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Keep Student Loans Affordable Act of 2013--Motion to Proceed--Continued

Floor Speech

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Date:
Location: Washington, DC

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Mr. BURR. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

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Mr. BURR. Mr. President, I come to the floor today to talk about the future of student loans for America's students. When I say students, I have to define who that is because, as we know, today we have students of all ages.

We have a category of students where a financial impact requirement is applied, such as for a 19-year-old who has entered their freshman year, and depending upon where the income of their family is, under the current system they may get a subsidized loan. The maximum they can receive under that subsidized loan as an undergraduate is $3,500.

I would be willing to bet the President pro tempore and I both can't pick an institution in any of our States where the tuition on an annual basis is $3,500. It doesn't happen today, and that is the reality that has been left out of the debate so far. This debate has been all about politics and it has not been about students and how to apply affordability as broadly as we can in the marketplace.

Let me describe where we are today. Between 1965 and 1992 the cap on the student loan program in this country was 10 percent--10 percent. In the mid-2000s, Congress, very politically, said: You know what. We are going to adjust it, and subsidized loans are going to be at 3.4 percent and nonsubsidized loans are going to be at 6.8 percent, graduate loans are going to be at 7.9 percent, and if you are a parent borrowing, you are going to have an even higher rate, in the 8-plus percent range.

That strikes me as incredibly unfair. We are taking two undergraduates--two 19-year-old freshmen--entering the same institution with the same financial obligation and we are saying to one: We are going to give you a rate on your student loan that is half of the person who sits in the seat next to you--half. In this chair, the student will pay 3.4 percent, and the student sitting in the chair next to him will pay 6.8 percent. Understand, the parents of the person sitting in this chair, depending upon the cost of the institution, may have an income over $100,000. Yet they may qualify for a Federal subsidy.

Let me suggest to you that the marketplace is the thing that ought to dictate and decide what the rate is. That is the only thing that is fair to the taxpayers in this country--the predictability of knowing it is tied to something.

Let me suggest that the bill we are going to take up--and we are going to vote on a motion to proceed at 12 noon today--is a bill that was created in the 2000s. Two years ago we kicked the can down the road and said we are going to extend this inequitable student loan program at 3.4 percent for some, 6.8 percent for others, 7.9 percent, and 8-plus percent for parents. Why? Because we are overcharging some to subsidize others. Let me say that again. We are overcharging some--we are overcharging some 19-year-old undergraduate freshmen in college--at 6.8 percent so they will subsidize the 3.4 percent we are charging on the subsidized loans.

Let me point to a chart I have here which shows undergraduates under the student loan program. This is a comparison. Actually, let me move to a different chart, because this one best displays what I am talking about.

Twenty-six percent of our Nation's kids are undergraduates and are subsidized, and 55 percent of the eligible students are either undergraduates or graduate students who fall under a 6.8-percent interest rate. So when the Senate majority leader came to the floor and said some were upstairs trying to negotiate a deal, he was 100-percent accurate. But the reality is we are still only going to have a vote on one plan at 12 o'clock. There is no option for Members of Congress.

What I would suggest is that this displays why, at best, there should be two options and, at worst, we ought to vitiate the motion to proceed and see if we can come up with another bipartisan agreement.

You see, another option--the Manchin bill--is a bipartisan approach.

It is Democrats and Republicans coming together and saying we can agree on something that we think is fair and equitable and financially sustainable.

But this is the plan we are going to have a vote on at 12. Fifty-five percent of the population of students, quite frankly, are being screwed. They are overpaying. They are paying 6.8 percent for interest, when a home mortgage for 15 years is 3.8 percent. Yet we are charging students 6.8 percent, and we are saying that to go to this is an injustice to our students, where all of a sudden we take 64 percent of the kids and we treat them all alike and we charge them 3.66 percent. Something is inherently wrong in the debate we are having.

If this is about kids and about affordability, this is the plan on which we should be having the motion to proceed, not this one. This plan merely kicks the can down the road for 12 more months.

