Transcript: Testimony of Iowa State University Student Financial Director Roberta Johnson on strengthening the federal student loan program for borrowers

Partial transcript of Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames, on strengthening the federal student loan program for borrowers. The Senate Health, Education, Labor & Pensions Committee hearing was held on March 27, 2014:

Chairman Harkin, Ranking Member Alexander, and members of the committee, thank you for inviting me here today to testify.

As has already been mentioned, I’ve been at Iowa State University for a number of years. I have had experience with both the FFER program as well as the direct loan program.

Iowa State University was a year-one school in 1994 in the direct loan program, and I have the experience of the direct loan program prior to 100% DL in that period of time. So I can talk to both sides of that issue.

To help you understand the whole borrower experience, I want to start with the application process, which Sen. Alexander showed. It’s a 10-page process through the FASA form, and it cannot be completed until Jan. 1st of the student’s senior year in high school. For many students, that is – they’re already emotionally invested in the institution.

And so because many institutions like ours use a deadline for making decisions about disbursement of campus-based and institutional dollars of March 1st, students are often estimating their information and getting that application in by March 1st. Then what ends up happening, of course, is that they don’t have their taxes filed until April 15th. The information is incorrect. Schools are going back and forth with them several times to try to rectify the situation.

I would suggest that some of the recent studies on the prior, prior year evaluation of using that tax information would be something that bears consideration primarily because it would allow that information to go to students in the fall semester of their senior year potentially, so that they have the opportunity to think about saving, they would know their costs, and they could potentially make other plans before they’re so emotionally invested in their institution if it turns out that that institution is simply financially unfeasible for them.

Iowa State University is using the financial aid shopping sheet as our official award notification to students. I was very skeptical about using this initially, but the feedback we’ve received from our students and their families are that they are very appreciative of this information. It’s clear to understand, and it did provide them with the definite picture of what their costs would be prior to borrowing any loans.

However, the shopping sheet does not work well for graduate and professional students because the metrics are all tied to undergraduate performance indicators. So we need to think about how we can change that.

Also, there are a number of consumer information required disclosures, college navigators, the shopping sheets, and the scorecard. We need to think about making these consistent and utilizing the same measurement points so that they’re truly helping families to compare their school choices rather than adding to their confusion.

Now, once a decision’s been made to borrow, the students are directed to the Department of Education’s website,, to complete the master promissory note, entrance counseling. They will ultimately use the site for entrance counseling and they also go here to use the financial awareness counseling tool, which Mr. Runcie discussed.

The financial awareness counseling tool is very robust. Our institution is using it when working with students to develop their own budgets, to help explain repayment plans, and to assist them in realizing what their repayment amounts will be once they complete their degree program.

The upfront processing of loans, known as origination, works very well via an electronic transmission of information that goes to a contractor that the Department has working for them.

And this year, we will be providing even additional information beyond just loan period and grade level, as we need, to also provide program information so when students have received 150% of their program borrowing that they would no longer be able to borrow through a subsidized Stafford Loan.

But it’s after the loan is dispersed that things are now more challenging for the borrowers.

When the direct loan program was implemented there was a single servicer and all correspondence was branded as the Federal Direct Student Loan Program. Now, the correspondence that comes to borrowers is co-branded with the name of the servicer on it and oftentimes it’s my experience that the name of the servicer appears in larger print than the Department of Education’s information. So it is difficult for the borrower to know that this is coming from the Direct Loan Program.

I would suggest also that the needs to be the single point of contact for borrowers to be able to log back in to access their student loans. Currently, the student has to go to that individual servicer’s website, sign up, get a sign-in log in. And that is very confusing and I think leads to a lot of challenges with repayment because students have to take some extra steps. And if we could streamline this and put it into one stop for students, I think it will help.

I think because loan contracts are up later this year, the Department has the opportunity to think about how contracts need to be awarded, and do the loan servicers need to come from a previous FFEL environment or are there servicers working in other financial sectors, such as credit card agencies, that may do just as good, if not a better job.

I think the plethora of student loan repayment plans can be confusing, particularly all of the income-based plans for students. We need to think about that.

And finally, I would say in response to comments about the cost of loans, I think there is some substantial revenue that’s being made and we need to look at things like the origination fee as well as the capitalization of interests for our borrowers and see if there are some ways to streamline those processes.

So in conclusion, let me state that it works well but there are definitely areas that we can fine-tune and find efficiencies to assist our borrowers.

Thank you.


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