Transcripts For CSPAN Private Student Loans 20140803

Being hosted by the metropolitan Junior Baseball League in richmond, virginia. We will have live coverage. From jacob zuma. Him speak at the National Press club live at 2 00 eastern. For over 35 years, cspan brings Public Affairs events from washington directly to you, putting you in the room at congressional hearings. Offering complete, gaveltogavel coverage of the u. S. House, all as a public service. We are cspan, created by the cable tv industry 35 years ago and brought to you as a public service. Watch us in hd, like us on facebook, and follow us on twitter. Next, a hearing on private Student Loans will stop topics included levels of debt in the options available for modifying loans. Half. An hour and a good morning. Financial institutions play a role in Higher Education. Loans toate student Student Loan Services, to collection and banking. Student loan debt is currently 1. 2 trillion and continues to be the largest form of Consumer Debt in the country. Is especially important to me, as my home state of south dakota has a higher percentage of students graduating with debt than any other state in the country. Nearly eight in 10 students. Rising Student Loan Debt affects everyone. Studenteased number of loan debt cant put off buying a home, starting a business, saving for retirement. Higher Student Loan Debt makes it harder for or students to stay and grow communities like south dakota. Of Student Loan Debt is significant, equally of thecant are the level options for borrowers and repayment. In repayment. Recent data shows that nearly arethird of borrowers entering delinquency faster than before the financial crisis. Findwers are unable to affordable repayment options and have difficulty working with Student Loan Services to correct payment errors. Last year, i held a hearing on this issue, encouraging people to work with followers. Beganmonths ago, the cpb overseeing a large Student Loan Services which brings 49 million borrowers this is an important step. Crisis is aortgage critical component of loan management. Both the Education Department and private lenders have a duty to ensure that the loans are effectively managed every step of the way. This means making sure students have full access to information about their loan options before taking on debt and providing affordable loan repayment, responsible servicing, and careful collection. Of Higher Education institutions have offered prepaid cards to students. Facilitate federal Student Loans. I look forward to hearing more about these, including what impact these relationships may have on citizens. With that thank you. The Higher Education system used to be full of educate exc itement and opportunities. But students are now faced with new questions, such as how they will pay for college, whether they should finally open a bank account and how they will budget their money. Banks and Credit Unions throughout the country serve an Important Role helping students work through the Financial Institution issues. Many entities provide Financial Literacy tools to help students understand the burdens they are about to undertake. Today, i will focus on two issues that impact students and their Financial Institutions. First, in the student loan market, both federal and private, there has been a growing field of Research Focused on the high students debt ridden. Burden. Recently, it was noted that the federal governments share of student debt topped 1 trillion for the first time, roughly five times higher than existing private Student Loan Debt. I share my colleagues concerns about the negative impact. About thee concerns significant and increasing role of the federal government in this market, which ultimately leads to excessive exposure to u. S. Taxpayers. The factors we should be focusing on our the rising crossed rising cost of college and the loan repayment process. 1974, the cost of college has risen 350 . There have been relatively few Market Forces to keep costs down, as students can borrow up to the cost and take out almost unlimited federal loans. Students are not adequately educated about the impact their borrowing will have on their life after graduation. It is unclear if students have the proper information to compare loan types, earning potential for different career choices, and what their Monthly Payments will look like when they graduate. These issues should be addressed before a student ever receives a loan. The second issue i would like to discuss is the department of educations proposed rulemaking for the federal student loan disbursement process. The issue has received bipartisan attention. The proposal would impact student accounts that are completely unrelated to the federal student loan disbursement process, which may cause unintended consequences for students and colleges and universities. The the proposed rule, department of education creates an indirect backdoor regulation of Bank Products, requiring them to also features for accounts that may never be used by a student, to receive the student loan disbursement. This could force banks and Credit Unions to simply exit campus markets, leading to diminished student choice, restricted convenience, and more on banked young people. Unbanked young people. Bankingwork with regulators to understand compliance challenges in the negative impact it could have on the supervision of banks. There is no doubt that the financial challenges can be daunting for students. I look forward to hearing from our witnesses about how we can improve our financial options, convenience, and Financial Literacy. Thank you. Thank you. Are there any other members who would like to give a brief Opening Statement . Thank you. I would ask unanimous consent that a letter i will submit to you from kansas he made part of the record. Without objection. Let me highlight that the crepoart of what senaotor universitiesg are expressing a concern over support of the regulation of the rulemaking. That wascular issue just mentioned in regards to other accounts is a significant issue for them and for their students. The letter indicates that they agree with the departments objectives to ensure students have safe, convenient, free access to credit balances. They want to raise the issue in regard to the regulation that any arrangement under which a student opens or is referred to open a financial account into which title 4 Program Funds may be deposited. Such a regulation could be interpreted to cover any account. That would have a chilling and in some cases terminal effect on goods is this partnerships. Good business partnerships. Students need access to safe and secure financial students services. It is a necessary part of student life. Knowing this, many schools have signed agreements with banks to provide oncampus Financial Institutions at low or no cost to students. Secure oncampus branches, atms, and data cards, Financial Education programs. Anything that could take away this access while simultaneously trying up the cost of education deserves to be studied with extraordinary care. That the b made part of the record. I hope the witnesses will address it. Thank you. I would like to remind my colleagues that we will be open for the next seven days for any other material you would like to submit. I will introduce our witness. Is Vice President for post secondary education and policy at the center for american partners. I recognize senator warren to introduce our next witness. Thank you. Id like to introduce christine lindstrom. The program director. She is a 14 year veteran of the withnt she now works the chapter to organize campaigns across the country for