Let me say this plan wasn't created by Joe Manchin or Richard Burr or Tom Coburn or Senator King or Senator Alexander. This plan was created by the Congressional Budget Office. The Congressional Budget Office in their March 2011 report to Congress came up with the idea of tying the interest rate to the 10-year Treasury bond, except the CBO says it should be the 10-year Treasury bond plus 3 percent. That is what Senator Coburn and I introduced. When Senator Manchin, Senator King, Senator Alexander, Senator Carper, and others got involved, we decided what we needed to do was continue to have a blended rate. We all agreed that an undergraduate student shouldn't face an interest rate schedule that is not equitable to all undergraduates.

So instead of applying it to 26 percent, we applied it to 100 percent of the undergraduates. We said: If you are an undergraduate in college, we are going to give you the best rate, which is the 10-year bond plus 1.85. It is fair. It is understandable. It is predictable. It is consistent. One year in advance you know exactly what your rate is going to be because it is determined on the 10-year bond every May.

My good friend Senator Harkin, whom I have great affection for, came to the floor and said we were balancing the budget on the back of the student loan program. The student loan program is a $1.3 trillion program. Based upon the CBO score on this bill, it had a 0.7-percent surplus. By Washington standards, in a $1 billion program, 0.7 would be a rounding error. This is a $1.3 trillion program. Let me assure the President and my colleagues, this is a rounding error. I can't look everybody in the face and say it might not cost us $100 billion. It might save us $100 billion. But we are certainly not balancing a $17 trillion deficit debt on the back of the student loan program. Let me assure you of that, and for any who suggest we are, that is, in fact, disingenuous.

This is the first time I have been accused of balancing the budget on the backs of our kids. But in 2010, as part of the health care reform act, Democrats ended the Federal Family Education Loan Program, FFEL, at a savings of $61 billion. Of that, the Democrats directed $19 billion to deficit reduction and the rest to help pay for ObamaCare, the Affordable Care Act.

If I am being accused of balancing the budget on 0.7 percent, determined by CBO, and in 2010 the Democrats voted to eliminate the FFEL Program and save $61 billion and applied $19 billion to deficit reduction and the rest to help the Affordable Care Act, then they plowed this ground long before I did.

As a matter of fact, in 2007, as part of the College Cost Reduction and Access Act, the Democrats found $21 billion in savings and spent a good amount of it on new programs--and then directed $1 billion to deficit reduction.

I said earlier, I have great affection for Senator Harkin. Senator Harkin said this should be part of the Higher Education Reauthorization Act--that may or may not happen next year.

We made changes to the interest rate on student loans outside of the higher education reauthorization in 2012 with a 1-year extension of the 3.4 percent. We did it in 2010 with the elimination of the FFEL Program. We did it in 2005 under the CCRAA, the Deficit Reduction Act. Senator Harkin's Appropriations Committee has made changes to the eligibility rules for Pell grants each of the past several years outside of the higher education authorization, including the elimination of summer eligibility, ability to benefit, and lowering of the automatic enrollment for low-income students.

It is not fair to come and say to me that I am doing it outside of higher education reauthorization when there is continually a track record of the person who accused us of doing it of doing it himself.

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Mr. BURR. I would be happy to yield.

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Mr. BURR. That is 100 percent correct.

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Mr. BURR. That is correct.

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Mr. BURR. That is correct.

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Mr. BURR. That is correct.

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Mr. BURR. The Senator is correct. I might add to my good friend, this chart shows exactly what we talked about. Under the plan on which we will vote at 12, because of the need for students in the subsidized category to borrow additional money at 6.8 percent, at the end of their process, they owe $78 a month, where under the bipartisan bill, where every undergraduate is treated the same, they owe $75. It is actually cheaper, even for the undergrads who are subsidized.

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Mr. BURR. I think they would. I think one of the agreements we came to was that students ought to be in control of their decision about their loan rate based upon what is available to them. If students go through the next 4 years and they have a combined interest rate of about 4.5 percent for the life of the loan, why in the world would they be excited at 8.25? If for some reason 10 years from now somebody got out of school and their combined interest rate was 9 percent, we give them the option of going back to 8.25.

