WATCH: The House Financial Services Committee holds a hearing on the student loan crisis

authorised to declare a recess of the anytime this hearing is entitled a 1.5 trillion crisis protected student bars and holding student loan services accountable I now recognize myself for four minutes to give an opening statement good morning today this committee convenes for hearing to examine the student loan debt crisis it appears that this may in fact be the first-ever full committee hearing in its history focused on student lending and the many financial ramifications it has for student Varro's given the scale of the crisis at hand it is long overdue at thank congressman Al Green chairman of our Subcommittee on Oversight and investigations for convenient a subcommittee hearing on the subject earlier this year and look forward to building on the insights from that hearing during our conversation today according to the Federal Reserve Americans collectively have 1.6 trillion in student loan debt that's more than credit card debt and more than car loan debt trailing only mortgage debt more than forty four million people carries student debt averaging almost $33,000 around nine million bars with federal student loans are currently in devolved the burden of student loan debt is preventing young people from saving for retirement starting small businesses starting families and becoming homeowners this crisis is affecting people across the country and ultimately it negatively affects our entire economy nevertheless Trump's Education Secretary Betsy Davos has consistently taken actions that are harmful for those with student loans and the Trump administration's appointees to the Consumer Financial Protection Bureau have also undermined key protections just last month the Trump administration appointed a student loan Ombudsman a former executive of a major student loan servicer that is being investigated by several state attorneys general or illegal Student Loan Servicing practice I'm pleased that we're joined by an outstanding panel of witnesses today including witnesses who have personally dealt with student loans have used their positions to raise awareness about the student debt crisis oh we are fought on behalf of consumers against the harmful practices of student loan services the Education and Labor Committee has an important role to play in this matter but this committee does as well given the need to strengthen protections for student loan borrowers and conduct oversight in the area of student loan servicing today we will discuss a series of bills that are designed to help student loan bars in a variety of ways these bills include creating a comprehensive student borrower Bill of Rights strengthening credit reporting standards stopping debt private debt collectors from going after vulnerable student borrowers protecting private student loan borrowers and helping borrowers with student debt purchased a first home Congress and this committee have a responsibility to take action to ensure student loan borrowers are better protected and so I now recognize the ranking member of the committee the gentleman from North Carolina mr. McHenry for four minutes for an opening statement well thank you madam chair and I appreciate the opportunity to discuss the student loan crisis let's rewind 2009 it's 2010 there are super majorities by the Democrats in that US House and the US Senate and a Democrat in the White House and at that moment in the midst of the Affordable Care Act the nationalization of our student lending was added to that bill as they pay for it is the consequence of Democrat policies that have nationalized the student debt lending in this country and as a consequence of those actions we've saddled a generation with unaffordable debt and an education that does not out match the cost of that education this is a crisis but it is a crisis that Congress create and foisted upon a generation yet without that generation actually having the decision-making nor the federal government the underwriting standards to ensure that good decisions were made and that we were going to give them alone that they would be able to repay so if you think about the consequences of the mortgage crisis that led to the financial crisis part of that was congressional lawmaking yes but most of that was in the private sector this matches that mortgage crisis but it was federal action on the whole that is foisted debt upon a generation it is unconscionable it is unconscionable that Congress would do that we have to fix the law and ensure that the federal student debt is much more like the private student debt markets so though we don't have jurisdiction over the Department of Education where this is primarily done we know the statistics nearly 43 million individuals one in six Americans have a federal student debt and according to the Institute for college access and success the class of 2018 averages almost $30,000 of debt per student the federal loan portfolio now exceeds 1.4 trillion and 5.2 million borrowers of the 43 million total federal student loan borrowers have loans in default a significant portion of that debt is at risk of default as well and not only is the federal government the lender of these loans it's now the largest consumer lender in the nation they're not cheering for what I just said in the hallway I can trust you trust me but think about that the largest consumer lender in the nation we don't adhere to the same laws that we demand to the private sector and how we voiced this debt upon students and young people the federal government is the largest consumer lender and the folks responsible for the stability and security of these loans are in the of Education which does not issue student loans issuing any type of underwriting standards the federal government must become a responsible lender as we demand to the private sector and we have to make sure the cost matched the benefits in education so we cannot address the student loan crisis and higher education unless we also talk about the cost of higher education that too is not within our jurisdiction but it's important for us to to agree that that is something that we should discuss and debate student loan servicers do not set interest rates or loan terms student loan services are subjected are subject to strict rules and regulations mechanisms exist to ensure they are held accountable that isn't a case for the loan originator the federal government we have to fix this and again I look forward to the witnesses and again highlight the fact that the jurisdiction of student lending is not within this committees jurisdiction in your back thank you and now I recognize the chair of the Subcommittee on consumer protection and financial institutions mr. Meeks one minute thank you madam chair for holding this very important hearing the rapidly increasing growth of student debt is indeed a national crises and it is not something that we should be playing politics with at all it is something that we should be focused about doing something about because young people today they have making they make decisions that affect their lives because they are in debt many of them 85% of african-american young folks they are already who have bachelor's degrees you're in debt it causes them to have to make decisions of their not being able to buy a home or start a family or take a job that they want to just because they want to take a job because they need a job to pay back it also causes them to be in a situation where they cannot achieve the American dream we can't we must stop this of pointing fingers and trying to figure out what's going on and blaming this whatever we've got to fix this problem because a whole generation of Americans young Americans are not going to have the better of the United States of America in that American dream it is time for us to fix it Democrats Republicans don't let our young people suffer because of our own disagreements and I yield back thank you I now recognize the ranking member of the subcommittee the gentleman from Missouri mr. Luetkemeyer for one minute for an opening statement thank you madam chair foundation of the American Dream is the idea that a free market economy you will allow entrepreneurs business and workers to succeed time and time again competition innovation the private market have provided American sumers with the best possible products and services in a decade after the government takeover student lending the federal government is the largest consumer lender owning are guaranteeing 92% of all student loans or 1.4 trillion dollars of student debt reality is the federal government has taken over a massive loan portfolio without practicing anything that even resembles sound lending the government is lending to millions of students without adequate underwriting resulting in 22 percent of federal borrows being seriously a delinquent in comparison to 15.5% of private loans according to the third bank of new york I can tell you someone who made student loans 30 plus years ago that we try to help students not hurt them that the system today is broken in my opinion the government doesn't need to be in the business of direct lending at all and there's numerous video adding factors that contribute student debt today we must start looking at and start producing some reforms that actually help our students and our citizens with that I yield back I want to welcome today's distinguished panel mr. Seth Rothman executive director the student varam Protection Center miss Percy's you staff attorney at the National Consumer Law Center miss Ashley Harrington senior policy counsel Center for Responsible Lending mr. Hassan men ha writer producer and host with shed light on the issue of student loan servicing mr. Jason de lisle American Enterprise Institute without objection all of your written State it's will be made part of the record each of you will have five minutes to summarize your testimony when you have one minute remaining a yellow light will repeat up here at that time I would ask you to wrap up your testimony so we can be respectful of both the witnesses and the committee members time mr. Franklin you are now recognized for five minutes to present your oral testimony chairwoman waters ranking member McHenry members of the committee thank you for the opportunity to testify today over the course of the last decade I traveled all across this country talking to thousands of people in big cities small towns and nearly every slice of America in between and from these conversations I have found that one aspect of life cuts across interweaving those communities with seemingly little else in common the fallout from extraordinary student debt I've heard this in town halls across the Bible Belt in state capitals coast to coast and in quiet corners admit hush conversations 60,000 consumer complaints tell the same story borrowers who did everything right went to school took on debt got the degree now they are desperately trying to pay it back but are derailed at every turn and in each story a common question how could this happen to me after I did everything I was supposed to do the answer is one we are often too unwilling to acknowledge we encouraged millions of students to take on billions in debt and then to add insult to injury we sent them into a market with a piecemeal consumer protection framework that buckled under the weight of this historic burden this is the story of our nation's student debt crisis we must put aside the notion that's simply because investment bankers are not lining the sidewalk of seventh Avenue while holding the contents of their desks in boxes that somehow this is not a crisis that somehow our nation does not need to act action should not be triggered only when a market is deemed as systemically risky as subprime mortgage-backed securities the call to action lies what the impact student debt is having on our neighbors and neighborhoods it lies in the collective weight of 1.6 trillion dollars last year more than 1 million borrowers defaulted on a student loan that's more than the population of each of your districts in fact every 28 seconds another borrower defaults that's every 28 seconds of every hour every day every week every year however it's more than that it's also the 3 million borrowers at least two payments behind it's the impact student debt is having on everything from starting a family to buying a home it's the way student debt is hurting hurting rural communities driving income inequality propelling the racial wealth gap like kerosene on a fire student debt is driving the systemic economic and racial inequality that is tearing our communities our country apart but it's more than ballooning balances it is also the bull's eye we have placed on the back of forty four point seven million people the student debt crisis is a consumer protection crisis because too many for too long have allowed predatory players to have near free rein to prey on the struggle of student loan borrowers you should know the name names of the companies that have targeted your constituents equit us Bridgepoint Citibank conduit Corinthian Colleges Discover Bank hire one ITT national collegiate student loan trusts navien Thea Quinn Street Sallie Mae Sophie Transworld Wells Fargo and the list goes on throughout America big banks and small scams hurt millions of borrowers at every single point of their financial lives from the day a student receives her first bill until the day she pays off her last loan regulators law enforcement officials scholars and consumer advocates have all documented how student loan borrowers have less rights and fewer protections than exist in other markets I'll say it again the student debt crisis is a consumer protection crisis and that is where this committee comes in from credit cards to debt collection credit reporting to mortgage servicing this is the committee that has taken a stand when consumers are getting ripped off committee's actions help consumers avoid billions of dollars in credit card fees kept tens of thousands of families in their homes in all of these instances and in so many others this committee took decisive action on behalf of the American people the 44 million Americans with student debt and the millions more who are affected by it need you to do the same that is what this hearing and the legislation before you today is about creating the protections and accountability that millions of Americans who receive a student loan bill deserve this is the unfinished work of financial reform the Unrated chapter that 44 million americans need Congress to write and so I would just like to close with this we cannot continue to be lobbied into believing that the companies getting rich off the misery of millions of Americans are not part of the problem we cannot continue to ignore this trillion-dollar black hole in our financial markets as it has done time and again this committee must protect those chasing the American cheering dreams from those who only seek to prey on its pursuit millions of Americans across this country need you to act thank you Thank You mr. Franklin miss you you are now recognized for five minutes to present your oral testimony Thank You chairwoman waters ranking member McHenry and members of the committee thank you for inviting me to testify today regarding how to protect student loan borrowers and hold student loan servicers accountable I offer my testimony here on behalf of the low-income clients at the National Consumer Law Center borrowers are struggling as the director of NC LC student loan borrower assistance project I see in here the human toll of the tattered student loan safety net vulnerable students like our clients attempting to better their lives and better provide for their families through education faced severe consequences that they default on their student loans loan servicers play a critical role in ensuring student loan borrowers are aware of their options for repayment and can avoid default unfortunately has has been extensively documented the student loan servicing industry has been rife with misconduct when servicers act abusively in deceptively the harm can be long-term and irreparable the devastating consequences are intensified for federal student loan borrowers because the government has collection powers that far exceed the collection powers of most unsecured creditors the government can garnish a borrower's wages without a judgment these tax refunds such as the Earned Income Tax Credit and portions of federal benefits such as Social Security racial disparities and default rates disproportionately exposed borrowers of color to these government offsets and other damaging collection practices which systemically strip wealth from families and communities that are already economically disadvantaged the amount the government sees is using these tools is often far greater than the amounts borrowers would be required to pay under an income driven or IDR plan borrowers who might otherwise qualify to have a zero dollar payment in IDR could have hundreds of dollars seized from their wages or thousands taken from vital tax credits IDR is critical for keeping federal loans affordable but remains inaccessible for too many borrowers many borrowers never learn about IDR and are steered into forbearances or deferment at NC LC most of our clients were in a series of forbearances and deferment prior to defaulting on their loans even borrowers who do learn about IDR have trouble staying enrolled in the program with more than half of borrowers failing to recertify on time critically serviced for misconduct is not limited in to income during repayment borrowers struggle to access vital loan cancellation programs because bar because servicers fail to provide them with critical information or improperly deny their applications unlike other credit products there are a few laws specifically governing student loan servicer conduct for either federal or private loans these last lack of protections have exacerbated the now well-documented problems for hours faced accessing public service loan forgiveness when common problems borrowers are experienced and as errors in counting their qualifying payments unfortunately borrowers do not have easy access to basic payment histories that could help correct these errors NC LC has been working with one such client since February just to get her full payment history and determine how many qualifying payments she has made on her loans there are some protections that the contracts are the department signs with it servicers however borrowers rarely know about these rights or have any way to enforce them those who are able to find a lawyer to assist them still face an uphill battle because the Higher Education Act provides no explicit private right of action borrowers can raise state law claims including those based on fraud misrepresentation but contrary to much of the state law the servicers and the Department of Education claim that those claims are preempted by the Higher Education Act fairness and justice require that servicers have the ability to enforce their rights when they've been breached by servicers problems are even greater in the private loan market without comprehensive federal laws requiring private student lenders to offer flexible repayment options borrowers are at the mercy of their creditors a few lenders claim to offer disability cancellation programs but in our experience those programs can be hard to access and critically there are no standards for these programs for private loans importantly even where private student loan borrowers do have rights under state law they are prevented from raising those claims in open court because of forced arbitration clauses these clauses deprive people of their day in court when a company violates the law and forces victims into a system that is often biased secretive and lawless in conclusion the problems facing individual borrowers are often symptoms of systemic problems to which systemic responses are required these problems threaten the financial security at some of the most vulnerable student loan borrowers and keep them from fully participating in the economy accountability is critical to ensuring that borrowers receive quality servicing borrowers need real rights and consumer protections and they need the legal tools to enforce those protections thank you for the close attention you're paying to the student loan servicing market and for the bills that you are considering today I appreciate your opportunity to provide this testimony and I look forward to your questions thank you miss you miss Harrington you are now recognized for five minutes to present your testimony the morning chairwoman waters ranking member McHenry and members of the committee thank you for the opportunity to testify today about the nation's student debt crisis with more than 44 million borrowers carrying almost 1.6 trillion dollars in outstanding student loan debt Congress has the responsibility to do its part to solve this crisis just a decade ago we all watched the devastating ripple effect of the 2008 financial crisis people lost their homes pensions and savings accounts were wiped out a generation of family wealth was gone was gone almost overnight and college graduates many with a mountain of student loan debt were entering a bleak job market a key lesson from the Great Recession is that skillful loan servicing could have dramatically mitigated the impact of foreclosures and their spiraling spillover effects on neighborhoods and the economy despite this relatively recent lesson the principles we learned seem to have already been forgotten as we face the current student debt crisis student loan servicers have consistently failed to fulfill their obligations and have engaged in a variety of abusive practices that have long-term negative consequences for borrowers while servicing reform is not the sole answer to the student debt crisis servicing failures contribute substantially to the growing student debt burden and the creation of undue harm to millions of borrowers today two and five borrowers are in default or seriously delinquent and many borrowers are not reducing their principal even after almost a decade of repayment 27 percent of borrowers who entered undergraduate higher education in 2003-2004 had defaulted on their student loans by 2016 up to 40 percent of this cohort are projected to default by 2024 when we spend seven hundred million dollars on collection activities and more than eight hundred million dollars on loan servicing activities annually Congress can and should require more from these contractors we should also have concern that the student debt crisis already a byproduct of the racial wealth gap is also further entrenching these inequities and perpetuating the cycle of poverty and economic instability that results from systemic lack of access to resources capital and affordable credit rather than creating a pathway to opportunity student borrowers of color are more likely to default and take longer to pay back their loans for instance for black students who entered undergraduate higher education in 2003 2004 almost 49% had defaulted by 2016 up to 70 percent of this cohort is projected to default by 2024 nearly half of black graduates with a bachelor's degree or more on their undergraduate student loan after four years than they did at graduation compared to 17 percent of white graduates student loan servicers have been notorious for putting borrowers into deferment or forbearance these practices have led to billions of dollars in extra interest and fees being added to the principal balances of already indebted borrowers they have also prevented borrowers from accessing affordable repayment plans that would allow them to take part in other wealth building activities servicers should enroll struggling students and income driven repayment plans not forbearance while reforms are definitely needed IDR plans are an essential tool for preventing delinquency and default despite these documented failures the current Department of Education has revoked existing policies meant to protect student loan borrowers it has acted to the benefit of private companies / students and taxpayers and it has attempted to prevent federal and state enforcement of consumer protections states have that have passed reforms hold nearly 30% of the 1.5 trillion in outstanding student loan debt states have historically played a critical role in protecting consumers from abusive and predatory practices from mortgage servicing to payday lenders student loan servicing is no different since 2015 11 states and DC have passed laws to oversee student loan servicers this is combined with multiple state enforcement actions against services like navien and fiha their approach to addressing this crisis will shape the lives of millions of borrowers and the health of our economy for decades to come federal efforts must complement these state-level actions not preempt them many of us in this room can attest that good servicing makes a real difference in borrower outcomes this is especially true for student loan servicing where there are already many options to help students avoid default and be successful in repayment by failing to hold services accountable too basic consumer protection laws and responsibilities we increase the likelihood of more default and that this crisis will worsen rather than repeat mistakes from the mortgage crisis we should learn from that experience and work to achieve a sounder more effective student loan system Congress must ensure that federal dollars are truly an investment not just a payout our nation's future depends on it thank you thank you miss heron mr. Manoj you are now recognized for five minutes to present your testimony thank you so much I want to thank chairwoman Maxine Waters for the opportunity to testify and I would like to thank ranking member Patrick McHenry for taking the time to Google Who I am cute very name is Hasan Minhaj I'm a Muslim and I condemn radical Islamic terrorism that has nothing to do with anything I just want that on the record it's good to get ahead of these things now chairwoman waters invited me here today because I host a political comedy show on Netflix called Patriot Act which means