more affordable, more accessible Higher Education. Her work has helped make college americanrdable for students, whether it is pushing fora form, or advocating lowercost textbooks. It is good to have you here today. This is the president of the south Dakota Association of Student Financial aid, the director of financial assistance. I thank you for traveling all this way to testify before us today. I know you have been in the Financial Aid sector for almost 25 years, and i look forward to hearing more about your expertise in helping students make smart decisions across south dakota in the country. Richard hunt is president and ceo of the consumer bankers association. I thank you all for being here today. I would like to ask the witnesses to please keep your remarks to five minutes. Your full written statements will be included in the hearing record. Mr. Bergeron, you may begin your testimony. Thank you. And thank you for inviting me to be here today. We are at a critical moment of the year. Our young people are in the process of preparing to go off to college. Many for the first time. Theyre going to be dealing with issues they have never had to deal with before. About thatnk experience that our students have it is different than the one we had. Today, 21 and a half Million Students will be enrolling in our institutions and 12 of them will be going online. When i went to school, there was no such thing as online. Population is experiencing different things. One thing is the level of death they are taking on. Since graduating with a bachelors degree in 2011, i graduated with 26,000 in debt. That was an increase in just four years, of 33 . Graduate students graduated with 55,000, an increase of 46 in just four years. While i worry a lot about the students who graduate from our institutions and the level of debt they are taking on, i am probably worried more about students who are taking on debt and failing to graduate. In 10 of students who drop out from our institutions, they reported that levels of 33,000 or more. That has to be a concern. I am also concerned about the students who take on private and federal loans. I point out in my testimony the difference and borrowing levels for those students who take on private and federal loans. It is much higher, much more concerning. S affects several of the life choices that students can make. Whether they form a household, whether they buy a car, whether they buy a house, whether they start a small business. We know there are concerns, legitimate concerns. Some people argue that this is not new. A recent study by another haveization that things not changed. I would assert that they have changed. You discount one of the findings the length of time that it takes to repay Student Loans. Years to over. 4 13 years. That is a huge impact on family a familys ability to save for retirement and their own childrens college education. The center for American Progress has indicated a very strong support for doing something about refinancing Student Loans, both federal and private, and we believe that path is a critical issue, and one that we need to address. Thatve also indicated there needs to be some reforms in the bankruptcy protection that is afforded to Student Loans. Five private and federal Student Loans are not afforded bankruptcy protection. That is something that exists for nearly all other borrowers. It really needs to be rethought so students who enroll in programs that are high quality and where the industry they were seeking to enter this appears because of changes in technology or the economy shouldnt have that hamper them permanently and hamper them in ways that prevent them from being able to do the things they need to do for their families, to improve our society. Id like to talk for a minute about the issue of student loan servicing. I tell the story and my written testimony of the development of stateoftheart, worldclass regulations for servicing debts. In the 1970s. Things have changed and we need to update the way we service and student loan portfolios, whether they are federal or private. We need to improve those and to develop and implement stateoftheart tools. With that, i am happy to answer any questions that you have. Thank you. Lindstrom, please proceed. Thank you, chairman johnson, for giving me the opportunity to speak. I am with the u. S. Public Interest Research group. The topic of todays hearing is broad so i will focus my remarks on issues we are actively tracking and promoting, specifically in campus banking spaces. Since 2007, we have work to ensure students are protected from trips and traps that are layered into highcost products like campus credit cards, that Student Loans, and campus Bank Accounts. Students are being hit with high fees that are hard to avoid as they try to access their federal aid refunds through campus sponsored Bank Accounts and prepaid debit cards. We found in our 2012 report that campus debit card traps two to cardsre exposed that may drive up their cost. Students at some campuses are feesed steep and unusual to get Financial Aids, including transaction fees, Overdraft Fees at 37 or more on the whole, these accounts are not necessarily a better deal for students than what they might find through a bank not affiliated with the campus. Still, industry leading banks and Financial Firms can see 40 to 75 of students on campus aftercampus Bank Products a few years of marketing. How do they do it . Firms ng said financial behind these products often rely on multimillion dollar revenuesharing agreements with campus administrations. The contract include receiving direct payments, providing bonuses for recruiting students at discounted pricing. They use Push Marketing and other strategies to steer students into opening up these new accounts, overusing their existing Bank Accounts. Firmsent financial premail cards to every student on campus before theyve opted in or out. The cards are branded with the college logo, giving the impression that the student must open the account. Another college Bank Representative set up tables outside the student id office, aggressively promoting their accounts that students can link to the student id card. Students can get freebies like tshirts for signing up. Finally, the fees can be high and unusual. On University Sponsored cards include a variety of inactivity fees, Overdraft Fees, atm surcharges, Checking Account balance, i could go on. The fees can be hard to avoid. If the merchant only accepts pin debit, or there is no fee free atm available. Accounts andnk Prepaid Card Services can charge overdraft. A form ofcoverage is credit, since the Financial Institution covers the law and is subsequently repaid the amount expended plus a fee. Some banks engage in the abuse of track tests of purposefully reordering transactions to maximize Overdraft Fees. Many banks and Financial Firms that are playing on campus right now have been held accountable for their abusive practices in this arena. Overdraft fees are inconsistent with the department of educations existing rule of School Sponsored accounts. The department of education rules also require that students be provided convenient atm access. In practice, access can be limited. One argument that is being made is that too many low income students are not able to acquire a bank account other than on campus. Consumer Financial Protection Bureau found less than half a incent of College Students america are legitimately unable to secure a bank account. A new student to comes onto campus without a bank account she doesnt have one because she chose not to have one or hasnt gotten one yet. Students do not need campus sponsored Bank