[Senate Hearing 115-725]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 115-725
 
                           REAUTHORIZING THE
                         HIGHER EDUCATION ACT:
                      FINANCIAL AID SIMPLIFICATION
                            AND TRANSPARENCY

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

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

EXAMINING REAUTHORIZING THE HIGHER EDUCATION ACT, FOCUSING ON FINANCIAL 
                  AID SIMPLIFICATION AND TRANSPARENCY

                               __________

                            JANUARY 18, 2018

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and Pensions
 
 
 
 
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             U.S. GOVERNMENT PUBLISHING OFFICE 
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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman
                  
MICHAEL B. ENZI, Wyoming            PATTY MURRAY, Washington
RICHARD BURR, North Carolina        BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia             ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky                 MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine             TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana       CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana                 ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah                TIM KAINE, Virginia
PAT ROBERTS, Kansas                 MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska              TINA SMITH, Minnesota
TIM SCOTT, South Carolina           DOUG JONES, Alabama

                                     
               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
             
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                       THURSDAY, JANUARY 18, 2018

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening Statement.........................     1
Murray, Hon. Patty, Ranking Member, Committee on Health, 
  Education, Labor, and Pensions, Opening Statement..............     4

                               Witnesses

Keane, Laura, Chief Policy Officer, uAspire, Philadelphia, 
  Pennsylvania...................................................     7
    Prepared statement...........................................     9
    Appendix A: Award Letter.....................................    18
    Appendix B: Award Letter Format Cases........................    21
    Summary statement............................................    24
Lowery-Hart, Russell, President, Amarillo College, Amarillo, 
  Texas..........................................................    25
    Prepared statement...........................................    26
    Summary statement............................................    38
Darcus, Joanna, Massachusetts Legal Assistance Corporation, 
  Racial Justice Fellow, National Consumer Law Center, Boston, 
  Massachusetts..................................................    39
    Prepared statement...........................................    41
    Summary statement............................................    49
Chingos, Matthew, Director, Education Policy Program, Urban 
  Institute, Washington, DC......................................    49
    Prepared statement...........................................    51
    Summary statement............................................    55
Dynarski, Susan, Professor of Public Policy, Education and 
  Economics, University of Michigan, Ann Arbor, Michigan.........    56
    Prepared statement...........................................    58

                   Additional Material for the Record

Laura Keane:
    Addendum to Testimony........................................    88
    ``A Court Recorder's Response to the HELP Hearing on 
      Financial Aid''............................................    89
Higher Education Loan Coalition, Prepared Statement..............    89
uAspire, ``Award Letter Checklist: Critical Terms, Calculations, 
  and Formatting Practices for Every Financial Aid Offer''.......    91


                           REAUTHORIZING THE



                         HIGHER EDUCATION ACT:



                      FINANCIAL AID SIMPLIFICATION



                            AND TRANSPARENCY

                              ----------                              


                       Thursday, January 18, 2018

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:07 a.m., in 
room SD-430, Dirksen Senate Office Building, Hon. Lamar 
Alexander, Chairman of the Committee, presiding.
    Present: Senators Alexander [presiding] Enzi, Collins, 
Cassidy, Young, Scott, Murray, Casey, Bennet, Baldwin, Murphy, 
Warren, Kaine, Hassan, Smith, and Jones.

                 OPENING STATEMENT OF SENATOR ALEXANDER

    The Chairman. Good morning. The Senate Committee on Health, 
Education, Labor, and Pensions will please come to order.
    This is another in a series of hearings as we work to get a 
result by early spring on reauthorizing the Higher Education 
Act. Today, we are looking at ways to simplify and make more 
effective Federal regulations to make it easier for students to 
pay for college, to pay back their loans, and to reduce red 
tape so administrators can spend more time and money on 
students.
    Senator Murray and I will each have an opening statement, 
and then we will introduce the witnesses. After the witnesses' 
testimony, Senators will each have 5 minutes of questions.
    Our Nation's first higher education institution was Harvard 
University, founded in 1636 just 16 years after the Mayflower 
arrived in Plymouth. There was, of course, no Federal role in 
higher education at the time. There was no Federal Government. 
During Abraham Lincoln's presidency, the Federal Government 
enacted the Land Grant College Act in 1862. But a century later 
at the end of World War II, just 5 percent of Americans had 
bachelor's degrees.
    The Federal Government's major role in higher education 
dates back only to 1965. When Congress enacted the Higher 
Education Act that year, the number with bachelor's degrees had 
increased to 10 percent. And today, it is 35 percent.
    Today, we have 6,000 colleges and universities. The Federal 
Government's role primarily is to help 20 million students pay 
for their education at a variety of institutions--graduate 
schools, 4-year colleges, community colleges, technical 
institutions, profit, for-profit, religious, public. All these 
form a higher education system that has often been called the 
best in the world.
    This involves a huge amount of money. There were 28 billion 
in Pell Grants last year, dollars, that students don't have to 
pay back. That number was over $30 billion just a few years 
ago. In addition, there were $92 billion in new Federal loans 
last year that students do have to pay back.
    The last time we took a comprehensive look at our higher 
education system was 2008. Since then, Congress and the 
President did something I didn't agree with by making the 
Federal Government the provider of nearly all loans to 
students. I didn't believe that the Federal Government had the 
capacity to be one of the largest bankers in the world, and the 
Department's performance to date has demonstrated I was correct 
about that.
    We began thinking about this authorization 4 1/2 years ago 
when we held our first hearing on reauthorizing of the Higher 
Education Act in September 2013. Since then, we have had 18 
hearings. These hearings have produced a large number of 
proposals, mostly bipartisan, ranging from simplifying student 
aid to improving the accreditation system.
    The House Education Committee approved their updated Higher 
Education Act late last year. It is now time to bring our 
process in the Senate to a conclusion and present our 
recommendations to the full Senate for action.
    Senator Murray and I are working to do this as we have done 
in other large issues--the law fixing No Child Left Behind, the 
21st Century CURES Act, a reauthorization of the FDA user fee 
agreements--in a process that is based on bipartisan consensus. 
It is our goal for the Committee to mark up a comprehensive set 
of recommendations and send them to the full Senate by the 
early spring.
    The consensus I see emerging is this--student focused. 
Simpler, more effective regulations to make it easier for 
students to pay for college and to pay back their loans, 
reducing red tape so administrators can spend more time and 
money on students, and making sure a degree is worth the time 
and money that students spend to earn it, and helping colleges 
keep students safe on campus.
    One area of consensus that has emerged, something we have 
heard over and over from students, parents, and administrators, 
is that the Federal financial aid form itself is overly 
complicated and needs to be much simpler. As a result of our 
hearings, we figured out we can drastically shorten the Free 
Application for Federal Student Aid, or the FAFSA, from 108 
questions to 15 to 25 questions using information the 
Government already has.
    This should be a welcome relief for the nearly 20 million 
students that complete the FAFSA each year. The president of 
Southwest Community College in Memphis told me he believes he 
loses 1,500 students each semester because of the complexity of 
the FAFSA. A woman who has mentored with Tennessee's Free 
Tuition Program, Tennessee Promise, said the complex form has 
``a chilling effect, intimidating parents who may themselves 
never have attended college and who have no experience 
navigating the process.''
    Over and over, families have asked me this. ``I have 
already given most of this information to the Federal 
Government when I paid my taxes, why do I have to do it again? 
Once should be enough.''
    We also consistently hear from students, parents, and 
administrators that students looking for Federal financial aid 
to go to college need a much simpler system for the nearly $30 
billion in grants and roughly $100 billion in new loans and the 
repayment plan for those loans so the financial aid system 
isn't a barrier to college for the very students it is intended 
to help.
    Today's hearing is to see if we can reach a result on 
simplifying grants, loans, and repayment plans. Currently, we 
have two grant programs, five loan programs, nine repayment 
plans. This is a complicated system for students. It leads to 
confusion about the aid and repayment options they are eligible 
for. It ultimately makes it harder for them to get that aid.
    The Federal financial system is so complex that even those 
in the higher education system have trouble navigating it. At a 
roundtable at the University of Tennessee-Martin, a Tennessee 
college president told me it took him months to figure out how 
to help his daughter pay off her Federal student loans in full, 
even with the money in hand.
    As one of our witnesses today, Laura Keane, will describe, 
many students can't tell the difference between a grant and a 
loan when they receive their financial aid from institutions. 
According to Ms. Keane, some letters don't clearly identify 
loans as loans, while other letters refer to the same Federal 
loan with different names, causing even more confusion when the 
student tries to compare the aid they might receive.
    Senator Bennet and I, along with Senators Burr, Booker, 
Isakson, and King, introduced a proposal last Congress to 
streamline Federal aid and repayment to One Grant, One Loan. It 
would have combined two Federal programs into one grant program 
and reduce five different Federal loan programs into three--one 
loan for undergraduate students, one loan for graduate 
students, and one parent loan.
    It would also simplify repayment options by streamlining 
complicated repayment programs into two simple plans, an 
income-based plan and a 10-year repayment plan. Today, I hope 
to hear from our witnesses about our One Grant, One Loan idea 
as well as other proposals.
    In addition to Ms. Keane, our witness include an adviser 
who counsels students on how to repay loans after their 
graduation, a community college president who has worked to 
enroll low-income students and keep them in school, and experts 
who will lay out their own research in simplifying Federal 
financial aid.
    We have several proposals introduced by Senators to discuss 
with our witnesses. All reflect a consensus that our grants, 
loans, and repayment plans need to be simpler. Senator Enzi, 
for example, has the Transparency in Student Lending Act that 
would provide the annual percentage rates of Federal loans on 
student aid letters, so students can compare public and other 
loans more easily.
    Senators Grassley, Cardin, Coons, Gillibrand, Warren, and 
Whitehouse have the Understanding the True Cost of College Act, 
which would address the lack of uniformity of financial aid. 
Senators Grassley, Coons, and Kaine have the Net Price 
Calculator Improvement Act that would streamline the net price 
calculator on college and university websites some families use 
to predict the cost of schools.
    Senators Grassley and Ernst have the Know Before You Owe 
Federal Student Loan Act. Senators Burr and King have the Repay 
Act, to simplify Federal repayment plans into two programs. 
Senators Warner and Rubio have the Dynamic Student Loan 
Repayment Act that would streamline repayment.
    As we continue to work on reauthorizing the Higher 
Education Act, I hope we can work together in a bipartisan way 
to make it clearer to students what grants they are eligible 
for, how much they are able to borrow, and provide simpler and 
manageable ways to repay their loans.
    Senator Murray.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Well, thank you very much, Chairman 
Alexander, and thank you to all of our witnesses for being here 
today. I look forward to your perspectives on how simplifying 
Federal financial aid and improving transparency can help more 
students attend and afford college and higher education.
    But before we begin, I do want to talk about our Nation's 
K-12 education lobby, Every Student Succeeds Act, because it is 
important to consider the implementation of our last education 
law as we start to update this one. Almost everyone agreed that 
No Child Left Behind was badly broken. So Chairman Alexander 
and I agreed to work together to write a law giving states more 
flexibility while maintaining strong Federal guardrails to help 
make sure no student falls through the cracks.
    However, Secretary DeVos' implementation of our bipartisan 
law has proved problematic. The Department of Education is 
approving state plans that do not comply with all of ESSA's 
guardrails and now issuing waivers of the law before it is even 
fully implemented.
    Now I know Chairman Alexander and the Republicans who 
worked on ESSA are just as proud of that law as I am. I would 
assume they would want to see this law implemented as we 
intended and oppose waiving provisions before the law is even 
fully implemented by the states. The waivers are also being 
approved, by the way, without full transparency provided to 
Congress or, more importantly, to the public.
    I think it would be a shame if Republicans refused to stand 
up to this administration when they disregard the law we wrote. 
I do appreciate the Chairman's willingness to meet with the 
Department on these issues, but it is imperative that we do 
keep these discussions going.
    I hope the Chairman and my colleagues across the aisle 
would join me in advising the Department to implement ESSA as 
Congress intended, which brings me back to the Higher Education 
Act. If we can't trust our good faith bipartisan work on the 
last education law will be implemented, well, how can we work 
together on this bill? That is a question that we are going to 
have to grapple with in the months ahead.
    Nonetheless, I do want to say I am hopeful and optimistic 
we can work together to put the Department on the right path 
and that these conversations will then be instrumental in 
maintaining good faith and confidence in our bipartisan 
approach as we now begin to reauthorize the HEA.
    Now we can all agree navigating the financial aid process 
and the student loan repayment system are just some of the many 
challenges facing students. They also struggle to afford 
housing and textbooks and childcare and a lot more. Many of our 
low-income and first-generation students have a difficult time 
getting through the door in the first place. And the rise of 
discrimination and harassment and violence on campuses means 
too many students are worried about--more about their safety 
than their education.
    So in order to make a meaningful impact for our students, 
we have to pass a comprehensive reauthorization of the Higher 
Education Act that addresses all of the challenges 
simultaneously. Anything less is a disservice to our students.
    Now I am pleased we are continuing our conversation about 
simplifying financial aid and increasing the transparency of 
how much college will cost for our families. But I hope we can 
all agree the purpose of our financial aid programs is to help 
open the doors of opportunity and higher education for students 
who feel that those doors have been shut.
    We have to acknowledge that simplification cannot mean 
elimination of aid, especially as college costs continue to 
rise. We should be reducing the barriers facing students at 
every stage of financial aid before they apply, while they are 
enrolled, and after graduation. So let me go into each of those 
a little bit.
    First of all, far too many students are held back from even 
applying to schools because it is simply not affordable. 
Navigating our complex financial aid system can be 
overwhelming, especially for first-generation students. 
Financial aid offers can be confusing and impossible to compare 
as there is no required standard format or terms. And by the 
way, high school counselors are few and far between. 
Nationally, there is about one high school counselor for every 
500 high school students. So students need more help and more 
transparent information.
    Second, I believe both our Federal aid system and schools 
and universities need to play a bigger role in helping enrolled 
students understand the complex maze of eligibility 
requirements for their financial aid. And we should be 
providing students with the support they need to maintain their 
financial aid.
    Unfortunately, some colleges are part of the problem by 
lowering students' financial aid after the first year, even as 
their tuition prices go up, a classic bait-and-switch that 
leads to many students dropping out when they can no longer 
afford their education.
    Finally, we have to help the millions of student loan 
borrowers struggling to manage their student debt with few 
resources that have their best interest in mind. Borrowers are 
experiencing delays and errors and mismanagement of their loans 
and are often getting conflicting and inaccurate information. 
And new research shows that a crisis of students defaulting on 
their loans could be getting worse.
    Simply consolidating Federal loans and grants would not 
address those deep-seated problems. We need sweeping 
improvements so servicers are held accountable, students know 
where to go for help, repayment is simple, and relief is within 
reach. So I am really glad we are having this conversation 
today, and I look forward to hearing from all of our witnesses 
and, again, appreciate all of you being here.
    By simplifying the financial aid process and making it more 
transparent, we can help more students afford higher education 
and lower barriers for students who can't afford to attend 
college otherwise. But these challenges are not singular. So in 
order to truly help our students, we have to tackle all of the 
challenges in higher education and negotiate a full and 
comprehensive reauthorization of the Higher Education Act.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    We will welcome our witnesses today. I would ask you to 
summarize your remarks, if you will, in 5 minutes. There is a 
little clock in front of you. And then we will ask--then that 
way, the Senators will have more time to have conversations 
with you, and we will try to keep them to 5 minutes as well in 
the back and forth.
    I turn to Senator Casey to introduce our first witness, Ms. 
Laura Keane.
    Senator Casey. Thank you, Mr. Chairman.
    I am pleased to introduce Laura Keane. Ms. Keane serves as 
the Chief Policy Officer at uAspire, a nonprofit organization 
headquartered in Boston, Massachusetts. In her role, Ms. Keane 
is responsible for leading the organization's Federal and state 
policy efforts focused on the advancement of student-centered 
policies that ensure that all young people can find an 
affordable pathway to the completion of a college degree.
    Prior to joining uAspire, she served as the Director of 
College Initiatives at Mastery Charter Schools in Philadelphia. 
An educator by training, she taught high school history for 6 
years in both New York City and Philadelphia. She earned her 
B.A. at the University of Notre Dame and a Masters of Education 
at Harvard. She now resides in Philadelphia, Pennsylvania, with 
her three children.
    Ms. Keane, we are grateful that you are here and grateful 
for your testimony. Thank you.
    The Chairman. Thank you, Senator Casey.
    Our next witness is Dr. Russell Lowery-Hart, President of 
Amarillo College, he previously served as Vice President of 
Academic Affairs at Amarillo, chaired the Texas Higher 
Education Coordinating Board Undergraduate Education Advisory 
Committee charged with evaluating and redesigning the State of 
Texas general education requirements. He was named the National 
Council of Instructional Administrators Academic Leader of the 
Year.
    I turn to Senator Warren to introduce Ms. Darcus.
    Senator Warren. Thank you, Mr. Chairman.
    It is my pleasure to introduce Ms. Joanna Darcus. Ms. 
Darcus is a Massachusetts Legal Assistance Corporation Racial 
Justice Fellow at the National Consumer Law Center in Boston, 
Massachusetts. The National Consumer Law Center is a nonprofit 
that works on behalf of consumers and has been doing 
extraordinary work in the area of student loans for decades 
now. I am very grateful for their work.
    Ms. Darcus represents low-income student loan borrowers 
through advocacy and through litigation. And prior to joining 
the National Consumer Law Center, Ms. Darcus was a supervising 
attorney at the Community Legal Services, Incorporated, of 
Philadelphia, where she represented low-income consumers who 
were struggling with consumer debt and with student loans. Ms. 
Darcus is a graduate of Williams College and Duke University 
School of Law.
    Ms. Darcus, thank you for the work you do for consumers and 
students in Massachusetts and all across the country. We are 
delighted to have you here and look forward to your testimony.
    The Chairman. Thank you, Senator Warren.
    Our next witness is Dr. Matthew Chingos, Director of the 
Urban Institute's Education Policy Program. He is co-author of 
The Game of Loans: The Rhetoric and Reality of Student Debt, 
Crossing the Finish Line: Completing College at America's 
Public Universities. He received degrees from Harvard.
    Our final witness is Dr. Susan Dynarski, Professor of 
Public Policy, Education, Economics at the University of 
Michigan. She is also Faculty Research Associate at the 
National Bureau of Economic Research, a nonresident Senior 
Fellow at the Brookings Institution, and the president of the 
Association for Education, Finance, and Policy. In 2009, she 
received the Huff Golden Quill Award from the National 
Association of Student Financial Aid Administrators. She earned 
her Ph.D. at MIT.
    I look forward to everyone's testimony. Why don't we begin 
with you, Ms. Keane?

   STATEMENT OF LAURA KEANE, CHIEF POLICY OFFICER, UASPIRE, 
                   PHILADELPHIA, PENNSYLVANIA

    Ms. Keane. Mr. Chairman, Ranking Member Murray, and Members 
of the Committee, thank you for this opportunity to testify on 
financial aid simplification and transparency. uAspire is a 
national nonprofit hyper-focused on college affordability as a 
way to close the achievement gap in our country. We advise over 
10,000 high school and college students a year to find an 
affordable pathway to college. We also train frontline staff in 
27 states to do the same.
    Choosing to attend and pay for college is an investment in 
one's future. Millions of students make this decision every 
year, yet just 55 percent of those who start college finish. A 
major reason for this is that college costs aren't transparent.
    We advise our students celebrate, then decide. Celebrate 
when you get accepted, but decide only after you review the 
financial aid award letter, which explains your aid. This is 
the deciding moment for our students who are predominantly low-
income, first-generation, and students of color.
    But award letters are confusing, if not misleading. They 
fail to provide the consumer--in this case, students and 
families--with key financial information.
    Let me tell you about Ella. Ella was granted a state school 
scholarship that covered her tuition fees and room and board. 
Her award letter showed no further costs. Ella's family was 
elated. Her father had passed away, and this was his alma 
mater. Her mother worked tirelessly as a social worker, so 
funds were tight.
    Once on campus, Ella realized how expensive textbooks were, 
and although she worked, she didn't have enough money to cover 
the science textbooks, in particular, and her grades suffered. 
When her GPA fell below a 3.0, she lost her aid and was forced 
to drop out. Now she has a debt and no degree and no 
transcript, by the way, because she still had money she owed to 
the college. So she had no credits as well.
    This is why, at uAspire, we have held over 10,000 award 
letter conversations with students and collected over 50,000 
award letters. And we have discovered three troubling trends. 
First, the cost of attendance is often incomplete or missing 
altogether. One-third of letters we analyzed don't list any 
cost at all. There is literally no price tag. One-third of 
letters mention only direct costs, what students have to pay to 
college to enroll and start school.
    Only one-third of these letters did what we believe they 
should, which is to include both direct costs and indirect 
expenses like books and transportation. That is what pulled 
Ella off track.
    Second, the formatting of the award letters often doesn't 
make sense. How schools list the aid affects how students do 
the math. Over two-thirds of the letters we analyzed--again, 
two-thirds of the letters we analyzed lump grant aid and loans 
together. It is unclear what is a gift and what needs to be 
paid back.
    Third, there is no standard terminology for students to 
compare offers. We found financial aid terms titled differently 
from letter to letter; the same thing written many different 
ways.
    For example, we found the Federal unsubsidized loan did not 
even use the word ``loan''--excuse me, let me start over. We 
found the Federal unsubsidized loan presented in 143 different 
ways. In 26 of those cases, the colleges did not even use the 
word ``loan'' to describe it.
    On the heels of complicated FAFSA and verification, these 
award letters really trip up our students. Students like Leon. 
Leon was a bright, but unmotivated young man who had a very 
difficult home life. An athletic program provided him with a 
love of learning and an ambition to attend college. Leon 
excitedly shared the news of a $20,000 scholarship to his top 
choice and committed to the college. Yet in August, he faced a 
$17,000 bill. Leon didn't go to college that year. This an 
example of summer melt, a phenomenon when students who are 
college ready and college intending never reach campus.
    Which brings me back to how you can help. While these 
letters lack consistency and transparency, there is a proven 
strategy of guidelines for providing clear information to 
consumers. It has been done successfully in other areas of 
commerce, including FDA food labels, the HUD-1 Settlement 
Sheet, and credit card statements. Please do the same for our 
Nation's students.
    This is a system-wide problem and needs a systems-level 
solution. Not enough counselors are there to help students 
navigate these tricky layers. We have a clear ask. Set standard 
requirements for financial terms and definitions and formatting 
to protect both our students and our taxpayers' investments.
    Simplifying award letter communication is vital. Yet 
simplification of grants and loans should not mean a reduction 
of funds for students who need it most.
    In closing, we are so grateful you invited a student-
centered organization to be part of this important conversation 
for our country. We know that students and those who serve them 
have insights to help make policy work.
    Thank you.
    [The prepared statement of Laura Keane follows:]
                   prepared statement of laura keane
    Mr. Chairman, Ranking Member Murray, and Members of the Committee, 
thank you for this opportunity to testify on ``Reauthorizing the Higher 
Education Act: Financial Aid Simplification and Transparency.'' My 
organization, uAspire, is a national nonprofit hyper-focused on college 
affordability. In the last year, uAspire advised over 10,000 students 
in the states of Massachusetts and California and virtually advised 
another 15,000 students in seven states on how to find an affordable 
pathway to a college degree. In addition, we trained 2,100 counselors 
who served another 350,000 students in 27 states across the country. We 
serve all postsecondary students attending a variety of institution 
types.
    We are a student-centered organization, working with one student at 
a time, and on a policy level, we utilize our learnings to make 
financial aid systems more equitable, efficient, and effective. We 
would love to put ourselves out of a job 1 day.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    The topic of how to pay for college is one discussed at the kitchen 
table for many Americans--at least for the lucky ones. Others, 
including many of the students we serve, assume it's simply out of 
their reach--not because of their academic performance, but because of 
cost. This problem is rooted in both perception and reality. Sometimes, 
the cost is out of reach. The price of college has skyrocketed faster 
than the rate of inflation for years now, while the purchasing power of 
the Pell Grant has dropped from covering nearly 80 percent of student 
need when created 40 years ago, to covering less than 30 percent of the 
cost of a 4-year, public degree today. \1\ Sometimes, it's not the cost 
that is a barrier for our students, but the confusing terminology or 
complex processes required to access and understand financial aid, 
which can be akin to the old board game of Chutes and Ladders. Often 
times, it's both high costs and lack of clarity of those costs at play.
---------------------------------------------------------------------------
    \1\  Protopsaltis, S. Parrott, S. 2017 ``Pell Grants--a Key Tool 
for Expanding College Access and Economic Opportunity--Need 
Strengthening, Not Cuts'' Center on Budget and Policy Priorities.
---------------------------------------------------------------------------
    My testimony today will focus on the student experience with our 
current financial aid system. Lack of clear and consistent information 
combined with messy, complicated systems denies students and families 
the ability to be smart consumers and make financially informed 
decisions in the higher ed marketplace. This leaves too many Americans 
at the doorstep of earning a higher education degree, but unable to do 
so, especially low-income Americans for whom the financial aid system 
was designed to reach. My goal today is two-fold: to share with you the 
common challenges our students face as they navigate financial aid and 
offer proposals from the front-line that we think can help improve the 
system. Given the focus of this hearing, we will do so looking at three 
phases of the student experience in the financial aid process: choosing 
an affordable college; transitioning to college; and during college.
           Student Experience: Choosing an Affordable College
    Finding an affordable college is a confusing process for students 
and families. Students confront a detrimental lack of information and 
transparency when making one of the biggest financial decisions of 
their lives. Though the mysteries should end when they receive 
financial aid award letters, often they do not. Some students may be 
stuck in the verification process and therefore unable to receive a 
final award letter or any financial aid. Others may have received award 
letters from multiple colleges but are unsure how to determine and 
compare the bottom line costs because their letters are filled with 
inconsistent terminology and vary greatly in format. Appendix A: Award 
Letters: Three Examples contains a sample of letters that showcase the 
divergence of formats, terms, and math at the root of the confusion.
    This section shares our insights based on two sources: our advising 
work where we have conducted thousands of award letter review sessions 
with students; and data analysis of our collection of over 50,000 
financial aid offers sources by students and advisors during award 
letter reviews. We are currently underway with an extensive research 
project with New America, a research and policy institute located here 
in Washington, DC. Together we are conducting both quantitative and 
qualitative analyses of our Class of 2016 data. This data set contains 
11,334 award letters from 6,023 students at 936 colleges. Of those 
students, 76 percent are Pell Grant recipients, making our analysis 
particularly relevant for the issues low-income students are facing. We 
are unaware of any other analyses of this sort that have been conducted 
at such a large scale.
    We conducted a deep qualitative review of 515 award letters 
provided to Pell-eligible students and have identified seven key areas 
as particularly problematic, illustrated by both our analysis and 
student and practitioner stories of how these issues have impacted 
their decisions. See Appendix B: Award Letter Format Cases for examples 
of the problems highlighted below.