I'm a Oh some of you guys royalties diem we can talk later now we recently did an episode on the student loan crisis and it really hit home with our audience because 44 million Americans owe more than 1.6 trillion dollars of student loan debt in fact the day we shot our episode we pulled our studio audience it was only about 200 people in that room alone had over 6 million dollars of student loan debt now granted our audience is mainly unemployed Poli Sci majors but that's still a lot of money now this issue is sidelining millions of Americans people are putting off marriage kids home ownership and retirement especially my generation so I'm 33 and growing up it was drilled into our heads you gotta go to college if you want a middle-class job and we even tell kids today look if you don't go to college you might as well get a face tattoo and then they point to post Malone and we're like ok that's one guy he's a very popular musician but it's true two-thirds of all jobs in America require at least some college this is the standard now and that wasn't the case when most members of this committee were in school and you paid far less for your degrees that's not speculation we looked up where the 60 members of this committee went to college in what your school's tuition was at that time even adjusting for inflation College Koch costs way less across-the-board so chairwoman Maxine Waters your tuition at Cal State LA in 1971 was the equivalent of about a thousand dollars a year today Cal State costs well over six grand that's more than a five hundred percent jump congressman King right in 1965 congressman king paid the equivalent of almost 10 grand a year at st. Francis College today st. Francis cost over 25 grand on average this entire committee graduated from college thirty-three years ago in paid and inflation adjusted tuition of eleven thousand six hundred and ninety dollars a year today the average tuition at all of your same schools is almost twenty five thousand dollars that's a one hundred and ten percent increase over a period of time when wages have gone up only 16 percent so people aren't making more money in college is objectively way more expensive you see what's happened we've put up a pay wall to the middle class and if there's one thing Americans don't deserve more of it's paywalls that's why we put up our entire show for free on YouTube it's also because you can't really find anything on Netflix it's like the lost-and-found bin of entertainment you're like great another show about people who love cake now despite these number you need these numbers you often hear the idea these kids wouldn't be in trouble if they just took some responsibility but they're trying to be responsible they're investing in education and they are trying to pay their loans backs and yet many borrowers are still treated like deadbeats because the government has put their financial futures in the hands of predatory for-profit loan servicing companies companies like navien and other companies you will hear from today have a history of misleading borrowers and pushing them into repayment plans that in some cases have cost individual borrowers tens of thousands of dollars in unnecessary very interest and the worst part is borrowers don't even get to choose their loan servicer the Department of Education chooses for you so there's no competition that makes these companies provide better service now look we know the deck is stacked against student borrowers in ways that it wasn't 10 or even 15 years ago and they deserve some basic protections Americans should not have to go bankrupt pursuing higher education and they should never be preyed upon by under-regulated loan servicing companies so members of this committee we know the government is capable of stepping in during a financial crisis so really all I'm asking today is why can't we treat our student borrowers the way we treat our banks because 44 million Americans that is too big to fail thank you so much for your time and I will now go back to where I came from Thank You mr. Manoj mr. jalal you are now recognized for five minutes to present your world system chairwoman waters ranking member mchenry and members of the committee thank you for the opportunity to testify today my testimony today represents my own views and not those of AEI which does not take any institutional positions so we've heard a lot today that there's a problem with the federal student loan program the private companies servicers that the Department of Education has hired to run this government program are cheating borrowers out of benefits confusing them giving them subpar advice leading them to incur additional costs but this common narrative as we've heard today seems to assume that the problem is entirely due to factors that are under the servicers control but I want to remind the committee given that the student loan program is not under the committee's jurisdiction that all of the terms of the federal student loan program are set by Congress or the Department of Education and servicers don't own these loans they also don't get paid more if borrowers owe more so what this means is all of the perceived mistreatment we're talking about today the crushing debt the misleading information the confusion the source of that may actually be Congress and the Department of Education not the servicers now servicers can make mistakes absolutely I'm not denying that they can get things wrong they can be sloppy but I want to give you some examples of what I'm talking about where the terms of the program actually so confusion and resentment among borrowers the Consumer Financial Protection Bureau operates a complaint database where borrowers can lodge complaints against their federal student loan servicers I'm gonna read you one it reads as follows I have repeatedly requested that all overpayments get applied directly to principal but my loan servicer Nelnet continually advances the due date then they tell me I don't know how payments work I then have to educate a willfully ignorant rep on how compound interest works and advancing my due date is not in my best interest so I agree this looks strange I make a larger payment on my loan and my due date goes out into the future so where did this come from well it came from the Department of Education this is a policy this is the policy the loan servicer is required to advance the due date if a borrower makes an overpayment a strange policy where did this come from well like all of these things someone was trying to help they were trying to give borrowers extra flexibility and when they needed to make their next payment if they made an overpayment so this is not necessarily an example of a servicer mistreating the borrower but that's what the bar would that's what it looks like to the borrower in fact that's how many of the people on this panel described the situation I don't think it's quite accurate let me give you another example borrow words often complain that their servicer has misled them you heard that today it's given them and they're caught off guard by some term of their loan I want to show you the Department of Education application form for the income based repayment program can't quite get it to fully extend to the floor these are the terms of the income based repayment program run some 10 pages you'll see on page 7 & 8 there's a 60 cell matrix comparing all the terms is it fair to expect borrowers to understand all of that information no is it fair do it respect servicers to explain all that to the borrowers and make sure they understand it I don't think so why do we have a ten page form listing all the terms because Congress in the department education egged on by many of the advocates required all of these terms so borrowers are utterly confused but they're blaming servicers when it's really the terms of the program now I have many more examples of this in my written testimony their deals are just - there are many but I want to conclude today by telling you what I think Congress can do to solve this problem I think we need a much more straightforward student loan program this is not going to be easy it's gonna require trade-offs it's probably going to require fewer benefits fewer options these are the things that are confusing borrowers or we could simply provide the most generous benefits to everybody all the time that's gonna cost a lot of money and probably isn't the best use of scarce resources but here's what I want to say that is really important these trade-offs exist and excellent student loan servicing it's not gonna make them go away blaming student loan servicers for the tomb terms of the loan program not gonna make these trade-offs go away Congress is going to have to make them it's up to lawmakers to ensure that borrowers are not misled or mistreated by the federal student loan program thank you thank you very much I will now recognize myself for questions and I'm going to address my question to mr. frost Minh in March you testified before this committee that the lack of action on behalf of student bars by the consumer Bureau quote reflects a fundamental lack of seriousness in the work that Congress tasks the bureau to perform and willful negligence in addressing the deep systemic problems that plagued borrowers owing the second largest class of consumer debt in this nation in quote instead of vigorously enforcing the law to protect student borrowers it appears the only notable thing that the Trump administration has done is install a high-ranking official from one of the nation's largest student loan services to be your success at the CFPB so this committee and others are examining the activities of the CFPB Department of Education and student loan services and today's hearing appears to be based on records my staff reviewed going back to 1995 the first full committee hearing held by Financial Services on the topic of student lending mr. Proctor given how student debt can affect avars life including their ability to get a home or start a new business and the broader economy is a consumer Bureau going doing doing enough to help student wars is the bureau coming up short and failing in its job are there particular areas that the consumer Bureau and the Department of Education should be prioritizing when it comes to enforcement thank you so much for the question chairwoman so student debt crisis is a big problem impacting all of your constituents the student debt crisis knows no party knows no ideology knows no administration and what we have seen is the historic amount of debt is hurting all of your constituents from their ability to buy a house start a small business we see how student debt is driving folks out of rural counties and we re usually talk about this in the form of ballooning balances but it's more than that it's a bull's-eye placed on the back of nearly 45 million Americans who are subjected to to predatory tactics from the day they take out their loan until the day they pay it back and what we have seen is that student loan borrowers have restless rights and fewer protections than nearly any other type of borrower you have more protections if you're paying back your credit card or your mortgage so while I was at the Consumer Financial Protection Bureau this is an issue we worked on a lot which was there are big banks federal student loan servicers you name it up and down the line who are viewing the student debt crisis as their chance to get rich and I'm proud of the work we've done we were able to get back seven hundred and fifty million dollars for student loan borrowers and we worked with anyone and everyone and you know sometimes we worked with the Obama administration sometimes we didn't make them that happy but that was the job and what you've seen now at the Consumer Financial Protection Bureau is just walking away from that mission walking away from the job to stand up for your constituents who the only thing they've done wrong is taking on debt to chase the American dream and I think that's why this hearing and this legislation is so important because the CFPB is one piece of the puzzle borrowers need the same rights and protections they would have if they were paying back a credit card and a mortgage they need to be able to enforce those themselves they need their states to be able to enforce them because they're really struggling thank you very much I wanted to get into a little bit about the disparities for minority student borrowers and I'll just get to miss Heron Harrington in the short time that I have left on this Sun question the Center for Responsible Lending published its own report early this year on bars of color and the student debt crisis and trying to have student borrowers of color your report recommends that we improve repayment improve repayment options provide debt relief strengthen servicing standards and prevent abuses by for-profit institutions do you think the bills we're considering today including the student bar bill of rights would successfully help student bars of color absolutely congresswoman these bills go a long way in the right direction to ensuring that consumer protections are available to student loan borrowers that's particularly important for student borrowers of color who disproportionately take out student debt and take out higher levels of student debt than other populations they have to go to college and they have to have loans to go to college due to the system systemic inequities that we have seen since the founding of this country so any any extra work that that can be done by this Congress to improve that system for everyone but especially borrowers of colors is essential thank you very much and now I will recognize the gentleman from North Carolina a ranking member mr. McHenry you're recognized for five minutes well I thank you and look I do think there's a commonality among the full full panel here across perspective the question of affordability of the institution is an important question it is I think we all agree on that now how we resolve that becomes a bit of a challenge but that's the nature of where we are in our society mr. Manoj as you outlined in your show the question of cost is a fundamental issue - and you address that and you also address the servicers so you go from the the question of the debt but the key question as well is and you get to this in some ways but underwriting there is no underwriting for a loan there's no question of a student being informed enough about the decision they're making that is a life-changing decision and we have the federal government creating a mechanism and then using private sector folks to then service their decision right so you don't you don't say underwriting but you get at it right that these students are given way too many choices for their financial literacy basically and don't have an understanding of what that will mean to their life for a decade two decades three decades and that decision they make is a 17 or 18 or 19 year olds and the impact that's going to have on their ability to buy a house or a car or have children or getting married and the societal impact on that so you do a great job of highlighting that I have to say and you're a fan of the show I don't want to do that I'll get you that not helpful I'll get you that tea shop I'll watch you right after I finish watching the Chappelle specials so we'll move from from there mr. Lyall as you outlined to the question of affordability is is a question is a is a fundamental question to the form you outline at your show there is massive one example I would give you is until the CFPB attempted to rewrite our student debt servicers interact with their clients servicers could not text the people they're trying to interact with you ask the average 25 year-old if they answer their phone not a chance right so texting is a very reasonable and responsible thing they can't do it because the rules by which they're servicing the debt do not permit them to and the regulations out of the CFPB have not been modernized so they can do that so one simple change like that could make a major impact on the ability to service it but mister allow let's talk about underwriting what underwriting is done before this debt is is given to to students basically none it's almost a no-questions-asked loan it's an entitlement there's no income check no means testing it's basically open-ended and does that mean there's no ramification if they don't pay well there is a ramification if they don't pay they generally will have accrue additional interest could have their tax refund seized most of the time the government is able to get the money back how clear is how clearly is that outlined in the contract these students in the master promissory note which is about as long as this other forms that I showed you and so there's no clear box like on a mortgage that gives you the key ingredients of what you're about to sign for not really no I mean the inference the terms of the loan are listed there but because of this sort of strange nature of student loans it doesn't doesn't look like or walk like another loan so for example the interest rate that you are going to borrow at it's not listed on your master promissory note well that's because we don't actually know the interest rates that you're gonna borrow at going forward because the interest rate is different each year you borrow because take out a new loan every year so the sort of trying to make these things work and look like traditional financial products doesn't really work that well because we're trying to serve a sort of different market so how do you reform the program to mitigate those risks well I I think I think I don't think there is a huge sort of affordability crisis in in student debt contrary to what everyone has said here you know I think there's a lot of avail mean by that well I don't I don't see sort of widespread inability of people to pay their student loans I hear a lot of complaining about it you know but in terms of our people actually financially unable to pay the loan I don't think that's as widespread as as a lot of people believe you admit there's a broader societal impact for this level of debt they're coming out of college with yeah I'm sure there is but also the you know it's financing an asset it's financing a higher education so all the concern about student debt if student debt is harming people means higher education is harming people that's what it paid for thank you the gentlewoman from New York mrs. Maloney was also the chair of the Subcommittee on investing entrepreneur ship and capital markets is recognized for five minutes thank thank you madam chair and thank all the panelists the price of college education increased eight times faster than wages between 1989 and 2016 college tuition costs more than many people earn a year and while we must address the underlying cost of college student loans have become so unsustainable that means of people are now putting off buying homes starting families or even starting their careers that's why I support full loan forgiveness and I'm a co-sponsor of senator Bernie Sanders house companion bill HR three four four eight the student debt cancellation Act these us solutions might fall out of the jurisdiction of our committee we do have oversight on student loan servicers student loan servicers don't own loans set rates or control the cost of college yet they are a critical point of contact for bars repaying Direct Loans and they are responsible for engaging with the borrower's experiencing difficult he's making these payments we recently held a hearing on student loan servicers and one of the troubling things we heard was that some schools engaged consultants to push forbearance to keep their default rates down even when other options are better for the borrower that's because schools have would lose access to federal aid if their default rate is too high and I'd like to know and I'd like to ask Parise you how often does this manipulative practice push borrowers into forbearance when it might not be in their best interest shouldn't the best interest of the borrower be the only factor that is considered not artificially inflating numbers and what role do the services servicers play here Thank You congresswoman in the experience of the borrower's that I work with many of them have attended predatory schools that have made big promises about the career goals that they will get and the big sellers they'll get in those promises fall through unfortunately many of those companies also all those schools also engage with default management companies that push borrowers into deferments and forbearances and we see the fallout of that borrowers come to my office they're in default they have a series of these four appearances they've never heard about income driven repayment many of these borrowers would have qualified for $0 income during payments but instead they defaulted because they exhausted their forbearances through these default management companies and now are in default servicers have the role of informing borrowers of income during payment servicers are required to reach out to borrowers and for too many borrowers that that's not happening and that is why we're here today and we are encouraged by the bills that are being offered by his committee also the Department of Education recently withdrew a set of student loan servicing standards and many states have since passed their own strong standards and procedures including restricting forbearance steering and creating a compliant the department's wouldn't everyone especially borrowers benefit from a common set of minimum industry best standards that the draft Student Loan Servicing Reform and Consumer Protection Act calls for again absolutely thank you for this question there there's a desperate need for basic consumer protections for student loan borrowers borrowers do not have basic rights seif dispute resolution solutions to timelines for processing payments for ensuring that borrowers are getting the best options presented to them the bills that are presented especially the borrower Bill of Rights which would present basic consumer protections are vitally needed by the borrower's I work with and in cases of forbearance in many cases that just adds to the cost and is not in the best interest of the borrower would you like to elaborate on that Monsieur absolutely there are some very limited circumstances or appearances can be useful however for the most part they add to the cost of the loan the interest rate is capitalized meaning the principal bounds grows and then interest is charged upon interest importantly that time is not applied towards forgiveness like it would be under an income during payment plan therefore borrowers are both their loans become more expensive and it extends the life of those loans thank you my time is expired thank you gentlewoman from Missouri mr. Wagner is recognized for five minutes I thank the chair let's be clear here the federal government is responsible for almost 1.5 trillion dollars of the overall 1.6 trillion dollars in student loan debt around 92% of all debt it's my understanding that only just over a hundred billion of this debt is in private loans which have a 98% repay me right meanwhile stats from the Federal Reserve Bank of New York suggest federal bailout borrowers are not faring well as more than 20% of all borrowers are seriously delinquent or in default and a large number of federal borrowers are seeing their loan balances grow not decrease post-graduation mr. Dalal given this bleak outlook for federal borrowers shouldn't more be done to protect consumers from assuming more federal student loan assistance than they can reasonably pay back yeah I think the place to look for a solution like that most obviously is in graduate school ending the for undergraduates in the federal student loan program there's a limit Congress sets a limit on how much people can borrow recognizing the kinds of things that you were talking about dependent undergraduate can only borrow fifty five hundred dollars for their first year school when it comes to graduate school Congress had the infinite wisdom to decide to lend unlimited sums to people to go to graduate school and this is where the big problems are well let's explore that for a minute mr. July does the federal government evaluate a borrower's ability to repay a loan before issuing a loan no a student who receives a needs-based Pell grant could also have their parent take out $100,000 Parent PLUS loan even though they've demonstrated that they don't have the means to repay is that correct that's right in fact the federal government will assess your ability to repay using a financial aid application determine an expected Family Contribution for your child's education and even if that number is zero the federal government is determined you can contribute zero towards your student's education then they will lend you an unlimited amount Sistani for your shelter it seems some federal borrowers are set up for failure from the start by the rules put in place by Congress what recommendations briefly would you make to Congress to prevent students and their parents from over borrowing well I think probably should restore some sensible limits to the amount that graduate students can borrow and I think there's really no good public policy purpose served by having the Parent PLUS loan program that we were talking about mm-hmm the federal government took over the vast majority of student learning from private lenders in March 2010 as we've discussed how does the design of these Department of Education contracts impact the ability of federal loan servicers to provide individualized service to borrowers well I mean they have to carry out the terms that are set in law so it can't be that individualized because they have to provide the borrowers the terms that they're entitled to but they have some because of all the different options in different situations that a borrower could find themselves in people on the left and the right have decided that it's better that servicers have some discretion and how they counsel borrowers so there's some flexibility for servicers to make decisions I actually think one of the sort of unintended consequences here of some of these