Accounts. I urge you to consider legislation that bans revenuesharing agreements between colleges and banks or Financial Firms rafted specifically to offer Bank Accounts and related banking products. The conflicts of interest is problematic for students and consumers and needs to be addressed. Inc. You. Thank you. Thank you. Mr. Kocer, pleace proceed. Thank you for inviting me. Promote student loan programs as their first and best option when considering a loan to assist with educational costs. As with my colleagues across south dakota. Financial aid administrators counsel students on the many benefits of federal student loan programs, including availability for subsidized interest, options for loan forgiveness, and multiple generous repayment plans. The federal direct programs also offers consolidation opportunities and in many interest instances, lower Interest Rates. Some still find that they need additional resources. Private loans can fill the gaps in certain cases. Institutions in south dakota generally have a lower tuition rate, but we find that some students need to utilize private loans. In surveying my colleagues someghout the state, campuses receive private education loans. I would like to share with you an example that may cause a student to utilize a private loan to cover educational costs. Lets say an institution calls for 18,000, setting aside the indirect costs like books and cards. If a student is not eligible, the only choice they may have is a direct loan. Our 18,000 cool, this leaves over 12,000 to the student, who needs to find a way to fund. This is a shortfall in federal loan eligibility. For this reason, private Student Loans fill an important need for some students. I would like to walk through the process for private Student Loans. It begins with selecting a private lender that suits the students need. A number of schools provide a site where the act where the student can access a private loan. Importantly, providing historical private education loans is providing it for lenders. The stools recommend specific lenders. Enablerical list students to make comparisons that lead to an informed decision. Once the student selects the private loan, they go to the private lender, who approves the sent tod the request is the school, who reviews the educational cost and the Financial Aid resources the student has already received. The amount for the private loan for which the student is eligible. By involving the school and private loan certification processes, schools track also borrowing and allows them to counsel students. We consider this a Good Practice , as it provides more information to assist students from over borrowing. There are quite a few private institutions that currently utilize certification in determining whether the student is eligible for private loan, but lenders are not required to do so. Having provided some context, i would like to offer the following recommendation. Is to require School Certification for all Higher Education laws. The current application process should be revised to impact lender marketing and over borrowing. Would give institutions the opportunity to ensure that students are aware of the benefits of Student Loans. Thationally, by requiring an administrator additionally, we can help reduce unnecessary or inappropriate student borrowing. Recommendation number two is to provide a single website for students to see all of their borrowing from private sources. Staff supports recommendation to create a universal loan portal where students can easily access information on all of their Student Loans. This will allow all educational loans from progovernment private lenders and colleges and universities to be reported to one central database. Students need an accessible, onestop shop where they can manage their Student Loans. Any are in various stages of repayment. Having a central website where students can review access to all of their loans would significantly help students as they manage their borrowing. That would result in an expansion of the data collected. Thank you for the opportunity to speak today. Thank you. Mr. Hunt, please proceed. A very good morning. My name is richard hunt. I am president of the consumer bankers association. Is most timely as many of the nations 21 Million Students are preparing to head for campus. The need for fair, clear, and transparent products for these students have never been more important. Loans and Student Banking services to some College Students and their families. I appreciate the opportunity to offer insight on these products and services. Ofore i address the topic todays hearing, we cannot ignore the real crisis facing students and their families. The rising cost of a Fouryear College education. The average cost has risen 1100 , more than four times the rate of inflation. Over half of our College Students need some form of financial need. We must make college more affordable. In thengly believe pursuit of Higher Education. It is critical for economic ourlity, the success of nations economy, and international competitiveness. We have a sacred bond with our students. Theiry a role in Financial Futures by creating a good read rating and helping them earn a good college education. Loans have a complementary role in helping students achieve their goals. Loans are a sliver of the marketplace. 92 of all Student Loans are originated by the department of education. They alone have over 1 trillion on their balance sheet. Unlike federal loans, by the student loan applications undergo a robust underwriting process based on a variety of factors, including and most importantly a determination of the borrower to repay the loan. The use of cosigners results in lower Interest Rates for the student. 90 of Student Loans have a ghost writer. Since private Student Loans do not carry a government guarantee, the lender bears the risk of loss, not the taxpayer. By that lenders have strength in underwriting standards, resulting in lower delay wednesday and default rate. Just this week a new report came out that found that less than three percent of private Student Loans were 90 days or more delinquent. 3 . On the other hand, the federal loan program has a current default rate of 14 , with some reports estimating more than 40 of loans become delinquent. We are committed to working with students oneonone and utilizing every tool necessary, including restructuring, refinancing. Private student loan borrowers are provide are required to provide disclosures at multiple times through the process. At the federal loan programs before opting for private loans. It is up to each borrower to determine the right mix of federal and private loans to meet their educational needs. In addition to the small but Critical Role in the Student Lending market, cba plays an Important Role by offering Banking Services on campus such as checking and savings accounts designed to meet students unique needs and establish their credit history. In some cases, banks partner with educational institutions to ,ffer services such as id cards Financial Literacy programs, and assistance with Financial Aid Financial Aid in the system. They are fully disclosed and completely optional for students. Recently, the department of education entered into role making on the topic of Cash Management. This includes the disbursement of student aid refunds in excess of what is needed to pay School Tuition and needs. Faith with theod department and are disappointed that an agreement was not reached. A Bipartisan Group of your colleagues, and cleaning Senators Club which are frank ken ande heller fran heller, we could go much further by regulating the financial accounts