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Mr. DURBIN. Mr. President, I have come to the floor a number of times to talk about a new business in America that has become a major source of income and a major source of Federal subsidy that most people are not aware of. The business I am talking about is the for-profit college. These are schools which are popping up everywhere across my State and across the Nation. You can hardly go to the Internet and put in the word ``college'' or ``university'' that you will not be bombarded by all these for-profit schools that try to entice young people to sign up.
Some of them, I am sure, offer valuable courses. But too often these schools offer worthless diplomas. They entice young people into a curriculum that is vastly overpriced, and it turns out these schools they attend and the education they achieve doesn't lead to a job.
Here is this young person, all full of hope and idealism, signing up to go in one direction or the other, and they find themselves lured into a school which is, frankly, not much of a school at all. I have seen these cases over and over again.
I was just in southern Illinois last weekend and a young girl came up--she was a high school senior, standing there with her mom--and I said: So what is next for you? She said: Well--and I am not going to use the name of the school--I have just been accepted at the XYZ cooking school in St. Louis.
I said: Well, that is interesting. How much does it cost?
She said: Well, after I give them my Pell grant--$5,500--my mother will cosign a note for $17,000 for me to go to this cooking school.
That is the tuition, and it is a 2-year course. Well, it turns out she is getting off easy.
In the Chicagoland area I ran into a student who was actually picketing outside a hearing I had on for-profit schools. He was dressed up like a chef, and I asked him: So you are going to culinary school?
He said: Oh, I love these food shows. I watch the Food Channel all the time. I think this is great.
I said: So you are studying to be a chef.
I said: How much will it cost you? How much do you have to borrow to finish a 2-year course in culinary school in the Chicagoland area?
He said $57,000--$57,000.
The point I am trying to get to, Mr. President, is student loan debt in America has surpassed credit card debt in America, and it is growing by leaps and bounds. Decisions are being made by young people and their supportive parents and grandparents--and I will talk about that in a minute--to get deep in debt to go to a school. These young people think they are doing the right thing. They have been told all their lives not to quit after high school; that they need to pick up additional education or additional skills, perhaps a bachelor's or a professional degree. So they instinctively believe they are doing the right thing for themselves, and they instinctively believe if the Federal Government is loaning money to the students to go to the school that it must be a good school; right? The Federal Government wouldn't loan money if it were a bad school.
But the honest answer is that some of these are very bad schools. There are three numbers to remember when we talk about for-profit schools: 10, the percentage of college students that attend for-profit schools, 10 percent; 25, the percentage of Federal aid to education going to for-profit schools, 25 percent; and 40, the percentage of students defaulting on their student loans--40 percent going to for-profit schools.
The reality is that the student loan default rate on for-profit schools is substantially higher than for any other schools. We can just open the box and look inside and say: I think I understand why. They are being charged too much in tuition, and they end up with training or an education that doesn't lead to a job or doesn't lead to a job that pays money--enough money to pay back their student loans.
The other thing is we passed a law that said for-profit schools in America can receive no more--get ready--than 90 percent of their revenue directly from the Federal Government. How close is this to a Federal agency? Ten percent, that is all they need to be a complete Federal agency. We send subsidies to these for-profit schools by way of Pell grants and student loans to the tune of 90 percent. If they train veterans, we waive that and let them go to 95 percent and higher.
In the academic year 2009 2010, for-profit colleges took in $31 billion in title IV Federal student aid--Pell grants and student loans. For-profit colleges received one out of every four Pell grants given to institutions of higher education--only 10 percent of the students going to these schools, 25 percent of the Pell grants. As I mentioned, current law allows them to receive up to 90 percent--90 percent.
The for-profit college industry is just 10 percent away from being an actual Federal agency. Let's put that aside for a moment and think about what $31 billion means to the private for-profit school industry. This chart is interesting because it compares the amount of money we spend in a given fiscal year for a variety of things.