debates and I look at some of the legislation that was posted today for the hearing and there's a there's a tendency to want to be more prescriptive of how servicers operate and I just am a little bit concerned about that because I'm not sure I would supplant lawmakers judgment for servicers judgment in the best way to handle each student's individual situation private student lenders make at least 18 disclosures on three separate occasions before loan is made providing much clearer information than is provided for Federal Direct Loans with disclosures for federal loans like those private student loan borrowers make lead to better outcomes for student loan repayment perhaps I don't really think this is an information problem I held up the form that today the 10 page form with the 60 cell matrix and people still complain there are thousands of complaints in the CFPB database about people saying they want help let me see this would it help to have disclosures of accumulating debt made during the course of study rather than just when a student first enroll graduates it may I mean the reason why you know typically the government and Congress have shied away from doing exactly that is they were worried it would scare people from continuing to borrow and finish their education so I you know I don't know what the right right direction is on that my time the gentleman from Georgia mr. Scott doesn't recognize for five minutes thank you very much mr. chairman it seems to mean that we have a profound question here of why why in an article that the very distinguished publication Forbes mentioned last year noted that the price of a four-year college education has nearly doubled since the 1980s they said though they average annual growth rate in wages and salaries over that same period increase only 3% this means that the cost of this four-year college education has increased eight times as rapidly as people working on their jobs earning wages and salaries that to me is what we need to really pull the covers off and ask why why did this course of a college education explode over this period at a rate eight times greater if we're going to really get to the answers of how we solve this and further as a matter of fact excuse me the course of a four-year college education in a more narrow window between 2003 and 2007 teen the cost of a four-year college education rose nearly fifty percent forty eight percent but between this same smaller window 15 year period wages and salaries rose only six percent this means that the cost of a four-year college education has increased nine times as fast as ours so ladies and gentlemen why what has caused this I think if you all could tell us each quickly if you could put your hand on one thing so that we would know what does zero end because we can put legislation on forever and no one handmade let's give a free education because nothing is free but the issue here is what is causing this abnormal teacher salaries professor salaries what has happened can can we go right quickly and let's try to get on the record why'd you if you all could put your fingers on just one thing maybe you can give us five things that we can address mr. Frohman so I think in many ways the answer is those five things but there is one thing that this committee can do to tackle it which is stop the predatory players that add zeroes to individual borrowers bills in the lawsuits against a company navien in in court houses coast to coast they documented how this company's practice has added four billion dollars okay at predatory lending great point we can hit that now miss you so I don't have the one answer but for the borrowers that we work with certainly the fact that the Pell Grant has not kept up has been hurting the borrowers that we see and has made it so that our borrowers have to take out loans in order to go to school that it is not a choice for them to take out of loans they are forced to take out the loans if they want an education which they need and which is why again we need these vital consumer protections forced to take out the loan all right miss Harrington so I think overall we need to reframe education as an investment in our future and that looks like many things all the things that my colleagues have said but also accountability for for-profit colleges federal state federal state partnership that really invest in equitable higher education and an ability for students across students across backgrounds to really access higher education in an affordable way an affordability at the front end and the back end all right miss him yes yes one of the things we covered on the show is the fact that when a student borrower calls their loan servicer say navient navient will rush you off the phone often times in seven minutes or less and they will advise you to go into loan forbearance instead of an income based repayment plan which would probably be better for you so that simple misinformation is a problem and I think student borrowers need just basic Bill of Rights like a protection to do not let that perpetuate all right thank you I get the sense you would complain though if navient kept them on the phone no not you wouldn't even tolerate that from United read all of these terms to them to make sure they knew exactly what they were getting into I guess people would be very upset about that too but they they want their best option not a CVS receipt all right Thank You mr. chairman very helpful I think that's very informative thank you gentleman from Florida mr. Posey is recognized for five minutes I thank you mr. chairman I'm wondering why there have been oversight hearings in the Education and Labor Committee on the role of the US Department of Education in managing his loan servicing agents and I would I just wonder if the panelists beginning on the far right would give me their comments on that am I on the far right yeah you're far right [Laughter] I mean I I think that the I think that sort of nature of my testimony is actually probably why the the the committee the Education Committee would have a hard time really going after loan servicers and blaming them for the problem because so many of the things that are frustrating borrowers are actually terms that that committee put into the loan program themselves so I think that that's one of the reasons why the loan servicing issue just isn't they sort of recognize it for what it is which is not the major problem here thank you what was the question again what's the major problem yeah what are your thoughts on the role of the US Department of Education in managing its loans just the fact that they outsource it to private loan servicers your general thoughts I mean my general thoughts is this are you familiar with the rapper lil Uzi vert no I think it's a huge problem that the youth of America have to bombard their favorite rapper pop musician and ask them to pay back their student loans they're not even asking for selfies anymore are you a fan of Taylor Swift I well are you swifty because even her fans have gone up to her and said we please pay back my student loans that's how desperate student borrowers are alright next so I think there's absolutely a role for the Department of Education in this but there's also a role for the consumer agency that we have which is the CFPB student loan borrowers are consumers and they are taxpayers and they should be and they should be protected by the CFPB and a CFPB should be required and have mechanisms to do so I think and I think there hasn't a lot of discussion about what the department can do particularly they can have better oversight and accountability for the bad actors in the system and that servicers but also for-profit colleges there's a few mechanisms that the different Department has actually rolled back that would have held these groups accountable the borrowed offense through a payment rule the gainful employment rule which would have gotten bad actors out of the system and lower default because defaults are actually directly correlated to the for-profit college growth and decrease so we need to look at the people that the actors that are actually response for some of the some of the burdens in the system thank you well I agree with my colleague we absolutely need the Department of Education to do a better job at protecting student loan borrowers but said the current administration has been shielding servicers from liability and rolling back consumer protections that every opportunity the Department of Education oversight by the department education is necessary but not sufficient to solve the student loan crisis these are private companies working with borrowers on the second largest credit market we need strong consumer protection laws to protect all student loan borrowers from the private companies that are profiting off of their student loan debt and so I agree with all my colleagues there's a critical role for the department oversight of the department but we should remember that under the FSA has called themselves the largest special-purpose consumer bank in the world and this is the committee that deals with banks and regulation of financial services companies and this isn't just a higher education policy issue this is a consumer finance and a consumer financial protection issue and borrowers need your help when they're ripped off when they're trying to pay back their debt okay I saw where the collections on their private is much greater than the public and and I'm just concerned now we go back through again on the role of the borrowers in creating the problem well you know I'm not I'm not sure that the the borrowers are really creating a problem here I mean I think that you know what I see is borrowers frustrated with the the terms of the loan program and so I think that really what borrowers are saying is they want something simpler you know we talked about a little bit about people saying oh well they're steering people to the wrong option how do you know what the wrong option is I mean that I mean a lot of people would disagree on what the right situation is there's so many options there's so many different situations it's almost impossible to tell so I don't really think that the the borrower's are really to blame here I think it's this sort of really crazy program that we're putting them into okay and and so the correct way to address that problem you think best would be well so you know for example you know one of the one of the things you could do is stop you know so one of the repayment plans that people complain about it's a benefit sorry lost my time the gentleman from Washington mr. Hecht is recognized for five minutes Thank You mr. chairman I want to follow up on some of the lines of questioning that congressman Scott engaged in but before I do that I want to be very clear very explicit very upfront I stipulate to the need to a substantial increase in a consumer protection regimen to deal with this problem it in fact just seems like common sense to me that absent that those protections and a one point six trillion dollar a circumstance that we can and should act but there is this issue of the root cause of the cost fire education going up at a multiple of inflation I've read a hundred percent since 2000 we have specifically cited 50% between the years so 3 and 16 and the subsequent amount of overall average student debt has skyrocketed as well we know that wages have not kept up the root cause here seems to be wages aren't keeping up do they increase constituition and the cost of tuition is frankly skyrocketed way beyond adjusted inflation adjusted one of our in fact that very chart there suggest that a decline in state funding as part of the culprit here I would like to personally attest to that and offer kind of a framework for why this is happening what happens in in the West where higher education as the principal delivery mechanism is that when economies have recessions state legislatures reduce their support for higher education and supplant that support with Board of Trustee increased tuition setting authority and as a consequence every time we hit a downturn they pull back on their support and say to the colleges and universities up to you you can increase tuition or you can cut your enrollment and reduce staff the letter which is obviously not very tenable so boards of trustees have hiked tuitions very significantly in the last twenty years and even longer this occurs every time we hit a recession unless do you think that I'm just trying to lay the blame off and point the finger at state legislatures I happen to have been a member of the board of trustees of one of those institutions during the last significant downturn and yes I raised my right hand and support offices of a substantial increase in tuition to compensate for the reduction in state legislative support this is going to continue to happen if we don't come to grips with what overall tuitions are one of the most insidious effects and I'm so grateful to those of you who have mentioned it is that this substantial increase student loan debt burden has resulted in a significant deferment of home purchasing options it's just one of the problems but this is a big one and this is one I want to point out know ordinarily what I would be sitting up here doing is telling you we have a housing crisis in this country and it is a crisis of supply and you know what that's true we don't have enough units it messes with the market there aren't enough starter homes for these young people who are debt burden rents are going up because people can't get out of their apartments into their starter homes so I would tell you it's a supply problem there is this portion of the market however where it is demand problem and what I mean by that is that student debt is creating material impediment for them to begin their homeownership here's why that is so important and how we have to view this holistically and keep this in mind frankly I think above and beyond just student loan servicers which is a problem we ought to attack defined contribution pension programs in this country have fallen off the table the increase has been in defined contribution levels and as a consequence the number one investment the number one investment for the average American for their retirement security is homeownership and they are being compelled to defer the beginning of the compounded interest that that investment that asset provides them with toward their senior years and this is in no small part being brought about as a consequence of increased student debt which is driven by wage growth being inadequate and tuition skyrocketing and I I seek to highlight this and consume all my time and none of yours for which I apologize because I think a dimension of this that should be considered above and beyond the student servicing consumer protection reforms which I hope we will enact in this committee is how in particular to deal with the homeownership question for those who seek to do it they're deferring it far fewer are engaged in it and it is going to hurt them in their retirement and it is a ticking time bomb please give that some consideration thank you for your time the gentleman from Missouri mr. Luetkemeyer is recognized for five minutes Thank You mr. chairman as I indicated my opening remarks I may be the only guy or if not maybe one or two you on this committee who actually has made student loans did that 30 plus years ago so I know a lot about student loan program years ago as well as what's happening now and so years ago I mean our student loan past do problem the collection problem was right similar to what this in the figures today which and according to New York Bank less than 2% of the private loans go have problems where 22% the federal loans have problems so it goes back in my mind to underwriting mr. de lisle what kind of underwriting standards does apartment Education have all do they have any at all or are they like no don't know doc loans that we got in trouble with during the Great Recession right I mean it's a federal entitlement so you are entitled to the loan if you were enrolled in a school so we have a we had an example back in the crash of Oh 8 where low doc no doc loans or a huge problem because you put people in house that could afford it and now you have people with student loans who can't afford it one of the things that we did when in my bank when we were over there we'd said and advised people it's kind of like if they want to come in and buy a brand if they're a youngster 16 years old about brand new Cadillac and they can only afford a a used Honda or whatever what do you do you said there explain to them why what they can afford and what they can't afford that kind of financial literacy a kind of financial oversight that kind of financial help is not there I would assume whenever they take out a student loan today so mr. lot can you tell me the process the student loan today yeah I think the way that the program has been designed to try to get at that is to impose some limits on how much undergraduates can borrow so rather than saying what's the right amount they say well look if you're a dependent undergraduate your first year school 5,500 that's it it's fairly blunt and unsophisticated but that's the way that's the policy we have for dealing with that and as I pointed out before for parents and graduate students there are no limits and that's where the problem is well that same token there if they go into an area of study they're wouldn t get a job in a real world they're gonna have difficulty paying back a $5,500 per year student loan they need to be told that do you not agree yeah I mean that they need to understand what what what their ability to actually earn in the real world is there so they understand how they can actually pay back these loans there is not that kind of explanation in place today is there no I mean there are some efforts to make more earnings information available to people who are attending institutions but in terms of know nobody sits down and says exactly how much you're going to make there's no requirement that they do that although I'm a little bit I wouldn't imagine exactly that writing something like that in legislation would be the best way to go either because well I don't agree I don't think you know my I'm old enough I got the gray hair to prove it that I remember back in the 70s when the Thoreau Graham was in the business of direct lending farmers there was an absolute total disaster it absolutely ruined agriculture for ten years absolutely ruined it because government was making direct loans to ever could walk in and sign their name regardless of where they could qualify it because if you walked in and you were breathing you could qualify that's basically what you got here and it's ruin a student loan lending business it's put the taxpayers on the hook for lots of dollars and I would argue that whenever you have a blank check and you can hand it to the you know mr. heck and and mr. Scott were arguing here a little bit about the cost of education whenever you walk into a school and say I've got a blank check you want help fill it out and let me know if I can get in school here if there's no accountability on the school's part or there's no ability of the consumer the student to go out and choose based on cost what that what that school can can whether school they want to go to I were to go to a better school that costs more I couldn't afford it so I went to school that cost less so that I didn't have this burden of the huge burden of debt that's something that students need to be told need to be explained to them given to them as an option and say look when you get out this is the problem you're going to have with this huge amount of student debt or you can go to the school over here which is not going to charge you that much and you'll have the ability to repay much more quickly and then you can go buy the house that mr. heck was talking about a quick question before you also mr. ly with regards to the contracted services by the the servicers who sits those those parameters in the contract the Department of Education does but by extension Congress does as well because the servicers have to carry about carry I know some of the kind of some of the concerns are about repayment I've got a chart in front of me that has 50 plus repayment options that are given to the students I'm not mistaken I get two seconds yet and I think this is this delays to me the question is what we need to put some more options in here fine if they've really got over 50 repayment options if that's not enough let's talk about it but I think we've got a lot of them in there that they can fall in those categories that they should be okay I yield back the gentleman from Colorado mr. Perlmutter is recognized for five minutes Thank You mr. chair let's I want to start where mr. heck left off with his soliloquy and ask you mr. Rothman I mean what do you and your study see to be the impact on housing of young people coming out of school with a big burden of debt around their necks so the impact of student debt is more than just what appears on your bill every month and a significant piece of that is the impact this is having on housing so there's one study that showed for every additional thousand dollars of student debt a borrower takes on they put off buying a house for two and a half months and we've raised a lot more than thousand dollars obviously and the impact of student debt isn't shared equally so you see a tremendous impact when it comes to african-american borrowers Hispanic borrowers and I think as congressman heck pointed out this is a tremendous way that people build wealth in this country and when student debt is impacting their ability to do so it should call us all to think broader about the scope of this problem thank you and and I kind of agree with a couple of things the gentleman from Missouri mr. Luetkemeyer had to say I mean choose how big alone whether you can repay it you know make some intelligent decisions at the beginning but much of this occurred in the recession when people couldn't find a job and figured they should go retrain themselves so that they could find a job and so you know there's the cohort is much broader than it used to be of people seeking student loans and it was at a time when jobs weren't available so I'd like to to turn to you mr. Minaj and ask you in your investigations and your expose what sharp practices you know deceitful practices deceiving practices manipulative practices did you all see in action with the servicing so we start with should anybody have taken out the loan in the first place we can disagree about that and the cost of higher education but in terms of servicing what did you see where there were improprieties specifically we saw when it came to servicing when a student who was actively trying to find the best possible option to repay when they would get on the phone with their loan servicer they oftentimes were given misinformation so instead of telling them - hey you should probably do an income based repayment plan because they were trying to get them off the phone within seven minutes or less they would say go into loan forbearance so that's actively students are giving bad advice that will hurt them later on down the road and they think they're doing the right thing because the person on the phone told them to the expert told them - did you find any particular servicer to be more abusive than others or maybe not abusive but navient was really bad do you have Comcast navien is like the Comcast of loan servicing you ever feel that frustration where you're like oh they're the worst I think you have no choices because the Department of Education put you in this arranged marriage that you can't get out of okay so because there are several different servicers and you know we really want to get to the bad apples and to the sharp practices or the practices that really hurt the students because first the debt is bad enough and then to pile it on gets you know really impossible because that gets me to my third question and to the lawyers on the on the panel you know in 2005 we made a very difficult for individuals to discharge their student loans in a bankruptcy and actually we've seen the rise in sort of delinquencies to go straight up from 2005 so I would just turn to you miss Harrington or you miss you I don't know if you're both lawyers or not but you seem like it so I'm gonna choose you two to start on that question so we absolutely believe that there need to be more discharge rides for student loan borrowers and it this is one of the ways in which student loan debt is treated different than other type of consumer print product and borrowers need the right they need protections they need bankruptcy protections and they need consumer protections and right now student loan borrowers don't have them anybody else for what it's worth I was wait-listed to go to law school you were yes I could see why I'm because your professors would have had to take you on all day so actually think I was a great I think I was a great student and for what it's worth my fingers are still crossed I'm waiting it's been 12 years but you never not I yield back to the chair thank you the gentleman from Kentucky mr. Barr is recognized for five minutes Thank You mr. chairman and mr. de lisle since the theme of today's hearing is student holding student loan servicers accountable and since some of your colleagues on the panel seemed to be blaming the student loan servicing industry for the 1.5 trillion dollar student loan crisis in this country I wanted to drill down a little bit on the actual role of student loan servicers in contributing or being part of this this crisis that we're here to discuss today do student loan servicers advise students as to which school to attend or which degree to pursue no the servicer isn't involved on the front end of the loan disbursement do student loan servicers set tuition rates do student loan servicers advise a student as to how much money to borrow no do student loan servicers underwrite student loans at origination no do student loans actually issue debt to students no do student loan servicers set the terms of the loan no do student loan servicers set the interest