of students from already regulated and wellsupervised depository institutions. We believe this would be outside the departments scope, whether it is a college affiliated Checking Account or private student loan. Serviceso offer these to serve the student well. Thank you for the opportunity to testify. Thank you for your testimony. As we begin questions, i will ask the clerk to put five minutes on the clock for each member. Bergeron, many student loan borrowers are unable to refund and areudent loans being taken advantage of directly low Interest Rates. What challenges in refinancing Student Loan Debt and what recommendations do you have to address this issue . Chairman, as i indicated in my testimony, i think the issue of refinancing is perhaps the most critical. Theould give the borrowers ability to take federal loans and combine them with private loans to repay them as a single package with your total debt being considered. Progressr for american released a report where we made specific recommendations for financing. From bothwith staff the house and the senate, republicans and democrats, to propose and work on legislation to carry out that. Senator moran has a bill that was voted on but did not reached the requisite number of votes to move forward. I hope and expect that that will be something that is taken up again by the senate. Longterm, we have to find a solution. The solution offered by senator moran is a good one. If we cannot move forward with that, there are other proposals that have been put forward by members. That should be considered. Creating a ensurelike vehicle to the student loan access act of a couple of years ago, to make Student Loans available during the credit crisis, provides a model for the kinds of Publicprivate Partnership that to create aated marketplace for consolidation of loans, particularly those that are in distress. As a first word of issue, we at thelook really hard bill that is already before the senate. Mandatoryport certification of private Student Loans. How does certification help student borrowers and in what way does your institution used certification to meet its own need for information about student debt . It is very important for schools to give us more contact with the borrowers. When certification comes in, we know there is an additional loan that the student is looking for and we have the opportunity to pounce on them. That is the first advantage of having them all school certified. Upfront counseling on how it can affect them further on and it helps us to prevent overborrowing for a student. We only allow them tomorrow up to the maximum cost of attendance at the institution but will prevent them from taking out additional loans not for educational purposes. Obamat month, president announced an expansion of the pay as you earn program. Can you discuss why this proposal is important and whether you believe more needs to be done to improve repayment options for borrowers . Is it on . All right. The 1. 2david mentioned trillion, as did you. That is not only a drag for the individual borrowers behind that figure, but a drag on the economy more generally. So it is important to make incomebased repayment options attractive to as many borrowers as possible. Obamas action would enable more than 5 million more orrowers to take part partake in that benefit than previously. So i do think that is very important. As i mentioned, it is important to make those opportunities attractive or borrowers. For borrowers. That said, borrowers who do qualify for these benefits are not getting into these programs. That is another big problem that i would love to see lawmakers tackle. There is a major system failure where borrowers who qualify for these alternatives that could be beneficial to them are not getting into these programs. So we have to figure out a way to deal with that, to look at the way the servicers are being compensated, and to ensure that there is a smooth path for borrowers in distress to access the pay as you earn program, now with the expansion component and some of the other alternatives that are there. Thank you. Since the termination of the federal Family Education loan program in 2010, there has been a dramatic change in the student loan market structure. The private sector markets are contracting and the federal market is growing significantly. I am concerned that this reduces student borrower options. Could you describe the current state of the private student loan market and how it compares to the federal market and maybe explain why we are seeing this dynamic . Thank you for the question. We have gone from a 24 billion industry to about an 8 billion industry. Yet the performance rates have gone much better. Many are exiting the student loan business and some are thinking about it as we speak. We have a three percent default rate. Equation, we do not want to look at a refinancing option. We do not need to. Abilitysure we have the to repay. There is nothing worse than telling a student at the beginning of their career, we are not sure you can afford the loan we are about to give you. Self certification. 97 of our loans are certified. When there is time to repay the loan, we work with the student many different ways, including confirming and refinancing the student. That is why we are at 3 . Just because we do the ability to repay, does not guarantee that the students are paying. That helps quite a bit. , wemonths after graduation give then that grace. We give them that grace period. A student having trouble finding a good paying job cannot pay back their loan, we give them an additional six months and then we work with the occ to ensure we are helping out the student. There is nothing more sacred for us than making sure our students , especially so early in their career, can repay their loan. Thank you. In your testimony, you discuss the department of educations new rulemaking and the disbursement process that has been mentioned several times here today. The concerned that department has not worked through all of the compliance challenges with banks and banking regulators. Can you share with us how the departments rule, as it is would impactposed, student Bank Accounts and what compliance issues would be introduced . If the department of education goes down where i think they might be going, there will not be much concern for the regulatory structure because i think most of the banks would exit. Right now, they want to apply to the rules and requirements of a disbursement Cash Management program that has nothing to do with title 4 disbursement. It is apples and oranges. I am afraid the direction they are going we negotiated in good faith with a lot of other groups to come to a consensus. I thought there would be a consensus until the very end and they did not do it. We are hoping they will have common sense. They want to apply rules and regulations to an association that has nothing to do with title for title 4. , aaccording to one measure report by measure one, a private research firm, substantial loan requirement differences exist between the federal and private loans. You mentioned that in your testimony as well. According to the numbers i have, by the student loan borrowers only default in the low single digits. I think you said 3 . I have for federal Student Loans is close to 20 . Can you describe some of the didures of you already describe some of the features of the private student loan system. Can you explain why that difference exists . What is it about the federal loans that generate a higher statistic . Our default rate is going down. Than 3 ,n to less 2. 