Statement on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. REED. Mr. President, today postsecondary education is required for most family-sustaining, middle-class jobs, and an educated workforce is essential to a modern, productive economy. A recent report by the Georgetown University Center on Education and the Workforce found that college-intensive business services have replaced manufacturing as the largest sector in the U.S. economy, and that while college-educated workers make up only 32 percent of the workforce, they now produce more than 50 percent of the Nation's economic output, up from 13 percent in 1967. Median annual earnings for bachelor's degree holders were $23,000 higher compared to high school graduates in 2014.

Yet just as there is growing recognition that postsecondary education is indispensable in the modern economy, families are being required to shoulder growing debt burdens that threaten access to college.

According to a recent analysis of student loan debt by the Federal Reserve Bank of New York, between 2004 and 2014, there was an 89 percent increase in the number of student loan borrowers and a 77 percent increase in the average balance size. Today, over 40 million Americans have student loan debt.

This is a growing drag on our economy. As student loan debt has grown, young adults have put off buying homes or cars, starting a family, saving for retirement, or launching new businesses. They have literally mortgaged their economic future.

We know that student loan borrowers are struggling. Default rates are on the rise. The Federal Reserve Bank of New York reported that the number of borrowers who default each year increased from about half a million 10 years ago to 1.2 million annually in 2011 and 2012. Only 37 percent of borrowers are current on their loan and actively paying down their debt.

We cannot tackle the student loan debt crisis without States and institutions also stepping up and taking greater responsibility for college costs and student borrowing.

That is why I am pleased to introduce the Protect Student Borrowers Act with Senators DURBIN, WARREN, and MURPHY to ensure there is more skin in the game when it comes to student loan debt by setting stronger market incentives for colleges and universities to provide better and more affordable education to students, which will in turn help put the brakes on rising student loan defaults.

The Protect Student Borrowers Act will hold colleges and universities accountable for student loan defaults by requiring them to repay a percentage of defaulted loans. Only institutions that have 25 percent or more of their students borrow would be included in risk sharing based on their cohort default rate. Risk-sharing requirements would kick in when the default rate exceeds 15 percent. As the institutional default rate rises, so too will the institution's risk-share payment.

The Protect Student Borrowers Act also provides incentives for institutions to take proactive steps to ease student loan debt burdens and reduce default rates. Colleges and universities can reduce or eliminate their payments if they implement a comprehensive student loan management plan. The Secretary may waive or reduce the payments for institutions whose mission is to serve low-income and minority students, such as community colleges, Historically Black Institutions, or Hispanic Serving Institutions provided that they are making progress in their student loan management plans.

The risk-sharing payments will be invested in helping struggling borrowers, preventing future default and delinquency, and reducing shortfalls in the Pell Grant program.

With the stakes so high for students and taxpayers, it is only fair that institutions bear some of the risk in the student loan program.

We need to tackle student loan debt and college affordability from multiple angles. And we need all stakeholders in the system to do their part. With the Protect Student Borrowers Act, we are providing the resources and incentives for institutions to take more responsibility to address college affordability and student loan debt and improve student outcomes. I urge my colleagues to cosponsor this bill and look forward to working with them to include it and other key reforms in the upcoming reauthorization of the Higher Education Act.

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