I think the Senator from West Virginia made an extremely good point. For the most subsidized students, they can only borrow $3,500. Think of the institutions that are out there--none of them have an annual tuition of $3,500. We know they are going to borrow out of the 6.8-percent pot. What we are offering is that the pots are the same and that the subsidy is that--for students who qualify for the subsidy--they are not responsible for the interest rate while they are in school. That subsidy still exists. It is just that we are not overcharging one group and we are certainly not overcharging the ones we just subsidized because they have to borrow more money to complete their college education.

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Mr. BURR. The most significant part is for the undergraduates who were not subsidized, they would go from 6.8 to 3.6.

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Mr. BURR. This goes to the heart of what the Senator from Tennessee said. Today the subsidy goes to 26 percent of our students; 55 percent pay the 6.8 rate. Under the bipartisan bill, 64 percent--all undergraduates--get 3.66.

If this is about affordability, if this is about what provides the greatest flexibility for students to afford it, then the answer is clear. It is on the chart. But it also computes in the monthly payments to which students are obligated. The fact is that for a typical student in their

first year, taking $5,000 out, $3,500 comes from the subsidy--$5,500 out, $3,500 comes from the subsidy, $2,000 comes from the 6.8 rate.

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Mr. BURR. I will be happy to yield for a question.

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Mr. BURR. It holds for 1 year until the readjustment of the 10-year bond, which could by higher, it could be lower.

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Mr. BURR. Higher than it was in May----

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Mr. BURR. Would the Senator from Iowa like another question?

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Mr. BURR. I will wrap up and move on.

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Mr. BURR. I would rather make the points that I need to because at 12 we are going to vote on one bill. We are going to vote on a 3.4-percent extension, kicking the can down the road for 12 months, not fixing the problem, not finding the solution, and continuing to overcharge some students and subsidize another pool and go to bed at night and feel good about this.

I think the reason we have a bipartisan agreement is there are some who do not feel good about that. We look at it and we say the Senate has not done what people sent us here to do, and that is to get it as close to right as we can.

Again, I say to my colleagues--and I can go to the CBO again--the CBO scored the bill, and CBO says the bipartisan bill is within .7 percent of having no cost and no surplus. I am not sure you can get any closer than that. They have also told us verbally and showed us in scoring: put the cap in and you raise the interest rate on all students, all postgraduates, all parents. And our objective, when Senator Manchin and Senator King and Senator Coburn and Senator Alexander got into the discussion, was, How can we get rates as low as we can? Our focus was on the affordability for the students; secondarily, the sustainability of the program, which was long-term, something we do not visit every 1 or 2 or 3 years.

Let me get into specifics because there are four proposals out there. One of them has already passed the House of Representatives. The House of Representatives has a 10-year variable rate that fluctuates annually. For unsubsidized loans, the rate is 4.31; for subsidized loans, the rate is 4.31, which is 10-year plus 2.5 percent; for PLUS loans, 5.74. It removes the consolidation cap--removes it--and it creates caps of 8.5 and 10.5 percent.

The vote that we will have at noon, I think everybody knows it is a 6.8-percent rate for most students. Twenty-six percent get a subsidized rate of 3.4 percent. The PLUS loans are at 7.9 percent, and that is 18 percent of the loans at 7.9 percent.

Under the President's proposal, the unsubsidized is--I think this is backward. I think it is the subsidized at 10-year and .93; the unsubsidized at 10 year, 2.93; the PLUS at 10 year plus 3.93; and it is uncapped and fixed for life.

So it brings us to the bipartisan bill. The Senator from West Virginia said it well. What were the agreements we made? We are not going to make money and we are not going to lose money We are at .7 percent, according to CBO.

An undergraduate is an undergraduate. We should not cheat one to subsidize another. But there should be a subsidy for low-income at-risk students. The assumption is that they are not responsible for the interest payment while they are in school. The reality is that we extend the same 10-year bond plus 1.85 percent to all undergraduates.

For the graduate students, we would bring the rate down to 10-year plus 3.4, and for PLUS loans, 10-year plus 4.4, and we keep in place the consolidation cap that has been in law.