          1. Inconsistent/inaccurate terminology: Financial aid 
        award letters are filled with jargon that leave students and 
        families scratching their heads. In our sample, we had 454 
        letters that offered the Federal direct unsubsidized loan. 
        After accounting for differences of punctuation and minor 
        formatting, we identified 143 unique titles for the direct 
        unsubsidized loan. Of those, 26 letters do not even identify it 
        as a loan (e.g., ``Fed Direct Unsub,'' ``Unsubsidized DL''). 
        Additionally, colleges sometimes misuse important financial aid 
        terminology, such as ``net costs.'' This lack of 
        standardization and improper usage of terms makes it very hard 
        for students and families to compare offers.

          2. Missing cost information: More than one-third of 
        the letters in our sample did not include any notation of cost 
        on the page that listed the awards. This lack of information 
        puts the consumer in the dark. Students cannot contextualize 
        their financial aid offers without knowing the cost, as $20,000 
        of aid means something very different from a college that costs 
        $25,000 than at one that costs $65,000. Further, of those 
        colleges that included cost, nearly half only included direct 
        costs (i.e., tuition/fees, room/board) and did not mention any 
        indirect expenses (e.g., books, supplies, transportation). 
        Failing to communicate full cost of attendance (COA)--direct 
        costs and indirect expenses--can later put students at risk of 
        insufficient funds to persist through college, or even to meet 
        basic food and housing needs. Last, assumptions made to 
        determine the cost, such as residency (in-state/out-of-state) 
        and housing (on/off campus) are often unstated, which limits 
        students' ability to confirm whether the cost of attendance is 
        accurate.

    As an example of how this can affect students, a Pennsylvania 
senior \2\ received a $10,000 scholarship at his top choice school. 
Beaming with pride, he shared the news with family and friends. Since 
COA was missing on the letter, the student didn't realize it was only 
20 percent of the cost and he still owed $40,000, even after the Pell 
Grant is applied. In the rush of excitement, the student already 
accepted the offer and deposited at that school--money he lost when he 
had to switch to a more affordable college option.
---------------------------------------------------------------------------
    \2\  Student examples are actual stories from uAspire advising. 
Names have been withheld to protect student privacy.

          3. Combined and undefined aid types: Less than one-
        third of the letters in our sample split out different types of 
        aid (i.e., grants/scholarships from loans, work-study). The 
        majority of letters group all aid together and most do not 
        include definitions of different types of aid, making it hard 
        for student--particularly those not familiar with financial 
        aid--to understand the long-term implications of their offer. 
        And in cases where letters do include definitions, some of 
        those definitions provided may actually cause more confusion 
        for the student, as illustrated by the example from an actual 
---------------------------------------------------------------------------
        award letter below:

        Work Study Earnings are normally used to defray personal 
        expenses during the school year. However, by participating in 
        the Work Credit Plan, you may contract to apply up to 90 
        percent of your work authorization to your statement of account 
        (example, $2,200 x 90%=$1,980).

          4. Missing and varied calculation of remaining costs: 
        Many award letters fail to calculate for students what it will 
        cost to enroll after taking into account their financial aid. 
        Based on our initial analysis, only about two in five letters 
        provided some calculation of remaining costs, yet there were no 
        clear trends of how that calculation was made. That is, were 
        they subtracting aid from the full COA or just from direct 
        costs? Were they calculating costs before loans, after loans, 
        or both? Were they subtracting out the EFC? Different 
        calculations across letters make it difficult for students and 
        families to compare and make financially informed decisions. We 
        believe that displaying ``net costs'' (i.e., COA minus grants 
        and scholarships) is critical to show what a student's all-in 
        cost will be to complete the year. In addition, based on our 
        advising experience, students and families want to know what 
        the bill will be--namely, what they have to pay now. As a 
        result, we help them calculate ``estimated bill'' (i.e., direct 
        costs minus grants and scholarships and loans) to show what 
        they would need to pay the college to start school.

          5. Direct PLUS Loan listed under awards: Nearly 15 
        percent of letters we analyzed included the PLUS loan in the 
        list of awards and calculations. The PLUS loan is particularly 
        troubling given how high the dollar amounts are that parents 
        could be ``offered.'' Our data analysis showed an average PLUS 
        loan amount offered for a single academic year as nearly 
        $10,000 for students who receive the full Pell Grant amount and 
        over $18,000 for students who are not Pell-eligible.

        In our advising, we frequently encounter situations where 
        students see their stated remaining costs are $0 and do not 
        realize a PLUS loan has been included in the calculation. As an 
        example of such a letter, see example #3 in Appendix A: Award 
        Letters: Three Examples. When faced with these situations, our 
        advisors explain the PLUS loan to students, who then realize 
        they cannot afford to go to these colleges. In some cases, a 
        student knows their parent would be denied the PLUS loan. For 
        other families, even if a parent is approved, they know they 
        will be unable to repay such large loans. Regardless of 
        financial situation, however, including the PLUS loan as though 
        it is an award is confusing to students and families.

          6. Work-study listed under awards: Many award letters 
        include work-study as an award, as though it is available at 
        the beginning of the semester to help pay the first bill. Our 
        data analysis showed a median work-study amount of $2,349 is 
        offered on the award letter, meaning if misinterpreted as aid 
        available immediately, it could leave a student with a larger-
        than-expected bill. Further, work-study is not guaranteed at 
        all. Students need to apply for and receive a job, and then 
        they can earn up to the amount offered on the award letter, 
        depending on working the requisite amount of hours to reach 
        that number.

        Our advisors report students are frequently confused by award 
        letters that include ``Federal work-study'' under awards. They 
        often interpret this aid to be available immediately, as 
        opposed to a potential job that could slowly earn money on a 
        bi-weekly basis.

          7. Lack of clear next steps: Only about half of the 
        letters included any indication of what, if any, aid would be 
        accepted on the student's behalf and what the student needed to 
        do in order to either accept or decline their awards. Given the 
        differences in policies across colleges, the path to unlock aid 
        is neither consistent nor clear. Therefore, it is important to 
        require each institution to identify next steps on award 
        letters so that students do not inadvertently miss out on aid. 
        Due to such disparity of next steps and the lack of consistent 
        communication, uAspire developed a summer program to fill this 
        gap and offer clarity on next steps as well as support to 
        successfully complete them.

    Americans are hungry for clear information to help them navigate 
the maze that is our current financial aid system. Beyond award letter 
terminology and format, we can better educate students and families on 
the key takeaways of award letters so they are better equipped to make 
a financially informed decision. FAFSA completion media campaigns are a 
strong example, yet the FAFSA itself is only the beginning of the 
financial aid process. In the Spring of 2017, uAspire partnered with 
the Office of the Massachusetts Attorney General to launch an online 
and social media campaign to help families better understand financial 
aid packages and college costs. Over 4,600 people have accessed the 
online tools to make an informed college choice, and our educational 
videos have reached an audience of over 20,000. Social media campaigns 
on making a financially informed college choice can promote improved 
student decisionmaking.
          Proposals to Improve Choosing an Affordable College:
    Based on our experience and learnings from the field, we suggest 
the following proposals to improve the current system for students and 
families when choosing a college:
          Conduct consumer testing with a multi-statkeholder 
        group to identify a required set of defined terms and 
        formatting practices for all financial aid award letters.
          Require standard terms with federally defined, 
        student-friendly definitions on the award letter: Cost of 
        Attendance; Direct Cost; Indirect Expenses; Gift Aid; Loans; 
        Net Costs; Estimated Bill; and Work-study.

               Require 5 formatting practices:
               COA broken down to include line items for direct 
        costs and indirect expenses
               Residency and housing assumption stated on 
        financial aid offer
               Aid broken down by grants/scholarships and loans
               Estimated bill and net cost calculations
               PLUS Loan and work-study offers listed outside 
        of aid calculations as potential options to cover remaining 
        costs
              Student Experience: Matriculating to College
    As students move from high school to college, they cross the ``no-
man's land'' between the systems of K-12 and higher education. High 
schools are funded per student up to graduation day, and school 
counselors are typically 10-month employees creating a significant gap 
in support services during a critical time for financial aid 
requirements. It is rare for students to have access to college & 
financial aid counseling during the summer months as they prepare to 
head off to college. \3\
---------------------------------------------------------------------------
    \3\  Castleman, B., Page, L. and Schooley, K. 2013 ``The Forgotten 
Summer: Does the Offer of College Counseling After High School Mitigate 
Summer Melt Among College-Intending, Low-Income High School 
Graduates?'' EdPolicyWorks Working Paper.
---------------------------------------------------------------------------
    There are many financial aid steps students must currently take in 
order to successfully matriculate to postsecondary education. The list 
includes: accessing and navigating college portals; reviewing and 
approving aid; selecting housing and meal plans; securing loans; taking 
placement tests and registering for classes; enrolling or waiving 
health insurance; and paying their college bill. Often this is the 
first time our students confront any of these type of tasks, and they 
are doing so without guidance given momentary lull between K-12 and 
higher ed systems. We'll focus here on two key moments: securing 
student loans and covering the college bill.
    Securing a student loan by signing the ``MPN'' or Master Promissory 
Note and by completing Entrance Loan Counseling are entirely new and 
intimidating tasks for recent high school graduates. Most students do 
not understand what an MPN is, or what exactly they are signing. It's 
often their first time reviewing a financial contract and the language 
is unfamiliar and overwhelming. While the current requirements for 
receiving a Federal student loan include Entrance Loan Counseling, its 
effectiveness as a counseling resource is questionable and the bar to 
determine proficiency is low, as demonstrated by a student study that 
indicated 40 percent of Federal loan borrowers had no memory of 
completing loan counseling \4\. Many of our students are easily able to 
complete entrance counseling without understanding the responsibilities 
and obligations of the loans they are assuming.
---------------------------------------------------------------------------
    \4\  Whitsett, H., and O'Sullivan, R. 2010 Lost Without a Map: A 
Survey about Students' Experiences Navigating the Financial Aid Process 
NERA Economic Consulting & Young Invincibles.
---------------------------------------------------------------------------
    Additionally, the bill that students receive from their college 
looks totally different than the award letter, and the numbers don't 
often add up in the same way. Before joining uAspire, one of my stellar 
students in Pennsylvania received a $20,000 institutional scholarship 
in May and excitedly committed him to the college. Then a few months 
later in August, he received an unexpected $17,000 bill. The full terms 
and implications of the financial aid award resulted in $17,000 of 
unmet need that was not made clear until the bill arrived. Because of 
this enormous and unexpected out-of-pocket expense, this student didn't 
go to college that year.
    Besides differing numbers, the bill often comes from an unfamiliar 
and separate office from financial aid. The silos in higher education--
in particular for where and how to access help for a financial issue--
create additional barriers for students to troubleshoot problems. Below 
is a text message a uAspire advisor received from a student in 
California, for whom a clerical error resulted in her financial aid 
being withheld. This became apparent when she compared her college bill 
to what her award letter listed:

        ``The due date is today and there's no way I can get it there 
        on time. I could have sent what they needed together. Also I 
        KNOW I sent the correct paperwork in. My mother keeps all 
        important documents in folders at home and the contents of the 
        packet were labeled. I scanned and copied everything myself . . 
        . I'm just so tired and frustrated with all this stuff before 
        school even starts!''

    In order to meet this deadline, the student had to drive 70 miles 
to hand deliver the form. It was a narrow miss, as a single missing 
link in the chain of requirements and documentations, can erase years 
of work that the student has put into their college goals.
    Collectively each of these challenges contribute to the phenomenon 
known as ``summer melt'', by which college-ready, college-intending 
students fail to successfully enroll in college in the fall following 
high school graduation. Despite having gained admission into a college, 
and completed many of the requirements to enroll, they are ensnared in 
the labyrinth of summertime pre-matriculations steps with little or no 
support at their disposal. Their individual missed opportunities for 
college and career are a tragedy for our country; a systemic failure 
that constrains our labor market and limits our tax base.
    uAspire partnered with researchers Drs. Ben Castleman and Lindsay 
Page to test and then prove that summer melt can be effectively 
decreased with scalable, inexpensive text reminders--behavioral 
economic nudges that provide the right information at the right time to 
students ripe for a reminder.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Overall, students who received texts during summer months were 7.1 
percentage points more likely to complete enrollment steps to 
matriculate into a postsecondary institution than those who did not 
receive texts. The impact was even greater for students who did not 
have specific college plans at the end of high school, showing 11.3 
percentage points greater matriculation than those without text 
prompts.
                  Matriculating to College Proposals:
    Based on our experience and learnings from the field, we suggest 
the following proposals to improve the current system for students and 
families when matriculating to college:

          Simplify FAFSA and verification to yield much needed 
        college-level counseling capacity in the summer to deliver 
        increased student advising of financial steps for enrollment.
          Conduct research to identify ways that Master 
        Promissory Note requirement could also educate students about 
        borrowing terms, concepts and responsibilities.
          Require estimated bill to be on award letter 
        notifications so students and families can financially plan
          Assign Federal Student Aid responsibility to 
        systematically communicate with all students on the key 
        financial steps to matriculation.
          Task Federal Student Aid to deliver financial aid 
        information and supports via mobile app or text and improve 
        customer service for supports therein.
                   Student Experience: During College
    College affordability is often misconstrued as the money it takes 
to start college, not how much it costs to finish. We have become 
deeply concerned that while college enrollment is up, college 
completion is not. We see students leave college without a degree, 
simply because they cannot afford to stay. For our students, it is a 
consistent story of ``not enough.'' Not enough financial aid to cover 
the reality of their indirect expenses. Not enough time to navigate 
loopholes and potholes to access aid they qualify for. Not enough 
opportunities via Federal Work-Study. And, not enough loan counseling 
to make informed financial decisions each year.
    As stated in uAspire's Affording to Finish report, meeting the 
financial need of students is a challenge for increasing numbers of 
both two and 4-year public institutions. Nationally, 4-year public 
colleges are able to meet full need for only 12 percent of their aid 
applicants. \5\ Significant decreases in State higher education funding 
since the 2009 recession have negatively impacted the affordability of 
public colleges and universities. Forty-six states are spending less 
per student than they did just prior to the recession. Cuts in State 
funding have resulted in increases in tuition and fees at public 
colleges by as much as 33 percent at 4-year publics since 2007-08. \6\ 
Students from families in the lowest income quartile feel the effects 
deeply, it is estimated that over 90 percent have unmet need. \7\
---------------------------------------------------------------------------
    \5\  CollegeInsight. 2013-14. Financial Aid--Undergraduates. April 
25, 2017. http://college-insight.org/-topics/ 
go&h=9c7b6be0256bf370a9ea749afedcf7fb. Oakland, CA: The Institute for 
College Access and Success.
    \6\  Mitchell, M., Leachman, M., & Masterson, K. 2016. State Cuts 
to Higher Education Threaten Quality and Affordability at Public 
Colleges. Washington, DC: Center on Budget and Policy Priorities.
    \7\  Walizer, L. 2015. Barriers to Success: High Unmet Financial 
Need Continues to Endanger Higher Education Opportunities for Low-
Income Students. Washington, DC: CLASP, Center for Postsecondary and 
Economic Success.
---------------------------------------------------------------------------
    When funding isn't enough, it's not the institution that gets 
short-changed, but the student. In order to enroll, direct costs are 
paid first, whereas indirect expenses go unmet. Today, the majority of 
U.S. college students live off-campus, attend 2-year schools and 47 
percent are financially independent. \8\ When advising students we 
consistently see that indirect expenses are not adequately estimated 
nor accounted for in financial aid determinations. This puts students 
at risk for meeting educational expenses and even sometimes basic 
needs. Our students share stories of being increasingly forced to make 
choices between books and food. This mirrors recent research that 
documents trend of food & housing insecurity across community colleges 
citing one-third of students regularly go hungry and 14 percent are 
homeless. \9\ When students struggle to afford basic needs while in 
college, information and access to public benefits can make a big 
difference--to get by and get through. Advisors share the relief they 
feel when students are at colleges with dedicated offices to support 
benefits access such as SNAP and transportation passes. Given the 
complexities of applying, more innovative government partnerships are 
needed to support coordination & administration of benefits to our most 
vulnerable, and increasingly most common college students.
---------------------------------------------------------------------------
    \8\  ``Today's Student Statistics'' 2018 Retrieved from https://
www.luminafoundation.org/todays-student-statistics.
    \9\  Goldrick-Rab, S., Richardson, J., & Hernandez, A. Hungry and 
Homeless in College: Results from a National Study of Basic Needs 
Insecurity in Higher Education. Wisconsin HOPE Lab. (2017).
---------------------------------------------------------------------------
    For today's typical college student, working while in school is a 
must. Our advising experience, as well as numerous research shows that 
students with work-study do better in school by GPA and rates of degree 
completion. Federal Work-Study provides a strong return on investment 
on both the individual and Federal levels. Specifically, community 
college students' who participate in Federal Work-Study demonstrate a 
12-15 percent increase in persistence to their second year \10\ Due to 
the antiquated formula of FWS allocation biasing historical 
participation versus a needs-based analysis, students at community 
colleges face a dearth of available work-study positions. As a result, 
the need to work draws them to off campus employment--decreasing 
flexibility and increasing potential disconnectedness. As a result they 
spend even more time with employers disconnected from their college 
pursuits and needs.
---------------------------------------------------------------------------
    \10\  Poison, C., and Weisburst, E., 2014. Work-Study Financial Aid 
and Student Outcomes: Evidence from Community Colleges in Texas. 
Austin, TX: Department of Economics, University of Texas Austin.
---------------------------------------------------------------------------
    Financial implications of academic decisions present as another 
hurdle for postsecondary students; credit and GPA requirements tied to 
financial aid are incredibly complex & hard to grasp. Within our 
advising program, students often run into financial barriers via 
academic decisions, from using time-bound Pell for development courses 
to losing aid eligibility if not meeting Satisfactory Academic Progress 
(SAP) standards. Research from Judith Scott-Clayton and Lauren Schudde 
of Teacher's College at Columbia University demonstrates this point. 
According to Schudde, ``Meeting SAP is a non-trivial hurdle for many 
students: a quarter of first year Pell recipients at public 
institutions have GPAs low enough to place them at risk of 
ineligibility, representing hundreds of thousands to over a million 
college entrants each year.'' \11\ Students receiving need-based aid 
who do not meet SAP after the first year lose their access to the 
dollars that level the playing field for them. Their full-pay student 
counterparts usually have until graduation to meet the same GPA 
requirements. The concept of SAP is not articulated to students 
clearly, yet even when students grasp the concept, most institutions' 
SAP policies tend to be obscure and complex even for college academic 
advisors, making it easy for students to miscalculate (credits 
accumulated/credits attempted) and lose track. Last year, over one-
third of our advising sessions with students centered around SAP, often 
spent educating and calculating so students would be aware of their 
status in the future.
---------------------------------------------------------------------------
    \11\  Schudde, L. and Scott-Clayton, J.(2014) Pell Grants as 
Performance-Based Aid? An Examination of Satisfactory Academic Progress 
Requirements in the Nation's Largest Need-Based Aid Program. CAPSEE 
http://ccrc.tc.columbia.edu/media/k2/attachments/pell-grants-
asperformance-based-aid.pdf.
---------------------------------------------------------------------------
    Trellis (formerly TG) conducted extensive user-research on loan 
counseling that uAspire used to redesign how we counsel our college 
attendees. Core tenets of effective loan counseling were identified to 
be timely, personal, and interactive. \12\ Instead of offering all 
students the same advising, we offer annual loan counseling with 
personal real-time data from their award letter and National Student 
Loan Data System (NSLDS) account. We coach students to map out 
anticipated expenses and plan the best way to apply their aid, earnings 
and family support, to meet their needs. Students resist these 
sessions, they don't want to talk about it and face an accumulating 
debt that they don't know how they will repay. We have found annual 
loan review normalizes the relationship with borrowing and standardizes 
loan review behavior that is critical for the long-term. Given Federal 
Government only requires entrance and exit loan counseling, we provide 
the support in between. We believe all student loan borrowers, not just 
ours, need personalized and interactive loan counseling--looking at 
their debt total--on an annual basis timed to inform decisions about 
borrowing each year. Technology and data integration can lead the way 
so that scale can be reached.
---------------------------------------------------------------------------
    \12\  Fernandez, C., Fletcher, C., Klepfer, K., & Webster, J. 
(2015). A Time to Every Purpose: Understanding and improving the 
borrower experience with online student loan entrance counseling. TG 
Research. Retrieved from: http://www.tgslc.org/research/.
---------------------------------------------------------------------------
    Addressing insufficient loan counseling is also critical given the 
steady rise of delinquency and default. And the ultimate price for 
overcoming these obstacles is often more daunting for students of 
color. Although default rates are on the rise overall, recent research 
by Dr. Judith Scott-Clayton shows that ``Black B.A. graduates default 
at five times the rate of white B.A. graduates (21 percent to 4 
percent),'' and this disparity almost doubles for attendees of for-
profit institutions (23 percent to 43 percent for the 1996 cohort 
compared to the 2004 cohort). \13\
---------------------------------------------------------------------------
    \13\  Scott-Clayton, J. (January 11, 2018). The looming student 
loan default crisis is worse than we thought. Retrieved from https://
www.brookings.edu/research/the-looming-student-loan-default-crisis-is-
worse-than-we-thought/.
---------------------------------------------------------------------------
                        Postsecondary Proposals:
    Based on our experience and learnings from the field, we suggest 
the following proposals to improve the current system for students and 
families while attending college:
          Maintain aid levels for Pell-grant students tied to 
        inflation to cover growing costs.
          Increase Pell Grant dollars as students progress to 
        incentivize completion and help meet increased costs per year.
          Align interagency data and services to offer 
        postsecondary students access to SNAP food stamps and other 
        public benefits for which they qualify.
          Adjust Federal Work-Study formula to ensure it is 
        going to students who need it most and increase investment to 
        reach more students.
    Simplify and increase clarity of Satisfactory Academic Progress 
(SAP) requirements. Ensure requirements are equitable and not more 
stringent that those for full-pay students.

