Student Loan Debt

Floor Speech

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Mr. DURBIN. Madam President, I thank my colleagues Senator Jack Reed of Rhode Island, Senator Elizabeth Warren of Massachusetts, and Senator Kirsten Gillibrand of New York for joining us on the floor this morning to talk about the student debt crisis and college affordability.

I don't think this is just another issue. I think this is a defining issue. Imagine, if you will, what has happened to America since we have called into question the intrinsic value of owning a home. That used to be built into our culture, the notion that if you could get beyond the rental stage and actually buy a home was a smart and good investment in terms of your neighborhood, your community, and your State.

The mortgage crisis that we went through was a shock to many people. They paid too much for their homes. They found themselves facing foreclosure and short sales, and the basic premise has been challenged. There is more rental property now. People are hedging their bets on the issue of home ownership.

Now take one of the other pillars of our basic American values, and that pillar is: You will never go wrong with more education. I learned that at an early age, and luckily my mom and dad--with limited educational experience on their own part--pushed me forward into college and into law school and to finish. They believed that at the end of the day, I would be better off. Of course, statistics bear that out.

Now comes the new challenge. The increasing cost of higher education has driven many families and students deeply into debt. In many cases, it is impossible for them to pay back their debt.

Senator Reed says it is transformative. There are young people who have literally had their lives dramatically changed because of debt. The basic premise is called into question: Is higher education worth the money? I didn't think I would ever see that as a legitimate topic for debate in America, but it turned out to be a cover on Time magazine.

This is not just a matter of the pundits and politicians talking about it. Average people, working families are talking about it. That is why we are coming to the floor. We hope to expand our numbers more and more, and I hope some of the Republicans will join in this conversation about what to do when it comes to student debt and the crisis it is creating.

Millions of Americans pursue a college education hoping they will realize the American dream, but as college tuition, textbooks, and fees skyrocket students are paying more and more for education and taking on greater debt to pay for it. Sixty-eight percent of the class of 2012 graduated with some debt. For those students the average debt was $27,850 a year. For students who attended for-profit schools, the average debt was close to $40,000, which deserves a special part of this topic of conversation when we talk about the cost of higher education.

Americans now collectively hold more than $1.2 trillion in student debt--more than Americans hold in credit card debt. This has surpassed credit card debt in America. It goes way beyond higher education. It goes into a question about personal credit, chances for mobility, and the future of students who sign for these bone-crushing debt loans.

In his recent State of the Union Address, President Obama said he wants to work with Congress to see how we can help Americans who feel trapped by this crushing debt. Several of us are stepping forward and accepting the President's challenge. I hope more Members will do so as well.

Late last year Senators Reed, Warren, Boxer, and myself introduced the student loan borrower bill of rights to spell out in basic terms the rights of student borrowers and their families in interacting with Federal and private lenders, loan servicers, and schools. It is amazing to me that when it comes to mortgage debt there are laws dictating what you need to be told. When it comes to student debt, there are not nearly the protections. Younger people who are making these life-changing decisions about debt deserve to know everything they face and what they are getting into.

I met a young woman in Chicago recently named Hannah Moore. She thought she did the right thing. She started off her higher education by going to community college. She was told that was affordable and close to home. Do that first. She did it and then she made a fatal error.

After 2 years at a community college, she enrolled at the Harrington College of Design in Chicago. If you go to their Web site, you will be dazzled with the beauty of this school, the faculty, and all the opportunities. Hannah Moore was dazzled, but this for-profit school ended up becoming a debt pit for her life.

After she had exhausted all of her Federal loans and started taking out private loans at the Harrington College of Design, she graduated with a debt of $124,000, and she could not find a job. At one point she was working three part-time jobs to pay $800 a month on this debt from this for-profit school.

Her Federal loan payments are manageable because the Federal program at least allows her to make payments based on income, but the private loans this school lured her into--thanks to interest and fees--now amount to $110,000. Her servicer on these loans refuses to work with her to find repayment alternatives. She sinks deeper and deeper every day into debt.

This poor young woman thought she was doing the right thing by going to school. Today she is so deeply in debt she can't even dream of buying a house or a car. Her father had to come out of retirement to help her pay off the loans at this for-profit school, the Harrington College of Design.

Unfortunately, she wasn't protected with the bill of rights, which I have introduced and is being cosponsored by my colleagues who have spoken today, which would have told her don't apply for a private loan until you have exhausted your government loans.

Government loans have lower interest rates and are more manageable. Government loans can be consolidated and in some cases forgiven, depending on the job you take. She was not told that. She was lured into a debt trap by a school that just wanted to rake in Federal dollars at her expense. This is going to standardize policies, such as how payments are applied to principal and interest so borrowers benefit instead of banks.

Under the current situation, many students paying back their loans find that the money is going to the higher interest loans and not to the lower interest loans; it is not being transferred to their benefit.

The bill requires servicers to have a servicemember and veteran liaison. Veterans are often victims of these notorious for-profit schools and other lenders. We also require students to be told of all of their options, including Federal loans which have better terms and repayments. Students often have no other choice but to take out loans to pay for their college education, but this bill says borrowing money for college doesn't mean you give up your power over your money and your debt.

I also want to mention something most people don't know. In bankruptcy court in America today there are only a handful of debts that cannot be discharged in bankruptcy court: taxes, child support, alimony, and government and student loans.

A few years ago, the for-profit industry and private loan industry engineered into these bankruptcy discharge laws protection for their own debt. What does it mean? It means if you go to a for-profit school and take out a private loan, you are literally burdened with that for a lifetime. The grounds for discharging a student loan debt are some of the strictest and toughest in America. Students who sign up for this debt ought to know they are in it until it is paid and that can mean for a lifetime.

The Wall Street Journal reported some time ago on a grandmother cosigning a student loan for her granddaughter. The granddaughter defaulted, and the lender decided to levy on the grandmother's Social Security payments. That is how outrageous this has become. Sadly, these students don't realize when they sign on the dotted line at ages 19, 20, and 21, they are signing on for a debt that can trail them for a lifetime.

That has to change. We have to follow Senator Reed's lead. Senator Jack Reed has said: These colleges have to have some skin in the game. If they are going to lure students into student loans well beyond their ability to repay, let that college and university bear some of the responsibility for repayment too. I think that is only reasonable.

I thank my colleagues for bringing forth this issue. I thank Senator Warren. Her partnership in this effort is especially important. Because of her background in law and finance she is an important part of this conversation.

We are not going to end with this speech on the floor today by each of us. Once a week we are going to continue to bring together those in our caucus--and I hope in the Republican caucus--who believe we have to address the student debt crisis and come up with a reasonable way for students to pay for an education that is reasonably priced.

To have these students burdened with the student loan debtor prison is unacceptable in America today. It is time for us, as a Congress, to address this issue.

I yield the floor.

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