How much does it cost us to run the Federal Bureau of Investigation for a year? Less than $10 billion. The Environmental Protection Agency, less than $10 billion; Customs and Border Patrol, about $10 billion; the Coast Guard, $10 billion; the Federal Aviation Administration, responsible for the safe landing of airplanes all across the United States, comes out to about $16 billion or $17 billion. The space program is about $18 billion. How about the National Institutes of Health? This is where we do all the medical research to find the new drugs and cures for diseases all across America. The annual expense there is right at $30 billion.
Now, take a look at the last bar. This is the Federal subsidy to for-profit colleges. Over $31 billion a year--$31 billion a year.
Fifteen percent of the students who take out loans at for-profit colleges default within 2 years. That is double the rate of public colleges and three times the rate of private nonprofit colleges, which are historically more expensive. We spend more on for-profit schools than we do keeping planes in the sky or protecting our borders or tracking down criminals through the FBI or responding to disasters through FEMA or researching cures for cancer at
the National Institutes of Health or protecting the Nation's food supply or making sure our air and water are safe for the people in America or exploring the outer reaches of our universe. That is how much we are investing in this relatively new and horrendously expensive industry.
I think the question we face with the deficit is where are we going to make our choices. I have been a reflexive voter for student aid all the time I have been in the House and Senate. Why? That is why I am standing here. I got National Defense Education Act loans to pay for my college and law school. That is why I am here. I know it, and I think the next generation deserves the same opportunity. So I have reflexively voted for these things.
Then someone said: Have you looked at where this money is going? Do you realize 25 percent of it is headed to an industry where so many students are being sucked into signing up, dropping out, and carrying loans for the rest of their lives?
Mr. President, you and I know this, but everybody should know there is something different about a student loan from another loan you take out. The loan you take out for your home, the loan you take out for your car, maybe the loan to buy some appliances is a lot different from a student loan.
Do you know what the difference is? It is not dischargeable in bankruptcy.
No matter how badly things go for you at any stage in your life, you are going to carry that student loan debt to the grave. It is there forever. It can't be wiped out.
There are Federal college loans, such as the ones I took out, they are different today. But they are much more reasonable. Do you know what the difference is between the private loans these schools are pushing on families and students and the Federal student loans? Start with the interest rate.
The interest rate on Federal student loans is 3.4 percent. The interest rate on private loans can be up to 18 percent. It is like credit card debt. Do you have any idea what that means when you borrow $50,000 or $60,000 and you face an 18-percent interest rate? Do the calculation and math, and I will tell you some stories about what it does when you start falling behind in your payments.
Brandy Walter grew up in a small town in Indiana. She wanted more out of life so she left for college right out of high school. She enrolled in the International Academy of Design and Technology in Chicago, a for-profit school owned by the Career Education Corporation. She switched later to Harrington College in Chicago, also owned by the same for-profit corporation.
Brandy took out a total of $99,844 in private and Federal student loans to cover the cost of her attending these for-profit schools, and then she ran out of money. She hadn't finished her degree. She took out the maximum amount of Federal student loans, she took out the private student loans, and without any cosigners she couldn't get any more loans. She was all in. Without any advanced notice from her school or her lender, one day her student ID card just stopped working. She dropped out and returned back home to Indiana with no options. She can't get a job in her field, and she doesn't have a degree because she didn't finish. So $99,000 into it and she didn't finish.
She is 24 years old. Think about being 24 years old and owing $99,000 in student loans, unemployed. Her private student loans have interest rates between 9 and 11 1/2 percent. Not the highest, but still much higher than the Federal loans. The monthly loan payment for this young woman for her private loan is around $900. Her total loan balance has ballooned because she couldn't find a job, from $99,000 to $139,000. She has been unable to save any money to go back to school or to even have a place to live on her own. She doesn't know what to do with her life at this early stage because of bad decisions to go to worthless schools.
If I could erase that student debt, I could move on with my life, and hopefully return to school to finish my degree.
Mr. President, 139,000 bucks.
