[Senate Hearing 113-906]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-906

                        INDEBTED FOR LIFE: OLDER
                    AMERICANS AND STUDENT LOAN DEBT

=======================================================================

                                HEARING

                               BEFORE THE

                       SPECIAL COMMITTEE ON AGING

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS


                             SECOND SESSION
                               __________

                             WASHINGTON, DC
                               __________

                     WEDNESDAY, SEPTEMBER 10, 2014
                               __________

                           Serial No. 113-30

         Printed for the use of the Special Committee on Aging
         
         
         
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        Available via the World Wide Web: http://www.govinfo.gov
                       
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                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
46-918 PDF                 WASHINGTON : 2023                         
                       
                       
                       
                       
                       
                       SPECIAL COMMITTEE ON AGING

                     BILL NELSON, Florida, Chairman
ROBERT P. CASEY JR., Pennsylvania
CLAIRE McCASKILL, Missouri           SUSAN M. COLLINS, Maine
SHELDON WHITEHOUSE, Rhode Island     BOB CORKER, Tennessee
KIRSTEN E. GILLIBRAND, New York      ORRIN HATCH, Utah
JOE MANCHIN III, West Virginia       MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut      DEAN HELLER, Nevada
TAMMY BALDWIN, Wisconsin             JEFF FLAKE, Arizona
JOE DONNELLY Indiana                 KELLY AYOTTE, New Hampshire
ELIZABETH WARREN, Massachusetts      TIM SCOTT, South Carolina
JOHN E. WALSH, Montana               TED CRUZ, Texas
                              ----------                              
                  Kim Lipsky, Majority Staff Director
               Priscilla Hanley, Minority Staff Director
                                CONTENTS

                              ----------                              

                                                                   Page

Opening Statement of Senator Bill Nelson, Chairman...............     1
Opening Statement of Senator Elizabeth Warren, Committee Member..     2
Opening Statement of Senator Susan M. Collins, Ranking Member....     5

                           PANEL OF WITNESSES

Rosemary Anderson, Older American with Student Loan Debt.........     3
Charles Jeszeck, Director, Education Workforce and Income 
  Security, U.S. Government Accountability Office................     6
William Leith, Chief Business Officer for Federal Student Aid, 
  U.S. Department of Education...................................     7

                                APPENDIX
                      Prepared Witness Statements

Rosemary Anderson, Older American with Student Loan Debt.........    25
Charles Jeszeck, Director, Education Workforce and Income 
  Security, U.S. Government Accountability Office................    30
William Leith, Chief Business Officer for Federal Student Aid, 
  U.S. Department of Education...................................    59

                        Questions for the Record

William Leith, Chief Business Officer for Federal Student Aid, 
  U.S. Department of Education...................................    69

 
                        INDEBTED FOR LIFE: OLDER
                    AMERICANS AND STUDENT LOAN DEBT

                              ----------                              


                     WEDNESDAY, SEPTEMBER 10, 2014

                                       U.S. Senate,
                                Special Committee on Aging,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:16 p.m., in 
Room 562, Dirksen Senate Office Building, Hon. Bill Nelson, 
Chairman of the Committee, presiding.
    Present: Senators Nelson, Blumenthal, Donnelly, Warren, and 
Collins.

                 OPENING STATEMENT OF SENATOR 
                     BILL NELSON, CHAIRMAN

    The Chairman. Good afternoon. We have a vote in progress 
and Senator Collins has just voted and she is on her way, so in 
order to make efficient use of the time, I am going to go ahead 
and start and we will recognize Senator Collins when she 
arrives.
    We in this Committee have taken a look at the financial 
security of Americans in retirement from a variety of angles. 
We have examined the difficulty of the average senior and that 
difficulty of facing life as they are on a day-to-day basis 
trying to make ends meet in retirement and how some of them 
have turned to risky products like pay-day loans or they have 
been enticed by scams. That is what a lot of the looks of this 
Committee for the benefit of seniors has been over the course 
of the last year-and-a-half.
    Well, today, we are looking at an unusual subject, student 
loan debt and how it puts the retirement security of senior 
citizens at risk. While many think of student loan debt for 
just a young person, increasingly that is not the case, and so, 
we are going to hear from the General Accounting Office today 
that a significant number of older Americans still have student 
loan debt from financing their own college education, and what 
happens to those folks when they hit retirement age is 
absolutely frightening.
    Those in default on their loans, a younger person might be 
out of money, in debt, and go bankrupt, but a senior citizen 
has their Social Security check coming in and it is garnished. 
It is leaving them with retirement income well below the 
Federal poverty line.
    Now, you take the case of Janet Lee Dupree, a 72-year-old 
Ocala, Florida resident. In the early 1970s, she took out a 
$3,000 loan to finance her undergraduate degree, and while she 
recognizes that she did not pay the original loan when she 
could have, or she should have, she has now paid thousands of 
dollars on this loan, and today owes an astounding $15,000 due 
to compound interest and penalties.
    She is in poor health. She will never be able to pay off 
this sum of money, and especially because all she can afford is 
the $50 the Government takes out of her Social Security check 
every month, what she has left over from what they garnish.
    Large amounts of any kind of debt can put a person's 
finances at risk, but I think Mrs. Dupree's story shows that 
student debt has real consequences for those in or near 
retirement and they need to juggle debt on a fixed income and 
that is a difficult thing for a senior.
    In today's hearing, we would like to achieve a few things. 
We would like for the public to know, especially seniors that 
are nearing retirement, to think about the amount of student 
loan debt that they have. We want to help folks with student 
loan debt understand the options that they have for staying 
current on their payments without descending into poverty, and 
we want to highlight any obstacles that might get in their way 
in doing that.
    I will recognize Senator Collins when she gets here.
    Senator Warren.