          Change Federal loan counseling requirement from 
        entrance and exit-only, to annual.
                               CONCLUSION
    Mr. Chairman, Ranking Member Murray and Members of the Committee, 
we appreciate the opportunity to contribute to this important dialog on 
financial aid simplification and transparency. We greatly value this 
series of hearings and urge the Committee to address these issues in a 
holistic manner and focusing across the full lifecycle of a 
postsecondary student, from making an affordable college choice, 
eliminating barriers during the transition to college and ensuring that 
students have access to clear information to ensure they maintain aid 
and stay on a path toward their degree while enrolled in school.
    We believe that financial aid simplification matters, but know it 
won't solve the college affordability issue alone. While these efforts 
do not directly address the much-discussed cost barrier, they will make 
a real and measurable impact on the lives of students across this 
country. Streamlining systems to reduce bureaucratic inefficiencies and 
removing additional barriers for students to navigate will make the 
pathway to a college degree easier for many Americans. Our students can 
focus their efforts on making financially informed decisions rather 
wasting time and frustration navigating confusing terms, unnecessary 
processes. Our counselors and financial aid administrators can spend 
more time advising students on key decisions related to their 
postsecondary education, instead of having to devote valuable time 
bogged down navigating bureaucratic inefficiencies.
    Our goal as an organization is to help more Americans earn a 
college degree with less debt. uAspire believes that the proposals we 
have shared to simplify financial aid practices and increase 
transparency for students, families and practitioners will contribute 
greatly toward reaching that goal. We look forward to working 
collaboratively with government, K-12 and higher education systems and 
others in our field toward pursuing these cost-effective changes which 
will bring a college degree within greater reach for all Americans who 
wish to pursue one.
    Thank you.
                                APPENDIX
    Appendix A: Award Letters: Three Examples
    Appendix B: Award Letter Format Cases
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
        
                   [summary statement of laura keane]
    uAspire is a national nonprofit hyper-focused on college 
affordability and working with students directly. Last year, we 
assisted over 10,000 students in MA and CA, virtually advised another 
15,000 students in 7 states and trained 2,100 counselors serving 
350,000 students in 27 states. On a policy level, we utilize our 
experiences with students to make financial aid systems more equitable, 
efficient, and effective.
    Lack of clear and consistent information combined with complicated 
systems disempowers students and families to be smart consumers in the 
higher ed market and to make financially informed decisions. My goal 
today is two-fold: to share the common challenges students face as they 
navigate financial aid and offer proposals from the front-line that we 
think can help. I will review three phases of the student experience in 
the financial aid process: (1) choosing an affordable college; (2) 
transitioning to college; and (3) attending college.

          (1) Students confront a detrimental lack of 
        information and transparency when making one of the biggest 
        financial decisions of their lives. In reviewing 515 financial 
        aid award letters received by Pell-eligible students, we 
        identified significant barriers to making an informed and 
        affordable college choice, including inconsistent/inaccurate 
        terminology, missing cost information, and problematic 
        formatting practices that mislead consumers.
          (2) As students move from high school to college, 
        they cross the ``no-man's land'' between the systems of K-12 
        and higher education and have reduced access to adequate 
        guidance. At the same time, students must complete a number of 
        required financial tasks alone before they can transition to 
        college, including securing education loans and paying their 
        college bill. This contributes to the phenomenon known as 
        summer melt, by which college-ready, college-intending students 
        fail to successfully enroll in college in the fall following 
        high school graduation. Students who wind up ensnared in the 
        labyrinth of summertime pre-matriculations steps are casualties 
        of this systemic failure that constrains our labor market and 
        limits our tax base.
          (3) College affordability is often misconstrued as 
        the money it takes to start college, not how much it costs to 
        finish. We have become deeply concerned that while college 
        enrollment is up, college completion is not. We see students 
        leave college without a degree, simply because they cannot 
        afford to stay. For our students, it is a consistent story of 
        ``not enough.'' Not enough financial aid to cover the reality 
        of their indirect expenses. Not enough time to navigate 
        loopholes and potholes to access aid they qualify for. Not 
        enough opportunities via Federal Work-Study. And, not enough 
        loan counseling to make informed financial decisions each year.

    Based on our experience and learnings from the field, we offer the 
following proposals to improve the current system for students and 
families:

          Choosing an Affordable College: Conduct consumer 
        testing with a multi-stakeholder group to identify a required 
        set of defined terms and formatting practices for all financial 
        aid award letters. Require standard terms with federally 
        defined, student-friendly definitions on the award letter: Cost 
        of Attendance; Direct Cost; Indirect Expenses; Gift Aid; Loans; 
        Net Costs; Estimated Bill; and Work-study. Require 5 formatting 
        practices.

          Transitioning to College: Simplify FAFSA and 
        verification to yield much needed college-level counseling 
        capacity in the summer to deliver increased student advising of 
        financial steps for enrollment. Identify ways that Master 
        Promissory Note requirement could also educate students about 
        borrowing terms, concepts and responsibilities. Require 
        estimated bill to be on award letter notifications so students 
        and families can financially plan. Assign Federal Student Aid 
        responsibility to systematically communicate with all students 
        on the key financial steps to matriculation. Task Federal 
        Student aid to deliver financial aid information and supports 
        via mobile app or text and improve customer service for 
        supports therein.

          Attending College: Maintain aid levels for Pell-grant 
        students tied to inflation to cover growing costs. Increase 
        Pell Grant dollars as students progress to incentivize 
        completion and help meet increased costs per year. Align 
        interagency data and services to offer postsecondary students 
        access to SNAP food stamps and other public benefits for which 
        they qualify. Adjust Federal Work-Study formula to ensure it is 
        going to students who need it most and increase investment to 
        reach more students. Simplify and increase clarity of 
        Satisfactory Academic Progress (SAP) requirements. Ensure 
        requirements are equitable and not more stringent that those 
        for full-pay students. Change Federal loan counseling 
        requirement from entrance and exit-only, to annual.

    Our goal as an organization is to help more Americans earn a 
college degree with less debt. uAspire believes that the proposals we 
have shared to simplify financial aid practices and increase 
transparency for students, families and practitioners will contribute 
greatly toward reaching that goal.
                                 ______
                                 
    The Chairman. Thank you, Ms. Keane.
    Dr. Lowery-Hart, welcome.

STATEMENT OF RUSSELL LOWERY-HART, PRESIDENT, AMARILLO COLLEGE, 
                        AMARILLO, TEXAS

    Dr. Lowery-Hart. Chairman, Ranking Member Murray, and 
honorable Senators, it is a pleasure to sit before you today.
    I grew up in a small town in West Texas on a farm, never 
imagined myself sitting here advocating for community college 
students. But I come here as a small business owner worried 
about economic development turned educator and a community 
leader turned community college student advocate. I know that 
the future of our country, at least the part that I live in, is 
uncertain. With automation, robotics, biogenetics, the future 
of work in our economy is shifting, and I am worried that our 
students in our communities aren't prepared. But I know that 
the solution is education and job training.
    I also know that our future rests in the hands of a rather 
remarkable student. At Amarillo College, we call her Maria. She 
is the typical student in higher education in this country 
today. She is 26. She is a mother. She is a volunteer in her 
church and her student organizations, and she is working two 
jobs and going to school.
    Maria is dramatically different from the traditional 
student of the past. She is often the first in her family to go 
to college. She has kids or has to support her family. And she 
is working two jobs, minimum wage, 38 hours a week, often a 
graveyard shift, and she still has to turn to financial aid not 
only for her tuition and her books, but to make sure that she 
can meet her basic living expenses.
    Community college is far from free. The price is still a 
driver for dropouts. In Texas, community college students 
borrow on average $16,000 on top of work to finish their 
certifications and degrees. Even with full Pell and maximizing 
her loans and working two jobs, Maria cannot afford school. But 
she is amazing. Our country's future rests in her capable 
hands. She just needs your support and our support and help.
    Our economy depends on Maria in every community in this 
country to complete her degree. Economist Edward Glaeser wrote 
a book called Triumph of the City, where he looked at cities 
that exceeded and cities that failed. The common denominator 
was human capital and education attainment. His prediction for 
the future is that for every 10 percent we increase education 
attainment, we get a 22 percent increase in GDP. But we need 
financial aid to help Maria and students like her in all forms 
to ensure that our economy can grow.
    We need financial aid because it helps Maria focus on and 
complete her degree. It not only helps Maria, it helps her 
family and her kids. And the data that we have, including my 
own data where I have used my students as secret shoppers to 
test my own college's work, shows that the process of financial 
aid is confusing, frustrating, and even fear-inducing.
    So Maria and her communities across this country need a 
simplified FAFSA application process. They need a curtailed 
verification process. They need increases in maximum Pell 
awards. They need increased funding and greater alignment 
between students and specialized programs for food, housing, 
childcare, and transportation.
    In my own school, this past fall, 1,400 of my 10,000 
students who are going to school and working and raising a 
family, and volunteering in our community, needed the use of 
our food pantry. Students are working hard. They are doing what 
we ask them to do. We just have to give them more support to 
help them do it.
    So thank you for your leadership. My community, the place 
that I am raising my own family, and my students need you. But 
more importantly, you and your communities need my students.
    Thank you.
    [The prepared statement of Dr. Lowery-Hart follows:]
               prepared statement of russell lowery-hart
    Students attending Amarillo College, and community colleges across 
the country, define the future of our country, and its capacity for 
economic growth and prosperity in a global society. Today's community 
college student is dramatically different from the ``traditional'' 
college student of the past. She is often the first in her family to 
attend college, has children or supports other family members, work 
multiple jobs for minimum wage and frequently during the graveyard 
shift, and yet still has to turn to financial aid not only for tuition 
and books but also to cover basic living expenses. But community 
college is far from free--the price is still a driver of dropout. In 
Texas, community college students must borrow $16,000, often on top of 
working, to finish their degrees.

    Financial Aid Increases Education Attainment and Economic Growth

          Financial aid increases degree completion rates; 
        without it more students would drop out of college.
          Economic growth is directly linked to education 
        attainment in urban and rural communities: only 30 percent of 
        citizens have any post-secondary credential, putting the 
        economy at risk, and for every 10 percent increase in education 
        attainment, GDP increases 22 percent.

    Shifting Student Demographics Make Financial Aid More Important

          The typical student at Amarillo College is a 27-year 
        old Hispanic mother who is a first-generation student going to 
        college part-time while working two jobs.
          In Texas, 54 percent of all college students are 
        enrolled in a community college. And, 35 percent of Bachelor's 
        degree graduates transferred to a Texas university from a 
        community college. 60 percent of Amarillo College students 
        leverage Pell grants, student loans and scholarships to 
        succeed.

    Financial Aid Addresses Barriers to Student Success

          Funds from financial aid help keep students focused 
        on school rather than work.
          Financial aid not only helps parents in college but 
        also their children.
          But data--including from ``secret shoppers'' reveals 
        that financial aid's ineffective processes, regulations, and 
        bureaucracy make it hard to get the dollars and create 
        confusion, frustration, and even fear for students.

    Fixes for Financial Aid

          1. Simplify the FAFSA application process to obtain 
        aid and curtail the Verification process.
          2. Increase the maximum Pell grant award by an 
        additional $4,500 per year. Current Pell awards fund less than 
        50 percent of today's real higher education costs.
          3. Increase funding for specialized programs that 
        assist college students with housing, food, childcare, and 
        transportation needs.

    The students attending Amarillo College, and community colleges 
across the country, define the future of our country. I want to 
introduce you to this important student because her future impacts your 
own. We call her ``Maria.'' She is smart, determined, hardworking, 
church-going mother and she is dramatically different than the typical 
higher education students from the past century.
    Maria faces significant barriers to success, including a 
bewildering financial aid process. She needs you to truly see and 
understand her. Mostly, Maria, and the communities in which she 
resides, need you to advocate for her as if our country's future 
depends on her success--because it does.

    Financial Aid Increases Education Attainment and Economic Growth

    The education attainment for students like Maria will determine 
which of our communities flourish or perish. When Maria is successful, 
we are all successful. In fact, ``As the share of the population with 
college degrees increases by 10 percent, per capita gross metropolitan 
product rises by 22 percent'' according to economist Edward Glaeser 
(2011, p. 27). To grow our economy, we must grow the education 
attainment of our citizens. Yet, only 30 percent of our country hold 
any postsecondary education credential or degree (U.S. Census). Our 
country is becoming less educated and less capable. This educational 
crisis will have a lasting, generational impact on our country.
    In 1973, Senator Claiborne Pell and his colleagues understood that 
our economy would depend on an educated middle class. The Pell Grant 
fundamentally created the world's largest middle class (Goldrick-Rab, 
2016.) Almost 50 years later, with economic inequality on the rise, and 
low-income and middle-class Americans under pressure, this generation 
must meet the challenge of making one of the best ways out of poverty 
and into the middle-class--a college education--affordable for all'' 
(Goldrick-Rab, 2016, p. 260.)
    We triumph as a country when we advocate for Maria's college 
education by understanding and adapting to her. When we make Maria the 
focus of our processes, policies, and partnership, our country and 
economy wins. In fact, students who complete an Associate's degree are 
more employable. The unemployment data for citizens with an Associate's 
degree is a full 4 percent lower than those with a high school diploma 
These same students make, on average, $42,600 a year--a living wage in 
almost every community in the country (Data Points, 2017). These 
students move from poverty to self-sufficiency.
    Federal Financial Aid is the single greater contributor to moving 
students out of dependence and into a robust economic contributor. With 
an economy on the verge of changing through automation, robotics, and 
biogenetics, our communities and this country will suffer severe 
economic consequences if we are not able to guide more students through 
completion of a degree. Currently, 72 percent of all students in higher 
education require financial Aid (Data Points, 2017.) If we cannot 
simplify these financial aid systems for a more effective interface, 
Maria will more likely be sitting on the sidelines needing more 
government assistance, when she desperately wants to earn a living 
wage.
    At Amarillo College, we have adopted a No Excuses philosophy in 
serving Maria and the thousands of students just like her. We know that 
if we cannot dramatically shift our effectiveness in ensuring more 
students finish what they start, our Texas Panhandle will suffer 
serious, long-term harm.
    Amarillo College was the first higher education institution in the 
country to implement the No Excuses University philosophical framework 
developed by Damen Lopez's Turn Around Schools organization (see http:/
/noexcusesu.com/about/). The framework has prompted college leadership, 
faculty, and staff to take responsibility for the whole student by 
setting high expectations and assisting students in reaching these 
expectations. When our students are not successful, we explore the 
reasons for their lack of success; but WE, Amarillo College, ultimately 
bear the responsibility for having the right people, processes, or 
policies in place to support our students. As a college, we have No 
Excuses for student failure.

    As the Amarillo College president, I am ultimately responsible for 
ensuring excuses do not derail our ability to more creatively, 
effectively, and efficiently serve our students and community. I am not 
asking our Federal Financial Aid systems to improve without a deep 
understanding and commitment that my college and all higher education 
institutions must also take responsibility. We need innovation 
throughout the higher education sector with business and industry 
guiding us and the U.S. Federal Government as a full, faithful partner. 
Our country's economic future depends on our ability to ensure more of 
our neighbors obtain a post-secondary credential. Together, we will 
improve all of our systems. This innovation and improvement starts with 
understanding who our students really are and what they need from us.

    Shifting Student Demographics Make Financial Aid More Important

    As president for Amarillo College, I implore my colleagues to serve 
the student we have, rather than the student we thought, or wished, we 
had enrolled. Maria is the student we have. She is capable of 
shouldering our Nation's future. Yet, Maria is often ignored or 
dismissed. Much of the political attention and funding center on the 
traditional, 18-year-old university freshman. The reality is our higher 
education student landscape looks dramatically different.
    Community colleges serve nearly every square inch of the country. 
Community colleges serve as the job training center of a region as well 
as open the door to the higher education pipeline for most individuals 
to attend a university. Community colleges are critical to the health 
and wealth of the United States. Public 2-year community colleges 
enrolled 51 percent of all undergraduate students attending a public 
higher education institution in 2015-2016 (Ginger, Kelly Reid, & Mann, 
2017). Per the 2017 Texas Higher Education Coordinating Board Almanac, 
54 percent of Texas higher education students are enrolled in community 
colleges. Moreover, 75 percent of Texas bachelor's degree earners in 
2015-2016 attended a community college Nationally, 49 percent of all 
students who completed a Bachelor's degree attended a community college 
(Snapshot Report, 2017).
    Realizing today's college students either attend or did attend a 
community college is critical to understanding the challenges these 
students face in higher education. Today's college student looks like 
Maria, a 27-year old Hispanic mother who is a first-generation student 
going to college part-time while working two jobs. Today's students IS 
Maria. And, Maria is remarkable. She demands our attention. She 
deserves our support. Maria holds the future of America's economic 
growth and prosperity in her hands.

 
----------------------------------------------------------------------------------------------------------------
         Table 1: Community College Student Profile               Amarillo College               Nation
----------------------------------------------------------------------------------------------------------------
Full-Time Enrollment                                         40%                        38%
----------------------------------------------------------------------------------------------------------------
Receive Financial Aid (PELL, Student Loans, Scholarships)    60%                        58%
----------------------------------------------------------------------------------------------------------------
Transfer-Focus                                               51%                        59%
----------------------------------------------------------------------------------------------------------------
First-Generation                                             71%                        36%
----------------------------------------------------------------------------------------------------------------
Female                                                       65%                        56%
----------------------------------------------------------------------------------------------------------------
Minority                                                     54%                        52%
----------------------------------------------------------------------------------------------------------------
Average Age                                                  27                         28
----------------------------------------------------------------------------------------------------------------
Data Sources: Amarillo College Report Card, 2017; American Association of Community Colleges Fast Facts, 2017

    As a college president, I spend a great deal of time talking with 
our students. I am desperate to understand the ambitions and challenges 
of our students, our Maria. Maria works hard and struggles to 
experience the fruits of her labor. ``Today, the promise of a college 
degree in exchange for hard work and dedication no longer holds true'' 
(Goldrick-Rab, 2016, p.1). Instead, Maria is drowning in bureaucracies 
and processes designed for a different type of student.
    Per the Wisconsin HOPE Lab, ``the FAFSA represents a significant 
hurdle that students from many families must overcome in order to 
attend and pay for college. Research indicates that the complexity of 
the application and the difficulty of the process involved in 
completing it may prevent some students from obtaining financial aid.'' 
This same report declares 28 percent of community college students 
spent between one to 3 hours completing the FAFSA, not the 20-minutes 
touted by the U.S. Department of Education. Six-percent of community 
college students spent over 3 hours completing the form.
    Maria also faces a cost to college not captured in our laws and 
regulations. Our national and State financial aid bureaucratic 
requirements unintentionally extend Maria's time to degree--if she can 
afford the degree at all. The percent of students receiving aid 
increased from 70 percent to 77 percent between 2009-2010 and 2014-2015 
(U.S. Department of Education, 2017). The student need is growing and 
my rural community's economic future rests in our ability to leverage 
financial aid to ensure students complete a degree and find a job 
paying a living wage.

    Financial Aid Addresses Barriers to Student Success

    At Amarillo College, we have restructured our entire college around 
Maria's needs and removing the barriers to her success. As a first-time 
college president, I wanted to truly understand the student experience 
with Amarillo College. I hired two dozen first-time students to 
secretly experience the entire college on boarding process and give me 
feedback on what worked and what became a barrier. What I learned from 
these students changed who I am professionally and personally. After 
listening to student voices for months, three major barriers to student 
success emerged.
   Barrier One: First-Generation students feel isolated and fearful.
    From the parking lot to the graduation stage, first-generation 
students are afraid they do not belong in higher education. Their 
initial experience with higher education is with confusing forms and 
unfamiliar language. Many of these secret shoppers felt they were the 
only student who did not understand how to navigate through the higher 
education processes. Much of higher education processes are built with 
an erroneous expectation that students and their families bring 
``culture capital'' to any college interaction (Ward, Siegel, & 
Davenport, 2012).
    Traditionally, families who experienced college themselves, help 
their students navigate college admission, enrollment, finances, and 
social connections. For first-generation students, the lack of cultural 
capital leaves students with little familial and social support. 
Because these students do not have a cultural sense of what behaviors 
and choices lead to classroom and social success, they often experience 
lower academic achievement and lower degree attainment.
    My first-generation ``secret shoppers'' are 71 percent of the 
entire student body for Amarillo College. They often thought they were 
the only students unable to find a class, understand written 
instructions for financial aid applications, or anxious when 
interacting with faculty. As such, these students often felt 
embarrassed, insecure, and alone.
    For Amarillo College, the most powerful No Excuses impact on our 
students is two-fold: culture shift and relationship. I asked our 
students to tell what their ``ideal'' college looked and felt like. 
Their responses were insightful. Because they are first-generation 
students they wanted a college that served them with the effectiveness 
of some of our country's greatest companies. These students needed 
responsive, honoring customer service.
    As a college, we knew we needed to embrace a culture of good 
service and intense caring. We looked at the values of companies known 
for great service. We asked students to review the list of values from 
a dozen companies (some local and some national.) Our students 
identified college values that focused on understanding the first-
generation college student experience and responding with a culture of 
caring and service. The new Amarillo College Values our students chose 
were not typical ``higher education'' lingo: Caring through WOW, 
Innovation, Family, Fun and Yes.
    These values are written into every employee job description and 
merit pay evaluation. The first week of classes, we put these values on 
significant display by placing employees all over our campuses--from 
parking lots to classrooms--to ensure students have someone to walk 
them to their class, take them to the bookstore, guide them through 
advising, and serve them as if our community's future depended on it. 
Our most at-risk students receive a ``coach'' to support them through 
their first year in college.
    The No Excuses Culture of Caring values and relationships are 
working. Our college retention and completion rates are improving 
dramatically because we listened to our students and looked to our 
business partners for best practices. Our Federal Financial Aid systems 
would be well served to take the same approach to service, 
effectiveness, and efficiency.
        Barrier Two: Student poverty derails educational dreams.
    As a good, strong ``academic,'' I thought the greatest barriers to 
student success were poor academic preparation and study skills. I was 
wrong. In talking with my secret shoppers (and subsequently hundreds of 
other Amarillo College students,) the Top 10 barriers to student 
success in the classroom had nothing to do with the classroom. The most 
powerful and debilitating barrier to success in the classroom for our 
students is poverty related issues with transportation, childcare, 
food, housing, healthcare, utilities, and legal services. Good will and 
caring was not enough to help Maria succeed. She, like many of her 
peers, live in the war zone of generational poverty (Beegle, 2007).
    According the 2014 U.S. Census report Dynamics of Economic Well-
Being, 32 percent of the U.S. population lives in poverty for at least 
2 months annually. ``When students cannot cover their living expenses 
through financial aid or other benefits, they often compensate in ways 
that make them less likely to graduate'' (PD&R Edge, 2015, p. 1). When 
Maria cannot cover her living and educational experiences, she tries to 
pick up extra shifts from her current two jobs and avoids not 
purchasing course supplies and textbooks. When students like Maria face 
these difficult choices, they are much more likely to drop out, default 
on their loans, and never complete a degree (Goldrick-Rab, 2016.) When 
Maria has a sick child, her car breaks down, or her employer changes 
her shift times, she is often trapped between her educational goals and 
meeting her basic needs. Our current financial aid system is not 
helping Maria find her path forward and achieve educational success.
    No Excuses opened the door for us to recognize that our 
preconceived notions did not match reality. In the past, we held a 
narrow view of our students, believing that their college experiences 
were similar to our own. We did not see poverty as an issue demanding 
action. Yet we came to see that fulfilling the college's mission--which 
focuses on changing lives, educating students, meeting industry needs, 
and serving the community--requires us to fully understand our students 
and the barriers they face. Our students were working two jobs and 
still struggling to pay their bills.
    With intentional community partnerships, Amarillo College developed 
a robust social-services system to ensure students are able to finish 
the education they start. With food pantries, clothing closets, case-
management systems and direct connections to social service-providers, 
Amarillo College connects students to resources and emergency aid. If 
Maria's child needs health care or Maria's car needs repairs she could 
not afford it, she would drop out of school and take a third job or 
work an additional shift. She focuses on meeting her immediate needs 
rather than fulfilling her long-term educational and career goals.
    With intense community support and college employee buy-in, we have 
a system that removes life barriers when our students have no other 
options. Maria stays in school and defeats poverty by completing her 
degree. In Fall 2017, our social services system connected over 1,400 
students (15 percent of our entire student body) to services in one 
semester. The needs our students bring to campus can be overwhelming. 
As a No Excuses college, we can understand their poverty, but we cannot 
use it as an excuse. We see, every day, where greater financial aid and 
a more simplified, user-friendly interface, would ensure more students 
completed degrees.
   Barrier Three: Financial aid does not cover educational costs and 
                            living expenses
    I was stunned when my Amarillo College students explained how they 
managed their finances. Many students did not need ``financial 
literacy''--these students are well equipped to make a dollar stretch 
well beyond expectations.
    The Federal Financial Aid system leverages grants and loans to 
assist students. Yet, even with two jobs, students are unable to afford 
the cost of college. In 1979, Pell grants covered 99 percent of all 
community college costs. By 2014, Pell grants only covered 52 percent 
of college costs (Data Points, 2016). For Maria, and those like her, 
parents are unable to contribute to her education. In some cases, my 
own Amarillo College students reported their obligations to help 
support their parents and siblings. The reality of our student lived 
experience is not covered by the financial aid grants and loans 
available.