Let me give you a taste of what kind of business Career Education Corporation runs. The Career Education Corporation that owned the two schools Brandy went to owns 83 schools and enrolls almost 100,000 students across America. Many of them are in Illinois. I have spoken on this floor about several of their schools and, unfortunately, my office continues to be contacted regularly by students who have attended the Career Education Corporation school and left with a worthless degree.
In 2011, Career Education received $1.4 billion in title IV student aid. Career Education schools received about 83 percent of their total revenue from the U.S. Department of Education's student aid programs, and that doesn't include the money they get from the GI bill program. So 81 percent of the students take out student loans, and of those students who take out loans over 14 percent will default on their loans within 2 years.
On November 1 of last year, Career Education Corporation's CEO resigned while admitting that some of their schools, had falsified the employment rate of graduating students. Their accreditors--the people who say they are a real school--require a job placement rate of at least 65 percent for schools to remain eligible for title IV assistance. Career Education Corporation job placement rates were below 65 percent and, incidentally, the departing CEO who falsified the information to the Department of Education was run out of town on a rail with a $5 million bonus payment as he left.
I have met the new head of this Career Education Corporation. As with every for-profit school that actually sends someone in to see me, he has said: We are changing everything. We are going to straighten this mess out.
I will believe it when I see it.
And I will believe it when Brandy and students like her are given a chance.
It is hard to believe that we live in a time when student borrowers and their families risk losing their homes because of student loan debt. I have introduced legislation that would permit private student loans to be discharged in bankruptcy like every other private loan. This legislation will help these young people.
Let me tell you one other story that was in the Washington Post. Recently, one of the headlines in that paper read ``Senior Citizens Continue to Bear the Burden of Student Debt.'' Senior citizens. The story highlighted one of my constituents, 58-year-old Sandy Barnett.
As an adult, Sandy found herself in a familiar situation: Her husband was laid off, and she wanted to go back to school. When she was younger, college wasn't an option. Sandy enrolled in a bachelor's degree program in psychology. Concerned about the debt, Sandy didn't take out any student loans. She worked full time while in school and paid her tuition as the bills came due.
Balancing work and school was difficult, but Sandy graduated in 1987 with a bachelor's degree in psychology and no student loan debt. The school adviser told her it would be a good idea to keep going to school and get a master's degree. Because the degree program required a number of internships, she decided she wanted to focus on her studies and not work. She was going to be a full-time graduate student. Then, for the first time, she took out a student loan.
Sandy graduated in 1989 with a master's degree in psychology and $21,000 in debt. She taught part time for the next 10 years at Lincoln Land Community College in my hometown of Springfield, IL. By then she was divorced and it was tough for her to make the $300 monthly payments on her student loan. It took a few years for her to find a good job, but as soon as she did, she started paying back the loans again.
By 2005 she was already too far in debt to ever work her way out of it, and she filed for bankruptcy, but her student loan debt was not forgiven. They are not dischargeable in bankruptcy. Fortunately, many of her other debts were relieved, and she thought she just might be able to get back on track.
In 2008 she got a job with AT&T as a customer service representative, where she still works. Currently, 15 percent of her wages are garnished by the Federal Government to pay her student loans. That is $200 to $300 a month, depending on her income. Her total loan balance is now up to $54,000--more than double the amount she started with. The loan servicer will not work with her on a payment plan. And we hear that complaint all the time. What is worse is that her balance keeps going up because her payment doesn't cover the interest on the loan.
You may wonder what Sandy's life is like as a 58-year-old with a student loan debt. How did she get there? Does she live an extravagant lifestyle? The answer is a resounding no. Sandy's coworkers drive her to work because the cost of gasoline is now too much for her to pay. She has no money to do anything, is what she tells us. She owns a mobile home that needs a lot of repairs she can't afford.
When asked if, looking back, she would have taken the same path, Sandy says she would have absolutely not gone to school if she had known this was going to happen. Her degree is the worst thing that ever happened to her, she said. She doesn't think she will ever be able to retire. She said: I just don't have any money. I have nothing because of student loans.