rate for the loan no do student loan servicers create the income based repayment plan no who did that Congress did Congress did the Department of Education do did the student loan servicers and that industry did they create the graduated repayment plan no who did that it's in statute so Congress did the Student Loan Servicing industry create the extended repayment option no who did that it's in statute did the student loan servicers create the forbearance option know who did that Congress dudu student loan servicers get paid more for informing students about the forbearance option No do they get paid less for informing students about the forbearance option they are paid less when students are enrolled in a forbearance no student loan servicers are actually not financially incentivized to inform student loan borrowers about forbearance that's my understands that's how the contract is structured right Hey - oh that nine out of ten borrows her at risk of default can get back on track with their payments if they respond to service or outreach in a timely manner what impact has vilification of student loan servicers had on a borrower's willingness to engage with the service server we've actually seen evidence in the Consumer Financial Protection bureaus database of borrowers being advised to take a forbearance when it's pretty clear they should and they don't because they don't trust their servicer and they've heard bad things about forbearance so they don't do it and then they default okay so if student loan servicers are not the problem let's explore what actually is the problem since the Democrat Congress and the Obama administration orchestrated the government takeover of student loans in 2010 the total amount of student loan debt has exploded the federal government is now the largest consumer lender and owns in or guarantees 92% of the more than 1.5 trillion dollars in student loans the remaining roughly 100 billion are private loans the number of federal student loan borrowers has exploded to almost by 50% since the government takeover at the end of 2018 70% of college students graduated with student loan debt private loans in contrast with underwriting standards that actually involve underwriting that allow lenders to determine whether or not a borrower has the ability to repay have a repayment rate of 98% and meanwhile data from the Federal Reserve suggest that approximately 20 percent of federal borrowers are seriously delinquent or in default actually about 36 to 40 percent that are not fully in repayment are our federal loans not private loans so mr. de Lisle - what you to attribute the difference in the default rates of private versus federal loans so the federal loans are open access even people so for example if you lose your job you become unemployed you become an excellent candidate for a federal student loan now I think all this sense if I if I can I just think all of this if I could editorialize for a minute here I think all of this is exhibit a of not just the total incompetence of the federal government but the victimization of students by Congress by the federal government by the US Department of Education I know everybody wants a boogeyman and the student loan servicers are a convenient boogeyman but guess what look in the mirror Congress Congress created this crisis Congress created the forbearance option Congress gave loans to students and didn't even care whether or not they had the ability to repay and encourage them to do so meanwhile we have a dramatic shortage in the skilled trades we have a dramatic shortage of nurses we have a dramatic shortage of welders we need to be reorienting workforce development and Career and Technical Education to say look a four-year college may be good we need critical thinking skills I'm a product of liberal arts college but you know what we need nurses we need cyber security experts we need welders and construction trades people let's graduate these people in a hundred thousand dollar-a-year jobs with no student debt that might be a better better solution than than trying to blame an industry that's just following federal law created by Congress I yield back gentlewoman from New York mrs. Vasquez is recognized for five minutes Thank You mr. chairman mr. Friedman last month the CFPB announced the appointment of Robert Cameron to serve as the private loan Ombudsman until recently mr. Cameron had been deputy chief counsel and vice president of Enterprise compliance at the Pennsylvania higher education assistant Authority in a statement you were quoted as calling Mr Cameron's appointment outrageous can you elaborate on your statement and explain why you believe his appointment is outrageous so it's a raid but not surprising we have a Secretary of Education who has used every tool at her disposal to shield student loan companies from accountability and now the Consumer Financial Protection Bureau has hired as the top student loan official someone from compliance at a company that is at the center of every scandal that has ripped off borrowers for a decade so we have heard a lot today about blaming borrowers or blaming Congress Congress or borrowers did not force Sallie Mae to ripoff 77,000 servicemembers Congress and borrowers did enforce ACS to lie to public servants Congress and borrowers didn't force public teachers to have their loans turns to grants in violation of their rights and I think what is happening across this country is that people took on debt to try to get a better life for them and their families and some of the largest financial services companies in America have been ripping them off for too long I think the bills before this committee and this hearing shows that those days need to end and do you have any concern that the Trump administration only seems to focus on private student loan services so absolutely I think what we have seen now is private sector companies where you have borrowers in all of your States who have alleged that they've been ripped off and this administration has used every tool at their disposal to say that the federal government can oversee these companies your State Attorney General's can oversee these companies if this was seven years ago and Arne Duncan told your state AG's that he couldn't investigate that they were unable to investigate a company for ripping off service members you would be outraged and you should be but that is what is happening today is the federal government is trying to shield private sector accounted private sector companies from accountability for ripping off millions of people miss you do you have any comment I absolutely agree you know the fact that the Department of Education is she building servicers from liability both from the state AG's and from private borrowers who are attempting to to protect their own rights as I think is outrageous as mr. Rothman said and I think that this committee it why it's so important for the borrower Bill of Rights and the other bills that this committee is considering today thank you thank you miss Harrington in May the Fed produced a report on the economic well-being of US households in 2018 which among other things discusses the state of student loans and other educational debt on the US economy the report found that individuals who do not complete their degree or who attended a for-profit institution are more likely to struggle with repayment and those who completed a degree from a public or private not-for-profit institution even including those who took on relatively large amounts of debt can you have any sense as to why this is the case absolutely so non-completion is a big problem this country particularly as you mentioned the for-profit College industry and so what you have is students who have the debt but not the degree so they don't have the ability to them translate that into the job or the income increase that they hoped because they weren't unable to complete these are unable to complete for various reasons it's disproportionately a problem for low income consumers who always low income students who have a lot of other things that they are battling as they are trying to attend college their caretakers their single parents they have they have to have a job as well so we have to be cognizant of the fact that that is absolutely a big issue and there's a big issue particularly in the for-profit college sector thank you I'll yield back gentleman from Texas mr. Williams is recognized for five minutes Thank You mr. chairman for holding this important hearing to help deal with the trillion dollar student debt crisis in 2010 the government took over student lending at this time the Congressional Budget Office predict that federalizing this program would generate 58 million dollars in revenue for the government he's initial prediction by the CBO has proven to be wildly inaccurate the student loan debt crisis is now estimated to cost taxpayers three hundred and six point seven billion dollars over the next ten years this was a massive miscalculation made by the Obama administration well we can try to single out student loan servicers for contributing to this problem the simple fact is that they are a deep-rooted structure that there are deep-rooted structural flaws that have allowed the crisis to grow to these levels mr. de Lisle what miscalculations were made back in 2010 when the government took over student lending yeah it relates to the Obama administration's decision and a Democratic Congress to dramatically increase the generosity the income based repayment program so under the prior version of the program borrowers paid 15% of their discretionary income had their loans forgiven after 25 years under the Democratic Congress and the Obama tradition in 2010 they changed that to 10% of income and 20 year loan forgiveness here's what that's done to the annual cost of that program in 2009 it was about a billion a year today it is 14 billion a year and that is not what the Obama ministration promised us the president's top domestic policy adviser went on MSNBC and said these changes will not cost taxpayers any money and they've gone from a billion to 14 billion all right thank you I think this is a prime example of the government trying to expand their influence in areas where the private sector can actually perform the task better many individuals on the other side of the aisle have been calling for greater government control over larger segments of the economy such as allowing the post office to offer banking services I hope everyone will see the disaster that has unfolded we've allowed for the depart of education to become the largest consumer lender in the country so mr. de lisle do you think the private sector government is better equipped to handle lending so I think on the undergraduate school side I think the private market could do a much better job in fact I think students who already have college degrees by definition are excellent candidates for private lending and in the in the parent loan program I don't think the federal government has done a very good job at all there so it'd be safe to say you're a capitalist thank you in recent Bloomberg analysis it was discovered that borrowers are collecting pay down about 1% of their federal debt every year at this rate would take a hundred years to repay the loans some people in Washington think that simply forgiving the student debt would solve the issue however I think it is a short-sighted approach to a much more complicated issue I'm a small business owner back in Texas and in my world if you borrow the money you pay the money back pure and simple so do you think that forgiving current student loan debt will do anything to insure that we will not be in this exact same position for the next generations who take on these loans and what message do we send that it's okay to borrow but not to pay back yeah I think the the real problem here again is to graduate school the department education shows that about 66% of the borrowers who are using this income based repayment program the one that supposed to be a safety net for struggling borrowers borrowed to go to graduate school many of them are projected to earn incomes a hundred thousand dollars and above so this loan forgiveness program was supposed to help struggling borrowers has essentially become a tuition assistance program for high-income graduate students and that is another example where the estimates for the Obama administration were wildly off they never told us that that is what was going to happen like we say borrow the money pay it back pretty simple formula mr. Dalal on page 7 of your testimony you talked about the how the forbearance lawsuit against Navi aunt from the CFPB is misguided can you please elaborate this statement yeah I think there are many instances where forbearance is is superior to income based repayment many of the panelists today I've told you it's one or the other in fact here's the here's the facing part you can actually get a forbearance while using income based repayment you can use them simultaneously in fact many borrowers call their servicer who are they're using income based repayment and they say I still can't afford it still can't afford it and what do they do the servicer offers them forbearance in fact the servicer can see that the borrower is already using forbearance so on the kinds of phone calls that you're listening to you're not privy to that information so the servicer is actually making the right decision realizing there's no more option to lower this person's payment forbearance is the best option thank you I you of my time back the gentleman from California mr. Sherman is recognized for five minutes our prestigious and elite educational institutions are revered they house the smartest and most articulate professors and administrators our society has so no smart politician would attack or criticize these revered institutions fortunately this committee includes at least one low IQ member so let me say the tuition is too damn high it's grown it is doubled in real terms adjusted for inflation since 1989 is it any better health costs have also gone up faster than inflation but at least you live longer if you get there you know at least the operations are better our today's professor's any better I don't know from 2030 2003 to 2017 a 48% increase in tuition now the these elite universities and others are able to create a self-perpetuating model that claims that they're accomplishing a lot they admit only the folks they think are the smartest the most likely to succeed and then they brag that their graduates are smarter and more likely to succeed than the people that weren't admitted to their institution and then they say that's because they provided them with such a and outstanding education maybe we could do a test and just take all the those admitted to Harvard and put them on an island for four years take them back they continue to be smart they continue to in most cases be well-connected from rich families and guess what 20 years later they're going to be rich people community colleges in California for in State students charge $1,000 a year in today's money less back when I went to Community College the education is just as good but what they suffer from is the employers know that all the best students are trying to get out of Community College and get into something more prestigious this is the investor Protection Committee if some outfit got people to invest $100,000 in Zimbabwe currency we'd be all over them some outfit gets them to invest $100,000 in an art history degree we think that's fine we just want to make sure that they don't that the federal government ultimately pays for it and finally there's the struggles of the fam of families with student debt what about the families that don't go to edgy don't go to college at all they're making less money they too are delaying starting a family buying a house and they're from families that are less wealthy than those that are struggling with student debt so we've got a lot of issues but we have limited jurisdiction here our jurisdiction is over the servicing process one idea throw out there is that why don't we allow people borrowers to choose another servicer you're assigned to one servicer that servicers in the know doing a good job you should be allowed to fight to say I wanted I want this other servicer let the servicers compete but I have a believe it and I have a question for mr. Dell with delilah Thank You private student loan lenders make 18 disclosures on three separate occasions before the loan is made providing more personalized information than is provided to those borrowing Federal Direct Loans you're going to be on the hook for the loan either way so you'd think the borrower would benefit from disclosures whether they owe the money to one outfit or another would disclosures for federal loans like those made to private loan to private student loan borrowers lead to better outcomes and would it make sense to have disclosures on the federal loans be made during the course of study rather than just at the beginning in the end well we have a lot of disclosures already I showed you the forms yes I'm talking about the distinction between the federal loans and the and the private right so I don't think you're going to really do much good in providing borrowers with more information at this point I think we're at information saturation in the federal loan program borrowers I had a so should we provide less to those who have the private loans or more to those who have the federal loans or should we can continue to have the disparities sir well look a borrower right now in the federal loan program has to sit for 70 minutes of entrance and exit counseling okay I'll ask another witness mr. primont so what I've seen is that people are taking on debt because it's the only way they could get the degree this isn't a bhoot bootstrap moment this isn't a tightening the bail people are taking on debt because they're going to school and this is the only way they can I agree come to pierce College thousand dollars yield back gentleman from Arkansas mr. Hill is recognized for five minutes I thank the Chairman thank the witnesses for being here on this issue certainly all of us sympathized with the challenges that student lending has brought to a lot of families across our country I agree with a lot of the comments today that this really is in the jurisdiction of of the committee and that this kind of debate really should be held firmly over at the Education Committee and to paraphrase mr. frontman you should know the names of who owes apologies to these families across the country that's important first of all state legislators state legislators who don't fund higher education as they had over the entire post-war environment state legislators who instead of doing that I have regressive taxes called lotteries and handout scholarship money the Congress and the Education Committee and the Affordable Care Act proponents that sold a bill of goods to the American taxpayers and the American people saying that this was a reform that would benefit families and pay for the affordable care act they promised 58 billion dollars over ten years to positive contribution to pay for the ACA what is it it's costing us three hundred and six billion negative it's a three hundred and six billion ten year negative is what CBO says the student loan systems contributed apology from colleges and universities who aren't educating people in that student aid office or in that admissions office about the cost of college and that you should you know all the ways to go about it they don't do financial literacy training which is why I support that bill so strongly with my friend Bill Foster from Illinois for Pell and non Pell and all student loan people that they have some sense of where they're going with this those people our families are owed an apology for that group of people that have contributed over a long period of time to this crisis I'll also say that families bear a responsibility of sort of knowing what they get into I agree with you that you know this is presented for a lot of families as this is the only way they're going to go to higher ed or a two-year school I agree and this gets into the comments we've all had about rising tuition at these rates the rate of higher ed since 1975 per annual income is higher than the health care per annual inflation rate that we had collectively complain about as families it's higher and I would submit scholarship lotteries taking away state legislators support promoting money with no strings attached all those things subsidize what higher tuition so I admire people like mitch Daniels at Purdue who says we're freezing tuition we're going back to basics to try to make sure we're doing a better job and so our administrators OS that but fundamentally there's under writing in these loans I was at a panel yesterday talking about of algorithmic lending credit underwriting and someone's the boy of a terrible atrocious problem with our student lending we try to underwrite the loans on the back end because there's no underwriting on the front end and so that's why these servicing companies have so many complaints about it and finally I'll say as a community banker for a long time nothing broke my heart more than a story a nurse she came to me or dad asked her to come see me made thirty eight thousand dollars a year working four days a week as a registered nurse or LPN at one of our big hospital systems she went to the U of A Little Rock single mom child lived with her mom so she shouldn't have a housing expense she had a hundred and seventy thousand dollars of student loan debt why pay for your rent pay for your child care pay for your failure pay for room and board and pay for all these expenses plus tuition in books so that's why I think financial literacy is so so important here and that personal responsibility this is an interesting hearing I thank you for bringing these subjects I'm sure the CFPB can do more about transparency maybe we can improve the forms that accordion out we were promised in 2009 that would be a principal mission of the CFPB transparency and shortening forms and making it easier for consumers but the fundamental issue mr. chair is this should be dealt with in the education committee we need to reform this plan and we need to let families get out from underneath this crushing misdirection of government policy and student lending gentleman from New York mr. Meeks who is also the chair for the Subcommittee on consumer protection and financial institutions is recognized for five minutes Thank You mr. chairman you know III come out this is a very very important subject matter for me being a kid that grew up in public housing not having any family member prior to me able to go to college parents not making much money and think my dad at the time might have made 125 dollars a week but they had hope for their son their old his son to break the barrier and go to college they surely couldn't pay for it had I gone to a bank at 18 years old and said give me a loan and they were gonna go through a whole lot of pieces about whether or not I could pay it back I would not have gotten alone I would not have had a chance at getting an education at 18 years old never worked in my life parents poor can't contribute anything I would have been denied an education and therefore not sitting here today because the most significant thing to be is an education unless I apologized out of here because there was a movie ceremony going on why I have this Kent they cost or about 400 years when the first indentured Africans were brought here as slaves and talked about one of the first thing that they would deny was the right to read and get educated there anything to keep them in slave was to prevent them from having an education and that's ultimately what this is about if you're rich you're gonna qualify for loan you shouldn't need to get one but you're qualified you'll meet every metric but if you're poor you're in trouble and I see every other nation focusing on their young to try to make sure they're doing everything that's possible that they can in education because of that is their key to their future and we talk about being in a competitive world if we are leaving the majority of our individuals uneducated because they can't afford an education then we are endangered as our country now I think all of you in the panel will agree that when we talk about the current student debt it is crises is that not correct it's a crises it's the crises for America mr. Fortman let me ask you and I hear my colleagues on the other side talking about all of this but if this was a crises I think it is a crises for us right now the government of the United States is spending and I guess they call them socialists but it'd be nice 18 billion dollars to farmers because of tariffs and other policies that the administration what with 18 billion dollars do to help the crises of student debt it's a great question congressman I think I've traveled coast to coast talking to student loan borrowers in blue states and in red states and they they don't want apologies they want help they don't they don't want to hear about a president who hasn't been in office in three years or policies from a decade ago they're struggling now and this is the committee that ensures that those who took on the debt don't get ripped off and they're getting ripped off they're calling their student loan company and getting bad information they're getting arrest by debt collectors so twenty billion dollars sure but this is the committee that stands up for those people who have taken on debt to try to make a better life and student loan borrowers need you to do it again now would it help because the FHA does not adjust for an income-driven repayment plan which allows borrowers to pay a reduced amount for their student loans each month based on their income and family size instead debt to income ratios are calculated using debt figures higher than the actual figure people are paying this makes it difficult for many student borrowers to obtain a FHA mortgage shooting the FHA base debt to income ratios on the amount of student borrows actually pay yes miss you absolutely is Herenton yes mr. Munoz sure