Transcript: Sen. Lamar Alexander’s Q&A w/ Federal Student Aid COO James Runcie on strengthening the federal student loan program for borrowers

Partial transcript of Sen. Lamar Alexander’s (R-Tennessee) Q&A with James W. Runcie, Chief Operating Officer of the Department of Education’s Federal Student Aid, on strengthening the federal student loan program for borrowers. The Senate Health, Education, Labor & Pensions Committee hearing was held on March 27, 2014:

Sen. Lamar Alexander (R-Tennessee):
…With all respect, the line of questioning you’re using sounded to me like the line of questioning you might use to question a trial lawyer who might try a lot of lawsuits and lose them all and might win one and get 30% or 40% of the award.

Mr. Runcie, Secretary Duncan, if I remember correctly, testified a few years ago before the Senate appropriations committee that if the federal government took over all the student loans that it wouldn’t increase the cost of administrating them. Yet, the statistics that I have show that it’s – the cost of administering the student loan program has increased – has nearly doubled since 2009 by about nearly $700 million. Why have the administrative costs of the student loan program nearly doubled since 2009 when Secretary Duncan said it wouldn’t?

James W. Runcie, Chief Operating Officer, Federal Student Aid, Department of Education:
That may have to do with the substantial amount of [incomprehensible audio] that occurred since 2007. As I mentioned in the testimony, between the chasm, the transition to DL, the over all [incomprehensible audio] has increased substantially. But if you look at our per unit cost for applications, for loan disbursements, all those per units costs have actually decreased.

Sen. Lamar Alexander (R-Tennessee):
So, none of the $700 million – you mean, the per unit costs are less today than they were six years ago?

James W. Runcie, Chief Operating Officer, Federal Student Aid, Department of Education:
The per unit cost for originating, dispersing, and servicing a loan – all those costs have decreased. Now, we’ve had more in terms of security, in terms of compliance – I mean, there are other activities – updating some of our systems, our legacy systems, but the actual transaction costs have actually gone down.

Sen. Lamar Alexander (R-Tennessee):
But overall, the costs of administering the student loan program has nearly doubled since the government took them all over.

You mentioned in your testimony that you had a campaign to identifying 3 million borrowers who needed help paying back their loans, and that 150,000 responded. That you helped 150,000. That’s not a very high percentage. Why do you suppose that more borrowers didn’t respond to your offer to help them figure out the various options for repayment of the loan?

James W. Runcie, Chief Operating Officer, Federal Student Aid, Department of Education:
Well, I think that 150,000 based upon any industry’s standard for mailing and for contacting through that mechanism is a very high number. But obviously, we’re looking to make sure that we maximize the response rates and the amount of people that take up the plan. But income-driven repayment plans are very beneficial as a tool that people can use to address issues around handling repayment, but those plans may not be for everyone, because income-driven plans may actually have you pay more over the life of a loan. So it really has to do with the borrower’s circumstance…

Sen. Lamar Alexander (R-Tennessee):
…I think it might have something to do with the complexity of this 5-page set of instructions about how you sort through your various ways to help.

I have one other question, which is this: According to figures that I have, two out of five college students go to community colleges – two-year schools, and the average tuitions and fees are under $3,300. These students receive $4,800 average in grants and scholarships. So the average community college student is receiving about $1,500 more in grants and scholarships than it costs them in tuition and fees during that two years. They have extra money. The college itself is free for the average community college student.

In fact, the governor of Tennessee is working to advertise in our state so that you can encourage more people to go to college. But are you concerned that some of the students may be borrowing the money, taking out these low-cost loans simply to get the money, not for education but for other purposes and that many of them have little intention of getting a degree, and that that might be one of the reasons why we have many students say that they’re over-borrowing more than they should have? Is that a concern of yours?

James W. Runcie, Chief Operating Officer, Federal Student Aid, Department of Education:
Yes, it is a concern. I think that we’ve been over the course of the last couple of years looking at ways to make sure that we verify the intent and the actions of people who receive grants and loans, and so we’ve increased our verification and we’ve worked the schools to ferret out situations where there might be fraud or abuse of the loan and grant program. So we are very concerned and, you know, will continue to look at ways to mitigate situations like that.

In terms of the limits, those are statutory. Our function ends up being more compliance and try to maintain the integrity of the programs versus any structure around the limits.

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One Comment on “Transcript: Sen. Lamar Alexander’s Q&A w/ Federal Student Aid COO James Runcie on strengthening the federal student loan program for borrowers

  1. Pingback: Election 2014: Tennessee Sen. Lamar Alexander's voting records & positions on issues | What The Folly?!

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