Transcript: Sen. Sherrod Brown on private student loans
Edited by Jenny Jiang
Senate Banking, Housing, and Urban Affairs Subcommittee hearing on July 24, 2012
Transcript of opening statement by Sen. Sherrod Brown (D-Ohio) on private student loans:
“On June 29 of this year, Congress passed a transportation and student loan package, an essential legislation that not only ensured funding for our nation’s infrastructure and highway system but also included extension of the current student loan interest rate of 3.4% for subsidized Stafford loans, an issue that Sen. [Harry] Reid had especially worked hard on.
“The passage of this legislation was important for 7 million undergraduate students nationwide, some – we figured – 382,000 of them living in Ohio. Without this extension, the average student would have faced an additional $1,000 in student loan debt per subsidized Stafford loan.
“As others did, I spent a lot of time in community colleges and four-year private and public institutions in my state – particularly in Cleveland, Columbus, Cincinnati, Toledo, and Dayton – talking about, hearing the stories from a number of students sharing with me their fears of graduating in a challenging economy with a high levels – even without those legislations obviously – high levels of student loan debt. Others shared the experience of family members and friends who are still paying off their loans years after graduation from college.
“This is surprising. Earlier this year, student loan debt, as we have heard repeatedly, outpaced credit card debt, soaring more than $1 trillion. It’s a problem that affects people of all generations, obviously not just the students but their families, sometimes even the grandparents.
“According to report released by the Federal Reserve Bank of New York, the average student loan debt burden for borrowers under age 30 has risen 56% since 2005. Meanwhile, borrowers in their 40s are most likely to default. Parents and grandparents who may have co-signed for a son or granddaughter must share the burden of the younger generation.
“It’s clear more must be done to ensure future generations are not saddled with high levels of student loan debt while helping borrowers of all ages pay off their student loans.
“That’s why today’s hearing, which would focus on the challenges borrowers in the private student loan market are so important. That’s a small portion relatively of the overall student loan market. American consumers owe more than $150 billion in outstanding private student loan debt, and their numbers have increased 14%. Undergraduates in 2000 – 2007 have taken out a private loan out, up from 5% in 2003-2004 and continuing to increase.
“This is troubling. Private student loans are the riskiest way to pay for college. Often these loans come with a variable interest rate, ranging from 5% sometimes to 18% often with no limits on origination and other fees.
“Additionally, unlike federal student loans, private student loans are less likely to come with affordable payment plans or loan forgiveness or with deferment options or with cancellation rights.
“Given the risks and the challenges as well as opportunities posed by private student loans, I’m proud to have fought for the inclusion of the private student loan ombudsman as part of the Dodd-Frank legislation. For the first time in history, private student loan borrowers have a central place to file complaints and have an advocate inside the government for them. I’m still concerned that too many borrowers are not receiving the assistance they need from lenders.
“Last week, the Consumer Financial Protection Bureau [CFPB], which as we all know was enacted as part of the Dodd-Frank, published a report on the private student loan market and the consumers who use these loans. What was evident from this report was that many borrowers took out private student loans without fully understanding the terms. Now, many of these borrowers are saddled with thousands of dollars of debt with limited options.
“And hopefully the hearing will allow us to further understand the challenges faced by these and other students.
“In the short term, we can explore ways to provide borrowers with short-term options to get out under the burden of high-cost private student loans. In the longer term, I hope we can provide students and their families with more transparency about private loan options and costs as well as predictability when they’re trying to work with their servicers.
“I’ll conclude with a story from Teresa of Mentor, Ohio east of Cleveland and her struggles with private student loans. She graduated from college in 2009. She soon applied to join the Peace Corp. She almost had to turn down this once-in-a-lifetime opportunity because of the unwillingness of her lender to defer her loans will enrolled in the Peace Corp. She came to one of my constituents coffee staff to ask for help. Through the work of my staff, the lender finally agreed to defer her loans; Teresa was able to go abroad last year. While domestic issues abroad brought Teresa home sooner than expected, her private student loan challenges remained. While she’s continuing her career in public service she began in the Peace Corp., she’s struggling to make her monthly student loan payment atop $400. In just two years, the balance in one of her loans has jumped from $22,000 to just under $30,000. Without intervention, these loans will continue to grow. We need to think about people like Teresa as we make these decisions.
“Moving forward, I’m hopeful today’s hearing will help move us closer to a solution on these important issues.”
- Banking.Senate.gov: Video of the Senate Banking, Housing, and Urban Affairs Subcommittee hearing on private student loans on July 24, 2012
- Sen. Sherrod Brown’s website
- WhatTheFolly.com: Transcript: Testimony of CFPB Student Loan Ombudsman Robit Chopra before Senate Banking Committee
- WhatTheFolly.com: Transcript: Sen. Bob Corker on private student loansWhatTheFolly.com: Federal judge reverses college ‘gainful employment’ rule
- WhatTheFolly.com: College loan rate hike averted