mr. Dilip well I think this is a good illustration of too complicated federal programs not working well together because they're complicated right that's that's the source oka says and I go back to my to my other issue because if the focus here that I see a lot of times I'm anxious to bang that gavel I yield back to mr. Zeldin is recognized for five minutes Thank You mr. chair ranking member McHenry and I actually I'm gonna want to pick up where mr. Meeks just left off in a moment I don't think anyone disputes that there's a student loan crisis in our country a recent study in my home state of New York shows that the average graduate is graduating with approximately $30,000 in student debt the federal government nationalised student lending is part of the Affordable Care Act in 2010 since then the federal government has become the largest lender in the nation because it owns or guarantees has been pointed out earlier 1.6 trillion in student loans and as husband's has been said by others only 8% is held by private lenders at home in my district on Long Island we have the next generation trying to achieve the American dream to be able to start their family to buy a home to afford a car that would get them to work the burden of student debt certainly is a huge obstacle it's clear we have a problem students are borrowing exorbitant amounts of money and many don't fully comprehend what they're getting into in the first place I would use this opportunity to put in a good word as brad sherman was pitching a local college we have the state university of new york we have the city university of new york in my home county we have Suffolk County Community College I was actually recently at a graduate ceremony for a two-year graduate at Suffolk Community College and because he made the most of his experience he was actually transferring to Cornell on a full ride and then he was gonna have an Ivy League degree because he applied himself well at at this great Community College locally there are an incredible number of requirements placed upon lenders in the private sector when they originate loans and consumer credit markets notably the requirement the lender approve a borrower's ability to repay at the time of origination doesn't make sense to me that we wouldn't hold the federal government to the same standards the federal government lends to anyone without regard for its ability to repay disclosures for key loan terms like Apr future monthly payments are not required on federal student loans either I thought Andy Barr's line of questioning was was great as was French Hills recent remarks though it's not in the committee's jurisdiction to pass here I introduced the Excel Act HR 4079 this is where I want to be able to pick up where my colleague from New York Gregory Meeks just left off I believe that the system should allow people to be paying off their loan based on their ability to repay for some people they will be able to repay in a shorter amount of time and others will there are periods of low income or unemployment over the course of your career this is where you can rack up a lot of defaults with where you owe a lot of money we need to help people get through those periods of low income Iran and low income or unemployment so that they are not defaulting and that they're able to more quickly get back up on their feet also as people are seeing increases if we are moving into if we were able to move into a better system of factoring and ability to pay as somebody is getting a promotion and they're getting more of a salary you want to make sure that the increase that they might be paying towards their student loan is one that doesn't remove the incentive for being able to get that step-up in in salary so it should be there should be an increased there also people need time to get their feet under them so you graduate you get your job and you're your first bill is quickly come due but your ability to make that first payment and your one or your two is not the same as your ability to be able to make that repayment say in your seven or your ten because now you're further along the the career ladder ladder so this flexible repayment approach focuses on this students ability to repay loans based on their income to ensure the student is not being set up to fail everyone benefits when borrowers and lenders operate under a rational incentive structure especially when it comes to servicing and loan rate borrower servicers and the taxpayer will benefit when borrowers stay current with their payments this committee may not have well that this committee does have purview over private student loans and their servicers as a French he'll point out there's a lot that needs to get done under the jurisdiction of the education and work force committee mr. Delilah I know you may not be able to comment specifically on the merits of the excel Act but what kind of lessons can a federal student loan originating learn from the private loan originating servicing market well I want to get at something you asked around you mentioned about the the need for flexible repayment options in the student loan program and I should point out though that we have them we have this income based repayment program but ironically it's actually why we're having my understanding is why this hearing was called many of the borrowers who were complaining about student loan servicing are actually complaining about the terms of the income based repayment program they say I've been making payments for years on time I've never missed a payment my balance keeps going up and they think the servicer is pulling a fast one on them that's actually how this program was designed to work I'm at a time but I just want to point out we need to make some changes to that because it's not working for the government it's not working for the borrower and and many others I yield back the gentleman from Texas mr. Gonzalez is recognized for five minutes i-i don't have a lot to comment i would i we we've you know shot arrows at each other and talked about all the issues that are wrong if if I had to ask one question it would be what's the solution and I'll ask mr. frontman if you had to come up with a solution to the grave issue that's impacted everyone certainly I was a student loan recipient I wouldn't have been able to go to school without one I had a hundred thousand dollars in student loan debt when I got out of law school and you know I had to live in a in a you know matchbox apartment and really just hunker down to eventually pay that debt and it was a you know I did it with much gratitude because I I certainly wouldn't be here if it hadn't been for that opportunity but clearly something's really screwed up in this country when it comes to student loan debt and I don't know that we have the answers to it maybe you guys do so I want to hear your opinion and others on the panel so quickly I think there there is some truth to the fact that a lot of this problem doesn't rest with this committee but a lot does and I think what we have seen is that student loan borrowers are getting ripped off and one of the reasons why they are getting ripped off is because they don't have the same rights and protections as if they were paying back a credit card or paying back a mortgage and we've heard a lot about how servicers are just doing the right thing as part of the lawsuit with that all the states and the CFPB against navient just documents the the incredible incentives that these companies have to try to drive a profit so there is one employee at navien who described it this way do I help this borrower and answer their questions or do I rush through it and afford my groceries this month these are the incentives that the call reps that these companies have to give bad information no information or little information at all and borrowers need rights and protections that are enforceable so when they get ripped off they could stand up for themselves so I absolutely agree I think that there are numerous problems and I sincerely do hope that we could solve the you know tuition crisis however likewise the borrowers that we work with took on this debt because they wanted to improve the lives for their families and now they're saddled with that debt and today there is a hearing in the 11th Circuit where Great Lakes is arguing that they don't he'll have to be held accountable when they commit fraud and misrepresentation because it's preempted by the Higher Education Act and I think what this committee needs to do is to say that borrowers should not be cheated and lied to I'd agree with my colleague I think that student loan borrowers deserve and need the same protections that all consumers are entitled to in this country I think that the solution to the student debt crisis is both working on front-end and back-end affordability and that's what we're talking about here an affordability absolutely includes at the back end strong servicing protections and quality servicing for all borrowers we do need to increase the amount of the Pell Grant we do need to increase investment in HBCUs and MSI's we do need to do a lot on the front end but the commitment this committee has a has a big part to play in making sure the CFPB can actually protect student loan borrowers thank you mr. Gonzales I'm I'm very passionate about this issue because I'm lucky when I left college I didn't have any student loan debt because I have immigrant parents and they made me live at home with them so I don't have crippling student loan debt I have crippling emotional debt and Congress has yet to stand up and do anything about it and stand up to my parents and say what you did was wrong but you don't have to have crippling student loan debt to to have empathy for people who are investing in their futures and that's why I'm here today thank you so I I mentioned in my my testimony that I think we need a simpler system the program has too many options too many overlapping features that are just too complicated even for Congress to anticipate the confusing way they interact and trip up borrowers and actually many of them actually almost look like the borrower's being scammed where a borrower says for example wait my payment increased I didn't even know it was gonna do that how come I I've been paying the same thing for the same month and also my payment increased those those you know nasty student loan servicers actually turns out the borrowers in the graduated repayment plan that's spelled out in statute with their payment increases every two years all right so the program has been designed to look like a scam to borrowers so I think the big solution is to stop blaming servicers and get busy fixing the terms of the program thank you I yield back gentleman from Georgia mr. Loudermilk is recognized for five minutes Thank You mr. chair and truly this is a crisis we're seeing and hearing and all around and before I start my question mr. chair I'd ask unanimous consent to insert into the record two letters regarding the student loan crisis by the consumer Bankers Association identifying the crisis and some suggested solutions to that without objection thank you I was recently a meeting with some constituents this is about three years ago back in the district we were talking about the void we have in jobs in the nation and I was talking about the need for a lot of technical skills and stuff and after I got done this young lady comes up to me and she said look I have a twin sister both graduated high school at the same time I went to a tech school went right into the workforce and she said and you know in four years I've made more that my sister has in student debt at this point which was incredible to me that now in four years in a in a in a field professional field that this young lady went to tech school now has made more than her sister had and student debt I started looking into it more often and realized that you know we truly do have a crisis and there's a lot we have to do it mr. Fortman you said something earlier that when I follow but you said students have to have a loan to go to college is that true sorry I sorry if I wasn't clear enough I was saying when I talk to people over the last half decade that's what they feel like from I think Hassan that said this best which is people don't feel like they have a choice for as long as I can remember I'm sure for as long as many of you can remember it was go to school take on the debt right and I think what is happening is that for enormous swaths of American society that decision is premise on whether or not so it's more to people feel than actually I mean do we happen to know what percentage of students actually graduate with no debt does anybody know what that is in the 2016 class 70% of graduates had student loan debt okay so about 30 percent there's a vast majority of students and this and it is something that is no longer a choice 65 percent of jobs by just next year are going to require some form of post-secondary education that's not a good that's all gonna go up I've just wondered because of that I think that two of my three children graduated 4-year College institutions was zero dead and no scholarship they actually worked I couldn't pay for it they actually worked and paid for their tuition even from some colleges you would recognize that statistic that many of the people who take out student loans come from high-income families which should tell us that people aren't necessarily taking out student loans because they have to they're making choices and maybe making choices to attend more expensive schools they may think the government is offering such an incredible deal you can't turn it down so so I think it's important that we tend to cast student debt as this thing that only low-income people take and it's a huge burden but many high income families are choosing to use it so follow on what you're talking about there so in their truth-in-lending that they receive I assume they receive a Truth in Lending statement to they know what the repayment requirements are mean you talk about people calling back saying why did my cost go up are they receiving documentation showing the requirements that they have to repay this loan yep they're receiving an overwhelming amount of documentation they also need to sit for about 30 minutes of entrance counseling and about 30 to 40 minutes of exit counseling to get the loan sign a master promissory note and then any time they use a different repayment plan they're also signing another form so we don't have an information deficit we have as much information as we have options in this program which is way too many what yes so yes there are high income individuals who do take out student loans but there are a significant number of low income individuals who have to take student loans and that's where the issue lies 90% of the defaulters are low-income students who are eligible for Pell grants so those are the folks who are struggling to pay the most and that continues to be the case because the student debt has not taken them to where they're supposed to go so we do have issues in this with this do you agree with mr. Doyle that they are they do know going into it what the requirements are of repayment their interest rates their payment the escalating payments I mean is that is there enough disclosure there I don't think this is a question of personal responsibility or dis or more disclosures this is a question of how we make sure that private actors are acting in the best interest of consumers and students and therefore taxpayers well I think it is in a sense of if I was under the impression that they were just being given loans by statute or whatever and they didn't know what they were getting into and their requirement to repay so that would be my question I mean we buy a house the trig requirements is so expansive of the truth-in-lending that that we have to have software to do it but anyhow see that I'm out of town I can I can submit the rest of my questions for the record thank you gentleman from Florida mr. Lawson is recognized for five minutes Thank You mr. chair and welcome to the committee this is a very interesting to me because I have probably over 100,000 students throughout the field congressional district so I talk to students all the time of I probably haven't you know I didn't have in it stood alone because I was an athlete and so but a lot of my colleagues that I was in a dorm and so at night would be talking about what's going to happen to them and how do we have to pay them back I have taken a great deal of interest in this particular area and I don't think the federal government caused any problem because in Congress because we are the good guys you know and everybody else is bad but I have gonna do several bills to address various angles of they are still a loan problem these includes a bill to refinance federal loans with a fixed interest rate exclude an income of dependent students in the expected Family Contribution calculation that most recently the bill to extend the interest-free grace period of federal loans and and the reason why I introduced those is because six months after student graduated from college and they don't have a job they expected to pay so hopefully we can delay it for at least a year so you can give them the opportunity to to get a job the and also you could just buy refinance just about everything so they should be able to refinance to a loan I would like to hear the panel discussion on the land student loans for at least a year to the can find a job and the ability to refinance student loans and I start with chill intro so I think we often get stuck in this mindset that you need to have a silver bullet to solve every problem there is no silver bullet to solve a 1.5 trillion dollar student problem so I think bills like these are should be encouraged I think we need try to tack at all of the different ways that student debt is not only impacting individuals but our larger society so I'd love to learn more about these bills and work with you thank you for your question certainly borrowers need more assistance getting off the ground you know interest rates for some borrowers are way too high but also the borrowers that we see you know it is the fact of their debt it doesn't matter if it's five thousand or fifty thousand dollars whether or not it's a five percent or ten percent interest rate the borrowers that we work with are just struggling with that all around and they need to make sure that they're able to access the programs that already exist they would greatly benefit from income driven repayment it would greatly benefit from a lot of the cancellation programs that already exist and they're just not able to access those because of lack of consumer protection I'd agree with my colleagues and I just add that there definitely does need to be streamlining an improvement of the income based repayment program make it actually affordable based on eight percent of discretionary income not ten percent increasing the line above which income starts to 250% of the poverty line there's a number of things we can do making it one plan but again all of that only matters if students actually can access these programs and plans if their services are actually doing their jobs if they had the information they need to be successful I'm not an expert when it comes to refinancing although I am very good with Microsoft Excel and macros so you can refinance a federal student loan the federal student loan has no prepayment penalty so you are free to go out into the private market and shop for a better rate obtain the better rate use all the proceeds from the new loan pay off the old loan and you've refinanced exactly like you refinance a mortgage I don't know why it is it is this is the sort of common misperception that you can't refinance a student on there's actually it's happening all the time it's happening right now there's a company called sofa sending out mail all over the place saying refinance your federal student loan with us so you wouldn't build a whole company around something you can't do right so I think there's ample evidence that you can actually refinance a federal student loan but everything that I've heard from you this morning you all are the good guys because it seems like everything that I've been discussed here students don't know about it and the people who've been on this panel and talking about it even so many members have no idea about all the things that available for student is often time they're not even if I refinance to loan and the federal government should that be making a profit of the backs of our students and I know I'm running out of time I like to have more discussion with you in the future and with that I am back gentleman from Ohio mr. Davidson is recognized for five minutes I think the witnesses and I think the committee for talking about a major problem in the country the student debt crisis we've seen it accelerate in the past decade and I think we can go back and pinpoint the point in time when the rate of growth of the problem began to accelerate the question is do we have the resolve to actually go to the root cause or do we want to do things the way Congress normally does which is akin to the fire department showing up at a burning building and looking at the building burn while we blame one another or try to figure out whose fault it is we just need to put out the damn fire and so when you look at it how do we do that the structure in Congress actually prevents getting to the root cause we've got a committee that can only deal with the jurisdiction of servicers so we're sitting here talking about the issue of how mr. Barr highlighted the very limited ability of servicers to actually spend this problem we're spending hours talking about services here servicers here instead of talking holistically about the root cause of the problem and how do you deal with that what we did is as a country we decided that we wanted students to be able to get loans that the private sector wouldn't make because the default rates would be too high so when I was a young person and I looked at how much debt I would need to take on and I looked at the alternatives I had one of the reasons that I loved my option one of the reasons I chose to March for free college back in the day is because the Army had the college fund and I was able to go to the Army and have a path to not go into debt as my first act as an adult but to defend our country and that led me to go to the United States Military Academy and all that as part of why I'm here today so I do want to thank the American taxpayers who paid for me to have a great high quality education and I think when we think about the taxpayers of America we need to forget about the Forgotten men and women who are actually being defrauded here and it's the taxpayers because they're fronting all this money for no sound underwriting to people who do not have a realistic expectation to pay the money back doesn't mean that those students are committing fraud though some may be but they do not have a realistic prospect of repaying the loan and when you have market principles at work people don't make the loan they don't they say you know I love you it's not about you as a person it's you do not have a realistic expectation to pay for this and when we lost those principles that's how we crash the housing market in the United States and that's how we're crashing the education market in the United States there are a lot of people being hurt because lawmakers are making half-baked solutions to real problems because the way this place is structured with jurisdictions doesn't allow solutions to the whole problem we could we should be structuring and say you know the student debt crisis is a problem we've got a committee for that that committee has jurisdiction to deal with the whole problem we should talk about healthcare and say you know the status quo is broken we should have a health care committee's 20% of the u.s. GDP 20% and instead we divvy it up amongst three committees you look at immigration same story so on and so forth the spending problem the broken welfare system the means-tested programs the poverty assistance that we have divvied up amongst 12 of 16 committees can't even get a bill to holistically deal with it to appoint a commission for Republicans for Democrats you can't cut spending you can't launch new programs but you could refine it to fix the benefit cliffs that are in there no one can convene it because there's not a single committee with jurisdiction and yet Congress sits here we demonize each other we point cameras and say see here's the problem that's the problem we don't go to the trouble to put out the fire and solve the problem if we want to do it colleagues we have to change the structure of the way this place works and do bills that get to the root cause because the American people are being defrauded we're going to bankrupt our country by spending more money than we have the same way these students are being bankrupted right out of the gate the earliest stages in life by taking on more debt than they can afford that's exactly what this nation is doing today and we need to change the broken status quo and that starts right here in this I yield thank you the gentleman from Guam mr. San Nicolas who is also the vice chair for the Committee on financial services has been recognized for five minutes thank you so much madam chair I don't think anybody's hands are clean in all of this I don't think anybody's hands are clean I think that um you know politics has a way of making us try and pigeonhole the problem and make it be the previous guy's problem or try and you know identify some other reason why things are the way they are but the reality is that our entire system is kind of designed to create this mess that we have here today miss Harrington when you say 90% of the defaulters are low-income Pell Grant recipients I think that speaks volumes to how systemic this problem is you know we have our people in this country who are looking for opportunities they see education as the way to go which is how we're all raised we're all raised and told go and get a good education it's going to open doors for you and it's going to create the better life and the life