                 OPENING STATEMENT OF SENATOR 
               ELIZABETH WARREN, COMMITTEE MEMBER

    Senator Warren. Thank you very much, Mr. Chairman, and I 
really do commend you for all you have been doing through these 
hearings to talk about many of the pressures on seniors, but I 
am particularly glad you are talking today about student loans. 
You know, it is easy to see that student loan debt is a problem 
for young people, but we cannot forget the burden on older 
Americans. Not every college student is 18 or 19 or 20 years 
old, and parents, even grandparents, have guaranteed loans for 
their children and their grandchildren.
    More and more Americans are dealing with student loan debt 
into their 50s, their 60s, their 70s, and even beyond. Mounting 
student loan debts is not just a problem for borrowers. It is 
an economic emergency. The Federal Reserve Bank, the Consumer 
Financial Protection Bureau, and the Treasury Department have 
all sounded the alarm.
    Student debt is holding Americans back from making the 
purchases they need to make to keep the economy growing. They 
are not able to buy homes or start businesses, save for 
retirement, buy cars, and student loan debt cuts significantly 
into retirement security.
    I am very pleased that this Committee is examining the 
student loan problem. We cannot just bury our heads in the sand 
and hope that it goes away. We need to face it head on and find 
solutions that will reduce the burden of student debt and 
provide real protection for borrowers who find themselves 
struggling to pay back their loans, so I thank our witnesses 
for being here today. You do a great service by joining us. Mr. 
Chairman, I am ready whenever you are.
    The Chairman. Okay. I just want to point out that of those 
in retirement age, just six years--in a six-year period, from 
2004 to 2010, the number of seniors in retirement age with 
student loan debt was 150,000. That has ballooned in six years 
to 700,000, and the amount of that debt in just that six years 
ballooned from $3 billion to $18 billion.
    Now, what Senator Warren said is true, that some of that 
debt is seniors taking out student loan debt for their 
grandchildren or their children, but that is only 20 percent of 
it. 80 percent of it is their own student loan debt, so this is 
a problem that if you ask the average American if they thought 
that there was a problem here, nobody would guess this and that 
is why we are having this hearing.
    What we will do, we will start and I am just going to stop 
you all when Senator Collins gets here, so we are going to have 
Rosemary Anderson, who is struggling with student loan debt, 
and Charles Jeszeck, Director for Education Workforce and 
Income Security at the Government Accountability Office, GAO, 
and William Leith, the Chief Business Officer of Federal 
Student Aid at the Department of Education. Thank you all for 
being with us. Ms. Anderson.

                STATEMENT OF ROSEMARY ANDERSON, 
             OLDER AMERICAN WITH STUDENT LOAN DEBT

    Ms. Anderson. Thank you, Chairman Nelson, and in her 
absence, Ranking Member Collins, and Senator Warren, for the 
opportunity to tell my story before the Senate Special 
Committee on Aging. I was a little reluctant to be the poster 
child for the older American, but I am still working. I am 57 
years old. I was a healthy married woman with one child and 
another on the way when I decided to go back to school in my 
30s.
    I lost a job I'd had for 16 years and decided that in order 
to be more employable out into the future, that I needed to 
have a college degree. By the time I had obtained both a 
Bachelor's and a Master's degree to pursue career goals, I was 
divorced and overcoming a debilitating illness. I owed $64,000 
in student loans at that time.
    I had faced a variety of expenses that made me unable to 
pay my debt and that figure has now ballooned over $126,000. I 
will be indebted for life. While my growing concern is that 
when I reach the age to take Social Security, that a sizable 
portion of that check will be garnished to pay my student loan 
debt.
    As a teenager, I had been accepted to Boston College and I 
decided instead to move to California. I got married, I bought 
a house. I worked in the field, as I said, working with 
developmentally disabled adults teaching life skills. I started 
a family. However, a series of life events prompted me to 
return to school, as I mentioned, and I finished my 
undergraduate degree in my 30s and my Master's degree when I 
was just over 36.
    For those two degrees, as I mentioned, I took out $64,000 
in loans, but at that time, I was not worried. I was married. 
My husband was gainfully employed. I had a job where I could 
start paying back those loans. I had a variety of loans so I 
chose, when the opportunity came about in 2001, to consolidate 
those loans so I was making one payment for the convenience of 
writing one check as opposed to all the checks that I was 
writing, and trying to track the loans over the life of that 
time.
    It took about a year to go through the consolidation 
process and at that time--and it still is--the interest rate 
was 8.25 percent, and once you consolidated your loans, you 
could never refinance them, so therein lay the problem for me, 
is that over time, that interest, as they mentioned before, has 
compounded and grown over time. Do I need to stop?
    The Chairman. Okay, please continue, Ms. Anderson.
    Ms. Anderson. That was in 2001. Then life and the economy 
changed. In 2002, my husband and I divorced and I was forced 
then to live on one income. I had child support, but it was 
impossible to pay and get by on the income that I had. As a 
result, I incurred additional debt and to address the debt that 
I had to borrow--I borrowed against equity in my home. I put 
things on credit cards. That increased my credit card debt and 
I fell further into a financial hole.
    After the child support ended and the housing market 
crashed, and as a state employee I took a pay cut, my house 
that I had been borrowing against and using the equity from was 
now worth less than what I owed on it. It was actually worth 
less than half of what I owed on it, and my mortgage was 
greater at that time than my income was.
    My parents raised me to be a responsible adult and I was 
committed to paying down my debt. I sold everything I could, I 
took extra jobs, I rented rooms in my home, which I still do 
today, and I was able to pay down my credit card debt and 
restructure my mortgage through the Federal Relief program that 
was offered at that time, so that my mortgage payment was now 
more affordable.
    However, while I was struggling with the consumer debt, I 
was deferring my student loan payments and I have been doing 
that for the past eight years. I am not making any payments on 
loans and that bottom line just grows bigger and bigger and 
bigger literally by the day. I was offered this last time, 
because every year you have to become eligible for some sort of 
deferment program in order to stay out of default. My objective 
was always to stay out of default because as you mentioned in 
your introductory statement, if I default on those loans my 
Social Security will be garnished at a time where I am the most 
financially vulnerable.
    My hope is that through hearing the testimony from the 
people that are before you today and understanding how, as 
Senator Warren pointed out, that it has a ripple effect on our 
economic stability as well as the stability of my personal 
future, I know that I will likely never retire, but I do not 
want to, when I start collecting Social Security, to have the 
fixed income that I have be garnished to the point where then 
that is my biggest worry.
    I find it very ironic that I incurred this debt as a way to 
improve my life, and yet, I sit here today because the debt has 
become my undoing. I am a responsible person and I would not 
entertain the idea of bankruptcy, but even if I did, under 
bankruptcy law, the student debt is not able to be discharged.
    I thank you. That concludes my statement and I welcome any 
questions that you may have later.
    The Chairman. Thank you, Ms. Anderson. Senator Collins.

