Transcript: Sen. Elizabeth Warren’s Q&A on strengthening the federal student loan program for borrowers

Partial transcript of Sen. Elizabeth Warren’s (D-Massachusetts) Q&A on strengthening the federal student loan program for borrowers. The Senate Health, Education, Labor & Pensions Committee hearing was held on March 27, 2014:

Sen. Elizabeth Warren (D-Massachusetts):
Ms. Loonin, you recently wrote a report on Sallie Mae that’s doing both servicing under the direct student loan program and of course still has outstanding old federally guaranteed loans. Sallie Mae touts its status as the loan servicer with the lowest default rate. So I recently sent a letter to Sallie Mae asking for more information about its default prevention strategies because I think it’s important to understand the default aversion programs that borrowers are using, whether it’s a deferment, forbearance, income-based repayment, or something else. And I asked for data on all of its federal loans, including both federally guaranteed and the direct loan program. Sallie Mae recently responded to my letter but it did not respond to the extensive data request. Instead, Sallie Mae cited three pieces of data all related only to the direct loan program – its default rate, its forbearance rate, and its income-based repayment rate.

So Ms. Loonin, I wanted to ask, are these data sufficient to give us an accurate picture of Sallie Mae’s default prevention strategies?

Deanne Loonin, Director at National Consumer Law Center:
Thank you, and it’s great that your work’s been in holding Sallie Mae more accountable, and I really am sorry that they’re not here today. It’s excellent that they revealed some information because we do want to have more data but that’s very incomplete.

First of all, by not including the FFEL information, it does not give a complete picture, and surely Sallie Mae has control over its FFEL, no worries about any kind of instructions from the Department of Education not to release that information. So that would be extremely useful information, and you’d get more historical data too because the program’s gone on for longer.

Also, within default prevention, you know, it’s helpful to see what their statistics are but default prevention is about much more than just this cliff of who actually falls into default. We’d like to parse that out and see by times of delinquency, for example…how many people inquired about income-based repayment or other things, what was the acceptance rate, what was the retention rate. That would give you a much deeper picture of whether people are not just out of default at one moment in time but over time.

Sen. Elizabeth Warren (D-Massachusetts):
Good. Thank you very much. I’m very disappointed that Sallie Mae did not come today, and I think it’s important that we take a closer look at how all of our servicers are performing, but we need accurate data to be able to do that. So, thank you.

I want to ask a second question, and that’s about the student loan program. You know, the student loan program – just loans from 2007 to 2012 – are now on target to make $66 billion in profits for the United States government, just that small cohort. And let’s keep in mind, these are the best data we have available. These are government data. These are not data anybody else made up. GAO, the CBO, the Fed are all looking in the same direction on what’s happening to students that are loading up on student loan debt.

And right now, the best estimate we have is that the interest rates that we’re going to charge next year to our students is doubled – nearly doubled – the rate that undergraduates would have to pay in order to have the program break even and as much as tripled for graduate students and for PLUS loans. I think it is obscene for the federal government to be making profits like this measured in the billions of dollars off the backs of our students.

So the question that I want to ask is with $1.2 trillion in outstanding student loan debts and a third of borrowers more than 90-days delinquent on their student loan debts, this is crushing our young people, and I’d just like you to talk about what the implications of this are for young people who are trying to start their lives. Dr. Cooper, could you talk about that please?

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
Absolutely. I think we definitely need to keep these things in mind because as we extend even some of our repayment options to 20-25 years we have to recognize that then delays the students’ ability to make some life choices, like buying a home, saving for retirement – things that we’ve all heard about, I’m sure, in various articles and reports. And so we need to be mindful. We want our students to be effective and active parts of our economy. We don’t want them saddled with debt for first 20 years out of college.

Sen. Elizabeth Warren (D-Massachusetts):
Anyone else?

Deanne Loonin, Director at National Consumer Law Center:
I want to say that what I see with my clients, many of whom as I mentioned did not succeed the first time around, the debt is really crushing their opportunity to try again, and they really are trying again. I think if we looked at the cost that way in the long-term, it would cost us less to actually have them succeed.

Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames:
I would answer from the perspective of having a number of new young staff in my office as well as the students that we serve, and yes, they’re delaying those life choices. They are utilizing the income-based repayment plan just to assist them. But homeownership – all of the things that we think contribute to a successful economy and that we want to have happen to drive our economy towards more health are being deferred or delayed because of the debt.

Marian Dill, Director of Student Financial Aid, Lee University, Cleveland, TN:
I would just say that it is a burden, and I’ll concur with what the other individuals have said and that I appreciate what this committee is doing to help our students be successful not only in school but in the repayment process.

Sen. Elizabeth Warren (D-Massachusetts):
…There is no problem that is more urgent in our economy and in our country. We don’t build a future if we crush our young people with debt and don’t let them have a fighting chance to get a start. Thank you.

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