 
----------------------------------------------------------------------------------------------------------------
          Typical Amarillo College Student Budget                      Income                    Expense
----------------------------------------------------------------------------------------------------------------
Pell Award                                                   $6,000.00                  ........................
----------------------------------------------------------------------------------------------------------------
Financial Aid Loans--Reduced due to Pell Award               $8,914.00                  ........................
----------------------------------------------------------------------------------------------------------------
Part-Time Job #1 -19 hours at $7.25/hour                     $6,612.00                  ........................
----------------------------------------------------------------------------------------------------------------
Part-Time Job #2 -19 hours at $7.25/hour                     $6,612.00                  ........................
----------------------------------------------------------------------------------------------------------------
Tuition & Fees--Fall                                         .........................  $ (1,335.00)
----------------------------------------------------------------------------------------------------------------
Tuition & Fees--Spring                                       .........................  $ (1,335.00)
----------------------------------------------------------------------------------------------------------------
Tuition & Fees--Summer                                       .........................  $ (534.00)
----------------------------------------------------------------------------------------------------------------
Books--Fall                                                  .........................  $ (836.00)
----------------------------------------------------------------------------------------------------------------
Books--Spring                                                .........................  $ (836.00)
----------------------------------------------------------------------------------------------------------------
Books--Summer                                                .........................  $ (335.00)
----------------------------------------------------------------------------------------------------------------
12-Months Rent--$781 per month                               .........................  $ (9,372.00)
----------------------------------------------------------------------------------------------------------------
12-Months Utilities--$150 per month                          .........................  $ (1,800.00)
----------------------------------------------------------------------------------------------------------------
12-Months Food--$550 per month                               .........................  $ (6,600.00)
----------------------------------------------------------------------------------------------------------------
12-Months Childcare--$600 per month                          .........................  $ (7,200.00)
----------------------------------------------------------------------------------------------------------------
12-Months Transportation--$250 per month for gasoline        .........................  $ (3,000.00)
----------------------------------------------------------------------------------------------------------------
Totals                                                       $28,138.00                 $ (30,183.00)
----------------------------------------------------------------------------------------------------------------
Net Income                                                   $ (2,045.00)               ........................
----------------------------------------------------------------------------------------------------------------


    Maria is full Pell eligible. Even with two part-time jobs at 38 
hours a week, Maria must take out a loan for her education. After 
securing Pell grants and student loans, Maria is STILL unable to pay 
for her living expenses and college. What my secret shoppers helped me 
understand, as a college president, is their ``budgets'' are built on 
smoke and mirrors.
    For the budget in Table 2 to work, Maria will have to go hungry on 
some days, forgo some books for classes, potentially drop a course and 
prolong her time-to-degree, and ration her transportation. Maria must 
hope and pray her child does not get sick, her car does not break down, 
gas prices do not surge, and cross her fingers that her utilities and 
rent do not increase.
    This is not a sustainable model for education attainment. The 
financial barriers of life do not prioritize the completion of a 
degree.
    At Amarillo College, we know we must accelerate Maria's time-to-
degree and hold costs down for her. The longer Maria takes to complete 
her degree, the more costly it becomes and the less likely she is to 
graduate. With an intentional system to graduate every student in 3 
years, Amarillo College innovatively accelerates Maria's learning. By 
transitioning over 80 percent of our classes to an accelerated, 8-week 
format, Maria is not only completing her degree on time, she is 
learning more in the process. Maria was taking, on average, 6 hours a 
semester, 12 hours a year. Best case scenario, Maria would graduate in 
5 years. Most students at Amarillo College were taking over 6 years to 
complete--if they completed at all.
    Our data indicates that the overwhelming majority of our students 
dropped out of school in weeks 10 to 12 as their ``life'' barriers 
became too much to bear. They cannot see the finish line to completion 
and drop out to take additional work and meet their immediate needs. 
Our social services combined with a transition to 8-week learning model 
changed everything about our student success. (Please see Amarillo 
College Report Card, pages 17-18.)
    Now, Maria is able to take 6 hours each Fall Term I and II and 6 
hours each Spring Term I and II. By doing so, Maria has become a full-
time student, taking 12 hours over a ``semester.'' She is in her 8-week 
class the same number of hours as the traditional course. She just goes 
to class every day of the week. Not only is Maria accelerating her 
time-to-degree. She is learning. Students in our 8-week classes 
increased their course success rates by over 12 percent compared to the 
traditional class. When our first-generation, poverty-ridden students 
can see the finish line, their hope carries them to success.
 Barrier Four: Long-term planning is often derailed for short sighted 
                                reasons
    Students, especially those living in the war zone of poverty, are 
all too adept at financial effectiveness. Their poverty is not because 
of poor financial planning skills. Their poverty is because of too 
little resources (Beegle, 2007). Generational poverty, however, does 
teach the need to solve the immediate need rather than plan for long-
term success (Beegle, 2007). The loans available to students are 
critical to ensuring education is a possibility. Many of our students 
are debt adverse and avoid loans--even when they would be the best 
option. We need more robust loans for students, but wrapped in fewer, 
easier to understand options.
    At Amarillo College, our Money Management Center is dedicated to 
counseling students about their loan options. Yet, we often do not have 
enough time or resources to more carefully guide students through a 
long-term financial planning process. One of our students helped me 
understand how desperately we need easier to understand financial aid 
information.
    ``Harrold'' worked for a large, national retail/grocery box store. 
They offered Harrold a 29 hour a week job as an assistant manager 
making $12 an hour. He excitedly told his family. They begged him to 
take the job and drop out of Amarillo College. He attempted to drop. No 
Excuses prevented this attempt. Through money management counseling, 
Harrold told us that if he worked as the Assistant Manager for 2 years, 
he could be promoted to Manager and make $15 an hour and potentially 
receive benefits. When counseling a student whose family has been mired 
in generational poverty, the promise of benefits and $15 an hour is too 
great an offer to turn down. Yet, Harrold was 18 months from completing 
a degree in computer science. When he successfully completed his 
degree, he could start in a job, with benefits, at $35 an hour.
    We had to help Harrold understand that he was sacrificing long-term 
success for a short-term fix. We literally had to map out his financial 
future on paper and show him what his financial future would look like 
if he dropped out of school and if he stayed and graduated.
    Harrold was excited and frightened. He knew the raise and promotion 
in his current position would help his family. He had not considered, 
if he stayed the course, he could actually be costing his family 
financial freedom long term. With his new reality, Harrold started 
crying and asked one question: ``Would you come with me and explain 
this to my family?''
    We are not just educating a student. We are charting a path for 
entire families. Greater financial information about potential jobs and 
what they would pay is critical the helping students stay in school, 
focus on developing their skills and planning for their careers. When 
you are hungry, lack of transportation and access to healthcare, 
talking about careers a few years down the road can seem frivolous and 
silly.
    If we remove these four barriers to our students' success, and 
Amarillo College is making strides, we can ensure a robust economy for 
everyone--especially for rural communities in the ``fly over'' regions 
like the Texas Panhandle. We need the U.S. Department of Education and 
Federal Financial Aid as partner on this journey. Maria and Harrold's 
futures hold in the balance.
       How Students Experiences the Federal Financial Aid Process
    For Maria, the cost of higher education is far more than money. 
Current Federal financial aid covers only a fraction of what it costs 
to complete a college degree. Tuition costs are only a fraction of a 
student's payments. Thus, all current Federal loan programs are a 
necessary evil. When students are counseled to avoid loans, they end up 
dropping out of college all together because, even if full Pell 
eligible, Maria has no way to pay for the true cost of a degree. When 
she drops out, she is not only hurting her family, she is hurting 
employers and communities. Maria works two jobs. She is trying to get 
her education. Yet, she needs more financial aid, not less.
    To curb the loans (and debt), Maria must complete her degree. She 
needs more access to Federal work-study programs so that her job is on 
campus, with inherent support, and a greater likelihood of success. 
Currently, funding levels for Federal work-study programs could not 
begin to support the need that currently exists in community colleges 
across the country.
    The process of completing the FASFA is so complicated, many 
students give up before completing application. Many students simply do 
not think they can afford college and do not believe they would be 
eligible to receive aid. As a result, students and their families opt 
out, choosing a life limited without a certificate or degree. According 
Data Points (2016), the overwhelming reason students do not complete 
the FASFA is they think they are ineligible. Over 44 percent of all 
community college students do not complete the FASFA.
    At Amarillo College, we have reduced this number significantly with 
robust relationships with students and their families starting early in 
high school. Through our Money Management Center, the college starts 
financial counseling early and often so students learn of their 
eligibility well before they graduate high school. Still, these efforts 
are laborious and costly. Because the process is so confusing, many of 
my ``secret shoppers'' thought if they were not smart enough to 
complete the form, they would not be smart enough to complete a degree.
    Maria is drowning in bureaucracy. Verification is confusing, time 
consuming, and has no real savings to the Federal Government. According 
to The Institute for College Access and Success study (Ahlman, 
Cochrane, & Thompson, 2016), over 95 percent of all verified applicants 
saw no change to their eligibility, nationwide. For Maria, this is time 
wasted. When Maria needs real counseling about her options and help 
mapping out a financial plan, she finds her financial aid staff 
spending their time on verification bureaucracy.
    Many of my Amarillo College students simply misunderstand the 
verification process. For so many ``Marias'' verification is seen as 
punishment. Maria questions whether she did something wrong and the 
process create needless fear and anxiety. I had one student and his 
father ask me if the family had done something wrong. My students and 
their families simply do not understand what verification means. When 
the U.S. Department of Education selects them for verification, these 
students do not receive any communication explaining verification. For 
my low-income, first-generation college students, verification is one 
more bureaucratic process that affirms they do not belong in higher 
education.
    For many students, their verification process conflicts with 
payment deadlines and they face having their classes dropped. They have 
to make a payment and their aid is not available to them in time to 
secure their schedule. These layers of bureaucracy create additional 
barriers that push students out of higher education. Yet, our economy 
and country cannot afford to lose these students. The economic 
viability of our country depends on their success in college.
    When Maria survives the verification process, she often does not 
have time for full counseling on her loan options. When she does visit 
with her financial aid officers, she learns of nine different loan 
options. She is confused. Her counselor does not have the time to spend 
at a minimum a full hour explaining each option and helping Maria 
decide which option is the best for her. Critically, Maria must have 
these loan options.
    Simplifying the loan options and narrowing the choices will help 
Maria and college financial aid staff. But in doing so, we cannot 
reduce the amount of aid available to students like Maria. If aid is 
reduced because loan options are reduced, Maria will not be able to 
enroll in college and achieve her educational aspirations.
    We certainly should simplify the loan program and curb student 
debt. To do so, we must reduce expenses for housing and food by helping 
college students' access affordable food and housing via other State 
and Federal programs. Students, like Maria, learn it is harder to get 
affordable food and housing if you ARE enrolled in college.
    Per the Wisconsin HOPE Lab report, Hungry and Homeless in College, 
studies indicated ``substantially higher rates of food insecurity among 
community college students than previously reported. Our 2015 report 
indicated that about half of community college students were food 
insecure, but this study found that two in three students are food 
insecure. Both surveys revealed that about half of community college 
students were housing insecure, and 13 to 14 percent were homeless'' 
(Goldrick-Rab, Richardson, & Hernandez, 2017). At Amarillo College, 54 
percent of our students are food insecure, and 11 percent are housing 
insecure. Per the U.S. Department of Housing and Urban Development 
report, Housing Barriers to College Success (PD&R Edge, 2015), ``more 
than 56,000 college students indicated they were homeless on the FAFSA 
in 2013--and that figure almost certainly underestimates the true 
total.'' This is particular true given we know low-income, first-
generation students are less likely to complete the FAFSA because they 
believe they will not qualify for assistance.
    Maria needs support to complete her degree. She and her peers do 
not need one more reason to push them out of attaining a degree and 
achieving their educational dreams. Rather than increase their fears of 
they do not belong in higher education, we must help them overcome 
poverty barriers hindering their success. We must help them navigate 
higher education and provide financial support in drastically different 
ways than have been provided in the past. We owe this to Maria. We owe 
this to our country's economic growth and viability.
    At Amarillo College, we leverage our Texas Panhandle P16 Council, 
with all 62 school districts and all four higher education partners to 
dramatically increase the FASFA completion with trained college 
employees to guide families through the application.
    We know the financial aid system is laborious and ineffective. Yet, 
we are a No Excuses college. We are working to build intentional 
partnerships with all 62 Texas Panhandle school districts to guide 
families more effectively through the FASFA process. This past year, 
our Panhandle P16 Council created a FASFA Scholarship competition for 
all area high schools. The rules? Every high school with 100 percent 
FASFA completion would receive a scholarship from the Amarillo Area 
Foundation to be distributed to one of their students.
    Amarillo College Financial Aid Office employees and a plethora of 
trained college employees traveled the Panhandle helping families 
complete the FAFSA--literally morning, noon and night. With 5,224 
graduating seniors Panhandle-wide, we ensured 3,522 submitted their 
FAFSA. Our goal is to guide 100 percent of our graduating seniors 
through this process. It is difficult. Simplifying the Financial Aid 
process is critical to our ability to get students a post-secondary 
credential.
    Additionally, we work with our Independent School District partners 
to start talking with families the moment they arrive in high school. 
With our Money Management Center, we are able to counsel students about 
their financial aid options. We work with local banks to assist our 
students in opening their own accounts. In our First Year Seminar 
course, we help students develop a budget. Financial Aid opens the door 
to a larger system of financial literacy--for our students and their 
families.
    Yet, these efforts are not enough. We need a more robust 
partnership with the U.S. Department of Education for a user-friendly 
FASFA interface, a more simplified form, a more limited verification 
process, and a realistic gainful employment accountability.
    Fixes for Financial Aid
    Education is the most reliable predictor to economic growth and 
education policy is an important factor (Glaeser, 2011). In order to 
help Maria and students like her, I recommend changes to our financial 
aid system. And by simplifying the Federal financial aid system and 
making a more robust funding stream to support today's college 
students, America's Maria will graduate from college and drive 
America's growing economic prosperity in the 21st century.
    1. Simplify the FAFSA Application and Verification Process.
    Base Pell awards on a limited number of data elements that are 
already available from the IRS so that eligibility is easier, more 
transparent and then a separate application is not needed. Equally as 
important would be to create a multi-year award for easy of student 
counseling, planning, and funding without the need for yearly 
reapplications. Summarize family and student eligibility is a simple, 
easy to read format that schools, counselors, and community partners 
easily distribute. Consider using IRS information to preemptively 
communicate with potential students and families about their likely 
Pell eligibility so students know they would qualify for financial aid 
earlier and see college as a real and viable option for them. Finally, 
eliminate the verification process or at least limit it to a single 
verification with better communication. Once a student is subjected to 
verification with no changes to their status, they should be exempt 
from verification in the future.
    2. Increase the maximum Pell grant award by an additional $4,500 
per year.
    Current Pell awards fund less than 50 percent of today's true costs 
to obtaining a higher education degree. By increasing Pell awards, we 
can offset student loan debt, decrease a student's time-to-degree, and 
increase college completion rates.
    3. Increase funding for specialized programs that assist college 
students with housing, food, childcare, and transportation needs.
    College students today need financial support to meet basic life 
needs. And by offering financial assistance to meet these needs, we are 
overcoming poverty barriers hindering Maria, and students like Maria, 
from enrolling in a college much less completing her college degree. 
Increased funding for financial assistance programs will decrease a 
student's need for student loans to pay for basic life needs like 
housing, food, childcare, and transportation. Without financial 
assistance programs like these, students will continue to rely on 
student loans at alarmingly high rates.
    Specific Federal policy changes could directly raise the education 
attainment rates in communities across the country. Identified by the 
Wisconsin HOPE Lab, please consider (Goldrick-Rab, Richardson, & 
Hernandez, 2017, p. 24):

          Promote degree completion by expanding the SNAP 
        eligibility requirements for college students to allow all 
        work-study eligible students (not only those receiving the very 
        limited pool of work-study funds) to meet the work requirement, 
        and reducing or eliminating the 20 hour per week requirement 
        affecting many other students (or, count college attendance 
        toward the work requirement).
          Simplify the FAFSA application process for 
        establishing independence, particularly for homeless students.
          Create incentives for community colleges to offer 
        benefits access opportunities on their campuses (including 
        employing a dedicated staff member if there is sufficient 
        demand) and work to align social and educational policies to 
        ensure that access for students is as seamless as possible.
          Encourage State and Federal investment in targeted 
        aid programs that reach students with the most financial need, 
        and/or Promise programs that help students who otherwise would 
        not access financial aid for fear of the price being out of 
        reach.
          Re-institute year-round Pell so students have access 
        to summer support to make progress in their studies and to 
        contribute to living expenses.
          Change American Opportunity Tax Credit (AOTC) 
        requirements so that students who receive Pell can access AOTC 
        as well.

    The future of our communities, urban and rural, rests on our 
abilities to more completely and effectively support our students from 
the enrollment to graduate to employment. With important shifts in 
Federal Aid policy and processes, students will complete degrees and 
meet employer needs--no excuses.

    Reference/Bibliography
    Ahlman, L., Cochrane, D., & Thompson, J. (2016.) On the Sidelines 
of Simplification: Stories of navigating the FASFA Verification 
Process. The Institute for College Access & Success. November, 2016.
    Bailey, T., Smith Jaggars, S., & Jenkins, D. (2015). Redesigning 
America's Community Colleges: A clearer path to student success. 
Cambridge, MA: Harvard Education Press.
    Bartlett, V., Bugg-Levine, A., Erickson, D., Galloway, I., Genser, 
J., & Talansky, J. (Eds.) (2017.) What Matters: Investing in results to 
build strong, vibrant communities. Federal Reserve Bank of San 
Francisco & Corporation for Enterprise Development. San Francisco: 
Federal Reserve Bank of San Francisco.
    Beegle, D. M., Ellis, D., & Akkary, R. (2007). See poverty--be the 
difference!: Discovering the missing pieces for helping people move out 
of poverty. Tigard, Or: Communication Across Barriers, Inc.
    Bok, D. (2017). The Struggle to Reform our Colleges. Princeton and 
Oxford: Princeton University Press.
    Brown McNair, T., Albertine, S., Cooper, M.A., McDonald, N., & 
Major, Jr., T. (2016). Becoming a Student-Ready College: A new culture 
of leadership for student success. San Francisco: Jossey-Bass.
    Choi, L., Erickson, D., Griffin, K., Levere, A., & Seidman, E. 
(Eds.) (2015). What It's Worth: Strengthening the financial future of 
families, communities and the Nation. Federal Reserve Bank of San 
Francisco & Corporation for Enterprise Development. San Francisco: 
Federal Reserve Bank of San Francisco.
    Cushman, K. (2005). First in the Family: Advice about college from 
First-Generation students. Providence, RI: Next Generation Press.
    Data Points. (2016). The value of Pell. American Association of 
Community Colleges. Vol. 4, 14.
    Data Points. (2017). More education = better jobs. American 
Association of Community Colleges. Vol. 5, 19.
    Dubick, J., Mathews, B., & Cady, C. (2016). Hunger on Campus: The 
challenge of food insecurity for college students. http://
studentsagainsthunger.org/wpcontent/uploads/2016/10/Hunger--On--
Campus.pdf. October, 2016.
    Desmond, M. (2016). Evicted: Poverty and profit in the American 
city. New York: Broadway Books.
    Ginder, S.A., Kelly Reid, J.E., and Mann, F.B. (2017). 
Postsecondary Institutions and Cost of Attendance in 2016--17; Degrees 
and Other Awards Conferred, 2015--16; and 12-Month Enrollment, 2015--
16: First Look (Provisional Data) (NCES 2017-075rev). U.S. Department 
of Education. Washington, DC: National Center for Education Statistics. 
Retrieved January 13, 2018 fromhttp://nces.ed.gov/pubsearch.
    Glaeser, E. (2011). Triumph of the City: How our greatest invention 
makes us richer, smarter, greener, healthier, and happier. New York: 
Penguin Books.
    Goldrick-Rab, S. (2016). Paying the Price: College costs, financial 
aid, and the betrayal of the American dream. Chicago and London: The 
University of Chicago Press.
    Long, A. (Ed.) (2016). Overcoming Educational Racism in the 
Community College: Creating pathways to success for minority and 
impoverished student populations. Sterling, VA: Stylus.
    PD&R Edge. (2015). ``Housing Barriers to College Success.'' 
Insights into Housing and Community Development Policy, U.S. Department 
of Housing and Urban Development, 1 Feb. 2015, www.huduser.gov/portal/
pdredge/pdr--edge--featd--article--030915.html.
    Snapshot Report. (2017). Contribution of Two-Year Public 
Institutions to Bachelor's Completions at Four-Year Institutions. 
National Student Clearinghouse Research Center. Spring.
    Taylor, P. (2014). The Next Generation: Boomers, Millennials, and 
the looming generational showdown. New York: Public Affairs.
    U.S. Department of Education, National Center for Education 
Statistics. (2017). The Condition of Education 2017 (NCES 2017-144), 
Sources of Financial Aid.
    Ward, L., Siegel, M., & Davenport, Z. (2012). First Generation 
College Students. San Francisco: Jossey-Bass.
    Wyner, J. (2014). What Excellent Community College Do: Preparing 
all students for success. Cambridge, MA: Harvard Education Press.