                 OPENING STATEMENT OF SENATOR 
                SUSAN M. COLLINS, RANKING MEMBER

    Senator Collins. Thank you very much, Mr. Chairman. My 
apologies for missing your opening statement, but I am glad 
that I was able to hear Ms. Anderson's testimony. An issue that 
we both care deeply about is whether older Americans will have 
the financial resources that they need to be secure in 
retirement.
    After four decades in the work force, seniors should be 
confident that they will have the money that they need to pay 
their bills and enjoy their retirement without fearing that 
they will be overtaken by debt and fall into poverty. Yet, as 
this Committee has seen in our work together this session, far 
too many American seniors struggle to get by with inadequate 
savings and limited income. Add to this the troubling trend of 
increasing debt held by older Americans.
    A recent study by the Urban Institute found that the share 
of Americans 65 or older who are in debt grew from 30 percent 
in 1998 to 43 percent in 2010. That study also found that the 
median debt held by those seniors increased by 56 percent from 
about $13,600 to $21,200. About half of this debt is 
attributable to mortgages.
    I was thinking about the fact that at my age, my parents 
were having a party to burn their mortgage; and yet,
    I find myself taking on new mortgages, and that is not 
uncommon. Much of the rest traces to various forms of consumer 
debt such as auto loans and credit card balances, but as our 
hearing topic today suggests, another source is student loan 
debt.
    Student loan debt held by older Americans is just a tiny 
fraction of the $1 trillion Federal student loan debt 
outstanding. According to GAO, about three percent of 
households headed by seniors have student loan debt. One might 
assume that this debt reflects loans taken out by parents for 
their children or by grandparents for their grandchildren.
    That does not appear to be the case. The GAO has found that 
82 percent of the balances remaining on student loans taken out 
by seniors are attributable to loans used to finance that 
senior's own education, while only 18 percent are attributable 
to loans used to finance the education of a child or a 
grandchild.
    The default rate for these loans, 31 percent, is more than 
twice that of the default rate for loans taken out by younger 
borrowers, and that is a very troubling statistic. As has been 
discussed, seniors whose loans are in default can have their 
Social Security benefits garnished and reduced to as little as 
750 a month, a floor set by Congress in 1998. That floor was 
not indexed for inflation and is now far below the poverty 
line.
    I will be introducing legislation shortly to adjust this 
floor for inflation over the past 15 years and to index it 
going forward, to make sure that this garnishment does not 
plunge seniors into poverty. We will be exploring today when 
and why these seniors took on such a heavy debt load, and to 
what extent the burden they carry is due to the soaring cost of 
a college education.
    Twenty years ago, the cost of attending a four-year public 
university was just half of what it is today, even after 
adjusting for inflation. Similarly, the cost of attending 
private four-year institutions and public two-year colleges was 
one-third lower than it is now. Given these dramatic cost 
increases, it is reasonable to ask what steps our nation's 
colleges and universities are taking to address the problem of 
student loan debt.
    Are these institutions doing all that they can to control 
their costs, to ensure they remain affordable not only for 
older Americans, but for all who pursue a higher education? Are 
they fulfilling their obligation to make sure their students 
understand the burden that heavy debt will place on them, 
especially older students who may be returning after a period 
in the workforce and who may not remain in the workforce long 
enough to pay off their loans before they retire?
    Mr. Chairman, I look forward to hearing from the rest of 
our witnesses. Thank you for calling this hearing.
    The Chairman. Mr. Jeszeck.

            STATEMENT OF CHARLES JESZECK, DIRECTOR,

            EDUCATION WORKFORCE AND INCOME SECURITY,

             U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Jeszeck. Mr. Chairman and members of the Committee, 
thank you for inviting me here today to discuss the state of 
student loan indebtedness among our nation's older citizens. 
Rising student loan debt has become a growing national concern. 
In 2013, total student loan debt cracked the $1 trillion 
barrier, up from a not insignificant $400 billion in 2005.
    My testimony today focuses on the extent that older 
Americans have student loan debt, the extent to which they may 
default on that debt, and the consequences of default. In 
summary, although student loan debt is not typically viewed as 
a senior citizen issue, our analysis suggests another look. 
Available data indicate that while the amount of student loan 
debt held by our nation's seniors is small in comparison with 
other age groups, it is growing more rapidly.
    Further, borrowers 65 and older carry defaulted student 
loan debt at much higher rates than other age groups. Such 
defaults can, among other consequences, leave some retirees 
with incomes below the poverty level. Our analysis of 2010 
Survey of Consumer Finance Data finds that about three percent 
of households headed by persons aged 65 and older held student 
loan debt, compared to about 24 percent of households headed by 
younger persons.
    However, the number of student households with student 
loan--senior households with student loan debt has increased 
significantly in recent years. For example, among households 
headed by persons aged 65 to 74, the percentage carrying 
student loans grew from one percent in 2004 to four percent in 
2010. Further, Education Department data shows that total 
Federal student loan debt, which accounts for roughly 85 
percent of all student loan debt, for those aged 65 and older 
surged from $2.8 billion in 2005 to $18.2 billion in 2013.
    Although older borrowers hold a small number of all Federal 
loans, they are much more likely to be in default. In fiscal 
year 2013, all persons aged 65 and older accounted for only one 
percent of all Federal student loans. 27 percent of loans held 
by persons aged 65 to 74 were in default, as were over 50 
percent of loans held by persons over age 75. This compares 
with a 12 percent rate for persons aged 25 to 49.
    Default can have serious consequences for borrowers. It can 
adversely affect one's credit rating and lead to collection 
agency actions and collection fees up to 25 percent of the 
interest and principle. Further, after 425 days of non-payment, 
the Education Department can send defaulted loans to Treasury 
for what is known as offset. Under an offset, Treasury can 
reduce the tax refunds of defaulted borrowers as well as 
monthly benefits like Social Security retirement, survivor and 
disability benefits.
    Tax refunds accounted for over 90 percent of the $2.2 
billion in total 2013 offset revenue for defaulted student 
loans with retirement and disability and survivor benefits at 
about $150 million. While small, the number of borrowers 
affected by offsets of Social Security benefits and who are 
older has grown significantly in the last decade.
    In 2013, 36,000 borrowers age 65 and older were offset, a 
sixfold increase from 2002. Meanwhile, the total number of 
borrowers who had their benefits offset increased from 31,000 
to 155,000 over the same period.
    There are limits on how much Treasury can offset from 
monthly benefits. The amount of allowable benefits offset is 
limited to the lesser of 15 percent of the monthly benefit or 
any benefit amount over $750 per month. The $750 minimum has 
not changed since 1998. If indexed to poverty, the $750 limit 
would be over $1,000 today. Such indexation would prevent some 
older borrowers from having benefits offset, but would also 
reduce the Federal Government's recoveries.
    In 2013, indexation would have resulted in 61 percent of 
offset borrowers aged 65 and older keeping their entire
    Social Security benefit. It would also have reduced 
collections by $94 million, or about 4.2 percent of all offset 
dollars collected on student loans. That concludes my 
statement, Mr. Chairman. I will be happy to answer any 
questions you or other members may have.
    The Chairman. Thank you, Mr. Jeszeck.
    Mr. Leith.

