Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. REED. Mr. President, student loan debt continues to climb. According to an analysis by the Institute for College Access, average student loan debt has increased by 6 percent each year since 2008. In 2012, over 70 percent of college graduates had debt, owing an average of $29,400.

This is a growing drag on our economy.

In this summer's National Association of Realtors survey, 49 percent of the respondents identified student loan debt as a huge obstacle to home ownership--more than those who identified having enough money for a down payment or having enough confidence in their job security.

It is clear that the more than $1.2 trillion in outstanding student loan debt has serious implications for the broader economy.

We know that student loan borrowers are struggling. Default rates are on the rise. 13.4 percent of borrowers entering repayment in 2009 defaulted within three years. The rate jumped to 14.7 percent for borrowers entering repayment in 2010.

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

States are critical partners in making college accessible and affordable. However, state support for higher education has declined in recent years, contributing to rising tuition costs at public colleges and universities. According to the latest State Higher Education Finance report published by the State Higher Education Executive Officers, state spending per full-time equivalent student reached its lowest point in 25 years in 2011.

In the Partnerships for Affordability and Student Success, PASS, Act that I am introducing today, we will re-establish a robust, Federal-State partnership for college affordability and student success. I long worked to fund the Leveraging Educational Assistance Partnership, LEAP, program, an initiative that engaged the states in matching federal funds to provide need-based grants to students. LEAP was modest in scale. The legislation I am introducing today calls for a more ambitious and comprehensive Federal-State partnership for higher education.

The PASS Act will authorize $1 billion for a State formula grant program. In order to participate, states must make a commitment to maintain their investment in higher education and must have a comprehensive plan for higher education with measurable goals for access, affordability, and student outcomes. At least 70 percent of the funding must be dedicated to need-based student financial aid. States also have the option of awarding grants to colleges and universities or partnerships between institutions of higher education and non-profit organizations to improve student outcomes, including enrollment, completion, and employment, and to develop innovative methods for reducing college costs. I am pleased to have the support of the National Association of State Student Grant and Aid Programs, the National Association of Independent Colleges and Universities, and U.S PIRG in advancing this legislation.

Institutions also have a critical role to play in curbing student loan debt. To ensure that institutions have more skin in the game, so they provide a better and more affordable education to students, which will in turn help put the brakes on rising student loan defaults, I am proud to be introducing the Protect Student Borrowers Act with Senators Durbin and Warren.

The Protect Student Borrowers Act will hold colleges and universities accountable for student loan default 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 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. We need all stakeholders in the system to do their part. With the PASS Act and the Protect Student Borrowers Act, we are providing the resources and incentives for states and institutions to take more responsibility to address college affordability and student loan debt and improve student outcomes. I urge my colleagues to cosponsor these bills and look forward to working with them to include these and other key reforms in the upcoming reauthorization of the Higher Education Act.

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