that we have now we have these as mr. Sherman pointed out institutions of higher learning that see all this money available and they keep increasing tuition rates as a local lawmaker back home I remember trying to introduce legislation to reduce the amount that our students had to pay for tuition and one of the one of the individuals in the university told me they said we don't want to drop it below the Pell Grant rate because that's free federal money that we're bringing in and we want to bring that money into the territory and you kind of sit back and you look at how the system is almost designed to to make the pursuit of capital on on the front end the priority and the pursuit of the American dream for all those people you know trying to find whatever way they can to get to where they want to go kind of falling into that trap and of all things I think that this is ultimately an indictment on our inability to provide significant financial literacy education in our community so people don't make these individual choices that are hurting them but when the whole system is almost designed where you need to go and you need to attend the best possible University you can just get accepted into so you can possibly get the best job that you're going to be able to get after you graduate and then you borrow as much money as you need to borrow in order to get from from here to there it's that classic case of the ends justifying the means and unfortunately what's resulted in all of that is 1.5 trillion dollars in student loan debt and a lot of people who took that option trapped they're trapped because now they have this debt and it's affecting the debt to income ratios they're not able to go out and borrow for a car to drive to work or to borrow to buy the home that they're that they're dreaming of for their families and as much as we talk about systemic risk in this community and as much as this committee has done so much work to address it when it was affecting the big banks we need to really ask ourselves a hard question is it systemic risk for an entire generation to be lost to student debt and to hold them all back because they fell into a trap that our society has kind of created for them and so we've asked the question of you know what can we do and I know that the committee has kind of stayed focused on the servicers and definitely there's a service gap that we need to fill but I wanted to ask the 1.5 trillion dollar question and this is the political question that I think a lot of people are talking about and there's some broad-stroke solutions that people mention that are running for higher office but I want to ask you folks what would you do about the 1.5 trillion dollar I don't want say elephant or donkey in the room but just the 1.5 trillion dollar giant that we're all facing here how do we how do we address that so I think it starts first off in hearing rooms like this I think for years when we started doing this work at the Consumer Financial Protection Bureau and you would talk about impact of student debt everything would always revert back to let me tell you how we're gonna make college more affordable for the next guy an entire generation felt like we were writing them off so I think it I'm not trying to evade the question at all is like we just need to talk about the impact that this debt is having and then come together and realize that it is just an unacceptable outcome for 45 million Americans who've seen their chance at the American Dream hampered by student debt and I think it starts there starts about talking about housing impact on buying cars on racial wealth gap on income inequality because I think that I think we hear about this issue sometimes talked about is like a generation eating too much avocado toast right and nothing could be further from the truth the fastest-growing segment of student loan borrowers are older Americans I think we need to come together and realize that this is impacting huge swaths of American population and the American economy well I'm almost out of time is anybody have a solution I mean we're talking about forgiving student loan debt hitting the reset button does anybody here advocate for that or something so we just cloud a recent report within double ACP Unidos Leadership Conference on civil human rights and the Urban League where we argue for broad-based cancellation even of $10,000 across the board which have a significant impact for many bars especially bars of color they're not full forgiveness but even just partial it just would give them breathing forgiveness for a significant amount of people who are most at risk so the 90% of the 90% of defaulters who are low-income are on the median amount they don't they're defaulting on is less than 10k so even at $10,000 we would have a significant impact on the lives of millions of borrowers and we'd help lift them out of poverty the gentleman from Tennessee mr. Rose is recognized for five minutes Thank You chairwoman waters I'm a graduate of Tennessee Tech University and in my home town of Cookeville Tennessee and fortunately I graduated from Tennessee Tech with no student debt and and just recently was looking at the statistics for that university and see that still today 48% of their graduates graduate from the university without student debt and the cost is very reasonable and it's a great University it seems to me and I think others have made this point today but I want to bear down on it that we are here swatting at something that is really not the problem and and this committee unfortunately or fortunately depending on your perspective doesn't have the jurisdiction to deal with the problem and so I you know I look back to July 2010 when the Affordable Care Act was signed into law and since that time all new federal student loans have been made through the Federal Direct Loan Program administered by the Department of Education today nearly one point four trillion of the 1.5 trillion in student loan debt is owed or guaranteed by the federal government a federal government who did it explicitly because they thought they could make money and use that money to offset the cost of a new entitlement and I think I think what we see unfortunately here in Washington is over and over again the federal government occupies a space that the private sector was handling fairly effectively and turns it into a giant mess and so now here we are trying to swat at the at the symptoms of this eel and and so I'm really kind of mystified by why we think beating up on the servicers is somehow the answer to this problem I mean by that logic it is the people who work at the servicers who the problem it is those dastardly individuals who get on the phone with you that we should be blaming and we should be sanctioning because how dare they mistreat student loan borrowers when they've got them on the phones and so I you know I'm just kind of mystified by this approach to the problem mr. de lisle what is the relationship between the Department of educators the relationship between the Department of Education and student loan servicing companies so it's a contract the department education hires them on contract to basically run the entire federal student loan program according to the terms that are spelled out in law and what is the process by which the terms and conditions of those contracts of loan servicing are set so it's the standard government contracting process from the department takes bids and and and and has a limit has a amount of money that Congress determines how much it can pay for these contracts and using that amount of money spells out what the servicers should do and who sets the terms of the loans such as the interest right and the loan terms that the borrowers borrow under what Congress does they're set in statute do you think the majority of borrowers are aware that Congress sets those terms it's hard to say there are certainly some who are unaware of that who in fact the only entity they're interacting with is their servicer so I think it's reasonable although incorrect for them to blame the servicer when they're when they're frustrated with this process it's the only entity they're interacting with but as you can see in my testimony I give a lot of examples where the servicer is just doing what they're supposed to do and it looks like a scam to the borrower and a servicers role is to ensure that the borrower's are acting according to their repayment plan or to suggest a better option it is the duty of the servicer to inform the bar or of all of his or her repayment deferral and forbearance options what is the process for choosing a new plan so a borrower is entitled to choose any plan for which they're eligible pretty much whenever they want they can get the information from the department education website they can get the information from the servicer who will send them forms and they can decide which one they want to use they can ask the servicer about the options servicers generally aren't in the position of telling you which one is best for you that's a really difficult kind of calculation to make I'm an expert in this I would have a hard time determining what and what the ideal option is for every borrower in every circumstance is there any connection between the compensation structure for the company's employees the servicers employees and the repayment plan that the borrower chooses it's mostly based on are you in good standing are you in forbearance or are you delinquent it's the my understanding is the contract is is less about which plan you choose it's more about whether or not you're in good standing on the loan thank you I yield back the gentlewoman from Michigan mr. Lieb is recognized for five minutes thank you so much madam chair I sincerely appreciate this conversation especially because my district and 13 congressional district I call it 13 district strong is the third poorest congressional district in the country and it is very dangerous when we start blaming borrowers unfairly when the system is really set up against them and set up for complete failure 52% increase in tuition just college debt in Michigan from two thousand seven to two thousand seventeen just putting that on there what's really hard in these conversation is we forget about the human impact and I think mr. frontman you were trying to put that forward and so have you been miss miss Harrington you've been trying to put that forward as something that needs to be in this room because doing nothing has consequences on real people's lives and Redford Township resident in my district came up to me and he said he's so concerned about what's happening with his college debt he's in his late 40s and he wants to buy a home and he can't because of college debt another young woman who just graduated from law school said I don't want to go into the court I want to do free legal pro bono work and she said desperately like what can we do because I hear all these horror stories about people doing the forgiveness loan program if you do public service for ten years and she just saw a number that 99% of those applicants were being denied again these are teachers these are public servants these are people that are giving back to the community that raised them and one of the things that we keep forgetting is you know these are not people buying Ferraris and I mean this is an education these are not you know fur coats which I would prevent people have asked them not to buy those but I'm saying that these are not luxury items and one of the most successful anti-poverty programs in this country is education and so we have to continue to try to put the human face on this issue and not try to get so much into the tech nap now of the other because I feel like when we do do that because there are these different solutions to this that we get far away from actually saying that there is a crisis here and madam chair I do if I may later on I plan on submitting for the record letters from real people not lobbyists directly impacted by this crisis without objection such as you order thank you we saw in the mortgage crisis that doing nothing had consequences and all of a sudden our residents and our families were getting preyed on and that's what's happening with college debt right now and you know today you cannot go on Facebook without seeing one of these ads you cannot listen to radio without hearing some sort of pitch you cannot go for 48 hours without getting a robo call or text message congratulating you on the opportunity of a lifetime to help you with your college debt right and we have companies like Pennsylvania Higher Education Assistance agency already meet peen paid hundreds of millions of dollars to service these loans and help our bars but all of a sudden these folks are coming and you know a lot of my colleagues will call them businesses I'm gonna call them scams they're scam artists they're scams period can't we cannot deter from the fact that they are trying to prey on the most vulnerable because guess what we made them very vulnerable because we're doing nothing about this crisis mr. Hartman do you think the reason that these long student loan debt relief scams are so poor philic you know I mean just increase is because services are failing to get borrowers the help they need absolutely I think one of the downstream consequences of the widespread abuses and mismanagement by student loan servicers is just this abundance of scams of companies willing to prey on the most vulnerable borrowers and steal their last dollar in the Mis Department you know Facebook Google Bing Yahoo and others have allowed these con artists scams to use their advertising platforms and search engine engines to target struggling bars to what extent do you have concerns that these search engines are enlarged and it part responsible for profiting off of the abuses of student loan borrowers and making this crisis worse so it is without question that companies like Facebook and other technology companies are making a whole lot of money on ads by scammers of people preying on student loan borrowers and I think this is to go back to a prior question the buildings on fire the buildings on fire now and there's things that the committee could do to help constituents your constituents across the country and this is what's happening to your point this is the human face of people getting ripped off and the to what extent and you when you think of that list of legislation before us what extent do you think that we be doing here to protect them because it is going to be hard to get some of my colleagues I'm really on both side of the aisle to really try to handle this crisis because doing nothing again for so long this is what you have before us for me I am you know I'm a mom and so I'm trying to even if band-aids don't work I'm trying to stop the bleeding right now and now I have so many of my residents falling into the trap of trying to refinance and do all these things and by the way mister like you keep saying that I mean if it looks like a scam and acts like a scam it's a scam but one of the things that is really distraught is and I'm so sorry madam chair I can submit my questions later but I really want to ask you what we can do in regards to these platforms and how we can protect our residents from scams like this the gentleman from Wisconsin mr. Steele is recognized for five minutes thank you madam chair I appreciate you calling today's hearing to to highlight what's a really serious issue we have a 1.5 trillion dollar student loan problem and today's hearing though I think digs into a false premise as to where the problem is the problem is in the underlying cost the education product in the first place that's driving students into debt misdirection works really well in comedy it's not terribly effective and actually solving what is a very serious problem when I was on the University Wisconsin Board of Regents what we did to address the student debt issue is we actually froze the cost of tuition froze it dollar-for-dollar and that allowed the cost of tuition become more affordable for students in the state of Wisconsin it had a direct impact on the total student loans that students were taking out and actually allowed students to come out with less debt than if they would if we just casually increase the cost of tuition it's a real solution to a real problem we see states go around and sue big bad corporations because we're you can't legislate and get the cost under control the underlying product in the first place you litigate if you can't legislate you litigate and what we need to do is actually have a real honest conversation about what the underlying cost of the product is that's driving students into debt in the first place and so if you kind of think through just our panel that's here today I'd ask you at your alma mater which is I think where we started off the very beginning this hearing what the underlying cost of tuition is so mr. Rothman at the University of Michigan do you know what the in-state tuition is for a student it's $15,000 if you're out of state is 51 thousand dollars MS you at wholly at Holyoke College do you know what the cost of tuition is is $52,000 fifty two thousand dollars miss Harrington at UNC Chapel Hill do you know what in-state tuition is it's actually pretty darn good it's less than nine thousand dollars that's solid work by the University of North Carolina and the University of North Carolina system that's getting that done mr. Manoj do you know what the cost of in-state tuition is currently at UC Davis go Aggies yes so oh three oh four my freshman year no no today today so today it's fourteen thousand four hundred ninety dollars oh do you know what the oddest bonus points absolutely do you know what the out-of-state tuition is I don't know what that is think it's forty four thousand dollars I think it's relevant I don't think I don't think that's worth it though mister if you're out of state I think you just we're gonna I think you invest just call it mr. Doyle do you know what the cost of tuition is at Lawrence University for poor student I believe it's zero do you know what the cost would be what's the sticker price which is I don't for a really high income student sticker price hope it's really high so it's forty forty nine thousand dollars they're high income good and so so so there's a disparity between sticker prank you you identify a good point there's a significant disparity between sticker price and the cost of students are paying but the published rates that are the most easy to obtain and what's causing a problem for access for students is the sticker price and or high income people good prices absolutely absolutely University of wisconsin-madison if you're below the median income in the state of Wisconsin tuition and fees is zero dollars not one doubt zero dollars is covered between a combination of the federal government between the state between private donors that actually addresses the underlying cost of the product in the first place and so we're we're having a lot of misdirection into the processors because there's big bad companies and I'm not telling you that they're perfect I'm telling you it's a misdirection to try to find a boogeyman for what's the underlying problem and the underlying problem is the folks that are running these universities whether or not they're state legislators state senators governor's Board of Regents they need to come in and address the underlying problem which is the rising cost of tuition fees let alone as you get into to housing and other issues and so what we did in Wisconsin was actually put forth a real program that addressed the problem driving down the underlying costs of tuition brings down the debt level it's darn effective in an areas where states continue to see their costs going up where they can't legislate or they can't put in policies in place that actually help students be able to live out the American dream we litigate we sue all these companies we misdirect we make a bunch of noise it's not effective it's pretty darn frustrating and I yield back the remainder of my time well I thank you mr. Stowell the gentleman from Illinois mr. Casten is recognized for five minutes thank you madam chair thank you so much to our panel mr. Manoj you mentioned in your initial comments that the median income is up 3% over the last 33 years I think you are far too optimistic census data came out with information this week the median income last year was 63 thousand dollars that is exactly the same as it was in 1999 to the extent it's up over 33 years that was a creature of the 90s it ain't true anymore now during that period as many have noted tuitions up over a hundred percent cost of housing is up 34 percent the price of a gallon of milk is up 30 percent we have one and a half trillion dollars worth of debt my colleagues across the aisle last term blew a one and a half trillion dollar hole in the economy so that we can remove the pain of the ultra-wealthy have so they don't have to decide between their milk and their college tuition the nation's 1% thank you meanwhile we still have this problem and while we while there are a whole lot of issues beyond the jurisdiction of this committee that are underlying that and of course we'll look into all that I think we have created a fiction that markets are perfectly efficient and there is no emotion and decision-making and therefore the entire marketing industry must be ashamed but we do have it we do have distortions in the system 2005 bankruptcy bill says that you cannot discharge your debt in bankruptcy if it is debt associated with a student loan program you can discard your credit card debt you can discharge your your mortgage debt you can discard discharge all cuts of other debts miss you can you talk about how that affects the underwriting process if you know that underwriting alone in a world where the median income is not keeping up with tuition growth is never effectively never going to default so I think that it is driving a lot of the abuses that we see in the in the private loan market because we know that borrowers are not going to get out from under their day so you know low-income students are struggling to make payments and lenders have no incentive to provide them with more flexible repayment options because they're gonna be on the hook so when mr. Dalal made the comment that essentially we're not doing underwriting for student loans is it safe to say that the underwriting process has been distorted by the 2005 bankruptcy bill I think that's right okay I'm speaking about the federal student loan program not private loans i fair enough distortions in the system I'll get to you in just a moment mr. Doyle there's a there's a separate narrative going on and we've we've heard it across this panel and we've been talking about this for years that if you subsidize the cost of a loan you will distort economic efficiency if you give people access to to debt that exceeds their ability to repay they're going to make unwise financial decisions and that has a certain it sounds logical we all took freshman economics and and yet as Raj Chetty has pointed out in his sort of Magisterial work on wealth and income inequality the single best predictor that you are going to find yourself in the top quartile of income in your peak earning years is weather and her parents were in the peak quartile of income when you were born some of us were so smart that we chose our parents wisely some of us were too dumb to do that oh if it is the case that the access to an affordable ledge Asian distorts your rationality it makes you more prone to do foolish things it makes you more prone to enter into careers that don't generate a useful income if affordable education is so distorting why are the children of the ultra wealthy so darned irrational mr. Dalal you described yourself as a capitalist why is it that the ultra wealthy don't enter into lines of work that don't pay them an income I'm not sure that that's necessarily the case so that I know quite to the contrary the best predictor that you are going to be in the top quartile of income not wealth all the wealth is also true top quartile of income is that your parents are born that way so we do not see data that people who have access to zero cost loans that never have to repay them that get total loan forbearance we see no evidence that those people are going into foolish lines of work why are they so irrational we do see we see evidence right that they're actually they are doing quite well which is why I think it's such a waste of money to forgive their loans which is actually the current policy I am asking a different question people who if you do not have to have a loan at all the reason why you don't have to have a loan at all is because your parents were so wealthy I'm not talking about whether or not those families chose to take out loans they could afford to repay why isn't Donald Trump jr. working in a shoe store as a philosophy major write in poetry so I think the data show since we'll talk about data and evidence here the data show that high-income families take out student loans that is not the question I've asked you said why don't they and I'm saying I am asking why people who do not have the need to take out loans violate your theories of economics that assume everybody is rational I don't assume everybody's rational the gentleman from Wisconsin mr. Duffy is recognized for five minutes thank you madam chair as a father who has her his kids now going through school I gotta tell you the student loan system is jacked it's a it's a horrible system and I think what it does is if you're poor you get great subsidies and you in college is more affordable and if you're wealthy you know you have parents who will help you pay I think the middle caste the middle class gets crushed in the way that this system works that's just my personal opinion from going through the process would you would the panel agree that probably the smarter the kid the better school they get into it maybe the less smart the child the not-so-great school they get into is that you guys I grew that no I don't agree with that given the history of racial injustice in the country and the fact that we have disparities across k-12 schools that