           STATEMENT OF WILLIAM LEITH, CHIEF BUSINESS

                OFFICER FOR FEDERAL STUDENT AID,

                  U.S. DEPARTMENT OF EDUCATION

    Mr. Leith. Thank you, Chairman Nelson, Ranking Member 
Collins, and distinguished members of the Select Committee on 
Aging. My name is William Leith and I am the Chief Business 
Operations Officer at the Department of Education's Federal 
Student Aid Office. I appreciate the opportunity to join you to 
discuss this very important issue, the impact of student loan 
debt on older Americans.
    Federal Student Aid's mission is to help students pursue 
their post-secondary education goals. Last year alone, Federal 
Student Aid delivered $138 billion in Federal grants, loans, 
and work-study funds to approximately 14 million students. As 
the cost of education continues to climb, more students are 
relying on student loans and student debt now totals more than 
$1 trillion and the debt owed by all students, including older 
Americans, continues to grow.
    We must continue to improve the tools and options available 
to help Federal student loan borrowers to manage their debt. 
Federal loans offer a number of flexible repayment options for 
borrowers, including several income-driven repayment plans. For 
example, the pay-as-you-earn plan caps a borrower's monthly 
payment at 10 percent of their discretionary income and the 
borrower's remaining balance is forgiven after 20 years.
    While income-driven plans are not the best option for 
everyone, many older borrowers with limited income may benefit 
from enrolling in one of these plans. Borrowers can apply for 
an income-driven plan using a central application which they 
can access on our Web site. Borrowers may also be eligible to 
have their loans discharged if they are totally and permanently 
disabled.
    As of 2013, Federal Student Aid offers a single application 
and a single point of contact for the total and permanent 
disability application process, and borrowers may now use the 
eligibility determination of the Social Security Administration 
and the Department of Veterans Affairs. In addition, borrowers 
may have their outstanding loans forgiven after ten years of 
qualified public service loan forgiveness under the public 
service loan forgiveness program.
    Finally, borrowers may qualify for deferment or forbearance 
on their loans for issues such as unemployment and economic 
hardship, but clearly, there are trade-offs there. It is 
important to remember that under current law, a borrower may 
have to pay income tax on loans forgiven under the income-
driven plans or discharge.
    Federal Student Aid offers a wide range of counseling 
tools, direct communication, and personal services available to 
all borrowers to make sure that they are aware of the tools and 
resources I am describing. The Department's Web site includes 
information on repayment options, forgiveness programs, and 
managing defaulted loans. It also includes a host of 
interactive tools which borrowers can use to learn about the 
debt and apply for various repayment plans.
    We are also constantly looking for new and innovative ways 
to reach our borrowers. For example, earlier this year, the 
Departments of Treasury and Education included a message on the 
back of 25 million tax refund envelopes to raise awareness on 
Federal student loan repayment options. However, while we work 
to help borrowers manage their debt, some borrowers still 
default on their student loans.
    Under the law, a default occurs when a borrower is 
delinquent for more than 270 days. Federal Student Aid and our 
servicers provide borrowers with multiple opportunities to work 
with us before and after default. Services contact a borrower 
when they become delinquent to help them avoid default. Even 
after default, we continue to try and work with the borrower to 
set up a repayment plan.
    If the borrower remains in default for nearly a year after 
stopping making payments, the loan is transferred to the 
Department's Default Resolution Group for further outreach. 
There are a number of ways that a borrower can get out of 
default. Borrowers can rehabilitate their loan by making nine 
one-time payments, and when a borrower rehabilitates that loan, 
that loan is removed from the credit history and that borrower 
then regains eligibility for other financial aid programs as 
well as income-driven repayment plans.
    The Department has worked to make the rehabilitation 
process easier, including new rules that determine a borrower's 
reasonable and affordable payment using an income-based 
repayment formula. In addition to loan rehabilitation, 
borrowers can resolve their defaults by consolidating their 
loans or paying the loan in full.
    If despite the Department's efforts to work with the 
borrower for more than a year and the borrower is still in 
default, the Department must apply other collection tools to 
recover that debt. These tools include administrative wage 
garnishment, litigation, and the Treasury Offset Program which 
is referred to as TOP.
    Under the Debt Collection Improvement Act of 1996, the 
Department of Education must refer delinquent accounts to 
Treasury, which may offset the borrower's tax refund, a portion 
of the Social Security benefits, and other Federal payment. 
TOP, however, may not collect on Social Security disability 
insurance payments and there are protections in place for low-
income borrowers subject to this offset.
    The Department of Education and Treasury both provide 
notice to borrowers before the offsets begin. I just want to 
reiterate that the Department is required by law to refer 
defaults to the TOP program at Treasury, but we do everything 
we can to contact and work with the borrower before we reach 
that point. If a borrower is subject to the offset, they should 
contact our loan holder immediately, and they can also find out 
more information on our Web site.
    In conclusion, Federal Student Aid is committed to working 
with older borrowers to help them understand and manage debt. I 
appreciate the opportunity to provide the Committee with a 
brief overview of the Federal financial aid programs and 
resources that we offer borrowers of all ages. I welcome any 
questions and thank you.
    The Chairman. Does that reduction of the loan because of 
the economic hardship that you mentioned, does that apply to 
seniors?
    Mr. Leith. There are no special benefits or programs that 
are based on age, so deferments, forbearances, income-driven 
repayment plans, none of those plans have an age qualifier.
    The Chairman. The case that I cited of the Ocala, Florida 
woman who is now receiving Social Security and whose Social 
Security check is garnished, and because she is in such 
economic dire straits, is that a consideration that your loan 
program would make in deferring or forgiving part of that loan?
    Mr. Leith. Under the law, we do not have the--my 
understanding is we do not have the option to take age into 
consideration, but we can suspend the Treasury offset based on 
undue hardship and we do have a process in place for that.
    The Chairman. An undue hardship in this definition is undue 
economic hardship.
    Mr. Leith. Yes. I mean, without, obviously, you know, 
looking at the exact case, but I think it is safe to say that 
the situation you are describing would fall under a definition 
of undue hardship for offset of Social Security benefits.
    The Chairman. Okay. After the hearing, we are going to give 
you the specifics of this case.
    Mr. Leith. Okay. I appreciate that.
    The Chairman. Thank you. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman. In June, the 
Senate voted on our proposal to refinance existing student 
loans down to rates currently offered to new student loan 
borrowers, and even though a majority of the Senate voted to go 
forward on this bill, every Democrat, every Independent, and 
three Republicans, including our Ranking Member here, the 
Republicans blocked it as a group and kept it from going 
forward.
    Ms. Anderson, you talked about that when times were tough 
