Transcript: Sen. Tom Harkin’s Q&A on strengthening the federal student loan program for borrowers – Part II

Part II. Partial transcript of Sen. Tom Harkin’s (D-Iowa) 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. Tom Harkin (D-Iowa):
…None of you in your testimonies touched on something that we also need to look at and that is the lack of any limits on graduate student loans.

Prior to 2005, kids going to graduate school could borrow Stafford Loans up to a certain limit. In 2005, a new program started – the Grad PLUS Loan program. So today, a student going into graduate school can borrow up to the maximum of the Stafford Loan and then they can go to this new program created in 2005 that has no limits. I’m just amazed at this. I’ve seen a lot of these loans of grad students that has really accelerated since 2005. Huge. I’m going to get more data on that.

I have two questions. One, should we be looking at again establishing limits on Grad PLUS Loans? And secondly, how much does the fact that these graduate loans are going up to $100,000, $200,000 raise the average national loan indebtednesses of all students? I’ve said before I think the average is $29,000. How much of that is boosted up because the Grad PLUS Loans that are put out there?

Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames:
First of all, the statistic about the average indebtedness – when schools are required to report their indebtedness on a common data set, et cetera, the question is always asked “What is the average indebtedness of your undergraduate students?”

Sen. Tom Harkin (D-Iowa):
Oh, I see.

Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames:
I have never been asked to report on the average indebtedness of my graduate students.

Sen. Tom Harkin (D-Iowa):
Do you have that data?

Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames:
No. We’ve been trying to do a study on our campus because we did get a grant to study this. It’s difficult because you have sort out – many students come to you later after having done their undergraduate study. They’ve already consolidated some of their loans, which are then in a big balance, and trying to figure out what’s graduate, what’s undergraduate is a difficult prospect. But no, we’ve never been asked to do that.

Sen. Tom Harkin (D-Iowa):
Are you telling me we don’t really know the indebtedness of these Grad PLUS Loans?

Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames:
I don’t know.

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
Sen. Harkin, what I can say to that is that I don’t the indebtedness, but I do know that graduate student borrowing has increased between 2008 and 2012, which does suggest that we may want to take a closer look at Grad PLUS Loan policy.

Sen. Tom Harkin (D-Iowa):
But the Grad PLUS comes through the Department of Education direct loan program, right? And we really don’t know how much is going out there and how much students are borrowing? I find that very disturbing because I have – maybe some of it is anecdotal – about $200,000 debts and things like that. Kids go to graduate school and they have these huge debts and even if – and they might not get jobs after that that really comport with that – maybe they’re going into teaching – and they can’t pay that back. Am I missing something here?

Dr. Michelle A. Cooper, President, Institute for Higher Education Policy:
It’s also worthwhile, you know, looking at how much of that is grad school debt versus how much of that is undergraduate debt, and sometimes in reports totals we’re not able to disaggregate what belongs to the undergraduate level versus what’s at the graduate level. But as I’ve said before for the Grad PLUS Loan program that we have had seen increases in the number of borrowers in that program.

Sen. Tom Harkin (D-Iowa):
Well, I wish Mr. Runcie is still here from the Department of Education. I intend to ask them and find out for this committee what kind of data they have on these Grad PLUS Loans, how much is outstanding, how many are defaulted on, separate that out from the regular Stafford loans. This is amazing.

The last thing I would say is I have a bill and it’s S. 546 – it’s called the Smarter Borrowing Act – to strengthen loan counseling, create more requirements for schools. I’d ask you to take a look at it and tell me what needs to be done to it. What else do we need to do to change it and modify it.

One more question that I have, Ms. Dill. You said something that kind of startled me. You said under current federal regulations, schools are prohibited from requiring additional loan counseling for students who appear to be over-borrowing or who by statistical indicators appear most at risk of defaulting. Is this so?

Marian Dill, Director of Student Financial Aid, Lee University, Cleveland, TN:
Yes, sir. Thank you, Mr. Harkin. Absolutely. The federal regulations require entrance counseling as a prerequisite to disbursement – the initial disbursement. But after that, institutions are not allowed to require additional counseling for disbursement. We can offer it but we’re not allow to require it, and without the ability to require it, there’s no teeth in it.

Sen. Tom Harkin (D-Iowa):
Anybody got any –

Roberta L. Johnson, Director of Student Financial Aid, Iowa State University, Ames:
I would agree with her assessment. There was one school I believe in Florida that attempting to do this and then the Department told them to cease because it wasn’t written in statute so they didn’t have a legal –

Sen. Tom Harkin (D-Iowa):
Is there a reason for this? Is there any kind of logical reason that schools are prohibited from doing this? Again, I think that’s something we have to look at that. I was not aware of that.

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