Let me remind my colleagues what I said earlier before they came to the floor. From 1965 to 1992, the cap on student loans was 10 percent. If we put that in today, it will raise the percentage each individual is going to pay.

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Mr. BURR. I am happy to yield.

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Mr. BURR. As did I.

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Mr. BURR. That is correct.

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Mr. BURR. I am happy to yield the floor.

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Mr. BURR. What didn't exist when my colleague went to college and graduate school was that we didn't have an income test for repayment. We don't charge anybody over 15 percent on an annual basis.

When the Senator went through the system, he was responsible to pay back 100 percent of it. Today, after a certain period of time on the subsidized loans, we forgive it. We have a lot of programs that didn't exist when he went through school. We have Pell grants that extend a tremendous amount of money that is not obligated to be paid back--$4,000. We have student loan higher education tax credits that did not exist when he went through college.

We have a basket of products. What we are looking at is, How can we take one program, which is the rate-based program, and make it as attractive and affordable for students as we possibly can? Under this scenario, we are able to accomplish that for 64 percent. Under what we will vote on, we only do it for 26 percent. We can't help but make the argument: You are overcharging here to subsidize here.

I agree with my good friend from Iowa, for whom I have great affection, that I want to make sure every student has an opportunity to go to college and that it is affordable for all. We have a system right now where the Federal Government controls 100 percent. When my good friend went through college, there were private lenders that competed with the Federal Government. At this time we have no private lenders. We legislatively eliminated the private sector from competing for student loans. It is all dominated by the Federal Government. At least we can try to get those loans as inexpensively as we can for the largest group of college students.

I have a unanimous consent request. I hope we will entertain this because not only is the debate worthy, but a vote is worthy.

I ask unanimous consent that if cloture is not invoked on the pending motion to proceed to S. 1238, the Jack Reed bill on student loans, it then be in order to move to proceed to S. 1241, the Manchin bill on student loans; further, that the cloture motion, which will be at the desk, be considered filed on the motion to proceed; and further, notwithstanding rule XXII, the Senate then immediately proceed to a vote on the motion to invoke cloture on the pending motion to proceed to the Manchin bill, S. 1241.

Before the Chair rules, let me just say this agreement would allow us to have two votes on two versions of student

loan rates that start at noon today.

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Mr. BURR. Madam President, this is an important issue, and I want to thank my colleagues who came together this morning to try to find an additional solution.

I thank Senator Manchin, Senator King, and Senator Carper because they were willing to try to fix this problem. I am convinced that my good friend from Iowa is doing this in good faith, but now is the time to find a solution. It is not a year from now, it is not a month from now, it is not a week from now, it is today.

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Mr. BURR. I have learned in my 20 years in Washington that ``permanent'' is defined as a 2-year session of Congress, and the next could easily change it.

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Mr. BURR. The Senator is correct.

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Mr. BURR. As I said earlier, how does that compute to the average student? It means a lower monthly payment. Under the bill that we will vote on, which is the current extension--the kick-the-can-down-the-road plan--they will pay $78 a month, and that number is based on a student borrowing $5,000. Under the bipartisan bill, it is $75 a month.

On the graduate Stafford comparison by month, the person who borrows under the graduate program--under the kick-the-can-down-the-road plan--is going to pay $251. Under the bipartisan solution, they are going to have a monthly obligation of $230.

For the highest group, the PLUS loans--and in a lot of cases those are parents--the monthly obligation is going to be $197 on the kick-the-can-down-the-road plan, and under the bipartisan solution, the monthly obligation is going to be $180 in payments. Again, this is figured with $5,000 borrowed over a 10-year amortization of the loan.

It makes the good point my friend from West Virginia made: Why would we not take the opportunity to make this cheaper for everybody for the next 12 months? If we find a better way to do it, let's change it 12 months from now.

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Mr. BURR. The Senator is exactly right.

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Mr. BURR. If it influences the Senator from Iowa at all, I will allow my 2 minutes to go to him, if the Senator wouldn't object to him having 3 additional minutes.

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Mr. BURR. Go ahead.

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