economically, you refinanced your mortgage to bring down the 
interest rate. When interest rates are low, people refinance 
all the time, but you did not mention refinancing your student 
loans, and I presume the reason for that is, are you permitted 
to refinance your student loans?
    Ms. Anderson. No, I am not permitted to refinance my loans, 
and I did want to make a comment about Mr. Leith's talk about 
the resources that are available, that it is true there is an 
income contingent resource available for people about 
repayment, but there are very certain criteria that you have to 
meet in order to be eligible for that.
    All of those income-based repayment plans are based on your 
gross income, not your net income. My gross income and my net 
income are very, very different, so the reason that I have been 
able to be--remain eligible for the various programs over the 
past eight years is that I can prove I cannot pay it.
    But with this negative amortization contract, which is the 
latest offer for me to be in basically deferment where I pay 
$100 a month, which I do not have, that then magically next May 
I will be paying $526 a month for 24 years, at which time I 
will be 81 years old and the total interest that I will have 
paid on that original loan amount is over $88,000.
    Senator Warren. $88,000 in interest on what was originally 
$64,000----
    Ms. Anderson. Correct.
    Senator Warren. [continuing.] That you borrowed?
    Ms. Anderson. That is right.
    Senator Warren. All right. Well, there is much that we need 
to fix here. I just want to focus for another minute, though, 
on the question about refinancing the student loans just so I 
am sure we get this into the record. Mr. Leith, according to 
the Department of Education estimates, how many borrowers would 
benefit if Congress passed the refinancing program?
    Mr. Leith. My understanding from the bill that was 
submitted, that it was estimated that roughly 25 million 
borrowers could benefit.
    Senator Warren. Okay, and I realize it is all age groups, 
but we would be able to help about 25 million borrowers who 
would have either lower payments or they would be paying more 
toward their principle to be able to pay down these student 
loans. Now, the borrowers who are able to refinance, does the 
Department of Education have some rough estimate on about how 
much they would be able to save?
    Mr. Leith. I think under the bill that was submitted, the 
estimate was that the average would be about $2,000 over the 
life of the loan.
    Senator Warren. I take it, it depends on how much loan debt 
you have outstanding. For some people, it will be hundreds of 
dollars a year; for some people, it would be thousands of 
dollars a year if they have much higher loan balances. Well, I 
appreciate this. Some of our Republican colleagues do not seem 
to think that it is worth asking millionaires and billionaires 
to pay their fair share in taxes so that we can put hundreds of 
dollars a year back in the pockets of student loan borrowers. I 
disagree on this.
    Ms. Anderson, let us come back to you. You said you 
borrowed about $64,000. It is obviously much more than that now 
because of the Government programs you have been involved in. 
You cannot refinance your interest rate down.
    If the student loan refinancing bill had passed and you had 
been able to cut your interest rate significantly--I think you 
said it is over eight percent--let us say cut it down to 3.8 
percent, maybe four percent depending on where you are with 
your loans, what would that have meant to you?
    Ms. Anderson. Well, first, it would have meant that it 
would have stopped the bleed, so to speak, for the amassed 
interest that I literally watched grow daily, and by cutting 
that, it would be more than half of what my current interest 
rate is. As I mentioned in my previous examples with my 
mortgage, is that I would not be living in my home if that 
refinance was not possible for people like myself who hit on 
hard times in the housing market and the mortgage problem.
    Senator Warren. Refinancing your mortgage.
    Ms. Anderson. Right.
    Senator Warren. If that had not happened, you would be out 
of a home?
    Ms. Anderson. Correct, and the mortgage debacle and many 
other economic issues that have arisen have had some kind of a 
bailout or some kind of a relief attached to it and the student 
loan has not, so no matter what I become eligible for, that 
fear is always a constant presence for me, and it especially 
becomes more critical as I become older.
    Senator Warren. Well, thank you. Student loan refinancing 
is not all that is needed. We also should be talking about the 
changes we need to make in bankruptcy protection and the cost 
of college and the repayment programs and the loan forgiveness 
programs, but I am disappointed that so many Republicans chose 
to stand with millionaires and billionaires instead of our 
students.
    I am disappointed that borrowers like Ms. Anderson will 
have to continue paying far more than they should on their 
student loans, but we are not giving up on this. This exploding 
student loan debt is threatening the futures of our young 
people, it is threatening the economic security of our seniors, 
and it is threatening our entire economy.
    I remain hopeful that eventually enough of our colleagues 
will listen to the voices of millions of student loan borrowers 
struggling under needlessly high interest rates and drop their 
filibuster so we can move this bill forward. Thank you. Thank 
you, Mr. Chairman.
    The Chairman. Thank you, Senator. Senator Blumenthal.
    Senator Blumenthal. Thank you for having this hearing, Mr. 
Chairman, which I think focuses on an aspect of the college 
affordability challenge and student debt problem that a lot of 
Americans simply fail to appreciate. I want to thank Rosemary 
Anderson for your story, which I think says thousands of words, 
volumes, about how this kind of overhang of student debt, not 
only in early years after graduating from college, but 
throughout lifetime can be literally crippling financially and 
emotionally.
    I want to join Senator Warren in everything that she has 
said about our determination to continue with this effort to 
make college debt and tuition more affordable in this nation. 
It is one of the supremely important challenges and it is not 
going away, nor are we.
    Let me also say, this GAO report strikes me as a kind of 
canary in the coal mine, because what it says to me is, look at 
this narrow slice of the baby boom generation that now has 
debt, look at its impact on people like Ms. Anderson, which is, 
if anything, more pernicious and insidious than it is for 
younger people because they have lifetimes ahead. They have the 
hopes and dreams and energy that all of us have at that age.
    And this age group is not only affected in more serious 
ways, but it is also going to grow. In other words, this report 
says, look out, the cliff is ahead, or the avalanche, maybe it 
is a tsunami of older student debt. Am I exaggerating or is 
that the message that I should take away?
    Mr. Jeszeck. Well, Senator, I think two things. One, if you 
look at Figure 3, you can see for the other age groups that 
there is a significant amount of debt coming down, and I think 
actually the one number that I think is also a cause for 
concern is that the default rate for people between 25 and 49 
was 12 percent. I mean, that seems quite large.
    Senator Blumenthal. It is higher for that age group than 
anyone else, so that is another way. I was going to raise that 
issue, that this report is the canary in the coal mine, because 
it says, you know, the rate of default at lower age groups is 
going to be dwarfed by the rates at older ages, so I think that 
is a very important point as well, and would you predict that 
trend will hold steady based on what you know now?
    Mr. Jeszeck. Well, I think given the findings of this 
report, I think we think that is likely the case. I do want to 