are concentrated in low-income neighborhoods neighborhoods of color we haven't adequately prepared our students and so this Martinus level which is usually measured by grade point average their SATs or things like that are inherently biased and so they don't they don't determine who is smarter they determine who had wealthier parents who could put who could put them in certain schools and give them access to certain programs and even the data with with those SAT programs show that there's also a mismatch between borrow students who have who have the ability to go into higher schools but then don't for other reasons great points but the higher the SAT and the higher the GPA the better school the lower the GPA and the lower the SAT the lower rung schools is that a fair assessment whether that's where the intelligence or smartness is I think you make a good point is that fair enough so if you have a 20 on your a CT your PI not going to Harvard oh I mean or if your mom's Aunt Becky you can just pay your way and at us what are we talking about it was like what are we talking about here but I would you and I were both former MTV stars you wasn't it material I was the star of and we use disaster date season five you know what it's like we can't afford mr. Manoj or that MTV trying to clear my time okay I know you think it's a joke it's not what you think it is and you want to come in here and make light of a serious situation so I don't think it's funny so you can sit here and and and do your film and make people laugh well we're trying to have a serious conversation and I only five minutes so okay leave it alone my point is we do have a problem and I agree with my colleagues that the problem belongs with the cost of Education okay and if you're going to let me go to your school and you're going to charge me fifty or sixty thousand dollars a year and give me a degree that I can't make a living to pay the loans back what what skin of the game does the school have for letting me in charge me the money giving me the debt and I can't pay it back who pays does the school pay mr. frontman no I think in should they so they have skin in the game so I'm actually happy that you're trying to talk about solutions I think in the game I think that should we call back some of that money I think that there nope needs to be back money from the schools if you give me a degree that I can't I can't pay back my loans why should the taxpayers why sure actually we're a couple of rules that would have ensured that the most the worst performing schools would have had to return you to Grandpa to borrow definitive repayment rule and the gainful employment rule which this department we should call money back from the schools we should hold schools accountable thank you actually the worst actors for-profit school it's not about calling money back it's about holding schools accountable just for the fact that they have low quality programs that cost a lot of money I think this this problem exists argot from all the scholars better your whether you're going the best schools I'm it's my time isn't all schools have this problem and so we should call money back from all the schools that give kids degrees with high debt and they can't pay it back number one number two I think we should look at the endowments I mean you're billions of dollars in endowments and we're talking about what giving loan forgiveness to all students there's so I in University of Wisconsin Marathon County five thousand dollars a year to go to go there to then you go to the University of wisconsin-madison for $18,000 a year that's a really smart choice those are kids making really smart decisions for their financial future versus the kid that goes to Dartmouth and pays fifty eight thousand dollars a year so why should those who you know became a union well when I went to a union welding school or the kid that went to UWM see pay for the kid that went to Dartmouth and has the pathway of Dartmouth that's fundamentally unfair if you set up a system where you have kids getting great degrees and making big money and we the taxpayers are we the union members are gonna pay back their school that's insane and I yield back madam chair gavel me down gentlewoman from Massachusetts mrs. Presley is recognized for five minutes I just want to say I'm very disturbed as we perpetuate the fiction that we live in a meritocracy and that people advance based simply on acumen when we are in the midst of quite literally some very high-profile people who have their their children's SAT scores fixed and things like that have been going on by the powerful and a few for a very long time okay so I want to say thank you chairman waters for your continued leadership for making sure that this committee stays focused on those issues of care and consequence to the American people I especially appreciate the frame and the titling of this hearing several months ago when director chroniger of CFPB was before this committee I asked her whether or not we were in the midst of a crisis and I could not get her on the record to even characterize a student loan debt as a crisis when in fact it is when we talk about that the choke hold of this debt and I've just spent six weeks in district in the Massachusetts seventh hearing from families who are struggling to put food on the table to pay the rent to take care of aging parents to pay for child care what does all this mean ultimately it means that people are alive but not living this debt is not just choking at our ability to build wealth or our purchasing power it is quite literally choking people we had a hearing an oversight and reform trauma and and we learned that suicides are on the rise for many reasons and one of those reasons is debt despair so this is choking at the promise of our country and quite literally we are losing lives because of the debt that folks are burdened by so it is a crisis and for those across the aisle that perhaps think that we are being dramatic you cannot overstate a one point six trillion in debt crushing close to 45 million borrowers you cannot describe that as anything less than a crisis so I think the chairwoman for her leadership and for those across the aisle that question whether or not this committee is germane to this issue when you overlay this with discriminatory policies like redlining and then miss Harrington shares with us that 90% of defaults are disproportionately bore by students of color there is no way that there is not an interconnectedness and an intersectionality from homelessness to housing to many of the issues that this committee tackles and so this is exactly what we should be addressing as a committee the facts of this crisis and again it is a crisis requiring no exaggeration we are past the point of just paying attention it's time to act madam chairwoman I'd like to ask unanimous consent to include a statement from the student debt crisis a nonprofit organization dedicated to combating this crisis without objection such as you order Thank You mr. Romney you led the team at the CFPB whose sole responsibility was to watch out for all student loan borrowers and younger consumers what were some of the trends that you and your team noticed so unfortunately what we see just like we saw in the mortgage context was when servicers fail it hits the most vulnerable borrowers the most and in the student loan context these are borrowers of color so we see now even holding for constant like income degree attainment African American borrowers have double-digit rates of default and with that in mind the bureau announced that we were going to be looking at whether or not student loan servicers and student loan companies were in compliance with the nation's fair lending laws during your time there did the CFPB begin to look into a potential discrimination in the Student Loan Servicing industry and violation of the civil rights laws including the Equal Credit Opportunity Act so in April of 2017 the CFPB announced that it would be prioritizing in our supervision work whether or not student loan companies were complying with the laws nation's fair lending laws in particular whether or not borrowers based on their race were more likely to have difficulty getting in an income-driven repayment plan okay and to your knowledge as the bureau continued to look into these issues unfortunately not based on your own conversation with director Cringer it appears as if the bureau has just dropped this work madam chairman I'd like to request unanimous consent to include a letter from civil rights organizations including the n-double-a-cp in the Leadership Conference of civil and human rights urging the CFPB to look into racial disparities and student loan outcomes and potential discrimination and Loan Servicing market without objections such as you order mr. Furman our friends across the aisle have mentioned that student loan servicers are supposedly not incentivized sister your borrowers toward forbearance and that they are not financially incentivized to give borrowers poor or outright incorrect advice yet an autorelease by the DOA in February of this year found that more than 60% of the department's oversight report contained examples of servicers acting improperly if our friends across the aisle are correct and loan services are not incentivized to make mistakes and give poor advice then why is this consistently happening because they're wrong because they are incentivized to give bad advice they're incentivized to get there call reps off the phone as quick as possible which we see across the industry leading to the outcomes we have today thank you the gentlewoman from Virginia mrs. Wexton is recognized for five minutes thank you madam chair for yielding and thank you to the panelists for for coming and for sticking with us throughout this very long committee I want to speak for a moment about the public service loan forgiveness program because this is something that's very important to a lot of my constituents as you know this program was intended to reward borrowers for public service and the deal was spent ten years in public service as a teacher a nurse a police officer somebody in a working in a qualified non-profit 120 monthly payments against your student loans and the government would forgive what's left now obviously it's not working out that way we have evidence that 99% of those people who applied for forgiveness were rejected over what most of us would view as technicalities and and things that should not be so news - can you speak a little bit to the problems with the program and in particular the role of fedloan which administers the program for the Department of Education absolutely there are definite improvements that could be made to any of the programs of the department at ministers and overseas right but again it goes back to Weather Service whether students have access to the plans and whether services are putting them in the right petite giving them the right information to make sure they are properly enrolled that they are making the right payments and that they are proceeding according to the requirements of the law so that they can receive that relief and most of that information again comes through their service or who they rely on to make sure they are in good standing and they didn't get that information on the front end most of them is that correct it's a big problem yes ok now I guess with regard to I would ask miss Harrington do you know who Kathleen Smith is yes who is Kathleen Smith she is senior to Department of Education she was but did you know that she's been hired by the pencil vera Pennsylvania higher education assistance agency had forgotten I guess I did though that okay so now she's she's their head of director of Federal Relations is that correct yes so she's now a lobbyist for that private entity yes in fact that it's fedloan is the subsidiary of the PHA yes that administers this faulty program is that correct okay and how about Robert Cameron's you know who that is yes who's that he is the new student loan Ombudsman at the CFPB where was he before becoming the new students also apphia okay and so now he's he's overseeing [Music] protection okay can you talk just very very briefly about some of the things that the Department of Education has and the CFPB have done to stymie state attempts to to hold student loan servicers accountable absolutely so the department has revoked a few memorandums that would have shared information with the CFPB and other agencies they have attempted to preempt state enforcement and regulation of student loan servicers trying to curtail the states already the state's ability to enforce consumer protections and protect their own citizens the CFPB under this administration got rid of the office of students and now it is hired again as you said a person with direct ties to one of the loan servicing companies and so there's a major problem and that's just the tip of the iceberg for actually the Department has taken that kind of undermine are undermine our confidence that they are that they are working to achieve their mission of supporting students and providing access to high quality education and that the CFPB is assuming its mission of protecting consumers which the loan borrowers are and are you aware that P is 10-year 1.3 billion dollar contract expires in December of this year yes so they the Department of Education and CFPB have made it harder for states to go after bad actors they have they have instance they have put a former executive from one of the bad actors in charge of enforcing consumer protection right yes and now a former top devos aid is has gone into public really are into government relations with that bad actor is that correct yes thank you madam chair I'll yield back but that sounds pretty swampy to me the gentleman from Ohio mr. Gonzalez is recognized for five minutes thank you madam chair first I want to submit for the record a Federal Reserve Bank in New York staff report entitled the credit credit supply and the rise in college tuition evidence from the expansion and federal student aid programs without objection such as you order thank you so I guess one good thing about this hearing is it there it does seem to be almost universal agreement that the effects of massive debt on young professionals balance sheets has a horrible effect on their ability to onestart families to buy homes basically to get started in the American Dream I have a constituent I do I talk to a lot about this as she went to my alma mater for for law school I took up a bunch of student loans and her and her husband are making real trade-offs on can we afford to have another child can we afford to to buy a home and and I think her story is indicative of stories all over the country again somebody who did everything right who continues to do everything right but but just can't quite get out from under the crushing debt one interesting thing though is we seem to be focusing on what I think is just a weird plate like the very end of the spectrum the very final stage which is the loan servicer whereas all these other things happen in advance that lead to higher tuition that lead to the fact that we can't refinance these loans and so we're for some reason we're focusing here I guess that's the only part that we have jurisdiction over but but it strikes me as just a strange place so to summarize mr. de lisle just quickly again I know this has been said a lot no underwriting standards right that's right okay federal government is essentially guaranteeing the loans they're making them directly you know and then all of this that we're talking about fully controlled by Congress that's right okay so clearly a problem that we have created I want to focus on the rising tuition cost which is why I submitted this for the record mr. delare are you familiar with the study that I just mentioned yes okay so correct me if I'm wrong but the the premise of the study or the conclusion of the study is as the federal government has taken over these loans as they've increased caps that has in fact resulted in skyrocketing tuition right that's right so more lending higher tuition that's the finding of that paper right so the fact that we have gotten into this industry hasn't done a thing about the cost of tuition all it is essentially done is transferred the debt over to the student I would say though the tricky part with those analyses though is that we know that student loans allow more people to go to school right so it raises tuition but more people can go and we know that when people get loans for people who don't they tend to finish and they tend to get better grades so there's been you know a lot of complaining about student debt here but sort of fundamentally it is a sound policy yeah well I mean I think that gets into the ROI right like that a big investment is okay if there's a real ROI there and you know we you're right we haven't talked much about that but I want to ask you specifically about an area that I know you research which is income share agreements so the thing I find interesting or that I like about them is it sort of shifts the risk right so instead of the student taking out the debt now the university or the institution is is taking out the debt if you will and saying we will provide this education upfront provided you pay us XYZ over time I guess from from your research my question would be where have you seen this work best like what if we're legislating or thinking about it what what should we be thinking about in terms of these are best practices that are doing well by students and the university I think right and I think it gets to what congressman Duffy was talking about is it sort of the beauty of an income share agreement where it is being done right is when it's when the school is making it right when the school makes it now the school has has risk they've got the skin in the game and the great part is is you know we talk a lot about you know sort of free tuition an income share agreement is a way to not charge students tuition give them an income share of unit and they only have to pay it back if it works right if it works and and then you build uncertainty which I know like Purdue University as one has done and I think again the beauty of that you graduate you have no debt you have a you have a liability you have to pay the income right but in fact when it comes to borrowing for other things whether that's a house a car whatever what is currently on people's balance sheets has now moved off great well with that I will yield back the gentlewoman from North Carolina mrs. Adams is recognized for five minutes Thank You chairwoman waters thank you for convening that hearing today and thank you very much for your testimony as a former educator and somebody who educated primarily first-generation low-income students of color this is a very personal issue for me a student that's a problem for all young people but particularly for low-income students who are predominantly people of color who look at a higher education degree as their ticket into the middle class and that's the promise that we make to our young people and so us as as members of Congress we need to start keeping our promises miss Harrington thanks for appearing before the committee I want to thank you for your work on the Senators report dealing detailing the student debt crisis in my home state of North Carolina the report shows that of the 44 million americans who hold 1.5 trillion dollars in student loan debt 1.2 million of those live in North Carolina holding a debt tab of about forty four billion dollars you'll hear my friends on the other side of the aisle blame the Obama administration's elimination of the federal family education loan program as the cause for student debt crisis but can you explain what the Senators reports showed that are the key causes of the dramatic increase in the debt in North Carolina sorry our report shows that there's a number of key causes right yes tuition has risen but there's been a drastic disinvestment I'm at the state level in higher education the purchasing of the power the purchasing power of the Pell Grant has been drastically reduced I think we should remember that the federal loan program was never meant to be the cornerstone of the HEA it was meant to be the Pell Grant it will submit to be actual grants not loans but we never allowed the Pell grant to keep up with the cost of college and to keep up with the proportion that it should have covered from the beginning it's the rise of for-profit colleges that again have disproportionately targeted low-income students and students of color with programs that are low quality and high cost and students are more likely to drop out of those programs as a completion crisis and this is this is particularly concerning again in North Carolina where we have a number of alternate institutions that serve students of color and low income so that's much better namely our historically black colleges and universities all right thank you I made VCU strong so you detail in your testimony that students of color are the most risk due to ballooning student loan debt and in the report you also mentioned how North Carolina's HBCUs do well in educating African American students with limited resources first of all what impact does a high student debt burden for young people of color have on one HBCUs so we've seen that across the board the student debt levels of HBCU graduates are higher and that's because they disproportionately serve more low-income students and students of color 70 over 70% of students at HBCUs are low-income over 80% are African American and so the the biggest indicator of whether you're gonna take out a student loan how much is your Pell Grant eligibility and so by disproportionately serving these students but serving them well they are taking on students who have to take on more debt and so on the back end it takes is take students of color particularly african-american students longer more debt and longer to pay it back and they are more likely to default even when they have a degree so what impact does it have on alumni giving it has an impact on the amount that students have of available resources to give back to their school and so I think we we can and this corresponds to the the wealth gap in education as a whole right so if you already are serving low-income students who will continue to be low-income because of the way the system is set up they often have less or fewer resources to give back we have HBCUs on average have much lower endowments than larger institutions that also contributes to the fact that students have to take on more debt and that these institutions continue to struggle unnecessarily okay so I'm running out of time but can HBCUs and actually be a part of the solution to decreasing the student debt burden in your opinion absolutely and there is much we can do to better fund these institutions to make sure that they become a cornerstone of the way we address student debt and the way address higher education in this country great thank you madam chairman just about time are you back thank you very much the gentleman from New Jersey mr. gan timer is recognized for five minutes thank you madam chairwoman and thank you all for being here today or we're all grateful the Federal Reserve recently published a new report about home ownership which found that roughly 20 percent of the decline in home ownership among young adults can be attributed to the hefty increase of student loan debt this is felt particularly hard in my home state of New Jersey according to a 20-18 study 61% of 2017 college graduates in New Jersey graduated with student loan debt concurrently a recent census data shows that the number of homeowners under 35 years old in New Jersey decreased from 7.7 percent in 27 2007 to 2016 and 47% of 18 to 34 year-olds in New Jersey are living with their parents the highest in the country home ownership can be an incredibly an incredible way as you know to achieve the American dream and I'm worried that not enough households are building well through homeownership due to increasing student loan debt I mister fromm man if I can start with you sir one idea put forth by the committee is to direct the Department of Housing and Urban Development to work with the Consumer Financial Protection Bureau and the Federal Housing Finance Agency to review the barriers to homeownership for borrowers with student loan debt and make recommendations for policy changes that will responsibly reduce or eliminate hurdles what do you think are some of the biggest barriers that HUD CFPB and FHFA should immediately address so I think one of the issues that I've seen is the back-end credit reporting system where borrowers are getting their their payments reported to a credit reporting agency and the it's all over the map and then when lenders go to try to figure out DTI calculations they're also unnecessarily hamstringing borrowers so I think this is a perfect example of how this is this committees job right I think there's an opportunity to reduce baauer barriers that are being put in place because of these back-end problems and I think as you mentioned I think this Bill's a good start that's you you're not an you you agree with that yes I mean one of the issues is like exactly is how do we consider negatively advertising loans when we're looking at housing for example and borrowers have the right to an income during payment plan but then how our house the housing market looking at that in terms of what the borrower can afford thank you very much according to CFPB 71% of student loan complaints between August 2016 and September 2017 involve complications dealing with the lender or servicer as we've heard about today servicers omissions or misrepresentations of information related the servicing of a loan are increasingly common as you've all pointed out earlier this year the Inspector General for the Department of Education reported that between 2015 and 2017 federal student aid found insas of servicer Representatives failing to adequately inform struggling borrowers about their available repayment options which is very frustrating obviously if you're not even presenting all the options miss you I'll ask you this question how do