Keep Student Loans Affordable Act of 2013--Motion to Proceed--Continued
Floor Speech
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Mr. ALEXANDER. Madam President, if I may respond to the Senator from West Virginia.
First, I wish to congratulate Senators Manchin and Burr for helping the full Senate understand this issue. This is similar to a lot of issues we have to face. They are not simple. I used to be a college president and the U.S. Secretary of Education. I had to re-educate myself on this legislation. I still made some mistakes.
I was saying last night, for example, that there were only 2 million subsidized loans. What I was forgetting was the point that the Senator from West Virginia makes, which is that 80 percent of the students who have subsidized loans, the low-income students, also have unsubsidized loans. So when we only take care of these subsidized loans, we are leaving 7 million students with unsubsidized loans out here hanging high and dry, and nobody is taking care of them. So we are hurting both the middle-class families and the low-income families when we have an incomplete solution.
The Senator from West Virginia posed a question. Let's say I graduated from the University of Tennessee and I had two loans; I had a subsidized loan, which means the government paid my interest while I was in college. Typically, if I am similar to four out of five students, I also had an unsubsidized loan, so I accrued that interest. Suddenly the interest rates have gone up for me because the country's interest rates have gone up to 10 percent. What I can do is take all my government loans at once and turn them into an 8.25-percent loan. So that is, in effect, a cap on my loan, and then I would have the choice.
I would say this to the Senators from West Virginia and North Carolina. I have heard some Senators say that when I consolidate my loan at 8.25 percent, that means the student is going to have to pay a lot of interest because it spreads the loan out over a long period of time.
But does not the student have that choice? Isn't it similar to a 15-year mortgage, where you have higher monthly payments, but you pay less interest because you pay it off quicker?
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Mr. ALEXANDER. Madam President, I ask consent that the Senators from North Carolina and West Virginia and I be permitted to engage in a colloquy for a few minutes.
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Mr. ALEXANDER. That is how I understand it. I would say to the Senator from North Carolina,--I would presume a graduate of the University of North Carolina would be smart enough to make that decision for herself or himself?
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Mr. ALEXANDER. If I could respond to the Senator who suggested that,--the answer is yes. I think it is fair to say that the consolidation option that a student has in case the rates go up, at 8.25 percent can be called a cap. It is not a hard cap, but it is a cap. And the second cap is the income repayment provision of which the Senator speaks. If you are making $40,000 a year, after they apply the formula you probably are not spending more than about 10 percent of your income--it is something called disposable income--to pay for your student loan. Loan repayment then continues for about 20 years. If at the end of 20 years you have not paid your loan off, the loan is forgiven.
Any student who has a loan has that opportunity. They can consolidate at 8.25 percent, and income repayment limits the amount they have to pay each year. So they have that.
One of the things I noticed about the Manchin-Burr bill that I would like to ask the Senators to talk about is that you have come up with--what I am beginning to understand, as I study this more and more--a very significant contribution: the idea that all of the undergraduate student loans--which, as I understand it, are about two out of three of the loans--should have the same interest rate. First, it is confusing the way undergraduate loan interest rates are now, but the other reason is that about 80 percent of the people who have subsidized loans, the low-income students, also have unsubsidized loans. So your contribution is to say: Let's simplify it, provide certainty over a long period of time, and treat all undergraduates the same. Otherwise, it seems to me, you are leaving 7 million middle-income students who have unsubsidized loans high and dry, and the 80 percent of the low-income students who also have these unsubsidized loans, you are not helping them either.
I wonder if the Senator could comment on this idea? I notice, without a cap, you are able to get the interest rate for all undergraduate loans down to about 3.66 percent, which is a pretty low rate.
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Mr. ALEXANDER. Madam President, if I may respond to the Senator from West Virginia.
First, I wish to congratulate Senators Manchin and Burr for helping the full Senate understand this issue. This is similar to a lot of issues we have to face. They are not simple. I used to be a college president and the U.S. Secretary of Education. I had to re-educate myself on this legislation. I still made some mistakes.
I was saying last night, for example, that there were only 2 million subsidized loans. What I was forgetting was the point that the Senator from West Virginia makes, which is that 80 percent of the students who have subsidized loans, the low-income students, also have unsubsidized loans. So when we only take care of these subsidized loans, we are leaving 7 million students with unsubsidized loans out here hanging high and dry, and nobody is taking care of them. So we are hurting both the middle-class families and the low-income families when we have an incomplete solution.
The Senator from West Virginia posed a question. Let's say I graduated from the University of Tennessee and I had two loans; I had a subsidized loan, which means the government paid my interest while I was in college. Typically, if I am similar to four out of five students, I also had an unsubsidized loan, so I accrued that interest. Suddenly the interest rates have gone up for me because the country's interest rates have gone up to 10 percent. What I can do is take all my government loans at once and turn them into an 8.25-percent loan. So that is, in effect, a cap on my loan, and then I would have the choice.
I would say this to the Senators from West Virginia and North Carolina. I have heard some Senators say that when I consolidate my loan at 8.25 percent, that means the student is going to have to pay a lot of interest because it spreads the loan out over a long period of time.
But does not the student have that choice? Isn't it similar to a 15-year mortgage, where you have higher monthly payments, but you pay less interest because you pay it off quicker?
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Mr. ALEXANDER. Madam President, I ask consent that the Senators from North Carolina and West Virginia and I be permitted to engage in a colloquy for a few minutes.
BREAK IN TRANSCRIPT
Mr. ALEXANDER. That is how I understand it. I would say to the Senator from North Carolina,--I would presume a graduate of the University of North Carolina would be smart enough to make that decision for herself or himself?
BREAK IN TRANSCRIPT
Mr. ALEXANDER. If I could respond to the Senator who suggested that,--the answer is yes. I think it is fair to say that the consolidation option that a student has in case the rates go up, at 8.25 percent can be called a cap. It is not a hard cap, but it is a cap. And the second cap is the income repayment provision of which the Senator speaks. If you are making $40,000 a year, after they apply the formula you probably are not spending more than about 10 percent of your income--it is something called disposable income--to pay for your student loan. Loan repayment then continues for about 20 years. If at the end of 20 years you have not paid your loan off, the loan is forgiven.
Any student who has a loan has that opportunity. They can consolidate at 8.25 percent, and income repayment limits the amount they have to pay each year. So they have that.
One of the things I noticed about the Manchin-Burr bill that I would like to ask the Senators to talk about is that you have come up with--what I am beginning to understand, as I study this more and more--a very significant contribution: the idea that all of the undergraduate student loans--which, as I understand it, are about two out of three of the loans--should have the same interest rate. First, it is confusing the way undergraduate loan interest rates are now, but the other reason is that about 80 percent of the people who have subsidized loans, the low-income students, also have unsubsidized loans. So your contribution is to say: Let's simplify it, provide certainty over a long period of time, and treat all undergraduates the same. Otherwise, it seems to me, you are leaving 7 million middle-income students who have unsubsidized loans high and dry, and the 80 percent of the low-income students who also have these unsubsidized loans, you are not helping them either.
I wonder if the Senator could comment on this idea? I notice, without a cap, you are able to get the interest rate for all undergraduate loans down to about 3.66 percent, which is a pretty low rate.
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