say, one of the real limitations of the study, we were unable 
to get information on the duration of the loans, so we do not 
know, for the people who are in default, or anybody actually, 
whether they took the loans out a few years ago or whether 
these people who are retirees took it out in their 30s.
    That is data that we were not able to get from the 
Department of Education in time. Apparently with their systems, 
it is quite difficult to calculate, but I think that would be a 
really important piece of information to have to sort of dig a 
little deeper and think about how we might want to attack this 
problem.
    Senator Blumenthal. Thank you for that answer. Let me ask 
finally, Mr. Leith, I am a strong supporter of the existing 
program providing student loan forgiveness for borrowers who 
choose to enter public service professions or occupations, and 
the Federal Government created this program to encourage young 
people to enter public service. Unfortunately, older Americans 
do not have the chance to participate in this program which was 
created in 2007, or did not prior to that.
    Is there some way to make it available to them now, number 
one? And number two, as you may know, I proposed expanding this 
program so that some of the limits, for example, requiring that 
people be in the same job for an excessive number of years and 
borrowing, in effect, a periodic or a staged forgiveness 
program be eliminated, and that is why I have introduced 
legislation to eliminate, in effect, the current all or nothing 
structure. Could you give me your opinion of those ideas?
    Mr. Leith. On the first question, I think there is some 
either statutory or regulatory issues that would have to be 
addressed and I would have to take that back to our--actually, 
both issues--back to our policy staff. Unfortunately--I mean, 
my role at the Department is to implement the legislation that 
is passed.
    I would be happy to take both of these issues back to our 
policy staff and make sure that the right people, you know, 
have the right conversation with you on this issue.
    Senator Blumenthal. On both ideas?
    Mr. Leith. Yes, sir.
    Senator Blumenthal. Okay. Just out of curiosity, Mr. Leith 
and Jeszeck, maybe you have already said, but I wonder, did you 
have student loans?
    Mr. Jeszeck. Yes, I did, sir.
    Mr. Leith. Yes, I do as well.
    Senator Blumenthal. Are they all paid?
    Mr. Jeszeck. Yes, but I am also close to retirement.
    Senator Blumenthal. You are close to retirement. You may 
have children who are paying.
    Mr. Jeszeck. Yes, Senator.
    Mr. Leith. I have three kids in college right now, so I 
actually have outstanding loans.
    Senator Blumenthal. You guys have skin in the game. Thank 
you for being here.
    Mr. Jeszeck. Thank you.
    Mr. Leith. Thank you.
    The Chairman. What about that, Mr. Leith? How about people 
that not only have loans themselves, but they have loans on 
their children? How do you go about helping them pay off that 
debt?
    Mr. Leith. I mean, the Department is working extremely 
hard, and the Administration is extremely concerned, with the 
student loan debt problem, the impact it has on individuals, 
the impact it has on the nation. The Department works extremely 
hard to educate all of the borrowers on the various repayment 
options. We work extremely hard to make sure that students now, 
when they are in school, are making smart borrowing choices.
    We have a calculator up on the Web site that, you know, for 
a student that is in school, allows them to pull their existing 
loans into a formula that will tell that individual how much 
they would pay over the life of the loan under all of the 
different repayment plans, both principle and interest. You 
know, we work at different communication strategies to make 
sure that people understand that these tools are available and 
what the options are.
    We also have to work within, you know, the limits of our 
regulations and statutes, so, I mean, that is what we are 
doing.
    The Chairman. Okay. Well, we are here also to talk about 
how to improve the law, so you are saying this is something for 
the policy people?
    Mr. Leith. I am not sure I understand that exact question, 
but I am saying as far as----
    The Chairman. We want to change the law to make it more 
fair for folks, so who do we need to talk to?
    Mr. Leith. Well, as I said, I think the President has put 
forward a number of proposals and I know that Secretary Duncan 
and his staff at the Department would be more than happy to 
discuss these changes with you.
    The Chairman. What do you think about Ms. Anderson's 
situation? She collected all of her loans together and she is 
paying eight percent.
    Mr. Leith. Right.
    The Chairman. She cannot refinance it. What do you think 
about that?
    Mr. Leith. Personally, I mean, it is difficult, but 
everything she said is true. You know, within the programs that 
we have, she has exhausted some options, you know, and it is 
difficult to work through these issues. I mean, we try very 
hard and we take it very seriously to help every single 
borrower, but, you know, everything she has put forward here 
today seems to me to be very accurate.
    The Chairman. In the case of a senior, you can garnish 
their Social Security check. You also charge them fees for 
doing that?
    Mr. Leith. I believe Treasury charges a fee for the offset. 
I would have to----
    The Chairman. It just adds to the debt?
    Mr. Leith. I would have to get back to you on that.
    Mr. Jeszeck. Other agencies may charge fees as well, 
Senator, for processing.
    The Chairman. Okay. What about, how do you determine 
hardship? Do we need to help you with the definitions?
    Mr. Leith. There is a--when it comes to suspending the 
offset for Social Security, garnishment, if a borrower calls 
and says they have a hardship, we will automatically suspend 
that offset for 30 days and ask the borrower to submit a 
statement of income and expenses, so based on that statement of 
income and expenses, then that suspension can be continued for 
another 12 months and it can be continued on a 12-month basis.
    The Chairman. Those employees that are making that 
determination, is their training clear and is it consistent 
across the board?
    Mr. Leith. I believe it is, sir.
    Ms. Anderson. If I may----
    The Chairman. Please.
    Ms. Anderson. [continuing.] Chairman, is that while that is 
true, again it is 12 months at a time. My economic hardship is 
not going to end at the end of 12 months, so while I might be 
able to delay default by getting into a negative amortization 
contract, it is saying that magically next year I am going to 
be able to pay close to $600 a month for 24 years when my 
economic status is not going to change significantly between 
now and then.
    The Chairman. Right.
    Ms. Anderson. Especially at my age.
    The Chairman. Well, forbearance and deferral seem like good 
ideas until you realize what you just said, that delaying the 
payment is making your debt grow. Mr. Leith, we are not trying 
to pick on you, but we have got to get answers from you, or if 
you would have one of your policy people call our staff 
director here, I would appreciate it.
    If the focus is on helping people and helping them to make 
timely payments and stay out of debt, what we have heard here 
is that it does not sound like the system is working that way.
    Mr. Leith. Clearly, not everyone is current on their 
payments, and I think, you know, like I said, we work, you 
know, very hard to educate the students coming out of college 
on the payment options and how to stay current. In certain 
cases, there are not options available for every borrower, so 
the income-based repayment program is an excellent program.
    It is not right for everyone. It is right for many, but not 
everyone is eligible, and as Ms. Anderson said, it does not 
take into account net income. It takes into account 
discretionary income, which is formula driven.
    Ms. Anderson. I also wanted to mention that, you know, 
Ranking Member Collins mentioned that there also has to be a 