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                                 ______
                                 
               [summary statement of russell lowery-hart]
    Students attending Amarillo College, and community colleges across 
the country, define the future of our country, and its capacity for 
economic growth and prosperity in a global society. Today's community 
college student is dramatically different from the ``traditional'' 
college student of the past. She is often the first in her family to 
attend college, has children or supports other family members, work 
multiple jobs for minimum wage and frequently during the graveyard 
shift, and yet still has to turn to financial aid not only for tuition 
and books but also to cover basic living expenses. But community 
college is far from free--the price is still a driver of dropout. In 
Texas, community college students must borrow $16,000, often on top of 
working, to finish their degrees.
    Financial Aid Increases Education Attainment and Economic Growth
          Financial aid increases degree completion rates; 
        without it more students would drop out of college.
          Economic growth is directly linked to education 
        attainment in urban and rural communities: only 30 percent of 
        citizens have any post-secondary credential, putting the 
        economy at risk, and for every 10 percent increase in education 
        attainment, GDP increases 22 percent.
    Shifting Student Demographics Make Financial Aid More Important
          The typical student at Amarillo College is a 27-year 
        old Hispanic mother who is a first-generation student going to 
        college part-time while working two jobs.
          In Texas, 54 percent of all college students are 
        enrolled in a community college. And, 35 percent of Bachelor's 
        degree graduates transferred to a Texas university from a 
        community college. 60 percent of Amarillo College students 
        leverage Pell grants, student loans and scholarships to 
        succeed.
          Financial Aid Addresses Barriers to Student Success
          Funds from financial aid help keep students focused 
        on school rather than work.
          Financial aid not only helps parents in college but 
        also their children.
          But data--including from ``secret shoppers'' reveals 
        that financial aid's ineffective processes, regulations, and 
        bureaucracy make it hard to get the dollars and create 
        confusion, frustration, and even fear for students.
                        Fixes for Financial Aid
          1. Simplify the FAFSA application process to obtain 
        aid and curtail the Verification process.
          2. Increase the maximum Pell grant award by an 
        additional $4,500 per year. Current Pell awards fund less than 
        50 percent of today's real higher education costs.
          3. Increase funding for specialized programs that 
        assist college students with housing, food, childcare, and 
        transportation needs.
                                 ______
                                 
    The Chairman. Thank you, Dr. Lowery-Hart. Ms. Darcus, 
welcome.

  STATEMENT OF JOANNA DARCUS, MASSACHUSETTS LEGAL ASSISTANCE 
   CORPORATION, RACIAL JUSTICE FELLOW, NATIONAL CONSUMER LAW 
                 CENTER, BOSTON, MASSACHUSETTS

    Ms. Darcus. Mr. Chairman, Ranking Member Murray, and 
Members of the Committee, the National Consumer Law Center 
thanks you for inviting us to testify today.
    As Senator Warren mentioned, before I joined NCLC, I was a 
legal aid lawyer in Philadelphia. There, I provided free legal 
help to hundreds of low-income clients who were struggling to 
repay student loans. I continue that work at NCLC with the 
other members of the Student Loan Borrower Assistance Project. 
We train and support attorneys who represent student loan 
borrowers nationwide. We offer this testimony on behalf of 
NCLC's low-income clients.
    Student success in school and borrower success in repayment 
depend on building a financial aid system that facilitates 
their access to the benefits and information they need to 
thrive. Pursuing higher education should increase opportunity, 
not restrict access to necessities of life. Simplification and 
transparency can help, but at this crucial moment, we can also 
design a Federal aid system that maintains its integrity 
through real accountability.
    The Federal aid program should be tailored to the needs of 
all students and borrowers, working seamlessly for their 
benefit. However, those who need aid the most are often those 
who struggle to obtain the protections and safeguards that aid 
promises.
    A distinct majority of our student loan clients have been 
people of color. Because of persistent historical income and 
wealth disparities along racial and ethnic lines, people of 
color rely on financial aid more than their white counterparts. 
If our financial aid system works well, it can help close gaps 
in higher education attainment, income, and familial wealth. 
However, if it performs poorly, then it may, instead, worsen 
long-standing inequities.
    Therefore, the Federal financial aid system should be easy 
for students and borrowers to understand and navigate. 
Simplifying the current system can help achieve this goal, but 
only if it is designed to accomplish twin objectives. First, it 
must serve everyone who needs access to it. Second, it must 
make extra efforts to ensure that those for whom financial aid 
is a critical pathway to educational opportunity receive all 
the benefits of the program.
    One of our current clients attended a for-profit school 
that was sued by the Attorney General of Massachusetts for its 
false and deceptive enrollment practices. Our client completed 
her program, earning a medical assistant certificate, but could 
not find a job in that field. She worked off and on, but never 
enough to afford her student loan payments.
    She has been out of school for 5 years and is still in good 
standing on her loans due to her extreme diligence. Each year, 
she dutifully contacted her servicer and submitted income 
documentation only to be directed to a deferment or 
forbearance--never to income-driven repayment. Before meeting 
with us, she did not know what income-driven repayment was.
    IDR is at the heart of making student loan repayment 
sustainably affordable for borrowers like our clients. IDR can 
certainly be simplified, but our experience with borrowers has 
shown us that they struggle to access these plans, not 
necessarily because the plans are complicated, but because, as 
described in the CFPB's enforcement action against Navient, 
servicers consistently fail to inform borrowers of IDR as an 
option for managing their repayment obligations.
    Due to servicing failures, the client I mentioned has 
missed out on the benefits of IDR, including working toward 
forgiveness by making affordable payments. Now she will be 
stuck in repayment longer and may pay hundreds or thousands 
more over the life of her loan because of interest 
capitalization and lost time. Income-driven repayment--whether 
it consists of one plan or 20--will only work for borrowers 
when servicers fulfill their responsibility for properly 
administering it.
    Borrowers need help navigating repayment. That is the 
precise function servicers are supposed perform. Unfortunately, 
due to inadequate servicing, a number of borrowers default. 
Neither the servicers nor the debt collection companies to 
which we pay billions of taxpayer dollars each year are 
actually guiding borrowers to and through the programs that 
could ensure repayment success.
    Our system of financing higher education through debt is 
deeply flawed if we only hold the borrowers and not other 
parties accountable. While the Department of Education 
continues to award lucrative contracts to companies that 
consistently fail borrowers and taxpayers, it is often the 
borrowers, our low-income clients, who bear the risk when their 
educational investment does not pay off. A fair system of 
financial aid would also hold accountable the many institutions 
students interact with from enrollment and loan origination 
through repayment.
    Thank you for this opportunity to testify. I'd be happy to 
answer your questions.
    [The prepared statement of Ms. Darcus follows:]
                  prepared statement of joanna darcus
    Mr. Chairman, Ranking Member Murray, and Members of the Committee, 
the National Consumer Law Center (NCLC) thanks you for holding this 
hearing and for inviting us to testify today. We care deeply about 
making a financial aid system that is affordable and accessible to 
students and student loan borrowers. Prior to joining NCLC, I was an 
attorney at Community Legal Services of Philadelphia. While there, I 
provided free legal help to hundreds of low-income borrowers who 
struggled to repay their student loans. I continue that work at NCLC, 
as I represent individual clients, and work with the other members of 
the Student Loan Borrower Assistance Project to train and support 
consumer law practitioners, including legal aid attorneys who represent 
student loan borrowers. NCLC also publishes Student Loan Law (5th ed. 
2015), a comprehensive practice manual for advocates representing 
student loan borrowers. We publish reports on student loans, 
participate in student loan rulemakings, and advocate for fair student 
loan policies at the State and national level. We offer this testimony 
on behalf of NCLC's low-income clients. \1\
---------------------------------------------------------------------------
    \1\  The National Consumer Law Center (NCLC) is a nonprofit 
organization specializing in consumer issues on behalf of low-income 
people. Since 1969, we have worked with thousands of legal services, 
government, and private attorneys and their clients, as well as 
community groups and organizations that represent low-income and older 
individuals on consumer issues. NCLC's Student Loan Borrower Assistance 
Project provides information about student rights and responsibilities 
for borrowers and advocates, and provides direct legal representation 
to student loan borrowers. Most of the clients we represent are low-
income borrowers living in Massachusetts. We work with other advocates 
across the country representing low-income clients. We also seek to 
increase public understanding of student lending issues and to identify 
policy solutions to promote access to education, lessen student debt 
burdens, and make loan repayment more manageable. See the Project's 
website at www.studentloanborrowerassistance.org. This testimony was 
prepared by Joanna Darcus and Persis Yu, with assistance from Carolyn 
Carter of NCLC.
---------------------------------------------------------------------------
    At present, millions of students are enrolled in school and relying 
on grants, Federal work-study, and Federal student loans to cover the 
cost. Many millions more are working toward repaying student loans. 
Here, I will provide an overview of the barriers my clients face when 
accessing the current Federal student aid system. I will then make 
specific recommendations about how to improve student outcomes in 
school and borrower outcomes in loan repayment.
              II. Make Higher Education a Reality for All
    Title IV of the Higher Education Act (HEA) authorizes a financial 
aid program that promotes access to postsecondary education for all, 
especially students from low-income families. \2\ It gives students and 
borrowers a number of safeguards, such as the right to loan 
cancellation in the event of death or disability and the right to repay 
loans through monthly installments based on the borrower's income 
rather than the total balance owed, when they take advantage of Federal 
student aid programs. Pursuing higher education should increase 
opportunity, and not restrict access to necessities of life. Yet for 
far too many student loan borrowers, that is exactly the outcome that 
our Federal student aid system produces. The system has failed these 
borrowers. We need to do better.
---------------------------------------------------------------------------
    \2\  20 U.S.C. 1070 (describing the purpose of grants).
---------------------------------------------------------------------------
    Many people contact us, sharing their stories, and asking for help. 
Last year, a borrower wrote to us, and described experience as follows 
(reproduced in her own words and unedited): ``The 15 percent that is 
taken each month, BTW I'm 69 years old. I'm a widower on my own and 
Social Security is my only money. I skip doctors and have taken meds on 
an every other day basis. . . It's very hard live so poorly. The 15 
percent is an enormous burden.'' She was living on a fixed income of 
Social Security, and 15 percent of those funds were taken each month to 
repay her defaulted student loans. I have represented many older 
clients who are still repaying student loans and have lived this story, 
too. I have watched them cry as they have explained their desire to 
repay their student loans, and described what they have to sacrifice to 
make repayment possible: food, medication, and paying utility bills.
    We have a chance to revisit what is working and what is not in our 
Federal student aid system. This testimony is informed by our work with 
individual borrowers. Their experiences illustrate the problems that 
this Congress has the power to resolve through its reauthorization of 
the HEA. We need a system that works for the students it is supposed to 
serve. A highly educated workforce is good for all of us. Taxpayers 
benefit the most when students complete their studies, get good jobs, 
and repay their loans.
   III. Financial Aid: An Overview of Problems Stymying Student and 
                            Borrower Success
    The Federal student aid programs should be tailored to the needs of 
all students and borrowers, working seamlessly for their benefit. But 
our clients are often forced to navigate a number of frustrating, but 
common, issues in Federal student loan repayment. The Federal student 
aid system is quite complex. Complexity alone is not necessarily a 
problem. However, complexity becomes problematic when students and 
borrowers cannot access the aid or loan features they need to thrive. 
Many borrowers successfully select their repayment plans and are on 
track to manage their loans. However, other borrowers become derailed 
and have difficulty obtaining the complete, accurate information they 
need to assess their options and the path forward.
    For low-income individuals and families who do not have extra 
dollars in their budgets, getting off track and facing involuntary 
collection activities, such as reductions of their monthly Social 
Security benefits or withholding of their tax refunds, can be utterly 
devastating. Though hardship programs are available to help borrowers 
through these situations, as the Government Accountability Office (GAO) 
recently noted, borrowers are not routinely told about these programs 
and the application forms are buried deep in obscure websites. \3\
---------------------------------------------------------------------------
    \3\  U.S. Gov't Accountability Office, Social Security Offsets: 
Improvements to Program Design Could Better Assist Older Student Loan 
Borrowers with Obtaining Permitted Relief, GAO-17-45 (Dec 19, 2016).
---------------------------------------------------------------------------
    Families with young children are similarly impacted. Last year, we 
met with a client experiencing homelessness who was raising 5-month-old 
twins. She had paid her rent, but was evicted from her last apartment 
when the building was sold to a new owner who did not renew her lease. 
Her twins were less than a month old at that time. When she had filed 
her taxes, she was expecting a tax refund of approximately $7000--
mostly from the Earned Income Tax Credit. However, she later found out 
that the entire tax refund was taken by the Federal Government to pay 
her defaulted student loan. She had not received the notice warning 
that her refund could be taken because it was mailed to her old 
address. NCLC helped her submit a request for the return of tax refund 
on the basis of extreme financial hardship. Her request showed that she 
was homeless and unable to meet her and her sons' basic living needs. 
She was planning on using her tax refund to secure stable housing. 
However, her request was denied because she had not experienced a 
foreclosure or eviction within 30 days of her tax refund being taken. 
Therefore, she could not meet the Department's narrow definition of 
extreme financial hardship.
    Although many of our clients are among those who borrowed 
relatively less than other student loan borrowers, they find 
themselves, nonetheless, with low earnings or limited means. \4\ Far 
too many borrowers, like our clients, have struggled to access critical 
features of their Federal loans just when they needed them. As a 
result, a large number experience distress and default. Those who need 
aid the most are often among those who struggle to obtain the benefits, 
protections, and safeguards that aid promises.
---------------------------------------------------------------------------
    \4\  Marshall Steinbaum & Kavya Vaghul, ``An introduction to the 
geography of student debt,'' Washington Center for Equitable Growth 
(Dec. 1, 2015), available http://equitablegrowth.org/research-analysis/
an-introduction-to-the-geography-of-student-debt/. See also Adam Looney 
& Constantine Yannelis, A Crisis in Student Loans? How Changes in the 
Characteristics of Borrowers and in the Institutions They Attended 
Contributes to Rising Loan Defaults, Brookings Papers, (Fall 2015), 
available at https://www.brookings.edu/bpea-articles/a-crisis-in-
student-loans-how-changes-in-the-characteristics-of-borrowers-and-in-
the-institutions-they-attended-contributed-to-rising-loan-defaults/.
---------------------------------------------------------------------------
    A distinct majority of the student loan borrowers we have worked 
with are people of color. Because of persistent, historical income and 
wealth disparities along racial and ethnic lines, people of color 
continue to rely on financial aid more than their white counterparts. 
\5\ If our Federal student aid system works well, it can help close 
gaps in higher education attainment, income, and familial wealth. 
However, if it performs poorly, then it may, instead, exacerbate long-
standing inequities. Many of our clients are also the first in their 
families to pursue higher education. Others are veterans. And some are 
parenting students. We need a Federal aid system that serves students 
from each of these groups--and others--well.
---------------------------------------------------------------------------
    \5\  Id. See also Scott A. Ginder, Janice E. Kelly Reid & Farrah B. 
Mann, ``Preliminary Data Report: Graduation Rates for Selected Cohorts, 
2008--13; Outcome Measures for Cohort Year 2008; Student Financial Aid, 
Academic Year 2015--16; and Admissions in Postsecondary Institutions,'' 
Fall 2016 (NCES, Sept. 2017), available at https://nces.ed.gov/
pubs2017/2017150.pdf; Ben Miller, ``New Federal Data Show a Student 
Loan Crisis for African American Borrowers'' (Center for American 
Progress, Oct. 2017), available at https://www.americanprogress.org/
issues/education-postsecondary/news/2017/10/16/440711/new-Federal-data-
show-student-loan-crisis-african-american----borrowers/; Marshall 
Steinbaum & Kavya Vaghul, ``How the student debt crisis affects African 
Americans and Latinos,'' Washington Center for Equitable Growth (Feb. 
17, 2016), available at http://equitablegrowth.org/research-analysis/
how-the-student-debt-crisis-affects-african-americans-and--latinos/. 
See also, Letter from NCLC et al, to U.S. Secretary of Education, John 
B. King, Jr. (Aug. 17, 2016) available at http://
www.studentloanborrowerassistance.org/wp-content/uploads/2013/05/ltr-
sec-king-race-student-debt.pdf.
---------------------------------------------------------------------------
    Because our clients are in distress and default before they meet 
with us, something or many things have already gone wrong before they 
make it to our office.

          The school may have failed to deliver the education 
        it advertised.
          The borrower may have been laid off or become 
        disabled.
          The servicer may have misplaced paperwork or 
        miscalculated the borrower's monthly payment.
          The private collection agency (PCA) may have 
        misinformed the borrower about options to get out of default.

    Any one of these possibilities is sufficient to impede borrower 
success in repayment.
                       Navigating Loan Repayment
    When we meet with a new client for the first time, our first 
challenge is to identify the type(s) of loans they have. Different 
loans have different rules and present borrowers with different options 
for getting and staying on track through repayment. For example, a 
borrower could have a Federal Family Education Loan Program (FFELP) 
Stafford loan eligible for the Income-Based Repayment (IBR) plan using 
the 15 percent formula, a Direct Stafford loan eligible for the Revised 
Pay as You Earn (REPAYE) plan using the 10 percent formula, and a 
Perkins loan with no income-driven repayment (IDR) option at all. We 
then have to figure out the history and the status of each loan, for 
instance whether the loan is current, delinquent, or defaulted, using 
the scant amount of information provided in the National Student Loan 
Data System (NSLDS) data base. Only then can we begin to work on 
resolving the issue that prompted the borrower to seek legal 
assistance.
    Of the borrowers who could benefit from the help of an attorney, 
far too few are likely to find such an attorney available to them. Few 
civil legal aid programs have sufficient resources to provide 
assistance to student loan borrowers, as they are grappling with 
meeting a wide range of legal needs for their low-income clients. 
Borrowers need help navigating repayment, and unfortunately, due to the 
void left by inadequate servicing, a number are preyed upon by 
illegitimate debt relief operations that siphon funds from borrowers 
without leaving those borrowers better off or delivering the services 
they claimed they would provide. \6\
---------------------------------------------------------------------------
    \6\  State and Federal regulators are working together to protect 
borrowers from these predatory companies. See Federal Trade Commission, 
Press Release: FTC, State Law Enforcement Partners Announce nationwide 
Crackdown on Student Loan Debt Relief Scams--Scammers made false 
promises and charged illegal up front fees of more than $95 million 
(Oct. 13, 2017), available at https://www.ftc.gov/news-events/press-
releases/2017/10/ftc-state-law-enforcement-partners-announce--
nationwide-crackdown.
---------------------------------------------------------------------------
    Borrowers should not need the help of an attorney to understand how 
to meet their repayment obligations. This is exactly the function that 
servicers should be performing before borrowers default. Unfortunately, 
the servicing companies and then the debt collection companies to which 
we pay billions of dollars each year are not adequately ensuring that 
borrowers are able to easily access the programs that could ensure 
their success.
                             Accountability
    Our system of financing higher education through debt is deeply 
flawed if we only hold students accountable for their degree of success 
in repayment. But that is exactly what is happening, in the experience 
of our clients, it is often the student or borrower who bears the brunt 
of the risk when an educational investment does not pay dividends of 
stable employment or decent wages. A fair system of financial aid would 
also hold the many institutions students interact with accountable for 
student outcomes, including borrower outcomes in repayment.
    We have created a Federal student aid system that enriches private 
companies who collect student loan debt from borrowers who have limited 
ability to repay. This collection activity often causes these borrowers 
even greater difficulty in repaying because collection costs and fees 
are added to the already daunting debt levels these borrowers face.
                               Servicing
    The Federal financial aid system relies on a complex patchwork of 
entities hired to provide loan servicing to borrowers. Few borrowers 
understand what loan servicing is or which company services their 
loans. Worse yet, some borrowers have more than one servicer for their 
loans. Different servicers have different practices and some are easier 
to reach or work with than others. Borrowers with more than one 
servicer often believe they have done their part to stay current on 
their loans by working with one servicer, and only learn otherwise when 
they begin facing debt collection activity on another batch of loans. 
Many borrowers (who generally do not get to choose their servicer) have 
had a dispute with their servicer or have concerns about their 
servicer's quality and effectiveness.
    NCLC had one client whose 11 loans were held by three different 
lenders. When she tried to consolidate her loans, a single loan was 
left off despite the fact that she had included it on her consolidation 
application. The consolidation summary is challenging to read, and 
because some of the loans from that lender had been included, she 
believed all of them to be included. To confuse the matter more, the 
lender who held the one unconsolidated loan also held her private 
loans. Instead of helping her navigate this situation, her lender 
(which is also a Department of Education servicer) routinely told her 
that she had called the wrong part of the company.
    To the extent that low-income individuals and families must borrow 
student loans to pay for college, those loans should come with 
protections, including high-quality servicing and affordable repayment 
plans, that will support borrowers throughout the life of their loans.
                      Default and Debt Collection
    Currently, borrowers get stuck in default and do not understand 
their options for getting out or staying out. It should be hard to 
enter and easy to exit default. Particularly for low-income borrowers, 
defaults can be prevented by enrollment in income-driven repayment 
plans. Nonetheless, too many borrowers slip through the cracks of the 
current loan servicing system and find themselves in default. Borrowers 
should not have to suffer such onerous consequences from default. The 
negative credit reporting alone can impede access to housing, 
employment, and other credit. Further, default precludes access to 
additional Federal financial aid, including grants and other non-loan 
aid. This is particularly problematic for borrowers who desire to 
continue their educations, especially those who did not obtain their 
degree or credential when they first attended school.
    Unfortunately too few debt collectors adequately explain the 
options available to borrowers for getting out of default. NCLC served 
a 60-year old woman who was living on less than $700 of Social Security 
Disability Insurance (SSDI) and Supplemental Security Income (SSI). The 
debt collector insisted that she had to rehabilitate her loans, and for 
reasons explained in greater detail below, insisted that her payments 
had to be $200 per month. This client tried in earnest to follow the 
rehabilitation plan for over 2 years, but, because it was unaffordable, 
she was never able to successfully make the nine on-time payments the 
program required. She was never informed of consolidation as an option 
for curing default. Throughout this time, the debt collector, despite 
knowing the source of her income, never told her about the Total and 
Permanent Disability discharge program. It was not until she reached 
NCLC that she ever learned about this program, and we were able to help 
her cancel her loans.
    Effective servicing and affordable monthly payments would leave 
fewer borrowers subject to default and its attendant debt collection. 
\7\ That would save taxpayers money because borrowers will be repaying 
their loans and the government will not have to spend money trying to 
collect outstanding loans.
---------------------------------------------------------------------------
    \7\  National Consumer Law Center, Pounding Student Loan Borrowers: 
The Heavy Costs of the Government's Partnership with Debt Collection 
Agencies (Sept. 2014), available at https://www.nclc.org/issues/
pounding-student-loan-borrowers.html.
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IV. Future of Federal Student Aid: Implementing Changes for Student and 
                            Borrower Success
    When students receive the benefits of the Federal aid program, we 
all win. On the front end, we can prevent uncertainty and challenges in 
repayment by ensuring that the neediest students receive all of the 
grant and non-loan aid for which they are eligible. Grants are a 
vitally important component of a financial aid system designed to 
ensure affordable access to higher education. They help make higher 
education a reality for students from low-income backgrounds.
        Increasing Access and Affordability Through Non-Loan Aid
    The lowest-income students, those with the most need should not 
wind up mired in unaffordable debt. Smoothing access to grants and non-
loan aid would allow more students to complete their programs and 
benefit from the credential they worked diligently to earn. When low-
income students borrow less, then there is less risk on the back-end 
with loan repayment. This puts them on a path to achieving the 
financial independence that will support loan repayment success--if 
they have to borrow loans at all.
     Increasing Affordability Throughout the Federal Loan Lifecycle
    Income-driven repayment (IDR) offers many borrowers a sustainable 
way to ensure that their monthly loan payments are and remain 
affordable. Although there are a number of IDR plans, they share 
important features:

          (1) they require borrowers to pay only a reasonable 
        percentage of their earned income toward their student loans,
          (2) they acknowledge that borrowers must cover basic living 
        expenses by exempting a portion of income based upon the 
        Federal poverty levels for their family size,
          (3) they allow borrowers to report changes in their income at 
        any time, and
          (4) they ensure that borrowers are not obligated to take 
        their student loan debt to the grave by providing forgiveness 
        after a fixed period of time.