89 . I think the biggest difference is the ability to repay. Many federal programs do not take into consideration the borrowers ability to repay after graduation. There are no underwriting standards whatsoever. In the private sector, there are extensive underwriting standards. Someone once told me he would never consider giving a low unless they could repay the loan and he mentioned and you mentioned the number 20 . Some people estimate it is as high as 30 when you look at the ibr forgiveness that will happen down the road. Thank you. Thank you very much. We are talking about these Bank Products that are essentially used to take federal loans and pay tuition but then the excess is moved into a banking account. , you indicateony there are arrangements between banks and colleges that would be detrimental to students. Is that fair . That is right. Campus where students are a captive audience and a bank is getting an exclusive deal, that deal should actually be far superior for the students who are exposed to that to than being marketed what is available to them on the open market. But in fact, that is not the case. In quite a few instances, the deals the students are driven into are equal to or, in some cases, worse than what is available right off campus. Obviously, we think that is a huge problem. The reality is that student aid ofedging up in all types bank and Financial Firm accounts that are offered to students on campus. So the mainstream banking industry, during the negotiations at the department of rulemaking, we are touting figures between 20 40 of students in places where they had deals with the campus, seven out of 10 College Students are graduating with Student Loan Debt. It is obvious that aid is ending up in those accounts as well as others. Therefore, the department is right on point in terms of extending its protections to the students in all the various accounts that are there. At least in concept, the solution is to require the school who is the intermediary to act as a fiduciary for the student. Absolutely. It would be required because they are dispensing federal funds for the benefit of the student and if there is an arrangement with a Financial Institution, that it benefits the student. And they should act in the best interest of the student. That was criterion put into place after the debate about the aggressive private student loan Marketing Tactics that were in effect previous to the credit crisis. That was put into place and it has really helped make the marketplace more fair on campus for students and it comes to steering students into those private student loan products. We would be thrilled if something similar were in place for students when it comes to campus Bank Accounts and debit cards. Do you think you should act as a fiduciary for the students . Our colleagues in south dakota, there are no arrangements with any of our colleagues all of them are dispersed by check or direct deposit so i cannot comment on anything. That seems to be more of a sensible approach. I would guess it would be direct deposit to a bank that the student indicates. That is correct. So the choice is what the you aredecides or if deciding for the student, you have to do it in the best interest of the student. Does that make sense . Actually, the student does have options. The student has a disbursement option. They can choose one of three things. They can go to a bank that has a relationship. They can go to their own institution. Or they can check the box and say, i would rather have a check sent to my mailing addresses. All of these are optional for the student. It does not have to go to the campus affiliation serving their choice. We think this has provided a safe, transparent access for funds for everybody. These choices are harder than others on campus. Can you elaborate . There is a suggestion that there are some very preferential deals giving the campus and incentive and they use that to put people in these funds. Is there data . As i mentioned, the consumer Financial Protection Bureau has gathered quite a few contracts and taken a look at what is in those contracts. There are some reimbursements that schools are getting. Essentially a bounty for students that takes up the account. Interest tol has an steer students into those accounts. Obviously, that is written into the contract deliberately. So there is that component, absolutely. And in terms of how that interfaces with the student consumer, as i mentioned in my previous testimony, if you are cardled premailed a when you have not even made a choice and it has the campus logo and the letter is telling you you should do this right now , of course youre going to log on to the computer and get started enrolling. And that is in some models where the rubber hits the road so that when the students log onto that screen, it is a screen that is designed by the industry. They are making the choice on the industry webpage and not on the campus or the bursar website. Into thee to opt industry or campussponsored account is more prevalent and more prominent and written in a way that steers you to that choice. You might have to click through four or five or six screens to make the choice to get it into your own bank account. In some instances, you cannot make that choice online. You might have to snail mail or fax information about your own bank account in order to get your aid steered in that direction. In fact, it is harder and there are barriers that are set up. As a result, students are kind of held into this campussponsored choice. Thank you. For havinging member this hearing today and also to our witnesses. Thank you for taking the time on this particular issue. Betterprobably a understanding for all of wrong reasons on this issue. I have four children who are attending school and have just graduated from college. So i have a good idea of the Financial Burdens that these students are facing. On top of that, the difficult job market that our youth are currently facing. We do have two issues here. That is the financial burden of Student Loans and also the jobless recovery for the last five or six years. You talk to some of these students, as i have, their friends and my own children and those back in the state of you, if you tell want to solve this problem, get me a job. They said, we can solve the burden of our loans if there were jobs created. They are very disappointed that they keepess asking, when is this Congress Going to do something that will spur the economy and create the jobs necessary so that these young men and women can go in society and take care of themselves . Obviously, this is a hearing only about Student Loans so we will keep it in that direction. I do not know if this was mentioned i am sorry, i missed the Opening Statements. Initiatives, could you expand on what the private sector is doing with this initiative . It is very much like a mortgage. You sit down with the lender and fill out an application for your assets, liabilities, income, and so forth. The financialn to institution for certification, the Financial Institution takes a look at your success and compares it to the cost of education at that university and then tells the bank, here is the amount of money this person should receive. It is the ability to repay. I may take a moment to respond to a couple of things about the campus affiliations. Her report of two years ago was very good in the fact that it identified a single bad after in the industry. That bad actor had enforced action from the fdic and we support every bit of that enforced faction. These campus products were very popular. Very low complaint rates received. They help start the tremendous stunt thetuition tremendous growth of tuition. Many of the banks hire interns from university if they have an alliance as well. Importantly, they provide Financial Literacy on campus to those students. They provide safe access to funds. It has been very wellreceived from students and institutions. And i assure you, senator, we have a lot of regulators in our banks. If they thought they were unfair or deceptive or abusive, they would have no hazard to should no hesitation to pull them out like the fdic did. Private lenders work with the students and share with them what alternative financing might , like pell grants and those kinds of issues . Not only do we want to, we have to. It is required by law. Question there are some benefits to having federal assistance before you have private assistance. Ther you solve some of private matters, then you can go to the federal. But we have to, we want to work with the students throughout. We have relationships already, usually with their parents. 