need on the part of educational institutions to look at their 
costs. I have been working for the University of California for 
21 years and I know on my campus how we have cut back 
administrative costs in order to pass on those savings to 
students who are seeing increases in just ways that is hard to 
fathom for the cost of their education.
    What we do not want to do is discourage people from 
pursuing an education. For me, if there was any silver lining 
is that when my daughters became eligible for college, I was 
able to really counsel them about how and from whom to borrow.
    Mr. Leith is correct that the communications about what the 
paperwork you are signing and what the implications are out 
into the future has improve exponentially over the years. For 
people like myself who came a little too late, not to say that 
perhaps the information was there, but in a nine-point font 
that I was not paying attention to because I was driven by my 
main objective, which was to get my education.
    I met with Congressman Farr this morning and said, really, 
there has to be some kind of bureaucracy busting advocacy 
office that helps people understand really what you are signing 
and be able to interpret what that impact is going to be, 
beyond a calculator on a Web site, into your future life, and 
for me, because I was older when I went back to school, as I 
said, I was able to buy a home. That would not be true today.
    The Chairman. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman. Mr. Chairman, I 
would like to be able to talk for a minute about student loan 
servicing. You know, there is more than a trillion dollars 
outstanding in student loan debt, but the United States 
Government does not actually go out and collect on these loans.
    This is handled by contract with the United States 
Government. We have private companies that are out there, 
private for-profit companies that are out doing the student 
loan servicing. Now, there are a lot of rules and a lot of laws 
around student loan servicing, things that they are required to 
do, things they are not permitted to do, that we have, in some 
measured way, tried to make sure that borrowers will at least 
be treated with some basic fairness.
    Now, I want to start this by thinking about what happens 
when you break your contract. You know, students or former 
students who cannot pay on their loans pay a terrific price. 
You have a document. They pay high fees, their credit is 
ruined, their paychecks are garnished, their Social Security 
checks can be garnished. In other words, one misstep on your 
obligation under your student loan and you can be in real 
financial trouble and you can pay for it for a very long time.
    What happens when the contractors that service our student 
loans do not meet their contractual obligations? Well, it turns 
out it seems that life is not nearly so harsh for them. 
Servicers like Sallie Mae, who has recently changed its name to 
Navient, have broken the rules, broken the law, failed their 
borrowers, and not lost a dime on their Federal contracts.
    Now, in June, President Obama announced that the Department 
of Education would take steps to hold these servicers, these 
loan servicers, more accountable, and two weeks ago, the 
Department of Education followed through on that promise by 
announcing that it had renegotiated the contracts with the 
student loan servicers. Now, that is good news.
    Evidently, the Department of Education decided that this 
should be done by paying student loan servicers a higher price 
for loans that are in active repayment and less for loans that 
are delinquent, so they have kind of changed the payment 
schedule.
    The problem is that these changes may not have the intended 
effect, because the new arrangement sets such a high price for 
loans that are current, servicers could make more money under 
the renegotiated contracts than they did under the old 
contracts without changing their behavior at all.
    For example, analysts at Compass Point ran the numbers and 
concluded that under the renegotiated contract, Navient, the 
Sallie Mae spinoff, would make an estimated $20 million extra 
every year going forward, even if it does not make a single 
change to treat any of its borrowers better or to comply with 
the law, so I do not get this. When Navient breaks the law, 
they get a new contract from the Department of Education that 
lets them make more money if they keep right on with business 
as usual, so what the heck is going on here, Mr. Leith?
    Mr. Leith. First of all, the contracts were renegotiated 
with the intent of incentivizing all of our servicers to do 
everything they can to make a borrower and keep a borrower 
current, not only active in repayment, but current. We modeled 
out the changes and I would have to look at the $20 million 
number.
    Senator Warren. I am sorry, so you modeled this out and how 
much more did you figure out that they were going to make?
    Mr. Leith. I do not have that with me, but I guess my point 
is----
    Senator Warren. Can you give me a ballpark here? Did you 
figure out that it was going to be more than $20 million?
    Mr. Leith. I am sorry. We looked at it in the aggregate of 
our portfolio, not by individual servicer.
    Senator Warren. Navient has what portion of your portfolio?
    Mr. Leith. They are our third largest servicer.
    Senator Warren. Here is one of your biggest servicers. 
Someone else has been able to run the numbers based on what you 
have published, and shown that this servicer does not have to 
change a single thing and can make $20 million more a year by 
continuing to treat student borrowers badly? And you do not 
have any numbers on this?
    Mr. Leith. Like I said, we have numbers on the aggregate 
portfolio.
    Senator Warren. What do your numbers show on the aggregate 
portfolio?
    Mr. Leith. I will provide that. I do not have it on the top 
of my head.
    Senator Warren. Okay. Let me ask you this. Surely, you know 
this because surely you did this analysis before you 
renegotiated these contracts. Did it show that in general they 
were going to make more money for doing the same thing, or they 
were going to make a whole lot less money if they kept doing 
the same thing?
    Mr. Leith. No. It shows, in general, that they will make a 
little bit more across the portfolio, but the point is, we want 
them to do a lot more.
    Senator Warren. Let me get this straight. You break the 
law, you do not follow the rules, you treat the borrowers 
badly, and you all just renegotiated the contract to make sure 
that across the portfolio they are going to make a little more 
money if nothing changes?
    Mr. Leith. We have 11 servicers, so----
    Senator Warren. But you told me this is across the 
portfolio.
    Mr. Leith. Right.
    Senator Warren. Collectively they are going to make a 
little more money for continuing, I presume, to break the law, 
to not follow the rules, and to treat borrowers badly. The idea 
of the renegotiation was to try to help the borrowers, not to 
make it worse or to make the servicers richer.
    Mr. Leith. The intent of the renegotiation is exactly to 
help the borrowers, so we will measure the impact of this 
change over the next six to nine months, and if we do not see 
significant improvement in the percentage of the portfolio that 
are in current repayment status, you know, moving people from 
delinquency to in repayment, then we will reset prices again. 
But we are----
    Senator Warren. You will reset prices again to do what, to 
pay them even more money for not making any changes?
    Mr. Leith. Then----
    Senator Warren. Mr. Leith, I do not understand a basic 
renegotiation that says, you can continue breaking the law, but 
we are going to pay you more money for doing it.
    Mr. Leith. With regard to the Navient, I mean, I think--and 
the breaking the law issue, this came up when Secretary Duncan 
said that we would complete a review within 120 days. That 120 
days will be up in a couple weeks and we are on schedule to 