    No borrower should remain indebted forever, and IDR enables 
borrowers to meet their student loan obligations while also working 
toward retiring the debt, regardless of the borrower's means.
    Without IDR, many borrowers have become delinquent and defaulted 
not because they are unwilling to repay their loans, but because they 
are unable. I have represented borrowers with decades-old outstanding 
Federal student loans. Many of them exhausted their forbearances long 
ago and ran out of chances to cure default because their monthly 
payments were not affordable. As soon as they exited default through 
consolidation or rehabilitation, they were set up to fail when they 
were placed back on the Standard or another unaffordable, balance-based 
repayment plan. This issue is particularly prevalent among those who 
exit default through rehabilitation. Because there is no statute of 
limitations on the collection of Federal student loans, any barriers to 
repayment only increase the risks of nonpayment and default for the 
borrower, taxpayers, and the government.
    Loan repayment should be affordable for all borrowers: students and 
parents borrowing for undergraduate education, as well as students 
borrowing for graduate education. To make it through loan repayment, 
borrowers need to know that IDR plans are available. Further, they need 
to understand how to enroll and stay enrolled. Finally, borrowers for 
whom the existing IDR plans still pose a financial hardship should have 
options for further reductions in their payment obligations on a 
temporary and long-term basis.
                      Supporting Borrower Success
    The Federal financial aid programs should be easy for students and 
borrowers to understand and navigate. All students and borrowers who 
need Federal aid should have an appropriate option available to them. 
Simplifying the current aid system can help achieve this goal, but only 
if it is designed to accomplish twin objectives. First, it must serve 
everyone who needs access to it. Second, it must make extra efforts to 
ensure that people for whom Federal aid is a critical pathway to 
educational opportunity receive all the benefits of the program.
    Income-driven repayment is at the heart of making student loan 
repayment affordable for borrowers like our clients. IDR can certainly 
be simplified, but our experience with borrowers has shown us that 
borrowers struggle to access these plans not necessarily because the 
plans are complicated, but because servicers consistently fail to 
inform borrowers of IDR as an option for managing their repayment 
obligations.
    A current NCLC client went to a local for-profit school which was 
recently sued by the Attorney General of Massachusetts for false and 
deceptive enrollment practices. She completed a certificate in the 
medical assistant program, but she was unable to find a job in her 
field of study. She worked off and on but never enough to afford her 
student loan payments. She dutifully contacted her servicer every year 
and has submitted income documentation. She has never been enrolled in 
an IDR plan. Before coming to our office, she had never heard of IDR. 
Although she called her servicer every year to discuss her financial 
situation, she was always directed to a deferment or forbearance. She 
has been out of school since 2012 and is still in good standing due to 
her extreme diligence. Yet that time has been wasted because she could 
have been in an IDR plan making affordable qualifying payments. The 
capitalization of the interest alone during this time period has cost 
her hundreds if not thousands of dollars. Moreover, she will be paying 
on this loan for five more years than necessary. IDR--whether it 
consists of one repayment plan or twenty--will only work for borrowers 
when servicers fulfill their responsibility for properly administering 
it.
    Two common-sense steps would help borrowers succeed in repayment. 
First, financial aid begins and ends with completing forms. The forms 
are long, confusing, complex, and not necessarily language-accessible. 
Submitting paperwork to servicers and debt collectors can result in 
delays or hassles that extend the repayment period and increase the 
amounts borrowers will pay over the life of their loans. And the costs 
of missing a paperwork deadline can be extraordinary. Therefore, forms 
should be more straightforward, translated into multiple languages, 
including Spanish, and readily available to borrowers when they need 
them, including through www.studentloans.gov. Also, fewer forms should 
be required where the government already possesses the information it 
needs to determine that a borrower would benefit from a particular loan 
benefit.
    Second, automatically enrolling or retaining borrowers in programs 
that will ensure their long-term success in repayment could reduce the 
cost of administering the Federal aid program, while also ensuring that 
more borrowers are on track to succeed in repayment. Reauthorization of 
the HEA should prioritize moving forward with information-sharing 
agreements and coordination between the U.S. Department of Education 
(Department) and other agencies to ensure that borrowers remain on 
their IDR plans from 1 year to the next or are identified as eligible 
for Total and Permanent Disability Loan Discharges in a timely manner, 
for example. \8\ Further, if there is a mechanism to automatically 
enroll borrowers who are in the late stages of delinquency onto IDR 
plans, then those borrowers may be spared the consequences of default 
and also continue to move toward repayment of their loans. \9\
---------------------------------------------------------------------------
    \8\  U.S. Dep't of Educ., Press Release, U.S. Department of 
Education Acts to Protect Social Security Benefits for Borrowers with 
Disabilities (Apr. 12, 2016).
    \9\  As the CFPB noted in its 2017 Student Loan Ombudsman annual 
report, following voluntary changes made by private lenders that 
automatically placed eligible service members in interest rate 
reductions, one government study found that the number of 
servicemembers who received the interest rate cap on at least one of 
their private student loans more than doubled, from 14,970 to 33,309. 
The CFPB posited that policymakers and market participants may find 
this example instructive as they consider steps to strengthen policies 
or practices where invocation of other benefits and protections depends 
on a similar process. Because borrowers must self-identify their 
eligibility in order to invoke their various rights and servicers rely 
on manual processing to apply benefits and protections to borrowers' 
accounts, many borrowers fall through the cracks. This likely widens 
the gap between the total population of eligible beneficiaries for each 
of these protections and the segment of borrowers able to successfully 
invoke their rights. As the Bureau's research has noted in the past, it 
is often the most vulnerable student loan borrowers who fall through 
this gap. See Consumer Fin. Prot. Bureau, 2017 Annual Report of the 
CFPB Student Loan Ombudsman 44-46 (Oct. 2017).
---------------------------------------------------------------------------
  Supporting Borrower Success Through Transparency and Accountability
    As we seek to make student loan repayment as simple for borrowers 
to manage as possible, we should continue to explore ways to ensure 
that borrowers have important information at crucial intervals and the 
public has access to data sufficient to evaluate the performance of the 
Federal aid system. On the front end, before they borrow, individuals 
and families should know the cost of the educational program and their 
options for using Federal aid to meet their needs. They should be 
informed of the outcomes of other students and borrowers while in that 
educational program and in loan repayment.
    While it is important for loan and educational program details to 
be disclosed at the outset, information about student loan repayment 
options provided at entrance or exit counseling may grow stale before 
borrowers know whether they will need to act on it. The time at which 
the information is presented renders the information irrelevant. 
Borrowers may also experience information overload and lack a sense of 
how to retain or track the information provided to them because they do 
not yet know whether they will need that information. Ultimately, those 
borrowers need a clear source of good information and comprehensive 
counseling when it is time for them to act.
    A single, online loan-servicing portal could provide key benefits 
to those borrowers. Ensuring that borrowers always know where to go to 
get up-to-date, accurate loan information is essential to ensure that 
they can meet their loan repayment obligations. It would also ensure 
that borrowers know how to communicate with the entity responsible for 
guiding them through loan repayment. The portal should also help 
borrowers understand their rights and learn about the services they 
should be able to obtain during repayment.
    Our experience representing borrowers has taught us that tasking a 
single servicer with responsibility for the Federal student loan 
portfolio would not be a panacea. Without competition, adequate 
oversight, or accountability, our clients and those of the advocates 
with whom we work, continue to uncover repayment issues that arose when 
a single company serviced the Direct Loan portfolio. \10\ As a result, 
some borrowers who are working toward repaying their loans on an 
income-driven repayment plan will pay more than necessary and spend 
more time in repayment.
---------------------------------------------------------------------------
    \10\  Danielle Douglas-Gabriel, ``ACS's $2.4 million settlement in 
Massachusetts highlights problems in student loan servicing,'' The 
Washington Post, Nov. 22, 2016, available at https://
www.washingtonpost.com/news/grade-point/wp/2016/11/22/acss-2-4-million-
settlement-in--massachusetts-highlights-problems-in-student-loan-
servicing/'utm--term=.05fc565139ef.
---------------------------------------------------------------------------
    Our experience representing borrowers has also taught us that 
servicers often act to maximize their compensation in ways that do not 
necessarily correlate with borrower success in repayment. We believe 
borrowers will receive consistently receive high-quality servicing when 
financial incentives for servicers are closely aligned with optimizing 
borrower outcomes.
    To ensure accountability, there must be appropriate, common 
servicing standards and real consequences when servicers underperform 
or violate borrower rights. Relative performance metrics, compliance 
with Federal and State consumer protection laws, as well as borrower 
complaint data should be shared with the public and factored into 
decisions regarding sanctions and future contract awards and account 
allocations.
    Over the past several years, an increase in public enforcement 
actions at the Federal and State levels based upon violations of the 
rights of borrowers who were attempting to repay their Federal loans 
has resulted in improvements in servicing. The Consumer Financial 
Protection Bureau (CFPB) has responded to borrower complaints and 
disputes by holding servicers and debt collectors accountable for 
depriving borrowers of the benefits and protections they are due. \11\ 
Federal and State regulators and enforcement agencies, coupled with 
private enforcement, are needed to promote strong oversight of an 
effective servicing system that protects borrower rights.
---------------------------------------------------------------------------
    \11\  Consumer Financial Protection Bureau, Press Release: CFPB 
Sues Nation's Largest Student Loan Company Navient for Failing 
Borrowers at Every Stage of Repayment--Navient, Formerly Part of Sallie 
Mae, Illegally Cheated Borrowers Out of Repayment Rights Through 
Shortcuts and Deception (Jan. 18, 2017), available at https://
www.consumerfinance.gov/policy-compliance/enforcement/actions/navient--
corporation-navient-solutions-inc-and-pioneer-credit-recovery-inc/; 
CFPB v. Navient Corporation; Navient Solutions, Inc.; and Pioneer 
Credit Recovery, Inc., No. 3:17-cv-00101 (M.D.Pa. Jan. 18, 2017).
---------------------------------------------------------------------------
    To ensure that borrowers receive consistently high quality service, 
borrowers and their advocates should have access to the guidelines and 
standards that the Department provides to contractors. Unfortunately, 
the recent past has shown us that some violations of borrower rights 
stemmed from the instructions that the Department provided to its 
contractors. \12\ In 2012, Bloomberg News reported that the 
Department's contract with private collection agencies paid the PCAs 16 
percent of the loan balance when a borrower completed a rehabilitation 
plan. However, it only paid this high commission rate if the borrower's 
monthly payments equaled between 0.75 percent to 1.25 percent of the 
entire loan balance despite the law requiring that the payment amount 
be reasonable and affordable based upon the borrower's circumstances. 
As the former debt collector quoted in the story said, ``It would be 
``a cold day in Hades'' before collectors would tell borrowers about 
options with lower payments.'' \13\
---------------------------------------------------------------------------
    \12\  Jack Remondi, Setting the Record Straight on SCRA, Medium.com 
(Mar. 13, 2016), https://medium.com/@JackRemondi/setting-the-record-
straight-on-scra-e642fa370d0a#.2lpfahnii (following U.S. Department of 
Justice enforcement action, CEO of Navient stated that Navient's 
violations of the Servicemembers Civil Relief Act were a result of its 
having followed the Department of Education's guidance).
    \13\  John Hechinger, Obama Relies on Debt Collectors Profiting 
from Student Loan Woes, Bloomberg News (Mar. 26, 2012) available at 
https://www.bloomberg.com/news/articles/2012-03-26/Obama-relies--on-
debt-collectors-profiting-from-student-loan-woe.
---------------------------------------------------------------------------
    Also, providing this information to borrowers will help borrowers 
to distinguish between legitimate and illegitimate debt collection and 
debt relief companies. Borrowers are unlikely to willingly work with 
debt collection companies when they cannot be certain that those debt 
collectors are truthful. A few years ago, the Department fired five 
debt collectors because those companies were misleading borrowers about 
their default resolution options. \14\ It would be easier to identify 
problematic practices like those even sooner if borrowers have access 
to better information about their options apart from what the debt 
collectors say. It would also help if borrowers know what to expect 
from the debt collectors, including what authority and discretion the 
collectors have to help borrowers exit default and get back on track to 
repayment.
---------------------------------------------------------------------------
    \14\  U.S. Department of Education, Press Release: U.S. Department 
of Education to End Contracts with Several Private Collection 
Agencies--After finding high incidences of materially inaccurate 
representations, Department acts to protect consumers (Feb. 27, 2015): 
https://www.ed.gov/news/press--releases/us-department-education-end-
contracts-several-private-collection-agencies.
---------------------------------------------------------------------------
    Recently, the Department of Education announced that it was 
rehiring a private collection agency (PCA) that has faced private 
litigation due to its refusal to allow borrowers to enter into 
reasonable and affordable loan rehabilitation agreements in violation 
of the Department of Education's regulations and the Fair Debt 
Collection Practices Act. \15\ Private enforcement will continue to be 
an important way to highlight issues before they become systemic and 
create greater risk for more borrowers and taxpayers.
---------------------------------------------------------------------------
    \15\  Love v. Windham Professionals, Inc., 1:13-cv-01649-BMC 
(E.D.N.Y.) (settled prior to rulings on cross motions for summary 
judgment); see Andrew Kreighbaum, ``Debt-Collection Contracts Awarded 
to 2 Companies,'' Inside Higher Ed, Jan. 15. 2018, available at https:/
/www.insidehighered.com/quicktakes/2018/01/15/debt-collection-
contracts-awarded-2-companies.
---------------------------------------------------------------------------
    The public should also have access to information about student and 
borrower outcomes. True oversight and accountability depend on 
collecting and sharing this kind of information. At present, little 
information about borrower outcomes, servicer performance, and debt 
collector behavior is publicly available. In its current iteration, the 
Department of Education's office of Federal Student Aid (FSA) resists 
disclosing the kind of information that could encourage real 
accountability, including public and private enforcement of the legal 
rights of borrowers. This is largely because the structure of the FSA 
produces some of the ongoing conflicts of interest within the 
Department. While FSA is supposed to act on behalf of its customers, 
there is no single priority group of customers. The priority group 
category includes not only students, but also financial institutions 
and schools. The FSA, by its very nature, has multiple constituencies, 
often with conflicting needs and goals. \16\ Thus, it often takes steps 
to protect financial institutions and schools to the detriment of 
students. Further, without access to information about borrower 
outcomes, future students and their families will continue to be 
deprived of the information that could help them determine which 
educational programs would be a good investment of their time and 
money.
---------------------------------------------------------------------------
    \16\  NCLC, Pounding Student Loan Borrowers, supra, at 4.
---------------------------------------------------------------------------
                             V. Conclusion
    Student success in school and borrower success in repayment depend 
on building a student aid system that allows students and borrowers to 
access the benefits and information they need to thrive. Simplification 
and transparency can help, but at this crucial moment, we can also 
design a Federal aid system that maintains its integrity through real 
accountability.
    Thank you for the opportunity to testify today. I would be happy to 
answer any questions.
                                 ______
                                 
                  [summary statement of joanna darcus]
    The National Consumer Law Center (NCLC) is a nonprofit organization 
specializing in consumer issues on behalf of low-income people. I 
joined NCLC after working at a civil legal aid organization in 
Philadelphia. At both organizations, I have represented student loan 
borrowers who are in distress and default.

    In this testimony, I provide an overview of the barriers my clients 
face when accessing the important safeguards that the system offers. I 
then make recommendations about how to improve student outcomes in 
school and borrower outcomes in loan repayment because pursuing higher 
education should increase opportunity, and not restrict access to 
necessities of life.
                          Overview of Problems
    For low-income individuals and families who do not have extra 
dollars in their budgets, getting off track and facing involuntary 
collection activities, such as reductions of their monthly Social 
Security benefits or withholding of their tax refunds, can be utterly 
devastating. Although many of our clients are among those who borrowed 
relatively less than other student loan borrowers, they find 
themselves, nonetheless, with low earnings or limited means. Far too 
many borrowers, like our clients, have struggled to access critical 
features of their Federal loans after something went wrong. Common 
factors, include

          The school failed to deliver the education it 
        advertised.
          The borrower got laid off or become disabled.
          The servicer misplaced paperwork or miscalculated the 
        borrower's monthly payment.
          The private collection agency (PCA) misinformed the 
        borrower about options to get out of default.

    Unfortunately, servicers and debt collectors fail to provide the 
help borrowers need to understand their options and repay their loans.
                         Overview of Solutions
    The Federal student aid programs should be easy for students and 
borrowers to understand and navigate. All students and borrowers who 
need Federal aid should have an appropriate option available to them. 
As we seek to make student loan repayment as simple for borrowers to 
manage as possible, we should continue to explore ways to ensure that 
borrowers have important information at crucial intervals and the 
public has access to data sufficient to evaluate the performance of the 
Federal aid system. This will help ensure its integrity and that it 
delivers on its promise of making higher education accessible to all.
                                 ______
                                 
    The Chairman. Thank you, Ms. Darcus.
    Dr. Chingos, welcome.

   STATEMENT OF MATTHEW CHINGOS, DIRECTOR, EDUCATION POLICY 
            PROGRAM, URBAN INSTITUTE, WASHINGTON, DC

    Dr. Chingos. Chairman Alexander, Ranking Member Murray, 
Members of the Committee, thank you for the opportunity to 
testify today about how our Nation's Federal student aid 
programs can be simpler and more transparent.
    I direct the Education Policy Program at the Urban 
Institute, where my colleagues and I provide original data and 
analysis to support education policymaking. I am proud of the 
work we do at the Urban Institute, but I should emphasize that 
the views expressed in this testimony are my own, not those of 
any organization with which I am affiliated, its trustees, or 
its funders.
    Federal student aid programs provide vital assistance to 
students and further national goals of increasing educational 
attainment and economic mobility. But they face serious 
challenges which are especially severe in the student lending 
system.
    For most students, debt is a tool that allows them to 
access educational opportunities that pay off in the long run. 
But for far too many borrowers, student loans are doing more 
harm than good.
    The number of borrowers in default has more than doubled 
over the past 4 years to nearly 5 million even though the 
default rate has fallen over this period. This is because 
default is like a hotel where you check in, but never check 
out.
    Borrowers with relatively small amounts of debt, especially 
college dropouts, are most likely to default. And there are 
troublingly large racial disparities. New data show that black 
college graduates more likely to default than white dropouts.
    Professor Dynarski has aptly described the state of affairs 
as a repayment crisis. Existing income-driven repayment plans 
provide a safety net for struggling borrowers but have failed 
to sufficiently mitigate defaults. Ending the student loan 
repayment crisis and better supporting college students through 
need-based grants can be accomplished through HEA 
reauthorization. My recommendations are rooted in the following 
principles--targeting support to students who need it most, 
fairness and transparency for students, and efficiency for 
taxpayers.
    My first recommendation is that there should be one Federal 
grant program. The best way to help students pay for college is 
to reduce the prices they pay at the time of enrollment. 
Benefits that only arrive after students have left college, 
such as the in-school interest subsidy and the Public Service 
Loan Forgiveness Program, should be repurposed into need-based 
grants.
    My second recommendation is to move to a single Federal 
loan program that is focused on extending credit to 
undergraduate students. Essentially unlimited lending to 
graduate students poses a risk to the fiscal sustainability of 
the program and should be addressed by limiting graduate loan 
amounts or their eligibility for forgiveness.
    My third recommendation is to create a single income-driven 
repayment plan that looks significantly different from any 
existing repayment plan today. An incremental step would be to 
automatically tie payments to borrowers' incomes using tax 
data. Payments would adjust annually but would not be 
responsive to short-term changes such as a job loss.
    A bolder change would have all borrowers make income-driven 
loan payments through the tax withholding system. In an 
automatic system, it would be difficult for most borrowers to 
default on their loans in the same way that it is difficult to 
underpay payroll taxes. A modernized loan repayment system 
would also address the problem with current policy, which is 
that borrowers pay the same percentage of their income toward 
their student loans regardless of whether they are a college 
dropout with $5,000 in debt or a doctor with $200,000.
    This can lead to overborrowing by students, make it easier 
for colleges to raise tuition, and entail significant cost for 
taxpayers. A solution is to tie the percentage of income paid 
or number of years prior to forgiveness to the amount borrowed.
    Even with these two changes, problems would remain. A 
borrower whose income-driven payments do not even cover the 
accumulating interest each month will see an increasing loan 
balance, which could have a psychological toll or make it 
harder to access other forms of credit, such as a mortgage. And 
taxpayers would continue to assume all the risk of nonpayment 
and reap none of the reward when borrowers are economically 
successful.
    An alternative would be to require borrowers to pay a set 
percentage of their income for a fixed period of time, even if 
it exceeds what the borrower would have paid under a 
traditional loan. A system along these lines, which would be a 
public sector analogue of an income share agreement, would 
eliminate the concept of a loan balance, and interest rates 
would no longer be needed.
    In conclusion, a single need-based grant program, combined 
with a loan program that protects borrowers and taxpayer 
dollars through automatic income-driven repayment, will 
increase the effectiveness of Federal support for higher 
education and reduce the harm that noncompletion and loan 
default disproportionately inflict on disadvantaged 
individuals. Designing these programs well requires considering 
how they interact with each other and with other components of 
the Higher Education Act.
    Protecting students and taxpayers from low-value 
institutions is especially critical to a well-designed system 
of Federal student aid. HEA reauthorization provides an 
important opportunity for Congress to streamline and strengthen 
the Federal aid programs that are critical to educational and 
economic opportunity in the United States.
    I hope my testimony will contribute to that important 
effort. I will be happy to answer any questions.
    Thank you.
    [The prepared statement of Dr. Chingos follows:]
                 prepared statement of matthew chingos
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee, thank you for the opportunity to testify today about how our 
Nation's Federal student aid programs could be simpler and more 
transparent for students.
    I direct the Education Policy Program at the Urban Institute here 
in Washington, DC. My colleagues and I provide original data and 
analysis to support education policymaking from pre-kindergarten 
through postsecondary. This year, we will focus significant attention 
on the Higher Education Act (HEA), producing original empirical 
analyses of reauthorization proposals and creating evidence-based tools 
aimed at elucidating tradeoffs created by different policy options.
    I am proud of the work we do at the Urban Institute, but I should 
emphasize that the views expressed in this testimony are my own, not 
those of any organization with which I am affiliated, its trustees, or 
its funders.
    My testimony will provide an overview of how Federal policy 
provides vital support, credit, and insurance for college students but 
could greatly benefit form modernization and reform through 
reauthorization of the HEA. Most important, the student loan system is 
harming too many students while providing arbitrary subsidies to 
others.
    My analyses and recommendations are rooted in three principles:

        First, Federal support for higher education should be allocated 
        in ways that help students who need it most, with the goal of 
        increasing educational attainment and economic mobility, 
        especially for students from disadvantaged backgrounds.
        Second, Federal aid programs should treat students fairly. This 
        does not mean treating all students the same, but aid programs 
        should treat students from similar circumstances similarly and 
        be easily understood by students and families.
        Finally, the system should be as efficient as possible so 
        taxpayer dollars are used to maximum effect.
                     Student Loan Repayment Crisis
    For most students, debt is a tool that allows them to access 
educational opportunities that pay off in the long run. \1\ Loans allow 
students to borrow from their higher-income future selves to invest in 
their educations today. The Federal Government, through the HEA, plays 
a critical role in extending credit to all college students, regardless 
of whether a private bank would make those loans.
---------------------------------------------------------------------------
    \1\  Beth Akers and Matthew M. Chingos, Game of Loans: The Rhetoric 
and Reality of Student Debt (Princeton, NJ: Princeton University Press, 
2016).
---------------------------------------------------------------------------
    But for far too many borrowers, student loans are doing more harm 
than good. The number of borrowers in default has more than doubled 
over the past 4 years, to 4.6 million, even though the default rate has 
fallen over this period. \2\ This is because defaulted loans are 
unlikely to return to good standing. \3\ Defaulting harms borrowers' 
credit and ability to borrow in the future. \4\
---------------------------------------------------------------------------
    \2\  Paul Fain, ``Growing Number of Borrowers Are In Default,'' 
Inside Higher Ed, December 14, 2017, https://www.insidehighered.com/
quicktakes/2017/12/14/growing-number-borrowers-are-default; and ``U.S. 
Department of Education Releases National Student Loan fiscal year 2014 
Cohort Default Rate,'' U.S. Department of Education, press release, 
September27, 2017, https://www.ed.gov/news/press-releases/us-
department-education-releases-national-student--loan-fy-2014-cohort-
default-rate
    \3\  Executive Office of the President, Investing in Higher 
Education: Benefits, Challenges, and State of Student Debt (Washington, 
DC: Executive Office, 2016, https://Obamawhitehouse.archives.gov/sites/
default/files/page/files/20160718--cea--student--debt.pdf), p. 33.
    \4\  There is little systematic evidence on the consequences of 
student loan default, but because defaults appear on borrowers' credit 
records, they should mechanically reduce credit scores and future 
ability to borrow.
---------------------------------------------------------------------------
    Default affects some groups of student borrowers more than others. 
Borrowers with relatively small amounts of debt, especially college 
dropouts, are most likely to default. \5\ These patterns are linked to 
low college completion rates because earning a degree increases a 
borrower's earning capacity and ability to repay her loans. \6\ 
Additionally, new data show large racial disparities in default rates, 
with black college graduates more likely to default than white 
dropouts. \7\
---------------------------------------------------------------------------
    \5\  See Meta Brown, Andrew Haughwout, Donghoon Lee, Joelle Scally, 
and Wilbert van der Klaauw, ``Looking at Student Loan Defaults through 
a Larger Window,'' Liberty Street Economics (blog), Federal Reserve 
Bank of New York, February 19, 2015,http://
libertystreeteconomics.newyorkfed.org/2015/02/looking--at--student--
loan--defaults--through--a--larger--window.h tml; and Figure 2015--14A, 
``Two-Year Student Loan Default Rates by Repayment Cohort and Degree 
Completion Status, 1995--96 to 2011--12,'' Trends in Student Aid, 
College Board, https://trends.collegeboard.org/student-aid/figures--
tables/two-year-student-loan-default-rates-degree-completion-status-
over-time.
    \6\  Only 59 percent of students who start at 4-year public 
colleges earn a bachelor's degree from any institution within 6 years 
(the corresponding figure for private, nonprofit colleges is 72 
percent). Among students who start at community colleges, only 39 
percent earn any degree from any institution within 6 years (Completing 
College: A National View of Student Attainment Rates -- Fall 2010 
Cohort [Herndon, VA: National Student Clearinghouse, 2016], figure 12).
    \7\  Judith Scott-Clayton, The Looming Student Loan Default Crisis 
Is Worse Than We Thought (Washington, DC: Brookings Institution, 2018), 
https://www.brookings.edu/research/the-looming-student-loan-default-
crisis-is-worse-than-we--thought/.
---------------------------------------------------------------------------
    Broadly speaking, there is a repayment crisis in student lending. 
\8\ A fixed monthly payment may work for a car loan, but the 10-year 
standard repayment plan asks too many student borrowers to make 
unaffordable payments shortly after leaving college, when their incomes 
are low. As a result, even students who have taken on reasonable debt 
levels to earn valuable degrees may struggle to repay early in their 
careers.
---------------------------------------------------------------------------
    \8\  Susan Dynarski and Daniel Kreisman, Loans for Educational 
Opportunity: Making Borrowing Work for Today's Students (Washington, 
DC: Brookings Institution, 2016), https://www.brookings.edu/wp--
content/uploads/2016/06/THP--DynarskiDiscPaper--Final.pdf.
---------------------------------------------------------------------------
    Existing income-driven repayment plans provide a safety net for 
struggling borrowers, which in theory should prevent defaults. But 
those plans have failed to do so, in part because they are too 
complicated. There are multiple programs with different rules, which 
borrowers often need to navigate at times of financial stress. \9\ 
Borrowers need to reapply every year; between 2013 and 2014, half 
failed to do so. \10\
---------------------------------------------------------------------------
    \9\  Game of Loans, p. 118.
    \10\  Kelly Field, ``Thousands Fall Out of Income-Based Repayment 
Plans,'' Chronicle of Higher Education, April 2, 2015, http://
www.chronicle.com/article/Thousands-Fall-Out-of/229031.
---------------------------------------------------------------------------
                           Options for Reform
    The current Federal aid programs resulted from years of well-
intentional policy changes that would now benefit from consolidation 
and simplification. In my view, each set of programs should be limited 
to the purpose for which it is best suited: grants to reduce the prices 
that students pay, loans to provide credit on reasonable terms, and 
income-driven repayment to provide insurance against unaffordable loan 
payments.
    Options for reform range from modest efforts to simplify and reduce 
the number of grant and loan programs (and repayment plans) to bolder 
proposals that would more fundamentally change how the student aid 
programs function. I discuss a range of options that Congress should 
consider as it reauthorizes the HEA.
                          One Grant, One Loan
    Consolidating Federal aid programs into one grant program and one 
loan program would make these programs more effective and easier for 
potential students to navigate. \11\ The grant program could better 
support the college enrollment and completion of disadvantaged students 
by repurposing poorly targeted subsidies from other programs. And 
moving away from multiple loan programs might reduce the troublingly 
large number of students who are unaware of how much they have 
borrowed, or whether they even have a loan. \12\
---------------------------------------------------------------------------
    \11\  The grant program might be bifurcated into one component for 
traditional-age college students and a second for older adults who 
return to school, including after a period of unemployment (see Sandy 
Baum et al., ``Rethinking Pell Grants'' [New York: College Board, 
2013]; and Sarah Turner, Labor Force to Lecture Hall: Pell Grants and 
Postsecondary Policies in Response to Job Loss [Washington, DC: 
Brookings Institution, 2017],http://www.hamiltonproject.org/papers/
labor--force--to--lecture--hall--pell--grants--and--postsecondary--
policies--in--resp o).
    \12\  Elizabeth J. Akers and Matthew M. Chingos, Are College 
Students Borrowing Blindly? (Washington, DC: Brookings Institution, 
2014).
---------------------------------------------------------------------------
    Whenever possible, Federal subsidies to college students should be 
delivered through a grant program. \13\ This is the most effective 
mechanism for delivering subsidies to students, as it reduces the 
prices students pay at the time of enrollment and it can be targeted to 
students who most need assistance. For example, the need-based in-
school interest subsidy would be better used to reduce college costs 
for lower-income students at the point of entry rather than the loan 
payments they make after leaving college. Likewise, the cost of the 
Public Service Loan Forgiveness (PSLF) program, which 
disproportionately benefits high-debt borrowers even if their incomes 
are not that low, could be repurposed into need-based grants. \14\
---------------------------------------------------------------------------
    \13\  Federal tax credits are outside the scope of the Higher 
Education Act, but there is strong evidence that these credits have no 
impact on college enrollment (George B. Bulman and Caroline M. Hoxby, 
``The Returns to the Federal Tax Credits for Higher Education,'' 
Working Paper 20833 [Cambridge, MA: NBER, 2015]). The tax credits 
should be eliminated and the funds used to expand need-based grants.
    \14\  PSLF is likely to deliver the largest benefits to borrowers 
with graduate degrees, who can borrow much more than individuals with a 
bachelor's degree or less. Repurposing PSLF might involve creating a 
grant program for graduate programs (e.g., one targeted to individuals 
from disadvantaged backgrounds entering socially valuable fields).
---------------------------------------------------------------------------
    The primary purpose of the single Federal loan program should be to 
extend credit to undergraduate students. Policymakers should consider 
capping or eliminating lending to parents of undergraduate students, 
perhaps in combination with increasing undergraduate loan limits, 
rather than operating a predatory lending program. \15\ Limits on 
lending to graduate students should also be reinstated, or the 
eligibility of those loans for forgiveness curtailed, to preserve the 
fiscal sustainability of the Federal lending program.
---------------------------------------------------------------------------
    \15\  Rachel Fishman, ``An Unsatisfying Consensus Reached on PLUS 
Loans,'' EdCentral, New America Foundation, May 27, 2014, https://
www.newamerica.org/education-policy/edcentral/unsatisfying-consensus-
reached-plus-loans/.
---------------------------------------------------------------------------
    Streamlining existing aid into one grant and one loan program would 
help students who are already navigating the system, but it would not 
reach students who lack awareness of their eligibility for Federal aid. 
Simplifying the Free Application for Federal Student Aid (FAFSA) is a 
modest first step, but a more ambitious option is to target aid based 
on information the Federal Government already collects rather than 
through a separate form.
    Eligibility for Pell grants could be determined automatically using 
tax records. For example, families could learn about Pell eligibility 
when their children are in elementary or middle school, perhaps through 
an ``account'' that would increase in value each year the family's 
economic circumstances made them eligible. This notification could be 
sent to all families who claim one or more children on their Federal 
income tax returns. \16\
---------------------------------------------------------------------------
    \16\  Alternative means would be needed to identify eligible 
children whose parents do not file Federal tax returns. Congress would 
also need to decide whether to use this determination to calculate a 
lifetime Pell award, or whether Pell should continue to be available to 
low-income adults who were not economically disadvantaged as children.
---------------------------------------------------------------------------
    Providing aid to families based on average income over a long 
period would preserve needs-based targeting, and it would arguably be 
fairer than considering a single year's income. It would also allow for 
communicating eligibility directly, early, and clearly, without the 
need for an onerous application. Research indicates that lowering these 
kinds of barriers can increase the rates at which children from low-
income families enroll in college. \17\
---------------------------------------------------------------------------
    \17\  Eric P. Bettinger, Bridget Terry Long, Philip Oreopoulos, and 
Lisa Sanbonmatsu, ``The Role of Application Assistance and Information 
in College Decisions: Results from the H&R Block FAFSA Experiment,'' 
Quarterly Journal of Economics 127, no. 3 (2012): 1205--42, https://
academic.oup.com/qje/article-abstract/127/3/1205/1921970.
---------------------------------------------------------------------------
    An aid application would not be needed to administer a single 
Federal loan program that provided credit on the same terms to all 
undergraduate students. Encouraging colleges to offer Federal loans to 
all their students could reduce the likelihood that students borrow too 
little. A recent study found that nudging community college students to 
borrow--in this case, by including nonbinding loan offers in financial 
aid award letters--increased both the amounts they borrowed and their 
academic success rates. \18\
---------------------------------------------------------------------------
    \18\  Benjamin M. Marx and Lesley J. Turner, ``Student Loan Nudges: 
Experimental Evidence on Borrowing and Educational Attainment,'' 
Working Paper 24060 (Cambridge, MA: NBER, 2017), http://www.nber.org/
papers/w24060.
---------------------------------------------------------------------------
    Ending the Repayment Crisis
    Streamlining income-driven repayment into a single plan would be a 
useful step forward from current policy, which provides borrowers with 
several options including the original income-based repayment (IBR), a 
newer version of IBR, pay as you earn (PAYE), and revised pay as you 
earn (REPAYE). When a borrower faces financial hardship, it will be 
easier to pick a single income-based option than decide among several.
    But simply reducing the number of plans is unlikely to 
significantly stem the rising tide of defaults. A borrower would still 
have to know that income-driven repayment is an option and take 
proactive steps to enroll and remain enrolled. And moving to a single 
plan is unlikely to address concerns about the fiscal sustainability of 
current policy. \19\
---------------------------------------------------------------------------
    \19\  See, for example, Jason Delisle, The Coming Public Service 
Loan Forgiveness Bonanza (Washington, DC: Brookings Institution, 2016).
---------------------------------------------------------------------------
    Making income-driven repayment automatic would do much more to 
reduce student loan defaults. Borrowers could be placed into such a 
plan after leaving college, using their prior-year income to calculate 
payments (which would change each year). Payments would generally start 
out low and increase with the borrower's income. Although this type of 
plan would adjust payments annually, it still would have limitations. 
For example, it would not be responsive to short-term changes such as a 
job loss. And borrowers might still fail to make payments, even 
affordable ones.
    The boldest proposals would have all borrowers make income-driven 
loan payments through the tax-withholding system (while retaining the 
option to pay them off more quickly). For example, under the Dynamic 
Repayment Act proposed by Senators Warner and Rubio, employers would 
collect payments and remit them to the Federal Government in the same 
way that they withhold income taxes. \20\
---------------------------------------------------------------------------
    \20\  S. 799, 115th Cong., https://www.Congress.gov/bill/115th-
congress/senate--bill/799'q= percent7B percent22search percent22 
percent3A percent5B percent22Dynamic+Repayment+Act percent22 percent5D 
percent7D&r=1
---------------------------------------------------------------------------
    In an automatic system, it would be difficult for most borrowers to 
default on their loans in the same way that it is difficult to underpay 
payroll taxes. \21\ This is the approach taken by several countries, 
including England and Australia, and it is also used in the U.S. in the 
form of ``wage garnishment'' for severely delinquent loans. \22\
---------------------------------------------------------------------------
    \21\  Nonwage employees (including ``gig'' workers) could be a 
subject to a system modeled on the IRS's estimated tax system. All 
workers would be subject to an annual reconciliation of earnings and 
debt payments. For a detailed proposal along these lines, see Sandy 
Baum and Matthew Chingos, ``Reforming Federal Student Loan Repayment: A 
Single, Automatic, Income-Driven System'' (Washington, DC: Urban 
Institute, 2017), http://urbn.is/2D6iY09.
    \22\  ``EPI's DC Conference, `Restructuring Student Loans: Lessons 
from Abroad,' '' Gerald R. Ford School of Public Policy, University of 
Michigan, June 14, 2016, http://fordschool.umich.edu/news/2016/epis-dc-
conference-restructuring--student-loans-lessons-abroad
---------------------------------------------------------------------------
    A significant downside of current income-driven plans is that 
borrowers pay the same percentage of income, regardless of whether they 
borrowed $10,000 for an undergraduate degree or $100,000 for a 
professional degree. \23\ Combined with loan forgiveness options after 
10--25 years, this means that a borrower can take on more debt without 
necessarily paying back any more. \24\ This could lead to price-
insensitivity among students, further driving up the prices that 
institutions (especially graduate programs) can charge and the costs to 
taxpayers.
---------------------------------------------------------------------------
    \23\  Under REPAYE, borrowers pay for up to an additional 5 years 
if they borrowed to attend graduate school (seehttps://
studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven), but 
the percentage of income paid each month is the same.
    \24\  See Jason Deslise and Alexander Holt, Zero Marginal Cost 
(Washington, DC: New America Foundation, 2014), https://
www.newamerica.org/education-policy/policy-papers/zero-marginal-cost/; 
and Matthew M. Chingos, ``Jeb Bush's Student Loan Plan Should Outlive 
His Campaign'' (Washington, DC: Brookings Institution, 2016),.
---------------------------------------------------------------------------
    This problem can be solved by tying the amount borrowed to the 
percentage of income paid. \25\ For example, borrowers might pay 1 
percent of their income for each $10,000 that they borrow. Under such a 
system, the undergraduate borrower with $10,000 in debt would pay 1 
percent of income, whereas the graduate degree holder with $100,000 
would pay 10 percent. Payments would continue until the loan is paid 
off (with interest), or Congress could specify a maximum period after 
which any remaining balance is forgiven (which could also be linked to 
the amount borrowed).
---------------------------------------------------------------------------
    \25\  Alternative solutions include loan limits (especially for 
graduate students), making forgiveness provisions less generous (e.g., 
eliminating Public Service Loan Forgiveness), or tying the length of 
time prior to forgiveness to the amount borrowed.
---------------------------------------------------------------------------
    Even with these changes, two significant drawbacks of income-driven 
repayment would remain. First, an increasing loan balance (i.e., 
negative amortization) could impose psychological harm on borrowers and 
prevent them from taking on other forms of debt such as mortgages. 
Second, taxpayers assume all the risk of nonpayment and reap none of 
the reward when borrowers are economically successful (beyond repayment 
of principal and interest).
    An alternative would be to require borrowers to pay a set 
percentage of their income for a fixed period (which could vary based 
on the amount borrowed), even if it exceeds what the borrower would 
have paid under a traditional loan. \26\ A system along these lines, 
which would be a public-sector analogue of ``income share agreements,'' 
would eliminate the concept of a loan balance, and interest rates would 
no longer be needed.
---------------------------------------------------------------------------
    \26\  Total payments would likely need to be capped (e.g., at some 
multiple of the amount borrowed). Otherwise, the fiscal sustainability 
of the system would be undermined by borrowers with high earnings 
potential turning to the private market for financing.
---------------------------------------------------------------------------
                                 * * *
    A single need-based grant program, combined with an easy-to-
understand loan program that protects borrowers through automatic 
income-driven repayment, will increase the effectiveness of Federal 
support for higher education and reduce the harm that noncompletion and 
loan default disproportionately inflict on disadvantaged individuals.
    Optimal design of Federal grant and loan programs requires 
considering how they interact with each other and with other components 
of the HEA, such as the rules that govern institutional eligibility to 
award Federal grants and loans. How to protect students and taxpayers 
from low-value programs is beyond the scope of this hearing, but it is 
critical to a well-designed Federal aid system.
    The reauthorization of the HEA provides an important opportunity 
for Congress to streamline and strengthen the Federal aid programs that 
are critical to college access and completion in the United States. I 
hope my testimony will contribute to that important effort, and would 
be happy to answer any questions.
                                 ______
                                 
                 [summary statement of matthew chingos]
    Federal student aid programs provide vital assistance to students 
and further national goals of increasing educational attainment and 
economic mobility, especially for students from disadvantaged 
backgrounds. The reauthorization of the Higher Education Act provides 
an opportunity to modernize and reform these programs to better support 
these goals.
                     Student Loan Repayment Crisis
    For most students, debt is a tool that allows them to access 
educational opportunities that pay off in the long run. But the student 
loan system is harming too many students while providing arbitrary 
subsidies to others.

          4.6 million borrowers are in default, a number that 
        has doubled over the past 4 years even as the default rate has 
        fallen.
          Borrowers with relatively small amounts of debt, 
        especially college dropouts, are most likely to default.
          Income-driven repayment plans provide a safety net 
        for struggling borrowers but have failed to sufficiently 
        mitigate defaults.
                          One Grant, One Loan
    Federal aid programs for undergraduates should be streamlined into 
a single grant program and a single loan program.

          Federal subsidies to college students should be 
        delivered through need-based grants to the greatest extent 
        possible, as grants reduce the prices students pay at 
        enrollment and can be targeted to students who most need 
        assistance.
          Subsidies currently embedded in the loan programs, 
        such as the in-school interest subsidy and Public Service Loan 
        Forgiveness, should be repurposed into need-based grants.
          Eligibility for grants could be determined through a 
        simplified form or existing government records, enabling early 
        communication with students and families.
                      Income-Driven Loan Repayment
    Moving to a single income-driven repayment plan is a step in the 
right direction, but it is unlikely to stem the rising tide of defaults 
if borrowers must proactively enroll every year.

          Participation in income-driven repayment should be 
        automatic, with payments made through the tax withholding 
        system (as is done in England and Australia).
          The percentage of income paid or number of years 
        prior to forgiveness should be tied to the amount borrowed, to 
        ensure fairness to borrowers and reduce unintended consequences 
        such as tuition inflation.
          The loan structure could be maintained, or Congress 
        could move toward a system where borrowers pay for a set period 
        rather than a set dollar amount, eliminating the need for a 
        loan balance and interest rate.
                                 ______
                                 
    The Chairman. Thank you, Dr. Chingos.
    Dr. Dynarski, welcome.

   STATEMENT OF SUSAN DYNARSKI, PROFESSOR OF PUBLIC POLICY, 
  EDUCATION AND ECONOMICS, UNIVERSITY OF MICHIGAN, ANN ARBOR, 
                            MICHIGAN

    Dr. Dynarski. Chairman Alexander, Ranking Member Murray, 
Members of the Committee, thanks for the opportunity to testify 
today.
    First thing I want to say is that I am a first-generation 
college grad. My dad was a high school dropout. Expanding 
opportunity for low-income students motivates my work and 
everything I say today. So that is what underpins all my 
recommendations.
    I am going to be focusing on what we can learn from other 
countries in repaying student loans, but I want to first 
express my strong support for simplifying the aid process for 
students. When I say ``for students,'' I mean where they 
actually meet the student aid system is where we need to change 
things if it is going to be more effective in getting more 
students into college.
    So in the U.S., student debt has risen sharply over the 
past few decades, but we should be clear, the typical 
undergraduate debt is not what we see in the headlines. For 
those who don't complete a B.A., half the students who don't 
actually complete a B.A., debt is less than $10,000. For those 
who do complete a B.A., it is about $30,000, and only 15 
percent of those who complete a B.A. actually end up with more 
than $30,000. Just 2 percent of undergrads end up borrowing 
more than $50,000.
    Now borrowing for college is common around the world. In 
Sweden, where they don't even have any tuition charged at all, 
people still borrow to pay their living expenses; about $20,000 
for their university education. In Australia, it is about a 
22,000. In England, about 70,000 for the typical university 
graduate. So what is exceptional about the U.S. is not the 
borrowing levels, but the default rates.
    Other countries--in other countries, loans do not send 
millions of borrowers into financial distress. In the U.S., 
loan distress is concentrated among those who borrow just a few 
thousand dollars to attend a for-profit or a community college. 
It is these smaller loans that go into default, not the larger 
ones. When fees and interest and penalties get piled onto small 
balances, they can balloon into much larger debt and then end 
up in default.
    Default is very costly. It does enormous damage to 
borrowers' credit ratings. It leads to higher interest rates on 
credit cards, on cars. Employers regularly check credit reports 
of their applicants, and so do landlords. So defaulting on a 
loan is devastating to a person's financial life. We need to 
stop student debt from ruining people's lives.
    So I am going to tell you what other countries do to make 
their debt work. First, they allow borrowers to spread their 
payments over more years. In the U.S., the standard repayment 
period is 10 years; Sweden 25, Germany 20, England 30, 
Australia, there is no time limit at all. I know of no other 
country that has a repayment period as short as ours.
    But more importantly, in Australia and in England, loan 
payments change with earnings. Payments are deducted from 
paychecks, rising and falling along with pay. This is like the 
system used in the U.S. to collect Social Security 
contributions and other payroll taxes.
    In England, there are no loan payments at income below 
30,000, and then they are 9 percent of income. So it works out 
that if your annual income is about 50,000, your payments are 
about 150 per month. In Australia, the loan payment is 4 
percent of all income, works out about the same. You don't pay 
until your earnings hit $46,000 and then around $150 a month, 
again.
    In both countries, the key is that loan payments change 
automatically with paychecks, just like our payroll taxes and 
income taxes do. If pay drops, we pay less in payroll taxes 
automatically. In fact, we are pretty annoyed if our hours were 
cut, but our payroll taxes stayed the same.
    In the income-based plans in the U.S., payments do not 
adjust automatically. Instead, they are based on the previous 
year's income. If a borrower needs to adjust her payment, she 
has got to fill out an application. The CFPB has shown that 
this is often a bumpy process that can take months.
    Borrowers cannot apply by themselves. Their loan servicers 
have to move the application along. Meanwhile, the student loan 
bills keep coming, no matter how small the paycheck is, and 
millions of borrowers end up in default.
    Now some worry that payroll withholding puts student loans 
above other expenses. Why should a student loan get priority 
over food and rent? But this is exactly what payroll 
withholding prevents. In Australia and England, when earnings 
drop, loan payments disappear immediately. So borrowers can 
devote those shrunken paychecks to essential needs. This 
effectively acts as social insurance against shocks to wages 
and hours.
    Now we actually have a system of automatic loan payments 
right now run by the Federal Government, but it is brutal. If a 
borrower goes into default, the Department of Education can 
collect payments via the Treasury Offset Program. Last year, 
this program seized $3 billion in Federal payments, including 
tax refunds like the earned income tax credit and Social 
Security payments to deceased, disabled, and retired people and 
their dependents.
    Through Social Security, 15 percent of the monthly benefit 
gets lopped off to pay a loan in default. The GAO finds 
garnishments are pushing Social Security recipients below the 
poverty line. We are already doing automatic withholding of 
loan payments, but in a way that hurts the most vulnerable 
people.
    There are many models for funding college, in conclusion. 
Some advocate for free tuition, others for a system of targeted 
need-based aid. No matter what, loans are going to be part of 
our system, whether they are large or they are small. Even in 
tuition-free Sweden, students borrow. We, therefore, need to 
make loans and loan repayment work. We need to overhaul a 
punishing system that turns manageable debt into a financial 
disaster for millions of student borrowers.
    Thank you, and I look forward to your questions.
    [The prepared statement of Dr. Dynarski follows:]
                  prepared statement of susan dynarski
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee, thank you for the opportunity to testify today.
              U.S. Student Loans in International Context
    Americans owe $1.3 trillion in student loans. Nearly five million 
borrowers are in default, and millions more are behind on their 
payments.

