Transcript: Sen. Lamar Alexander’s Q&A on strengthening the federal student loan program for borrowers – Part I

Part I. Partial transcript of Sen. Lamar Alexander’s (R-Tennessee) 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. Lamar Alexander (R-Tennessee):
…Just an observation, and this was a debate we had 2013 when we by 81-18 passed the law which put a new market-based interest rate formula on the student loan program. Our goal there was for taxpayers neither students to profit off each other. And so we asked the Congressional Budget Office to tell us how can we get as close to zero as we could, and those of us who voted for that felt we did not change what was already happening when the Congressional Budget Office – it’s true that if you take the way the law says, you cannot – whether students are profiting or students are paying – that over 10 years it is $185 billion based upon on what we were already doing. On the other hand, if you do what the Congressional Budget Office said we should do, which is called fair market accounting, which is the way we did TARP – Troubled Asset Relief Program, then the students would pay $85 billion more. In other words, students are profiting off the taxpayers. That’s the debate we’re likely to have this year between two different ways of accounting. But our goal there was not to have one profit over the other when we imposed that new rate on loans that cut in half the undergraduate rate to about 3.86%.

I thank you for your testimony today and for your specific suggestions. Ms. Johnson, your comments about early notification of the amount of money you could borrow or loan, we’ve heard before, and we’re taking that into account dealing with the FAFSA and trying to simplify it.

All of you suggested ways you could simplify the – you could count eight different options of – if you count forbearance and other things – available to a student in terms of repaying a loan. So I’d like to specifically ask you which we asked our earlier witnesses about the application form. Although some of you have done it in your testimony, if you would like to give us very specific suggestions in a letter about how you would re-write this five-page, these five pages, which is very small type, that would be very helpful to me and I suspect to others here. This is not an ideological inquiry. This is just simplification inquiry.

I think, Dr. Cooper, you used the words “layering new over old”. We don’t want to layer new over old. When we reauthorize the Higher Education Act eight times and that happened.

In a way, like if you were starting from scratch and saying, you mentioned the single standard repayment plan, the single income-based repayment plan. What would you include on this five-page form if you were starting from scratch? That would be very, very helpful to me and I suspect others.

Finally, I would like to ask you Dr. Cooper or anyone else. You mentioned “skin in the game”. One of the problems with over-borrowing, which is not really the subject of this hearing but several of you have commented about it. Ms. Dill commented on things we could do, like you shouldn’t be able to borrow as if you were a full-time student if you’re a part-time student. Second, there may be some – we could change the laws and regulations that prohibited institutions from counseling students in some cases or limiting the amount of money that could be borrowed. Or the third idea is the “skin in the game” idea that an institution or some institution at some point if they lend more money to a student would have some responsibility for repaying that. What you mean by “skin in the game” and have you got recommendations about that?

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
So, in terms of addressing the issue of “skin in the game”, we believe that when it comes to higher education and the costs of it and how to pay for it, it’s a shared responsibility. It’s one that goes with the states, the institutions, and the government as well as students. So we believe that everyone should be involved in that particular endeavor.

When it comes to the issue of over-borrowing specifically, I think –

Sen. Lamar Alexander (R-Tennessee):
But how would you do “skin in the game?” An example. What would you say to the University of Tennessee? How would the University of Tennessee put “skin in the game” on borrowing?

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
Well, one of the proposal that we recommend is a risk-sharing model. There are some risk-sharing models that are already out there. For example, guarantee agencies have used them. TECA has proposed some. We participated in the consortium that I just talked about.

Sen. Lamar Alexander (R-Tennessee):
Can you give me an example?

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
Yes, so what we could do is we could have the institutions pay into a fund – they could pay a proportion that’s equivalent to their cohort default rate, for example. So if their cohort default rate is about 20%, then they can themselves put 20% into that fund.

Sen. Lamar Alexander (R-Tennessee):
20% of the amount that –

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
Of students who are in default or who are in repayment. And it’s really a way of trying to better protect students from institutions that have a history of causing this issue of over-borrowing, and not just over-borrowing for the sake of over-borrowing, over-borrowing and then students not getting a high-quality degree at the end where they can get a job to repay it back.

Sen. Lamar Alexander (R-Tennessee):
…I think one of the issues we should examine is how do we get the institutions more involved either to have some say in how much they loan or some responsibility for paying it back.


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

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