you think how about creating clear rules of the road prevent student loan servicers from omitting or misrepresenting loans serving information benefit student loan borrowers well so a couple different ways first of all as the borrower Bill of Rights proposes we want to make sure that borrowers are informed about income during payment options prior to differences even if a forbearance is ultimately the best decision we need to make sure they're getting those options first we also need dispute resolution as part of the problem is that borrowers are frustrated because things are going wrong paperwork's getting lost and they don't have a single source a single point of contact to try to resolve those errors thank you I hope you have time for one more here some academics who work closely on the issue of student loans argue if there's not only a student loan debt but also a student loan repayment crisis and you know by forcing students to start paying back their loans right after graduation we're setting our graduates of for failure you know a ten year repayment plan is the most common student loan repayment plan but usually take several years at least after graduation to reach a point or a degree is paying financial dividends miss Harrington if I can ask this question to you has the Center for Responsible Lending put any thought into potential solutions to this repayment crisis absolutely we recently released a report with several civil rights groups where we talked about ways to improve the income driven repayment system how to streamline it into one plan how to lower the how to decrease the repayment term to 15 years rather than 20 or 25 years to base the payments off of 8% of discretionary income set it up 250% above the poverty line rather than 100% above the poverty line these are all important reforms that make it actually affordable for borrowers to pay back their loans and do other things like buy home start businesses and save for retirement thank you so much thank you our being here I yield back thank you thank you very much the gentlewoman from Iowa is recognized for five minutes Thank You chairwoman and thank you also for the witnesses for being here today we appreciate it just yesterday I heard from Liz she's a teacher in Urbandale in my district about the issues that she's had with her loan servicer in 2007 Liz began teaching and of course that's when the public service loan forgiveness program began so she called her servicer to see what she needed to do to be eligible and was told she didn't need to worry about the paperwork yet and wouldn't be eligible for another about ten years or so and so send in the verification forms when it gets a little bit closer to that date then when she followed up closer to that date five years later she actually tried to get on top of it by calling another five years she followed up to make sure she was eligible she was told her loans were now ineligible for the P slf because they had been serviced by other loan entities unbeknownst to her I want to right here tell you a little bit about what she said Liz further said that she was told there was nothing that could be done and that very few of her payments qualified and then she said for a while I thought I was the only one in that situation I never grew up for money I came from a single family household I remember being so cold in the winter and going hungry nothing in my life was easy so I figured this was just one more thing to add to my long list of unfair things to happen to me but put your head down work harder work longer and somehow maybe you'll come out just a little bit ahead so I thank you all for being here because this is truly impacting people's lives as we've discussed and mr. Manoj since you recently did a story on this and you pointed out in your opening testimony that the borrower does not control who their servicer is does this story that I'm hearing from Liz sound familiar to anything that you heard when you were researching your show yes can you tell me what another story briefly that you may have heard that's similar it was it was I can't say the names of the the loan service provider that they were switched to but it's very similar to that it's very similar to the story that you mentioned where because of misinformation and they were told the wrong information they were led down a path that was not beneficial to them in the long term yes thank you and I'd ask any of you because Liz isn't contacted me and I don't know what to do to help Liz at this point and I'd ask any of you for this teacher of 13 years who literally never had a late payment what can be done now to help her so I think unfortunately we hear these stories all the time and I think we've heard about consumer protection being a smokescreen or a distraction this is the problem is that borrowers are reaching out to private sector companies and they're getting lied to we've seen the nation's largest teachers union sue navient for the exact practices what you are talking about so these companies have to follow the law just being an Education Department contractor doesn't mean you get to have a free ride in this country you have to follow federal law and state law and I think that borrower has rights but I think there's more that this community could do to make sure that this doesn't happen again so we've all heard and I know this was discussed earlier that more than 99% of pslf applications are now being rejected despite Congress explicitly expanding the program last year and as discussed President Trump just appointed Robert Cameron who worked for an at profit student loan servicer to serve as the student loan offense men mr. Manoj does this seem like an administration that's putting private companies ahead of the interest of its borrowers I just think it's terrifying that the head of the predatory loan servicing company is now in charge of this thing that's supposed to protect you moving on I'd like to address another issue that we're facing and mr. Freidman you brought this up earlier I'm encouraged about the fact that we're having this discussion on both sides of the aisle but Americans now owe more than 1.6 trillion dollars in student loan debt and I think there are two ways that this debt impacts the overall economy explicitly you mentioned many but housing and entrepreneurship and I wanted to get into housing real briefly here do you feel mr. frontmen that student loan debt is keeping borrowers from buying homes absolutely thank you one estimate found that at least 400,000 less Americans own homes because of this student loan debt does that sound reasonable that's correct okay and this is exactly why I joined my colleagues miss Kaptur and mr. clay to introduce the transformed student debt into home equity act it's a legislation that creates a pathway for college graduates to purchase a home and then roll that loan into a lower interest home mortgage rate I'm also encouraged of course by the discussion draft were considering in this hearing to instruct federal regulators to study the barriers to home ownership the student loan is creating miss you do you think these two bills will help students make the transition to homeownership I think it's incredibly encouraging that we're talking about how to make home ership more available to student loan borrowers okay thank you so much the gentlewoman from Pennsylvania mr. Dean is recognized for five minutes thank you madam chairman I appreciate the chance to talk about this really important subject I I come at it through the lens of a mother and a grandmother also I was 10 years a university professor in Philadelphia at LaSalle University before I got into public service so I met with students regularly who were worried about or being closed out of their own education based on debt and the interest on that debt and I worry about the chilling effect that has on students coming up I met with students at my area high school Norristown area high school shortly after I was sworn in this year and they're bright they're engaged they're they're inquisitive and I asked them what are you doing next to seniors what are you doing next and many of them said I cannot imagine taking on burdensome debt that college would require I see my own parents some of them said I see my own parents still struggling with their student debt so I heard some conversation about what is the foundation of the American Dream my parents taught me and I believed it for my own children the foundation of an American dream is an education that's where it all begins because with that education one that we can afford that our children and our grandchildren can afford that's how we become fully engaged members of the economy and so many of you have so aptly described how we have saddled young people with debt that they cannot fully engage in our economy miss you I wanted to talk to you early on in my tenure we had a constituent come in our office her daughter had burdensome student loans became permanently disabled the mother is now the full-time caregiver and the student loan that they had was with a private lender and while the the daughter is forgiven from her debt the mother as the cosigner is not so now she has the full-time economic and emotional responsibility of caregiving and so I've introduced legislation I think you've talked about which would require private loan disability discharge can you talk about that and the inequities in the private loan system yeah absolutely so private loan cancellation programs are absolutely at the discretion of the lender some private lenders offer discharge programs others don't there's no standard there's no clear standard between lenders and even within lenders sometimes their disparities between one loan program or the other one of the first student loan borrowers that I ever worked with when I was a legal aid attorney was totally and permanently disabled due to complications from breast cancer her federal loans were fully discharged because she qualified for that loan program and her private lender actually had a press release saying that they were if they had a disability discharge program available for private loans but when we went to apply for it for this for this borrower they were only willing to offer her to waive the interest they weren't willing to leave any of the principal which for her she was totally importantly disabled she couldn't she couldn't work she was living on Social Security didn't make a dent for her so requiring private lenders to mirror the federal requirement which is discharged in the case of death or permanent disability you think that's the right way to go I think absolutely thank you I have another bill that would and forced arbitration the pre agreement to arbitrate a dispute that not has not yet appeared can any of you talk to me about how that would be helpful to our borrowers so sometimes we overlook the private student loan market because it's only you know seven or eight percent but seven or eight percent of one point six trillion dollars is a whole lot of money and there's a whole lot of borrowers who are getting ripped off in this market so we've seen private student loans make loans they know and they are gonna fail literally sixty five percent default rates we've seen predatory practices from for-profit schools who have private student loan programs and in each of these instances these borrowers were ripped off and they can't they can't access a court room to try to seek justice and I think this is a considerable step this committee took this step with regard to certain mortgages in terms of banning forced arbitration and I think it makes a ton of sense in the private student loan market as well and just quickly if I could follow up with you can you describe some of the practices in terms of lack of repayment options that you had described with the private lenders so in many ways a private student loan is just a straight ten-year amortize alone and despite what you hear about industry talking points about you know charge off rates there are a lot of private student loan borrowers who are really struggling the delinquency rates are much higher than what they advertised but what we saw in the Planes is that people take on this debt kind of in the path of a better life and then something happens they have a special-needs child or they become totally and permanently disabled a spouse loses a job and they're really stuck and we've seen time and time again borrowers aren't getting repayment options they're trying to pay something and a lot of this goes back again to the lack of protections in bankruptcy thank you madam chairman thank you sir the gentlewoman from Texas mr. Garcia is recognized for five minutes thank you madam chair and thank you for holding this hearing it was quite astonishing to hear from you that when you uttered the words that this was the first time we've had a hearing on this in the Congress I mean it just I mean it just baffles me that we've not really done anything to really wrestle with this problem and quite frankly after listening to all the questions and listening to the testimony you know I think we're all to blame and I think we're all to blame and it's time for us to take action so my question to all the panel members is what do we did repeal and replace we just get rid of the whole darn thing and start all over with a whiteboard what is the first thing that you would want put on the whiteboard and let's keep it short because that won't we've only got five minutes and there's five of you so you each a minute each so I think that the student loan borrower bill of rights is where I would start it's simply taking the protections that exist for other borrowers and making sure student loan borrowers have them that shouldn't be controversial Varro's rights all right miss Wu I think you need to target services towards the most vulnerable borrowers and then make sure that they're protected if they have to take on that viral borrowers based on what financial ability to pay income status would I mean I think income set us I think you know race and gender we see that borrowers of color women veterans they have to take on more debt to go to school and I think we need to make sure that we have that education is available for all of our students okay miss Harrington I agree with the student loan borrower Bill of Rights targeting services to the most vulnerable including low-income people in people of color I think we also have to make sure that both federal agencies and state agencies have the ability to enforce these rights as well as students have the ability to enforce their own rights and protect themselves okay mister no I agree with everything they've said I think it'd be great if we could just go tools clear history on everyone's debt and I also think we should have a digital clock in here I think that's a bipartisan position we can all agree on I'm sorry I don't know what time it is right now I thought for a second I thought it was 7:10 and I started freaking out well it was the law if you follow the shorthand technically it's 140 right well order a Mickey Mouse clock next time thank you so much thank you I actually have a paper where I've laid out a complete redesign of the federal student loan program it was published by the Manhattan Institute I would convert the whole thing to an income share agreement where you pay back 1% of your income for every $10,000 you borrow and then you pay it back on your income taxes I think this would dramatically simplify the program I would cap the amount people could borrow at $50,000 but put a cap in $50,000 $50,000 have you seen tuition rates or in the country well what I've heard from the members of this committee is that people are being crushed by their debt so I think the best way to solve the problem is to limit how much they can take out you know how much my law school cost me sure but people who law schools are could bat right and those people should be able to get loans in the private market if it's a good bad if it's a bad bad they won't get loans well no so what else did you say now you said the income sharing thing income share agreement so you pay back 1% of your income for every $10,000 you use in the program so if you use $30,000 you would be signing up to pay back 3 percent of your income on your income taxes for a set period of time so we don't have all the different options you know in fact the amazing part about this plan if you pay the loans on your taxes you get rid of loan servicers they're gone well I just think it's about time that we go ahead and start just rethinking the whole thing and miss Harrington one thing I would want to make sure that when we're talking about vulnerable populations they know that you talked a little bit about the disparate treatment if you will or the impact on african-american communities is there any other is a number differently for Latino community the Asian community or how do we fare in all of this there are definitely a number of issues across on various communities Latinos struggle with the fact that they have higher rates of non-completion which then makes it harder for them to pay back their loans and they do have higher default rates than their white counterparts we've also seen a high rate of student debt for Native American populations women tend to take out more student loan debt and take longer to pay it back and that also goes back to the income gap and how we pay folks we've seen a disproportionate impact on older borrowers now who are seeing their Social Security benefits offset is it any different difference between Community College did you know junior college to your schools versus a four-year university yes but what's really driving the default is really the for-profit College industry and and their and their issues and also are the lack of consumer protections without the servicing level thank you madam chair but the gentlewoman from New York ms Ocasio cortez is recognized for five minutes thank you madam chairwoman and thank you to all of our witnesses here today it's been a very long hearing and some with specious claims I would add but it's also been a very hard and long hearing for anyone who has student loan debt I literally made a student loan payment while I was sitting here at this chair and I looked at my balance and it is twenty thousand dollars two hundred twenty thousand two hundred and thirty seven dollars and sixteen cents and I just made a payment that took me down to nineteen thousand dollars so I feel really accomplished right now but the thing is is we saw two main arguments from the Republican side over and over again one is eeeh that this issues not germane to the committee that student loans are not germane to the financial services committee and it seems completely ridiculous right that loans are somehow you know this is not our job and I look at all of the things that are going on right here and I'm just article after article sure there are some aspects that are not our job like one what certainly seems like a very large amount of corruption coming out of the Department of Education but also in conjunction with the Consumer Financial Protection Bureau I have an article right here from the Washington Post Education Department Awards debt collection contract a company with ties to Betsy DeVos another one student loan behemoth tightens its ties to Trump and Betsy DeVos the company that rejected all but one percent of public sir a popular federal student loan forgiveness is beefing up its already close ties the third inside investigations that the edge inside the Education Department's effort to obstruct student loan investigations what could they be instructing what investigations could they be obstructing well in 2009 Sallie Mae CEO said quote if a borrower can create condensation on a mirror they need to get a loan this year in order to put their subprime lending in place navien forwarded wrong information to credit reporting agencies saying that permanently disabled veterans had defaulted on their loans when they hadn't then you have ITT credit union issuing and using financial aid staff to rush students through an automated application process when they knew that they have projected default rates as high as 64% is that correct miss you yes they knew that they were they were issuing loans that they knew had a default rate of 64% yes so they were setting people up to fail they were and I'm hearing people on this committee saying it's not our job this is our job mr. de lisle you are the Republican or minority witness and we appreciate that you're here testifying at the Republicans request one of the things the other argument that they say is that this is Obama's fault hashtag it's Congress's fault congressional Democrats one of the things that they say is that it's the it's the congressional and it's congressional Democrats fault and that in ending the federal family education program and moving to the to the direct loan program that it's it's our fault that we're creating the one point six trillion dollars in student loan debt do you agree with those claims well I think the terms of the loans for borrowers were identical under both programs mm-hmm and so that said no so they I don't think well no but borrowers were eligible for identical amounts of debt okay mister Delilah's seemed like you knew in February 2007 and your report called private in name only where you stated even in the executive summary that quote critics that also assert that the complete switch to the direct loan program in 2010 led to a record levels of outstanding and student debt and defaults a claim with no causal basis you went on again to emphasize that quote perhaps the most outrageous of all are the claims that direct loan that the direct loan program is to blame for record levels of outstanding student debt and a spike in student loan defaults I'll ask you again is it unfair to characterize the 2010 policy changes leading directly to the record 1.6 trillion dollars in debt wouldn't make sense that they caused increase I appreciate that and you know with just a few seconds left does anyone else have any closing comment area that they weren't able to get anything in today all right thank you very much thank you the gentleman from Texas mr. green is also the chair for the Subcommittee on Oversight and investigations is recognized for five minutes thank you madam chair I am especially thankful that you approved are having the oversight hearing in Houston Texas I'd like to report that it was well attended many members had other places to be and I will understand but I do want to thank mr. Lieb mr. cleaver mr. Meeks and miss Garcia for being in attendance I am a little bit concerned about persons who believe that you can somehow pass a skin test we just left the Visitor Center where we were commemorating some 400 years since the first slaves arrived here and many persons talked about the vestages of racism invidious discrimination slavery lawful segregation and how it impacts us today at one time as you well know black people were not allowed to learn not allowed to get an education so we have a system now that requires people to do things that they can do great strides have been made but they're still invidious discrimination it exists and unfortunately we don't like to acknowledge it but it does I'll give you one example that doesn't relate to education but when Kareem also known as Lew Alcindor was accepted into UCLA they changed the rules they changed the rules they outlawed dunking the ball because they didn't want to see this black man score all of these points is the truth they changed the rules the rules changed for us all the time but we've learned to live with it we we've literally I accepted it unfortunately for us so I'm saying to you there is still a skin test and it can fail even our best we find ourselves sending tax dollars to schools we can't get into but they benefit from our tax dollars very unfortunate so today I hear people complaining about why we're having this hearing let me just share one piece of information intelligence that the staff has accorded me and the staff does great work great work this piece of intelligence reads borrowers first became eligible for loan forgiveness under pslf in September 2017 ten years after the program began as of April 2018 the Department of Education had approved only 55 of 19,000 321 applications some things bear repeating 55 of 19,000 321 applications for loan forgiveness under pslf or 0.002 8% that's reason enough this number alone justifies some sort of intervention you cannot justify zero point zero zero to eight percent we do we have to do something I'm concerned about persons who get degrees and can't pay their loans back but I'm also concerned about people who don't get degrees and can't pay the loans back if you get a degree look I'm concerned about you don't please don't misunderstand but you're more likely probably in my world to be able to pay it back than the person who doesn't have the degree who's who can't get bankruptcy who's going to have to live with this and work through it with this throughout life so quickly if someone could just tell me this there's some debate about whether or not the persons who don't have degrees qualify for the forgiveness program there there's some opinion that the law doesn't specifically allow it if you think the law does allow persons who do not have degrees to participate in the forgiveness program please raise your hand I just like to get a quick survey if you think the law does allow it okay oh but well maybe you don't know something I don't know the answer okay that's good enough okay well look I'm very much concerned about those who don't get the degrees thank you madam chair I'll yield back thank you very much I'd like to thank all of our distinguished witnesses for their testimony today without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair which will be forwarded to the witnesses for their response I ask our witnesses to please respond as promptly as you are able without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record this hearing is adjourned thank you you you

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Id: 9IKaKKZWp8E

Length: 233min 33sec (14013 seconds)

Published: Tue Sep 10 2019