loans are not with the 85 percent of undergraduate students with federal loans. Let me repeat: Undergraduate students have an average federal loan debt of $21,600 when they graduate.
Of those, graduates with a four-year degree have an average federal loan debt of $27,300. It is hard to imagine a better investment. The College Board estimates that a four-year degree is worth $1 million in higher earnings over an individual’s lifetime off work. The average car loan is $27,430. Instead of a $1 a day subsidy, these students need a good job so they can pay off their loans.
For students who want lower monthly repayments, there are already provisions in federal law that allow the typical undergraduate to lower his or her payments by $60 a month more than the Democrat $1-a-day subsidy.
For the typical graduate student, the existing repayment plans could lower monthly payments by $300 more than the Senate Democrat subsidy. Under current law, if the loan is not paid off after 20 or 25 years, taxpayers forgive the remaining debt.
For students who want a less expensive college education, the average cost of tuition and fees at a public two year college is $3,200. The average cost of tuition and fees at a public four year college is $8,900. Three out of four college students attend public institutions.
In addition, 40 percent of students in public higher education have a federal Pell grant which may be as much as $5,600. So, for millions of college students, going to college today is free and there is no need for a student loan.
Most of the real problem with student loans today is over-borrowing by some students, mostly by graduate students. According to Mark Kantrowitz, more than 90 percent of students who graduate with $100,000 or more in student loan debt are graduate students—and this group represents approximately 6 percent of all graduate students. This is less than 2 percent of all student borrowers.
There is also some over-borrowing by undergraduate students.
The real solutions for such over-borrowing are to:
· Simplify the student loan program so that more students are able to take advantage of the affordable repayment options that already exist in current law.
· Eliminate the Graduate PLUS program that provides virtually unlimited loans to graduate students regardless of their credit history.
· Prohibiting part-time students from taking out the same amount of loans that full-time students can.
· Giving colleges and universities the ability to require counseling and limit the amount students can take out in federal loans.
· There are also proposals to require colleges and universities to put some “skin in the game” to ensure that students can repay their loans.
The student loan debate should be sent back to the Senate education committee so these proposals for addressing the real student loan problems with real solutions may continue to be considered in a bipartisan way instead of conducting a three-day political stunt on the Senate floor to provide some former students a $1-a-day taxpayer subsidy.