Smarter Solutions for Students Act

Floor Speech

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Mr. MERKLEY. Mr. President, in approximately 8 minutes from now we are going to have a moment of silence for Officer Jacob Chestnut and Detective John Gibson in recognition of the sacrifice they made in defending the Capitol against an armed intruder.

I want to say how much we appreciate the forces deployed to protect us in our ability to share our thoughts on a host of issues that we speak to on the floor. If somewhere across America someone violently disagrees with us, if they decide they want to not engage in democracy but engage in violence, they might come to the Capitol, and our wonderful force protects us and gives us the ability to speak our hearts and minds on this floor on behalf of our constituents every single day.

So not only are we paying respect today to the officer and detective, but we are also paying respect to the entire delegation of security forces who work at the Capitol.

I am going to be brief in order to pause appropriately for that moment of silence and tell you that the conversation we are having today is part of a broader conversation about how to build the middle class in America.

There are some core pathways to the middle class, and one of those is fair mortgages. Indeed, when we were having a debate on Dodd-Frank in 2009 and 2010, we decided to put an end to payments in which mortgage originators were steering people from fair loans into predatory loans and getting big bonuses for doing so.

Today, the Director of the Consumer Financial Protection Bureau announced that they are bringing a case against a company that was doing exactly this, paying $6,000 to $8,000 per mortgage to an originator so they would betray their customer and not put them in the best mortgage they qualified for but into a much higher interest mortgage.

I am delighted that in this Chamber we decided to end such practices. I am delighted we proceeded to confirm the first Senate-confirmed Director just last week so that this agency can do its job. Its announcement today shows it is hard at work in this critical area of fair home mortgages.

Another key pathway to the middle class is living-wage jobs. We are going to have a lot of debate about what creates and destroys those jobs in America because there is no program that substitutes in terms of a foundation for a family more than a living-wage job.

Another key pathway is education. Now, this is very personal to me. I grew up in a working-class community. My dad was a mechanic. I still live in that same community today, and I am surrounded by families that are struggling with near minimum wage jobs with often no benefits, hoping and praying that their children will be able to get the education necessary to have one of those remaining living-wage jobs. They are hoping we will do our job in Congress to help steer the economics of this Nation so there will be more of those living-wage jobs. But the viewpoint from the street is it doesn't look as though there are going to be a lot of jobs for those folks graduating from college.

They are also concerned if they send their child to college and their son or daughter ends up with a school loan the size of a mortgage, that is going to hang like a millstone around their neck and haunt them the rest of their life.

My colleague from California has just spoken eloquently to this issue. She has just been sharing stories of people on the ground and what they are facing in the context of how these big massive loans for school are weighting down the opportunities for our children.

In addition, it is discouraging our children from believing that they can even get that education. If they don't believe that, then they don't put in the work in high school to prepare themselves to get that higher education to fulfill their potential.

I grew up from a small child with President Kennedy speaking of a vision in which we could aspire to great things, of fulfilling the maximum opportunity for ourselves and for our families and for our Nation. But right now, on the ground there is an undercurrent of deep discouragement, almost desperation, not seeing a broad boulevard into the middle class but seeing a cooked, broken path complete with tricks and traps. That is what this conversation is about: How do we create that broad path into the middle class?

I am going to stop here, and I will come back later and talk specifically about the loan program.

Mr. President, I yield the floor.

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Mr. MERKLEY. Mr. President, on behalf of so many of my colleagues, I want to thank the security forces at the Capitol for the incredible job they do in protecting these rooms where debates and democracy take place.

The debate that we are engaged in right now is about how to create a broad path to access education, as education is one of the key factors in developing and realizing the dream of middle-class jobs in America.

I was starting to share that this is very personal to me because I come from a working-class family. My parents and my grandparents had not gone to college. I didn't know people on my street who had gone to college. I didn't have siblings who had gone to college. I didn't know anything about college. But it was a scholarship, a loan, and jobs that enabled me to attend a university and pursue an education that took me into this realm of public policy, the realm that we are still in right now.

My first deep interest was Third World economic development, and I was blessed with a chance to work in Central America and India and to live as an exchange student in West Africa. Then that same education gave me a chance to go to graduate school, and there I was able to prepare for working here on strategic nuclear policy.

Education took me into realms that matter to our Nation, to our world, and matter in terms of creating the foundation to be able to have a living wage. So this is critically important to our children.

The proposal we have before us is that we are going to set up a loan program, and the loan program is going to take the cost of funds that are lent out and put on an additional 2.05-percent cap or add-on in interest for those who are getting undergraduate loans. For those who are getting graduate loans, it is going to add a 3.6-percent spread, as it is called. And for parents who are getting loans to help finance their kids' education, it is going to add on a 4.6-percent spread.

This 2-percent spread on undergraduates, 3.6-percent spread on graduates, and 4.6-percent spread on parents produces a lot of profits. I had my team consult with CBO to make sure the net profits of this program over the next 10 years are going to be $185 billion, and make sure we understand that they are taking the profits that come from those spreads, the higher interest charged over the cost of money, and they are subtracting out the fact that some loans will be defaulted on. They are subtracting out the cost of administering the program, and they end up with a net profit. How much is that net profit? It is $185 billion.