97 of the applications are cosigned by parents or another family member. So it is a cogeneration police cogenerational lease. Withw are you working them . Several ways. The last thing we want to do is have someones Credit Rating destroyed at the beginning of their career. We start notifying them when the first payment is due. Some do not have the highpaying their payments or refinance their payments. Either one. What is the average complaint rate for private loans . That is a whole different subject on my late my plate. See complaints from the public and disperse it to the public without verifying what is true or not. Even if you were to take every single complaint as valid, if you look at the total number of loans we produce, 8. 5 billion, there were complaints in general 1 . Ting to. 03 of thank you. I appreciate you and the ranking members holding this hearing. I want to make a few advertisements for some solutions and get some response from the panel, maybe alert my colleagues. More about student debt around virginia than i do about obamacare. People are concerned. It has raised everywhere. We all know the numbers. I support senator warrens approach on refinancing. If we cannot get that, we need to figure out some other option. And recognize the combination between the federal and the private side that will have to come together. Senator heller mentionedk,now before you owe. \ long before you get to that, we ought to be doing something called know before you go, a bill that senator rubio and i ave that would build on common, easily accessible website not just in terms of student debt, but all the choices a parent and Student Makes before going to college. Retention rates, graduation rates. What is your chance of getting a job in that field . A zillow website on real estate, why cant we create the same for folks making, next to purchasing a home, the next expensive choice they are going to make, the choice of Higher Education . I would include trade schools as well. I heartily endorse your idea. We do not have to create any new reporting requirements. We have all this. Some of the conversation between hunt, i doom and mr. Believe we have some legislation that would help clear up these mistakes. But just know before you go. Second, and apologies to the panel, i am going to take all of your nods on know before you go. There are times when i kind of scratch my head when it seems like there are certain nobrainer solutions that still are not law. Let me point out one right now. It is not a Silver Bullet to our problems, but credit law allows an employer to take up to 5,000 of an employees salary and directly apply it to tuition. You always hear employers say, come work with us. You are going to get a masters and we will help pay for it. Senator heller said, why not take that same concept on the student debt . Go directly against the debt. Obviously, a great retention tool for the employer. The employee can opt in or out of this. Obviously, the employee would receive the benefit of having this money pretax against the debt. Me, it seems like a nobrainer. Is there any sense from the panel, and hopefully relatively short answers on this, about whether that makes sense or not . Let me just agree with you totally on this issue, know before you go. Part too . Second i will. With all due respect, i really love the know before you go. But i think there is something that lawyers should be doing, whether it is that employers should be doing, whether it is a change in the tax code, there is no reason an employer could not do exactly what you said today. You would have to change the tax code, but i think it is a great idea. I will settle for a yes. Yes. Anything you can do to help students is terrific. And it is a retention tool for an employer. It makes sense. Upon, has been touched incomebased repayment. Have that out there as an option right now. It is cumbersome and complicated. Why not allow incomebased repayment to become the top default mechanism, allowing a student to withdraw. Would that not provide more flexibility for folks to have the kind of career choices my time is expired. I absolutely agree. We should have that as a default option as i indicated in my testimony. Preferink we would insuring that students go into or borrowers move into the repayment plan that will keep their costs as low as possible. Ibr does not always work out that way for borrowers. Isrefore, i do not think ibr necessarily the right thing. For borrowers who are into Late Wednesday who are in delinquency, i do believe some kind of automatic move into ibr makes sense for those borrowers in order for them to protect their credit and get them something that will be more manageable than unchecked doing quincy doing quincy delin quincy. I agree with that response. Them into a program that they can afford to spend. We have our own options as well to reduce the debt on the federal side. Whohere are a lot of folks fall into default because of, if you take that 10year payment, your payments are so high coming out of school. Thank you. Thank you mr. Chairman. The borrowers are in serious financial trouble either because they have lost their jobs, had , canus medical problems get a fresh start on pretty much every kind of debt by declaring bankruptcy. They can deal with credit card debt, mortgages, payday loans. Student loans are treated differently. Discharge no matter how much trouble you are in or why you are in trouble. Veteran Student Loans have been excluded from bankruptcy since 1998. In 2005, the bank successfully lobbied congress to end bankruptcy protection for private Student Loans as well. Bankruptcy offers several borrowers programs for Loan Modifications, default rehabilitation, incomebased repayment. At least give people some chance to get the to get back on their feet. The federal government is still making progress off these loans. At least it is something. Banks get the benefit of bankruptcy exclusion and do not offer much of anything in exchange to help struggling borrowers. Last summer, the federal regulators, including the fdic, the occ, and the federal reserve, made it Crystal Clear that student lenders could offer Loan Modifications like reduced Interest Rates for struggling borrowers without any penalty. According to the consumer Financial Protection Bureau, banks are still not offering that help. What is the impact of that . Just three days ago, cnn published a story about a woman who died, leaving her parents to care for three small children and also leaving them with 100,000 in Student Loan Debt that the couple had cosigned. I think i heard mr. Hunt say that Student Loans have a 97 cosigning rate. So the grandparents of these children contacted the private lenders. They could not get