Madam President, we are running out of time. The interest rate on subsidized student loans is set to double in just over 2 weeks. This will hit middle-class families hard at a time when they are dealing with the devastating effects of the most severe recession that we have witnessed in our lifetime.
Earlier this week the Federal Reserve reported additional sobering news. Between 2007 and 2010, median family wealth declined by nearly 40 percent. Median family income declined by nearly 8 percent, and the share of families with education-related debt rose from 15.2 percent to 19.2 percent.
This is no time to increase the interest rate on need-based student loans on the more than 7,000 moderate and low-income students who rely on them to go to college. What we have seen is a middle-class that in terms of wealth and income has been shrinking dramatically. Ironically--perhaps not ironically--the very wealthy have seen income and wealth increase. However, for the vast majority of Americans, they have seen their economic position deteriorate.
Closely allied with economic opportunity and the idea of making your way in this country is the necessity to go on to higher education. We have been preaching that. That is what our parents told us, go on to college. They said, when you go to college, you will be prepared to go into the workforce, increase your family income, contribute more to your country. Yet now we see a situation where not only is there a compression in middle-income wealth and income, there is also a staggering amount of student debt. It is almost $1 trillion. In fact, I heard reports suggesting that it eclipsed credit card debt in terms of what households in America are holding.
There is a generation of college students who have graduated and are struggling with this debt. The worst thing we can do now is double the interest rate on those who need more loans to finish their school and put an even greater burden on them and their family as they go forward.
We need to pass this legislation that will prevent the doubling of interest on student loans, and we need to do it before July 1. We are looking at a period of time when interest rates are very low. The Federal Reserve is charging financial institutions somewhere around 1 percent or less to borrow money, and yet we are going to students and saying, the interest rate used to be 3.4 percent, now it will be 6.8 percent. That seems not only incongruous but incomprehensible, that we will allow the interest rate to double, particularly in this environment.
Students' families can't afford this increase. They are stretched too thin already. Every statistic--forget the statistics. Talk to people back home in New Hampshire or Rhode Island or New Jersey, and they will tell you it is tough. There are children who are moving back in with their families because they are struggling to find a good job so they can pay their student debt and get by. This is not the time to double the interest rate on these loans.
It is an issue of fairness. It is an issue of the future of this country. It is an issue of avoiding innumerable personal tragedies. We were just on a conference call when a woman called in and said she is involved with many students who have graduated in the last few years and they are literally at their wit's end that they can't pay their debts. They don't have jobs that will give them the chance to move on. They are saddled with debt. How will they even begin to think of starting a family and buying a home? That was something my generation sort of took for granted in their mid twenties. We have to deal with this issue. This is the first step.
According to Georgetown University Center on Education Workforce, over 60 percent of jobs will require some postsecondary education by 2018. No longer is higher education some nice thing to do, it has become a necessity to get jobs that will provide for a family. Yet in 2010 only 38.3 percent of working-age adults have a 2-year or 4-year degree. So we know there is a gap already. We have 40 percent of people with a postsecondary education, and experts are telling us we will need 60 percent by 2018, and that is just 6 years away. And we are proposing to make it harder to pay for college? Again, it does not make any sense.
That is why last January, working with my colleague Joe Courtney in the House of Representatives, we introduced the Student Loan Affordability Act. We saw this coming. We knew we had to prevent this increase. Initially the response from our colleagues on the other side was, no way. In fact, they voted for two budgets that assumed the interest rate would double, therefore giving more resources for tax cuts and other preferences that certainly won't be as effective to help the middle class as giving a youngster a chance to go to college. But we continued to push. With the President and students and families and student organizations across the country, I think we have made some progress. We have seen at least a change in rhetoric.
Governor Romney said he was in favor of keeping the rates low. There has been no specifications on how to do this or urging on how to do this, but at least conceptually there seems to be agreement on that one point. The Republican leaders then followed suit saying, yes, we have to keep this interest rate from doubling. But we have not seen the actions to match these words.
They initially made a proposal to keep the interest rates low by going after preventive health care, and that is a nonstarter. I hope we all understand that, one, if we are going to improve the quality of health care in this country, we have to emphasize preventive care. By the way, if we are going to bend that proverbial cost curve, we better start to do more prevention than treatment because it is a lot more cost effective to prevent than treat disease.
Then they proposed another offset that would take resources from low- and middle-income families through various programs, taking from one pocket of a low- and middle-income family and giving it to them in the education pocket. That didn't work.
They continued to resist a proposal we made to pay for it because we do understand in this environment we have to be fiscally responsible. We proposed to close one of the most egregious loopholes in the Tax Code. There is a provision that allows high-paid lobbyists, high-paid lawyers, high-paid consultants to avoid their payroll taxes, Medicare taxes, and other taxes by forming a subchapter S corporation. At the end of the year they give themselves a dividend, which is not wages subject to these taxes, and is actually treated at a very preferential tax rate. This is such an outrageous loophole that it was condemned by Bob Novak, late conservative columnist. It was condemned by the Wall Street Journal. It was condemned by everyone, but it was not something they could accept.
Well, we have moved forward. We have put a new offer on the table, led by Leader Harry Reid, and that would effectively help with respect to pension liabilities. First, it would give employers more predictability in terms of their contribution by allowing them to smooth out the interest rate which they assume in their contributions to the fund.
If you are trying to fund a pension liability over many years, you have to put in principal, but then you have to assume an interest rate to see if that principal will grow to an adequate amount. So the present law looks back about 2 years, and this is a remarkably low interest rate environment. So with low interest rates, they have to put more principal in. This way they could look much farther back, smooth it out, and take a more realistic interest rate that will reflect not just the last 2 years, which one would argue is very exceptional in terms of interest rates, but look at something that is more representative of the 25 or so years that they must provide for in their pension fund. In fact, this is a provision that employers think is very important to them.
The other side is to provide an increase of premiums paid to the Pension Benefit Guaranty Corporation, the insurance fund for defined benefit pension plans. Too often today the PBGC has to step in where companies go bankrupt and their pension funds are not adequate to pay for even part of the bona fide liabilities that they owe to workers, many of whom spent years in their employ and are depending on their pension.
This is a very balanced approach. It is an approach in the past that has had bipartisan support. I hope we are reaching a point now where we can come together. This is an incredibly difficult issue for families across this country.
I have heard pleas from Rhode Island families to fix this. I received letters and calls. One of them came in and said:
Please continue to fight for keeping the interest rate of Stafford loans down to 3.4 percent. It is difficult enough to pay for college. With unemployment so high for recent college graduates, our financial future seems bleak. My parents and I have taken loans to pay for my and my sister's tuition. We are from a middle class family. We appreciate your support and help with this issue.
Those words are more eloquent than mine.
Let's just get this done. We have no time to waste. July 1 is almost upon us. We have 2 weeks. Let's come together. Let's help people across this country and help our country.
Thank you, Madam President. I yield the floor and note the absence of a quorum.