That means we are providing a service to our students, not at cost, but we are building in an equivalent of a massive $185 billion fee on the children of working families who are aspiring to get an education. That is not a great deal. In fact, it is a terrible framework.

My colleagues who have worked to put this together point out that right now this may be the only option compared to locking in the 6.8 percent for the next 10 years. In the first few years it produces a lower interest for our undergraduates than they would otherwise get. That is an important point to observe, that for a couple of years the loans our students will be getting will be at a significantly lower rate under the deal that is being proposed today. But over the course of the 10 years, the best estimate from CBO of the profits generated is still $185 billion, in fact $1 billion more, rounding off, than it is under the existing program.

To those who believe this is a great long-term solution, I disagree. Is it better in the next couple of years? Yes, it is. But I ask you, exactly why do we believe that adding on $185 billion in fees as a profit center for the U.S. Government is a great idea if our goal is to create an affordable pathway to higher education? I have yet to have anyone explain that. In fact, I often hear: Well, you know, built into the existing law, which doubles to 6.8 from the 3.4 percent right now--that has profits built into that too.

That is a fair point. But let's step back and ask ourselves, sustaining the situation when we are charging extravagant fees to generate extravagant profits and lock them in for 10 years, is that a good idea?

There are a couple of proposals that would make this a much better program. One is to say, no, we are not going to have this big spread with a high cap of 8.25 percent on undergraduate loans and 9.5 percent on graduate loans and 10.5 on parent loans. But we are going to cap it at 6.8 percent. That makes a lot of sense. I applaud my colleague from Rhode Island who has come to the floor to speak for that proposal, and certainly I will be supporting that proposal.

Senator Sanders has said: You know what. This is a pretty good solution for a 2-year period, so let's sunset this after 2 years so we can have this debate again. Because if we lock this in for 10 years and if we maintain the pay-for rules of the Senate in which if you eliminate the profit margin in one area you have to increase the profit margin in another, we might never be able to unlock this and we will continue treating college loans as a profit center for the U.S. Government, so let's terminate this after 2 years. Let's sunset this and rethink this.

That is a pretty good idea too. I encourage my colleagues to consider doing that. I certainly will be supporting that.

Nick writes to me from Oregon. He says:

After receiving paperwork the other day from DoE servicer ``Direct Loans,'' I dove into my student loan [application] to see what I was filling out an application for.

I took out $5,500 my Freshman year of college, $6,500 my second year, $7,500 in my third, and $7,500 to finish my senior year. So in total I borrowed $27,000.

In January I deferred payment on my loan because I had not found full time employment.

With a stroke of luck, in February I landed two part-time jobs making a whopping $12 per hour doing manual labor to supplement my $10 per hour part time gig in the health care field.

Since March I've been full-time with the healthcare company, and earned a $1 raise. I've gained a lot of experience on the job, but from a monetary perspective, I wish I could be earning more so I could pay off my loans.

My loans are currently at 6.8 percent with a total owed as of today: $32,266.

That is up from the $27,000 he had owed before. He continues, saying:

At 6.8 percent my loans are accruing over $1,800 in interest each year. That's about $150 per month.

That is just the interest. Then when he is able to stop deferring and start making payments and include the capital being paid off it will be much more, and on a near minimum wage job that is extraordinarily difficult.

Here is a letter from a mother in Oregon, Melissa.

I graduated with a Master's degree in 1993. My loans have been paid off for over 10 years.

My husband enrolled in college when he was 36, 3 year ago. He will graduate next year with over $60,000 in debt for a Bachelor's degree.

At this rate of increase in what it costs to get a college degree, I don't see how it is possible for our son, who is now 2, to ever have a college experience.

Please do the right thing and help make education accessible to everyone.

That is the plea of Melissa, to do the right thing. The right thing would be to cap the interest in this program so it doesn't go over 6.8 percent. The right thing to do would be to sunset this program after 2 years. Both of those amendments will be available to all of us here on the floor. I encourage my colleagues to support those amendments.

Our students already face $1 trillion in debt. It is weighing them down. It means they are postponing getting married, they are postponing having children, they are perhaps postponing moving out on their own because they cannot afford an apartment with this debt. It is hurting the economy and it is hurting our future because children are discouraged about the possibility of going to college.

That is not the vision we want to have for America, where our children do not believe there is a path to the American dream for them. Today, if these amendments fail, it will be a very difficult choice, a very difficult choice between a couple of years of interest that is better than the status quo but a program that locks in a profit center for college loans, and we will have a very uncertain prospect about whether we can unlock that program a couple of years from now. I hope we pass those amendments.

I am not sure, frankly, which side I will come out on if we fail in that effort. But I will tell you this. If this deal becomes law we must return to this floor time and time again because adding $185 billion in fees so we can have a profit off working-class students trying to find a pathway to the middle class is wrong and deeply damaging to the American dream.

I yield the floor.

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