much help to manage the huge Monthly Payments. Considered a proxy only to discover that bankruptcy is not an option. Considered bankruptcy only to discover that bankruptcy is not an option. So if you cannot discharge your loans in bankruptcy, what are they supposed to do . Very much for the question. We share the same concern that you do. Making sure we do everything we can to make sure that students off in a timely manner, especially when you have circumstances like the very tragic incident that happened. I saw that on cnn and also a onort by senator reed christopher. I do not agree that there are not many options. We do offer refinancing we are talking about refinancing, not talking about performing loans, reaching out to your customers and saying, have we got a deal for you. What i am talking about our Loan Modifications that reduce the Interest Rate, that reduce principal. Do you have any data suggesting that the banks are doing this . That is very important when they do restructure their loans, it is a modification and it is refinancing. In massachusetts, 126 per month savings for your constituents. In rhode island, it is 149. That is my question again. Are you telling me that all banks in america or even a majority, they have data sears to suggest how many are offering Loan Modifications for student borrowers that will reduce Interest Rates or reduce principle . When it comes to refinancing, the amount of the Interest Rate do you have any data to suggest that the banks are offering the kind of loan modification that will help people who are in financial trouble get a chance to get back on their feet . After all of this, the banks lobbied to get nondischarge ability in bankruptcy. What is this family supposed to do that now has three children to take care of and 100,000 in ble Student Loan Debt from a child who died . Many of our banks are now formalizing that into their contract. You are telling me this is now available from all banks . Couple could take advantage of their loan forgiveness since their daughter died . I have not heard this. That is mostly right. Available or not . There are many more banks that are giving loan forgiveness. What number is many more . More than zero . Yes. There are more than zero. I know of at least 4 that are doing it right now. 4 out of 7000 . Banks. All 6700 one Large Institution since 2011 has forgiven 26. 89 because a 26. 8nt passed away Million Dollars because a student passed away. And when it goes for foreign aid, i am sure you will announce it is 100 . Only about eight tanks dominate the market. We are making progress. Therenothing worked is nothing worse than the tragic accident that happened. There is something worse. When Something Like this happens and the family is left with 100,000 in debt and three orphans to take care of. I am hoping that bank forgives that loan. Well, i am hoping too. So far, what that bank has said is no. They have not provided adequate relief to this family and i do not know how many other families are in these circumstances. Know, there really is no substitute for bankruptcy protection. They lobbied to make sure were going to be exempt from the Bankruptcy Law and they will not even provide the modest relief in people who end up terrible financial circumstances. I think this is wrong. Thank you. I want to begin with a discussion about the baseline problem, which is that we do not have a financially. E a financially literat population, especially among youth. A lot of what we are talking about requires sophistication in terms of understanding time value of money, understanding what compound interest can do longterm and making sure that they are in the best position. The first line of defense to helping a student is the student themselves. And the family. I have some questions for ms. Lindstrom. When you look at this full report, you talked about transparency. I could not agree more. I think senator warner made a great point, lets let people end. At the front what recommendations would you have for us in terms of reviving Greater Transparency on all of these financial transactions, not just debit cards but Student Loans in general, so that we have more truth in lending, if i can put it that way . Well, we are also supportive of the know before you go revisions that have been discussed. Provisions that have been discussed. Wouldnt you agree that sometimes students make bad decisions even if they have access to all the information . I do think that Financial Education plays a role. It is not the primary way that you are going to clean up or make the marketplace fair for students. In reality, these are uninformed consumers who are just emerging in the marketplace and they need stronger protections. I am disturbed a little bit of that answer. With studentn deal loan debt and Mortgage Loan debt and credit card debt. Canmost important thing we do, in my opinion, and i have been in this fight since the bankruptcy days, since i was , i see over and over again and unwillingness to get the information that consumers need to provide themselves with a first line of protection. I can appreciate and understand what you are saying, that things can be clouded and masked and we need to take care of that to make sure it is as transparent as we can, but transitioning to a bigger issue, what are campuses doing and what are you doing on campuses to provide better education to students so the politicalse option to tell the administration they want more options or the wherewithal to make a different choice . Specifically, we do run Financial Education campaigns from time to time. We are actually a studentrun organization. Currently, i do not have anything that we are running right now. ,ut in the past, we have run previous to the passage of the card act, he ran the campaign where students we ran a big campaign where students ran a Bank Marketing campaign on campus and gave out free tshirts and lollipops, etc. And Consumer Education guides for students on how to navigate the credit card deals that were being hocked on campus at the time. That is an example of the type of education that we have engaged in. Right now, we are considering engaging in an Education Campaign around keeping your interest low when you get into repayment. Cracks on the university of north dakota, they actually created within their Student Financial office a Consumer Protection division with Consumer Education. I have one other question for you. As you look at this and not only federal government responding, have you seen any states pass any kinds of laws that you think provide a good example of the right kind of protection for consumers . Right now, the state of california has been considering campus arenan the to provide more disclosures for students up front, as has the state of oregon. Neither of those have actually passed. But i know that those have been i have spoken to legislators at the state level who are considering those types of things. An example that i have is nouse fees. A number of states do not allow those. I think north dakota is one of them. Things i the kinds of think we need to have a broader , way tooding because often, we think the only people concerned about these issues are the United States congress and federal government, when there ,s a whole campus involvement local regulatory involvement. We need to have a better understanding of what the whole effort is so we can continue to provide students with the opportunity to seek a broader array of funding options, the opportunity to make choices, and the education to help them make good choices. Thank you. Whatwant to follow up on senator heitkamp unusual, she and i are on the same