Stop the Student Loan Interest Rate Hike Act of 2012--Motion to Proceed

Floor Speech

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Mr. FRANKEN. Mr. President, we just passed the deadline for students to decide where they are going to college this fall. This is one of the biggest financial decisions students will ever make. Nationally, student loan debt is over $1 trillion. It is higher than credit card debt. Over 60 percent of the class of 2010 graduated with outstanding student loans, college graduates. In Minnesota we are fourth in the country for the level of debt college graduates take with them. It is $29,000. This is hurting us as a nation in competition with other countries. It was not too many years ago that the United States was No. 1 in the world in the percentage of its adult population that had graduated from college. Now we are something like 16th. That is going to hurt us.

We have to do something about student debt. Behind every one of these statistics, there are stories. I had students from the board of MNSCU--it is a Minnesota organization of colleges and universities--in my office, and there must have been about 15 or 20 of them. I said to them: How many of you work at least 10 hours a week while going to school? All of them. How many of you work 20 hours a week? Most of them. How many of you work at least

30 hours a week while going to school? A lot of them. How many of you work 40 hours a week while going to school? How many of you work full time while going to school? A few of them, a number of them. That is no way to go to school.

Time after time when I talk to kids, I hear their stories.

Mike Flannery is a graduate of Hennepin Technical College. He was forced to take out private student loans because Federal loans were not enough to pay for his college costs. He graduated from his associate's program with a total debt of $34,750. Michael is now struggling to deal with this massive debt load, and he told me he will likely have to drop out of his summer coursework due to college costs. He currently owes $45,250 and is still working toward his bachelor's degree.

No wonder it takes our students 6 years to graduate--or longer. It is now not really a question; you have to graduate from college or at least get a 2-year degree to get a good-paying job in this country. In the next 7 years, 70 percent of jobs in Minnesota will require some type of postsecondary credential. Yet right now only 40 percent of working-age Minnesotans have one.

If we are going to compete with other countries, we have to do something about this. What can we do? We have to get long-term costs under control. There is a lot to do there, but that is the long term. In the short term, at least we should do no harm. On July 1 Stafford loans, subsidized Stafford loans are set to double, from 3.4 to 6.8 percent. That is unconscionable.

This legislation was written in 2007, and that said it would double. If you look at interest rates, what they have done from 2007 to now, they have just shot down. This makes no sense whatsoever. This is going to affect over 7.5 million students nationwide, over 200,000 in Minnesota. If we fail to take action, this will cost every student in Minnesota about $1,000 in increased loan costs over the life of the loans. That is real money.

We have an offset here we have tried to do. It is about S corporations. I don't want to get into the details of this. Basically what it is--let's say you have an S corp. You are a businessman, and at the end you take your salary and profits, and most honest businessmen pay taxes on all of that, including their withholding tax, their FICA. So you pay FICA on $107,000, approximately, in withholding tax. That pays into Social Security and Medicare. That is what FICA is.

There are others who take advantage of a loophole. It is a loophole. It is legal. Let's say you are a businessman and you make $300,000. Well, you pay yourself a salary of $40,000 and you pay your FICA on that. Then at the end of the year you take out the profits. Now, these profits are not capital gains. They pocket the business's profits without paying payroll taxes. This is as clearly a loophole as anything that exists in our Tax Code. This is exactly the type of loophole that everyone, not just our friends on the other side of the aisle but that we are talking about taking out of the Tax Code so that we can maybe not raise marginal rates as much or, on the other side, they say we can take out the loopholes and lower it. If you can't get rid of this loophole, there is no loophole you can get rid of. This is so obviously a wrongheaded loophole. That extra money they take at the end of the year, it is not considered capital gains, it is income. They pay the top rate on that income--it is above the top rate. This offset would affect only people making over $250,000.

We need to pass this legislation. This is a loophole we need to close because it just makes sense. It is a loophole that I don't think anyone can really defend. I really don't. I would love to hear someone try to defend this one. Again, I have heard over and over that we just have to close some loopholes, these crazy loopholes. This is the one we need to do so our kids can have a manageable debt, so they are not paying exorbitant costs on their debt.

We have to be realistic about all of this, about what it takes to make it in this country. You need a college education or you need some postsecondary education. We have a skills gap in this country we need to close. Kids are borrowing and borrowing, and we are doing this generation a disservice. We have to look at reality.

I heard Mitt Romney the other day in Ohio. He said to kids: Look, take a chance on yourself. Borrow money from your parents to start a business.

That is not what is happening in this country. Kids cannot accumulate an average of $29,000 in debt and still be able to borrow from their parents. If they could borrow from their parents, they wouldn't have an average of $29,000 in debt; they would be borrowing from their parents.

The reality is we are putting a burden on our children that we should not be putting on them. We should close this loophole that there is no rhyme or reason for so these students can be paying a reasonable interest rate and not some exorbitant interest rate. This is just common sense.

I urge my colleagues on both sides of the aisle to vote for this bill and then we can move on to some other things.

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