Transcript: Sen. Tom Harkin’s opening statement on strengthening the federal student loan program for borrowers

Partial transcript of opening remarks by Sen. Tom Harkin (D-Iowa) on strengthening the federal student loan program for borrowers. The Senate Health, Education, Labor & Pensions Committee hearing was held on March 27, 2014:

This morning is another in our series of hearings preparing to re-authorize the Higher Education Act. And this morning, our hearing is on strengthening the federal student loan program for borrowers and take a look at the whole student loan program. As I said, this is the eighth in our series of hearings on this.

Today, our primary focus is strengthening our federal loan programs and ensure they’re working well for students and their families.

Since the passage of the National Defense Education Act in 1958, under which I borrowed money to go to college, the federal government has played a role in helping students fund their college education through loans and grants.

We certainly have much to celebrate over the last half century when it comes to expanding higher education access but various new challenges demand our immediate attention.

In recent years, several major changes have been made to the federal student loan programs to address structural issues of loan originations, servicing, and repayment options.

In 2007, the income-based repayment was created specifically to help struggling borrowers repay their loans and avoid severe financial consequences of default.

And in 2010, Congress made the historic switch from the Federal Family Education Lending program to the direct loan program – a process that unfolded smoothly according to nearly all accounts.

So it’s important to take a moment to re-state the importance of that action and the real impact it’s had on students and families. We achieved the goal of 100% direct lending. This eliminated more than $60 billion in subsidies to banks and directed the bulk of that money to students and their families.

Despite all of the progress made, however, there’s still much work to be done.

As the current student loan landscape clearly illustrates the stakes have never been higher.

To put it in perspective, our aggregate student loan debt in this country is now over $1 trillion. The average student saddled with about $29,000 in debt.

And there is a growing consensus we need to address the impediments to college affordability – the key drivers of college costs. Now, we’ve had a hearing on that previous to today. We’ve explored those issues. But we need to examine one central question. How well has the student loan system from counseling to repayment working for students and families?

I would say at the outset I am disappointed to report that all four of our TIVAS – the Title IV servicers – the largest contractors were invited but chose not to take part in this hearing today, which directly concerned the contracts that they have with the Department of Education. And those servicers like Sallie Mae rely heavily on federal dollars for their business and yet they could not find the time to put this hearing on their calendar. I hope we can all agree that students and taxpayers need to be prioritized.

However, I am excited today for the opportunity to discuss the state of our federal loan program with a distinguished panel of experts. We’ll take a hard look at what’s working, what’s not, and what needs to be done to ensure the dream of an affordable higher education stays in reach for millions of families who rely on student aid.

At the outset, I want to re-state a fact – an economic statistic that was given to me by the President of Arizona State University – President [Michael] Crow – and it’s this: If you are a high-income, low-performing student, you have an 80% chance of going to college. If you are a low-income, high-performing student, your chances of going to college are only 20%.

That needs to be corrected.

Again, as we look at the different choices, the students ought to be able to choose between repaying options and decide which plan is best for them.

I had an interesting conversation with a young professional this morning. She told me she went to a very good high school, comes from an upper middle-class family, went to a great college, and went to a very good law school. And she’s a professional. And she had heard that we were having this hearing today, and she said, “You know, the biggest problem is that I went to all these great schools and not once did I ever have a course on personal finance. Not once in high school did they teach me how to balance a checkbook or how to set up a budget or what borrowing means – what are loan rates, what are fees, what are repayments, how do you calculate all those. Not once. Not in high school. Not in college. Not even in law schools.”

She said so many kids go to college – she said, “I remember when I went to college I got inundated by people wanting to loan me money, and it all sounds very good, it all sounds very cheap.” And then she said, “I must have had at least four or five credit cards sent to me – just “free” credit cards.” Of course, when you’re young like that you don’t know what all that means. Boy, it’s easy to use a credit card and get yourself into a lot of trouble.

So I just want to say that that just, again – maybe this is also a part of it too that we’re not doing a good enough job in our secondary schools and we’re not doing enough, and I know some of the witnesses testimonies…talk about the need for counseling – financial counseling – when you go to college.

I know my alma mater – Iowa State – has started doing that, and I assume there are others too. But I wonder if that shouldn’t be an integral part of a loan process for students when they are going to college.

So again, this to me is one of the most important aspects of what we need to address in the reauthorization of the Higher Education Act – how we write – how we get more equity in terms of high-performing low-income students to go to college, how we make sure that students know their rights and responsibilities when they borrow money and to make sure that they have adequate counseling.

Another aspect that I really believe bears looking into is the issue of collection agencies, and how much money collection agencies are taking out of the system every year. I’ve [been] told it’s over $1 billion just for collection agencies. And I’ve heard a lot of stories – some I know are true – I don’t know all of them – about how these collection agencies operate and how much money they get for very little work and what they do to collect this money. So I think this also bears looking into.

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