complete that review in the time frame that was committed to. I 
cannot say that I am aware that our servicers are out there 
breaking the law.
    Senator Warren. You are not aware that Sallie Mae has 
admitted to breaking the law and that you have--your agency--I 
am sorry, your title is you are the head of the Student Loan--
--
    Mr. Leith. I am the Chief Business Operations Officer.
    Senator Warren. Chief, Business Operations for Federal 
student aid and you are not aware that the servicers have 
broken the law?
    Mr. Leith. I am aware of the Navient settlement with 
Justice.
    Senator Warren. Which was a settlement because they did 
what?
    Mr. Leith. It was a settlement that was a non-admission of 
guilt, which is why we are doing our investigation.
    Senator Warren. So your position is you are paying them 
more money because you are not sure they broke the law?
    Mr. Leith. I am sorry. We are paying our servicers the 
prices that we are paying to try to get the borrowers into the 
best current repayment plan possible.
    Senator Warren. Well, I actually just wanted to point, 
based on these numbers, that the other side--I mean, this is 
just mad--they could actually do a worse job and still make as 
much money as they are making today. I just think this is 
deeply shocking. We need some real accountability here, and I 
think what that accountability means is we need publicly 
available data so everyone knows how each of the servicers is 
performing so we can hold their feet to the fire.
    It means serious penalties for violating contracts, not 
bonuses. It means open competition so that different 
organizations, different groups can bid for these servicing 
contracts, and we need a Department of Education that is going 
to be on the side of the students, not on the side of the 
servicing industry, so that is it on that question, Mr. 
Chairman. Thank you.
    The Chairman. Senator Warren, what I intend to do is to 
write a letter from the Committee. I invite you to be a part of 
the drafting of this letter and the signing of the letter. We 
will offer it to other members of the Committee to sign, to 
Secretary Donovan on these very points that you have raised.
    Senator Warren. Thank you. Can I ask one more question?
    The Chairman. Please.
    Senator Warren. I do not want to cut in front of you if you 
have got another one here. I want to ask another one, and let 
me see if I can just find my notes on this. I have kind of 
shuffled things around here, but I want to ask a question 
about--here we go. I think I have got it here. I want to ask 
about an Inspector General report for the Department of 
Education.
    In 2003, the Inspector General issued a report on how well 
the Department of Education was doing on monitoring these 
private collection agencies that administered the student loans 
and deal with students who are in default, and in this report, 
the Inspector General found that the Department of Education 
was failing in its central job to protect borrowers, failing to 
track complaints, failing to perform audits, failing to review 
deliverables, and failing to maintain adequate files.
    In response, the Department of Education's Federal Student 
Aid Office--I think that is your office, Mr. Leith--pledged to 
change its practices, and that was 11 years ago. Now, in July 
of this year, just last month, the Inspector General examined 
the Department of Education's collection practices once again. 
The IG found many of the same deficiencies.
    According to the Inspector General, the Department is 
failing to monitor borrower complaints, failing to take 
corrective action, and failing to review deliverables. In other 
words, the Department was still not doing its job to ensure 
that the collectors were treating borrowers fairly and 
following the law.
    Mr. Leith, how can the Department be making the same 
mistakes and failing borrowers in the same ways 11 years after 
the Office of the Inspector General pointed out these flaws
    Mr. Leith. I can assure you that from the last Inspector 
General audit, we have put a corrective action plan in place 
for every one of those issues.
    Senator Warren. I am sorry. When you say the last one, do 
you mean the 2003 one or the one that just came out?
    Mr. Leith. No, the one that just came out.
    Senator Warren. Well----
    Mr. Leith. I am sorry. I cannot speak to the 2003 one, but 
I can speak to what we are doing now. We have just change 
contractors for the debt collection system. We followed a life 
cycle methodology for the development and changes that are 
being made. We are tracking both verbal and written complaints.
    We are listening, doing random samples of 140 calls a 
quarter per PCA, and, you know, when we find an issue, we 
address the issue. We put it in. We develop a corrective action 
and we follow up through resolution on that corrective action.
    Senator Warren. Mr. Leith, I appreciate that and I am glad 
that you are doing those things, but what I do not understand 
is, there was a report in 2003 that identified the same set of 
problems, so each action that you identify, why were you not 
taking that action in 2004, in 2005, in 2006, in 2007, in 2008, 
in 2009, in 2010, in 2011, in 2012? Why have you not already 
done those things so when the Inspector General comes back in 
2013, the Inspector General can say, there has been significant 
change since 2003?
    Mr. Leith. It is a legitimate question. I cannot answer 
that, but I will certainly follow up.
    Ms. Anderson. If I may interject, I think that is a perfect 
illustration of what is happening with the student loan debt 
and the people like myself, the borrowers, that find that they 
do not have options available to them within the current 
structure, is that people who are in charge of those loans and 
in charge of that piece of it are given latitudes that we are 
not given latitude in, and therein lays the insidious nature of 
how those collections and how that money is being collected on 
the backs of people who just wanted to improve their lifestyle.
    Senator Warren. You make the right point, Ms. Anderson. 
Students do not get to pick their servicers. They borrow from 
the Federal Government and then the Federal Government picks 
who will service that loan, and part of the understanding is 
the Federal Government will not only pick the companies that 
will treat the students well, but will follow the law, that 
will be scrupulous in how they treat people who have taken out 
student loans.
    But also, that the Federal Government will then monitor to 
make sure, day after day, week after week, month after month, 
that those servicers are following the law. We depend on you, 
the Department of Education, to do this, and it is clear that 
it is not happening and it is not happening for millions of 
borrowers out there.
    Mr. Chairman, I would be glad to join you on this letter 
and whatever else it is we can do. We have got to make some 
changes here.
    The Chairman. Whatever else we can do is going to involve 
the Chairman issuing an invitation to Secretary Donovan on 
behalf of the Committee, Senator Collins and the rest of the 
Committee members, to come and have a discussion. We will start 
with a private discussion--it may turn out into a round table 
discussion at some point--about a number of the issues that 
have been raised here today.
    This meeting was for the purpose of concentrating on senior 
citizens and the debt that they are carrying, but obviously in 
the course of the discussion, we have raised a number of other 
issues that apply to all borrowers.
    I want to thank the panelists. I want to thank everybody 
who has been interested in this subject, and the meeting is 
adjourned.
    [Whereupon, at 3:26 p.m., the hearing was adjourned.]

    
      
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                      Prepared Witness Statements

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                        Questions for the Record

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