Her advice, 58-year-old Sandy's advice to others? Don't do it. Do not go to college. There is no guarantee your college degree will help you get a job that will pay for your student loans.
What a sad statement. All of us tell our children: Keep going; go to school. And we should. It is the right thing to do. But she has a right to be disappointed, even cynical about what has happened to her.
Sandy isn't alone. Other older Americans out there are bearing the burden of student loan debt because of different situations. Do you know why? They were generous to their children and grandchildren and said: Let me sign the loan with you. Do you want to go to school? It is the dream of your life. Let me cosign.
Tim Daniel's grandparents are two of them. When Tim signed up for $80,000 in student loans, he had no idea that years later his grandparents would be at risk of losing their home because of his students loans. Tim dreamed of going to college. In 2004 he enrolled in the Illinois Institute of Art, a for-profit school owned by the Career Education Corporation, I talked about before. Tim's grandparents were so proud and happy, they cosigned his loans.
Like many students who contact my office, Tim says he would have never taken out the loans if it was clearly stated to him how much his monthly payments would be. He put his trust in the school and he thought the counselors really had his best interests in mind, so he took out the loan.
Tim makes $25,000 a year. That is a modest income. He can't afford to get a car loan, and he says he will probably have to rent for the rest of his life. His Federal loans, which have a balance around $23,000--Federal Government loans--have a manageable monthly payment, but his private student loans are completely unmanageable. The lenders won't work with him to come up with a reasonable payment plan, leaving the burden of debt on his grandparents, who cosigned his loans. His grandparents don't have any money. They filed for bankruptcy, too, but because the private student loans are not dischargeable in bankruptcy, they risk losing their home to pay off their grandson's student loans.
This isn't the American dream. This is a nightmare, and we are complicit. We are complicit because this Federal Government continues to offer Pell grants and student loans to worthless schools. And students who sign up there think, well, if the Federal Government is going to loan some money, this must be a good school. So we are complicit in not policing the ranks of these for-profit schools on behalf of these students.
Secondly, the outrage I hear expressed on this floor all the time about overspending by the Federal Government should be directed as well at these for-profit schools. The annual subsidy of these for-profit schools--$31 billion--is greater than the amount we spend as a nation for medical research in a given year--as a nation. So people who are intensely aware of our deficit--as the Presiding Officer is--who want to cut spending and wasteful areas, join me in taking a look at these for-profit schools.
Congress could start by passing legislation to keep interest rates on the Federal Government student loans at a manageable level of 3.4 percent. They are going to double in July if we don't take action, so we had better do that.
Senator Harkin of Iowa and I recently introduced
legislation that will help educate borrowers about private student loans.
Actually, there are situations where students at these for-profit schools are still eligible to borrow money from the Federal Government at 3.4 percent, and the so-called counselors at these schools steer them into private loans at 5, 11, and up to 18 percent interest rates, and the students don't know it. They sign up not realizing they could still borrow the money under manageable terms from the Federal Government if they wish. There ought to be clear disclosure to the students, their families--and their grandparents.
Our legislation, the Know Before You Owe Private Student Loan Act, will require private student loan lenders to certify a potential borrower's enrollment status and cost of attendance with the borrowing school and require institutions of higher education to counsel students about all their student aid options before the private student loan is actually disbursed. Most importantly, schools would have to inform the students about the differences between private student loans and Federal student loans. Federal student loans have consumer protections built in but not the private loans.
I encourage my colleagues to go home and listen to these families. On your Web site, ask for the victims of student loan abuse to write in, as they have to my office, and you will come to realize this is a growing problem in this country. Student loan debt is greater than credit card debt, and it is coming due. Less than 40 percent of student loan borrowers today are current on their payments. This is a problem that is going to haunt our Nation for a long time.
I hope my colleagues will join me in bringing some real changes. If the for-profit school industry has anything to offer by way of real education and training, they had better shape up and they had better be honest with their students. They shouldn't drag them deeply in debt for worthless diplomas which could literally ruin a life.
Mr. President, I yield the floor, and I suggest the absence of a quorum
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