wavelength. Usual, she and i are on the same wavelength. As of the Fourth Quarter of 2012, nearly half of the 25yearold population had student that. Overall, student debt tripled between 2004 and 2012. Nearly one third of the borrowers are delinquent on student debt. Shifting demographics of 4049 agein the group, 5059 and 60 plus age groups. Student loan debt has quadrupled between 2003 and 2014. Other forms of loans have decreased or seen little growth ring that time. During the same time, the number of students with Student Loan Debt increased by 70 to almost 40 million individuals. And the average balance for borrower also increased by 70 25,000. Y it seems like there is an awful lot of easy money being pushed in one direction where you have the best chance of return. I am simply looking at it without blinders on. It has got to be the best game in town from a banking standpoint. You sign them up for life and try to collect it for life and they cannot escape it. I have talked to some of the people coming out of university and they say, it is hard to deny anybody. Cannot deny them and you cannot tell them they will need all of that money. We do not have any authority or law to tell them or devised them so they might be getting an apartment they cannot afford or using the money to buy a car. Using money for almost everything except their education. And then throwing the debt on education. This is what i am being told by the university. Something is wrong. There is a problem. Then you look at the statistics and Everything Else is going one way. This is disproportionate to Everything Else. That is why you are seeing an awful lot of movement and pressure on this. Nothing has to be done. Right down thet line. You are 110 correct. Something has to be done. If we do not address the cost of college, we will be right back here every single year. And i am agree not being we all borrow. But the bottom line is, this seems to be lucrative from a banking standpoint. I disagree with that. If it was not i assure you, you would see more banks getting in than getting out. What is your percentage of denials . About half. It is hard to get a student loan. If i asked all of these students, did you have a hard time getting a loan, any of you . If you had a hard time and they turned you down, raise your hand. One hand went up. It is almost impossible not to get a federal loan. It is hard to get a private loan. The federal student loan has no underwriting. The federal government has no underwriting standards. We have underwriting standards. If you get a loan from us, we have a reasonable expectation you are going to pay it back. Laxo you are saying we are on our end. So it is us. We have got to change it. You have a 15 default rate. You need to have a serious conversation as far as federal loan programs are concerned, to find ways to reduce the amount of borrowing for students who do not need it i am saying that you all can evaluate, is that truly the cost . Is the 1200 a month apartment and 500 a month car payment, should that be part of your student loan . It is not. We figure out a standard cost that would fit an average person, not the students who have borrowed or would borrow can students borrow more than what they qualify for . They can borrow up to the cost of attendance. All we can do is lower the amount of federal loans that we give students. Do you think the federal government needs to change the rules . I think we should give financial it ministers more control over the situation. If a student is a parttime student, they might not need to take the full student loan even though they can qualify. Two, ife hear the other you do not mind. Say that we do not want underwriting right. For Student Loans. Student loans are an access tool to keep the doors of college one. Open. Loansdergraduate stafford , we need to ensure that that as student aid to be able to access college. Lossit comes to parental loans so you are in disagreement with her. I am. I am just asking if you are. [laughter] a halftimedy is student and they stay a halftime student, they will run up their bill before they get a degree. You cant counsel them, but if they can get the money, they will. I enjoy your passion. I enjoy yours. At any rate, that is how i would view that. When it comes to private Student Loans, the reality is that complaints are on the rise. Private student loan consumers have a place to complain. The market is standing once again. Previous to the credit crisis, there was all sorts of collusion and aggressive tactics on college campuses. There is no indication that that well, some of those problems have been solved. Others have not. We should make sure there is a bankruptcy provision available for private student loan borrowers. If we do that, you agree that we have to change the rules. For private and student loan borrowers. If you are going to be able to use bankruptcy, you have got to make sure i am saying for private student loan products, not the federal student loan product. For the federal, it is your tax dollars. We are giving it away. As an investor, you want to make sure you are protected the best you can. If you are going to let me escape because of bankruptcy, you are saying you want the taxpayers to pick that up. You believe it should be supplemented. I understand. A lot of our members feel the same. I was making the point around the private student loan product in particular. Completely separate. Why dont we give mr. Bergeron an opportunity . I want to go back to what senator warren was talking about earlier. We need to do a better job helping students as they are leaving high school and make decisions about where to go to college so that they take costs into consideration. When i worked for the administration, we did a College Scorecard which made sure that those pieces of information as well as the default and loan burden were taken into account. Two things on this issue of bankruptcy protection. Saidote a paper where we some federal Student Loans inuld be dischargeable bankruptcy. But they are very specific. Changes, jobs disappear because of broader economic changes. I used the example of closed captioning. Point, technology is going to overwhelm that. Limitedthere is a dischargability that should be applied to private Student Loans. I think private Student Loans should offer the kind of protections. I think there are commercial products that could be developed that would aid that test. It would address the concern that senator warren was raising earlier. We me just make sure know that education is the great equalizer. It will continue to keep us the country that we should be. I think we are all passionate about that. The numbers are going in the wrong direction. Just trying to get it back down to the 3. 8. We are going to have to get all of you together even though you might disagree on certain parts. How do we Keep College Affordable . How do we do it by getting kids more involved in the educational understanding of what their responsibilities are . Thank you so much for your kindness. I want to thank the witnesses for testifying. This hearing is adjourned. [captions Copyright National cable satellite corp. 2014] [captioning performed by national captioning institute] after that, president obama speaking to Young African leaders at a recent summit in washington dc. Later, todd akin on his political career in the republican party. This week on q a, our guest is author sylvia jukes morris. She discusses her recent book, price of fame the honorable is heroothe luce, which second volume on the notable politician, socialite, writer and diplomat who lived from 1903 to 1987. Suffered no disillusion because i have