    Borrowing for college is common across the globe.

          Sweden: While tuition is zero, students typically 
        borrow $20,000 to pay living expenses
          Australia: Students borrow about $22,000
          England: Students borrow about $70,000

    In the United States, typical undergraduate debt is less than 
$10,000 for those who don't complete a 4-year degree and about $30,000 
for those who do.
    What's exceptional about the United States is therefore not student 
borrowing but a rigid, archaic repayment system that unnecessarily 
plunges millions into financial distress.
    Millions of U.S. borrowers with small loans--often less than 
$5,000--are ending up in default. In fact, it is the smallest loans 
that are most likely to go into default.
                        The High Cost of Default
    Default is costly to both government and citizens. It undermines 
the foundation of our system for funding college.

          Default does enormous damage to borrowers' credit 
        ratings.
          Defaulters face higher interest rates on cars and 
        credit cards.
          Employers regularly check credit reports, so those in 
        default miss out on job opportunities.
          Landlords also check credit reports, so borrowers in 
        default have a harder time finding housing.

    It doesn't need to be this way. Students in England borrow far more 
than ours do, but they have a simple, flexible repayment system that 
keeps borrowers current on their loans. The same is true of Australia.
    What do other countries do that makes their systems work better 
than ours?
                          Length of Repayment
    In the United States, the typically expected repayment period is 10 
years.

          In Sweden payments are spread out over 25 years
          In Germany, students pay their loans over 20 years
          In England, students pay their loans over 30 years
          In Australia, there is no time limit, with students 
        taking as long as they need to pay

    A longer repayment horizon makes sense. A core principle of finance 
is that the life of debt should align with the life of the asset. We 
pay for cars over 5 years and homes over 30 years because homes last a 
lot longer than cars. An education pays off over a lifetime, so student 
loans should be paid off over a long horizon.
                         Income-Based Repayment
    In Australia and England, loan payments are set as a percentage of 
earnings. This is analogous to the process used in the U.S. to collect 
Social Security contributions. Payments are deducted from paychecks, 
rising and falling along with pay.

          In England, loan payments are 9 percent of income 
        above $30,000.
             A person with an income of $50,000 would therefore 
        pay $1,800 (9 percent of $20,000).
          In Australia, there are no loan payments while a 
        person's income is below $46,000. Once that threshold is 
        crossed, the loan payment is 4 percent of all income.
             A person with an income of $50,000 would therefore 
        pay $2,000 (4 percent of $50,000).
          Automatic Adjustments to Payments If Income Changes
    In England and Australia, the loan payment automatically changes if 
pay changes. These payments are set on a dynamic basis, with the rate 
applied according to the annualized value of a person's given weekly or 
monthly paycheck.
    This is exactly as our payroll taxes and income taxes work. 
Payments are deducted directly from our paychecks, as a percentage of 
the pay period's earnings.
    Payroll withholding is the only way to provide an immediate link 
between fluctuations in earnings and loan payments. Any other system 
delays the protections that low-income borrowers desperately need.
    Automatic, Income-Based Repayment Is Effective Social Insurance
    Some worry that payroll withholding gives student loans primacy 
over other expenses. Why should a student loan get paid before more 
basic needs such as food and rent?
    No one facing economic hardship should have to choose between 
paying student debt and paying for basic necessities.
    Prioritizing basic needs is exactly what the Australian and English 
systems do. When earnings drop, loan payments drop immediately, 
allowing borrowers to devote their shrunken paychecks to essential 
needs. Borrowers don't have to fill out an application to have payments 
adjusted, or even make a phone call.
         Adjustment is Not Automatic in U.S. If Income Changes
    In the income-based plans in the United States, payments do not 
adjust automatically. Instead, payments are based on the previous 
year's income and are constant for a year.

          In the U.S., if a borrower's earnings fluctuate 
        during the year and she wants to adjust her payment, she must 
        fill out new paperwork. That can take months to process.

    After a year, a borrower is ejected from the income-based plan 
unless she completes a re-application.

          In the U.S., even staying in an income-based 
        repayment requires an annual, 12-page application. Many who 
        successfully enter an income-based plan find themselves kicked 
        out the next year, if they (or their loan servicers) don't 
        complete the required paperwork on time.

    In the United States, student loan bills keep coming, no matter how 
small the paycheck. It's up to the borrower to apply for a reprieve if 
their financial situation worsens. Getting on an income-based repayment 
plan depends on getting a loan servicer to complete the complicated 
paperwork. As shown by the Consumer Financial Protection Bureau, this 
is often a bumpy process that can take months. In the meantime, the 
bills keep coming--and millions of borrowers end up in default.
    This is no way to protect borrowers--especially young, low-income 
workers--against shocks to their earnings.
    Repayment Can End Faster With Automatic, Income-Based Repayment
    While automatic, income-based repayment protects low-income 
borrowers, it also speeds repayment by high earners.

          The typical Australian borrower discharges student 
        debt within eight to 12 years.
          Those with very high earnings (for example, lawyers) 
        finish in as few as 5 years.

    This is because payments rise automatically when earnings do. As a 
result, high earners pay down their debt more rapidly than they would 
in a system of flat repayments.
  U.S. Government Garnishes Benefits to Low-Income People for Student 
                                 Loans
    We have a system of automatic payroll deduction for student loans 
already, and it's brutal.
    If a borrower goes into default, the Department of Education can 
direct Treasury to collect payments via the Treasury Offset Program. 
This program seizes Federal payments to student borrowers who are in 
default.
    In 2017, $2.8 billion in payments went to the Department of 
Education from this program. These payments were seized from:

          Tax refunds, including the Earned Income Tax Credit
          Social Security payments to retired and disabled 
        workers
          Social Security payments to the dependents of 
        retired, disabled, and deceased workers
          Black Lung benefits

    These garnishments are far more punitive than the income-based 
withholding proposed in this testimony. The garnishment rate for Social 
Security beneficiaries in default on student loans is 15 percent--far 
higher than the rate on any proposed income-based repayment program.
    The Government Accountability Office has found that Social Security 
beneficiaries are being pushed below the Federal poverty line by these 
garnishments. While beneficiaries can appeal to protect their benefits, 
these appeals must be repeated annually.
             Make a Loan Repayment Work for Borrowers . . .
    The loan repayment program must be designed with borrowers in mind. 
Its goal should be to recoup the government's investment while causing 
as little financial distress as possible.
    Calibrating the elements of the loan program requires care and 
attention. The critical elements of an income-based repayment program 
include:

          Threshold above which payments begin
          Percentage of income deducted for payments
          Interest rate
          Borrowing limits
          Maximum length of repayment
          Conditions for early repayment

    These parameters can be set so that a loan program pays for itself. 
As we are putting such a program into place, the focus should be on 
getting these parameters right so that the system is sustainable for 
both borrowers and the loan program.
        . . . And Only Then Turn to Accountability for Colleges
    In a properly functioning income-based repayment program, there are 
no defaults. While we now use cohort default rates to hold colleges 
accountable for their performance, we should not fear the loss of this 
metric. To state the obvious, borrowers should not suffer the financial 
devastation of default so that we can hold schools accountable.
    An effective, income-based program will naturally generate 
administrative data that link earnings and borrowing at the individual 
level. These data will allow the creation of detailed, accurate 
measures of repayment burdens by school, cohort, and demographic 
characteristics. These measures will allow for fine-tuning of the 
parameters of the loan repayment program discussed above.
    These data can also be used in an accountability system to reward 
and punish schools, since they can be calculated by college and sector. 
These repayment-burden data are improvement over cohort default rates, 
since they arrive much faster and they are less easily gamed by 
schools.
                       What About Very High Debt?
    An automatic, income-based loan repayment program will work for the 
98 percent of undergraduates who borrow a manageable amount. For the 
other 2 percent, we need stronger consumer protection:

          Private student loans should not survive bankruptcy
          Loans that need a credit check should not be marketed 
        as student loans
          Students should exhaust Federal student loans before 
        being allowed to take out any private loans
                               Conclusion
    What's exceptional about the United States is not how much we 
borrow for college. What's exceptional is an antiquated, rigid 
repayment system that turns manageable debt into a financial disaster 
for millions.
    The repayment system in the United States was built when students 
borrowed little to nothing. Other countries have overhauled their loan 
systems to reflect changing times. It is time for the United States to 
do the same.
                                 ______
                                 
    The Chairman. Thank you, Dr. Dynarski.
    Well, thanks to all of you. We will now begin a 5-minute 
round of questions, and we will start with Senator Young.
    Senator Young. Dr. Dynarski, thank you for your testimony. 
I have seen countless Hoosiers in my travels and visited with 
them, and student debt has, indeed, ruined their lives.
    In the U.S., as I understand it, there are roughly 44 
million borrowers with loans totaling $1.4 trillion. In order 
for a student to be considered in default on their student 
loans, the Department of Education tells us that a student 
mustn't have made a payment in 270 days. The majority of 
students who default on their loans have very little debt. But 
ignoring student loan debt can have real-world consequences, as 
you know, both individually for the student and for the broader 
economy.
    Students who default on their Federal loans will face 
difficulties buying a house, buying a car, renting an 
apartment, and receiving a tax return. Furthermore, students 
who default won't be eligible for other Federal financial aid 
opportunities, which may prevent them from enrolling in an 
education program in the future.
    So I am going to ask you a two-part question following your 
well-received recommendations. In your opinion, Doctor, is 
there adequate information available for at-risk students to 
prevent defaults, and secondarily, what role does the Federal 
Government play in ensuring that students are fully aware of 
the consequences of defaulting on their student loans?
    Dr. Dynarski. I will echo the earlier testimony that often 
info about borrowing is unclear in the award letters, and 
information about how to avoid default is unclear and 
complicated in the repayment process. There are two ways to 
deal with the very complicated system. You can try to push out 
lots of information that explains to people this very 
complicated system. You can simplify the system so that it 
doesn't need so much explaining.
    That is, in part, what I am advocating for is that you 
might not know or I don't know the insides and outs of how the 
payroll tax works, but somehow it smoothly works on a monthly 
basis that the right amount comes out of my paycheck. I don't 
have to engage in the complicated paperwork. So I think 
streamlining things on the Government's end is the best way to 
get to fixing things for student borrowers.
    Senator Young. Is there research that exists that supports 
this claim, that is, streamlining and simplifying the process 
will alleviate the number of students who end up defaulting?
    Dr. Dynarski. We have evidence that when people are moved 
into income-driven repayment, perhaps because they ended up 
with the right call agent who actually was good at making this 
happen, that it reduces defaults, that it increases 
homeownership. So there is excellent research by a Princeton 
economist that looked into this, and indeed, it improves 
people's financial lives.
    Senator Young. Okay. I may follow-up about that evidence. 
For borrowers who have defaulted, Doctor, what assistance 
should be provided to make sure their accounts are healthy 
again?
    Dr. Dynarski. Moving people automatically into an income-
based repayment program, I think, would be the best bet and 
preventing those defaults up front. So one option is that as 
soon as somebody falls behind, instead of waiting for the 
servicer to provide an application for income-driven repayment, 
that they are automatically moved into the program. And ditto 
for somebody who has been in default.
    Senator Young. Thank you.
    Doctor Chingos, while our Federal student loan programs 
have become increasingly implicated and convoluted and 
difficult to navigate, innovative financing options for 
students are crowded out. I have spoken many times at this 
Committee and other forums to highlight how income share 
agreements, which you mentioned, are an emerging tool for 
students to pay for college.
    I first began working on this issue in the U.S. House of 
Representatives, and since that time, Purdue University, 
located in my home State of Indiana, has developed the first 
large-scale income share agreement called Back a Boiler.
    In October of last year, I visited with one student 
benefiting from this program. His name is Andrew Hoyler. Andrew 
was worried about how much monthly income he was going to have 
to contribute to student loan payments. As an out-of-state 
student, Andrew sought out of Purdue because of its world-class 
aviation program. But by participating in this program, it has 
allowed him to budget for the future and create peace of mind.
    I have introduced legislative with Senator Rubio that would 
provide a regulatory framework for so-called ISAs and instill 
consumer protections for students. And so, Doctor, I ask you, 
can you speak to the effects of a complicated student loan 
system and how that can potentially stifle other innovative 
financing mechanisms like ISAs?
    Dr. Chingos. I think part of what makes the student loans 
complicated is we advertise them as loans, but then now we are 
all saying we should get people into income-driven repayment on 
the other end. So up front, people think they are taking a 
loan, but we really want them to pay it as a percentage of 
income.
    So I talked about sort of a public sector analogue of an 
ISA, but I think in the private sector, ISAs are certainly 
worth experimenting with, especially as an alternative to 
private loans. I think that is where the case is strongest. We 
know that the private loan market has not served students and 
borrowers well. I think ISAs could be a promising alternative 
if the right regulatory framework and consumer protections that 
you talked about are in place.
    Senator Young. Mr. Chairman, thank you.
    The Chairman. Thank you, Senator Young.
    Senator Murray, excuse me.
    Senator Murray. Thank you. Again, thank you to all of you 
for your testimony and for being here today.
    Dr. Lowery-Hart, let me start with you. Again, thank you 
for your testimony.
    You touched on how students struggle to figure out how they 
are going to pay for college and their basic needs like food, 
and childcare, and transportation, healthcare, housing. I was 
glad you mentioned how student loans are one way that students 
meet those needs when their grants so often don't cover the 
cost of college and like most working families, they can't pay 
for those expenses out of pocket.
    Now, some have proposed making students pay more interest 
on their loans or reducing the sources of grant aid. Can you 
talk a little about how those would impact your students?
    Dr. Lowery-Hart. So if you were to talk to Maria, she 
doesn't understand any of the policy implications. She just 
knows what she is trying to do on a daily basis, which is 
change the economic outlook up for herself and her family.
    When I first came to Amarillo College, I looked at our 
success rates, and I was embarrassed of them. I was preparing, 
as a good academic recovering faculty member myself, to require 
more tutoring, which is important, and more academic 
preparation. I wanted to talk to my students, what was keeping 
them from being successful in the classroom? And what they told 
me changed who I am, personally and professionally. It is 
transportation, childcare, healthcare, legal services, utility 
payments, healthcare. Those were not things that a higher 
education entity was set up to do.
    SEOG helps us serve students in a profound way. Maria can 
be full Pell eligible, can maximize her loans, work two jobs, 
and still on her yearly budget come $2,000 to $3,000 short. So 
any funds that are removed from our ability to ensure that 
Maria can finish what she starts not only damages her, but it 
damages the economic outlook in my community.
    Senator Murray. Okay. Thank you.
    Ms. Darcus, I am extremely concerned that many of the 42 
million Americans with student loan debt are being driven into 
default. The poor practices in student loan servicing are 
failing our borrowers, who are being misled and mistreated, all 
while student loan companies make billions of dollars from 
taxpayers.
    If there was one a simple thing the Department of Education 
should do today to help struggling borrowers, from your 
viewpoint, what would that be?
    Ms. Darcus. The Department of Education has incredible 
responsibility to provide oversight to the contractors it 
hires. Both servicers and debt collection companies should be--
are responsible for student success, and they should be held 
accountable when students do default. Clients like mine, 
borrowers like our low-income clients, unfortunately don't get 
the help that they need to navigate repayment, and we need to 
know that the Department of Education is going to hold their 
agents, their servicers accountable.
    If they are not going to step up enforcement, then I am 
glad we have the Consumer Financial Protection Bureau, the FTC, 
and State Attorneys General who are willing to take up the 
charge. Students need to know that they are going to be able to 
get something out of the investment they made and that the 
companies that are supposed to serve them, if they are not 
serving them--if they are misleading them, if they are lying to 
them, if they are denying them opportunity to repay their 
loans--that those companies aren't going to be in the business 
anymore.
    Senator Murray. So students have somebody at their back at 
the Department of Education holding their feet to the fire?
    Ms. Darcus. Yes.
    Senator Murray. Okay. Dr. Lowery-Hart, I have been very 
concerned to see the new research that I mentioned that shows 
student defaults might be getting worse in the near future, 
with potentially up 4 in 10 borrowers defaulting over the 
course of the repayment. Taking away resources from students, 
including their ability to borrow when funds run short, will 
only make their lives worse. So as we now look at reauthorizing 
HEA and seeking to reduce student debt, what are some of the 
better alternatives than just restricting borrowing?
    Dr. Lowery-Hart. Well, there are several, but I would say, 
given the students that we serve that are now the typical 
student in higher education, one of the most important things 
that we can do is to align with resources that are already 
there. So for some of the resources that are available in our 
communities, with housing and food and other types of aid, 
being a student actually precludes you from accessing those 
resources. If we could align the work that we are doing in 
higher education with----
    Senator Murray. Because being a student, you can't apply 
for some of those other resources?
    Dr. Lowery-Hart. Yes. That is what it means. Or you fall 
down on the priority list for housing, for instance. The 
alignment between Government programs that already exist to 
serve students and exist to serve our communities, if those 
could be aligned and better integrated, more resources would be 
available to our students, which would mean they could complete 
a degree, which is an economic impact that our communities 
desperately need.
    Senator Murray. Okay. Thank you, thank you for in your 
testimony saying that we need your students. I thought that was 
an important point. Thank you.
    The Chairman. Thank you, Senator Murray.
    Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman and Ranking Member 
Murray, for putting together this series of hearings. It is due 
for reform and modernization. Student borrowers do face 
difficult decisions when they are choosing how to pursue a 
higher education, and they have a difficulty by the existence 
of so many choices, particularly in regards to the repayment. 
Simplification is a crucial goal for the reauthorization.
    Then there is the alarming GAO report that shocked me when 
I found that the Department of Education's approach to 
estimating income-driven repayment plan costs and quality 
control didn't ensure reliable budget estimates, with the 
actual costs found by the GAO to be more than double what was 
originally expected. Due to the popularity of these repayment 
plans, improving the Department of Education's estimation 
approach is critical to knowing how much these plans will cost 
taxpayers. We can't make good decisions about what to do with 
those plans unless we have that information.
    Ms. Keane, you mentioned the one-third of the letters that 
you have that had sufficient information in them. Do you have a 
checklist that you can share with us for what is insufficient 
information?
    Ms. Keane. Absolutely. Yes, absolutely. We really believe 
that on every award letter, it is very important that the 
students see cost clearly marked out. To be specific, first 
off, it is what are the net costs? That is, all in, what you 
need to pay to start and finish school. This takes away any 
grant aid that might be applied, any free money that has been 
offered to the student as gift aid for attending.
    Then from there, it is important to note what are direct 
costs to college as well as what are the indirect expenses. 
Indirect expenses are paid to other vendors at different times. 
The direct costs are paid to the school as a bill.
    When we talk to students about this, we call it an 
estimated bill. So we would love to see on every award letter 
both the net costs, the all-in costs you need to start and 
succeed in school, as well as the estimated bill that students 
can expect to get in August so that students like Leon don't 
get caught $17,000 short.
    Senator Enzi. Thank you, if you could provide that 
checklist to me, I would really appreciate it.
    Ms. Keane. Yes. I have a few more terms, so I am happy to 
share that afterwards.
    Senator Enzi. I thought there was probably more to it than 
that.
    Dr. Chingos, you mentioned the Government Accountability 
Office issuing that report in 2017 that kind of shocked us to 
find that $28 billion of loans between 2009 and 2016 are going 
to be in default. And although there could be some disagreement 
on the root of the problem, and complexity has to be a part it, 
but based on your previous research into simplified financial 
models, how significantly would a One Grant, One Loan style 
financial and model impact administration and cost estimation 
at the departmental level? Do you have any estimate?
    Dr. Chingos. Thank you, Senator.
    I agree that carefully and accurately estimating the cost 
of these programs is critically important to ensuring their 
fiscal sustainability. I was also troubled by that GAO report.
    I think where this really matters is on the repayment end. 
You know, grants, you write those checks out, you know what 
those cost today. It is really hard to measure the cost of the 
loan programs because the loans are paid back over--it used to 
be 10 years, and now it is much longer, especially in these 
income-driven plans. So having accurate estimates of what these 
plans are going to cost is really important.
    Senator Enzi. Yesterday, one college told me about a person 
that had just applied that was 30 years old and has already 
collected several degrees but can defer having to make the 
payments and the interest until they quit getting degrees. And 
the person now owes $500,000 and so can't afford to quit going 
to school. That is a problem I hadn't heard of before.
    Ms. Darcus, earlier this Congress, I introduced the 
Transparency in Student Lending Act, which would require the 
disclosure of the annual percentage rate for Federal student 
loans. Currently, this information is available to borrowers 
who get private loans, but not borrowers who get loans from the 
Department of Education. In your opinion, would that disclosure 
provide more useful information to student borrowers, and is 
there any other useful information that could help student 
borrowers?
    Ms. Darcus. At NCLC, we always support improving 
disclosures and ensuring that consumers have the information 
they need about the financial transaction they are entering 
into. They need comprehensive counseling at every stage, from 
when they are trying to decide whether to borrow to when they 
are figuring out how to repay, to when they are struggling to 
repay.
    So in addition to disclosing APR, there is a number of 
other factors and piece of information that we would hope would 
also be provided to students, and disclosures alone won't 
resolve the problem. So we hope that this Congress will go 
further and also ensure that there is real accountability if 
someone else doesn't--like breaks the rules and students have 
trouble repaying.
    Senator Enzi. You would provide me with that list of 
additional things, too, then?
    Ms. Darcus. Yes.
    Senator Enzi. Thank you.
    The Chairman. Thank you, Senator Enzi.
    Senator Bennett.
    Senator Bennet. Thank you, Mr. Chairman. Thank you so much 
for holding this hearing with the Ranking Member. I hear about 
it every single time I go home to Colorado.
    Dr. Lowery-Hart, just a little, slightly off topic. How 
does Maria get childcare?
    Dr. Lowery-Hart. It is difficult, and in most communities 
like mine, there is a shortage of childcare. As a college, we 
are working now to provide childcare for students.
    Senator Bennet. Can you tell us about that a little bit?
    Dr. Lowery-Hart. So we have two childcare options for our 
students. One that we have recently opened, the Hagy Childcare 
Center. It is especially important for students that are going 
in medical fields because they have clinicals that are 8 to 12 
hours long, and so they need childcare at off hours. But it is 
not something that we are financially set up to do.
    We have had to partner with childcare agencies in the 
community. We have had to seek philanthropy. I am still trying 
to find a long-term financial solution for that. What Maria 
ends up doing when she can't access our childcare is someone in 
her apartment is watching several kids while people go to work 
and go to school, which means childcare isn't as professional 
or as safe or as reliable.
    Senator Bennet. It always seemed to me--I used to be a 
superintendent of schools. It always seemed to me that 
community college provides the opportunity to have a building--
it may not be perfectly set up for child--a building, people 
that are learning how to be teachers or childcare providers, 
and that ought to create an opportunity for us to think----
    Dr. Lowery-Hart. Well, and that is what we are--that is 
what we are doing with our childcare center right now, but it 
is scaling it for impact that is the biggest worry.
    Senator Bennet. Yes, thank you.
    I want to ask Dr. Chingos and Dr. Dynarski an unusual 
question, actually, which is what is the best argument against 
automatic income-driven repayment? It sounds to me like a 
pretty elegant solution to a lot of what ails the people that I 
represent. Is it? If you were taking the other side of that 
argument, what would you say?
    Dr. Chingos. So I think the best argument against it is 
that it's going to lead to price inflation. Once we tell 
students, ``Borrow whatever you need to go to college, and you 
will pay it back based on your income later,'' the colleges 
will just say, ``Oh, thank you very much,'' and we will just 
raise our prices. So that is why I talked in my testimony about 
the need to tie the amount that students are borrowing to the 
amount that they pay. So that they pay it when they can afford 
it, but that they still pay in relation to what they borrow. So 
they remain price sensitive and keep the institutions in check.
    Senator Bennet. I would argue that the existing system does 
a pretty good job of incentivizing people to raise their rates. 
But that is something we need to worry about.
    Dr. Dynarski. I would say that starting any new program has 
hiccups. Starting a program of payroll withholding will require 
planning, and it will be challenging. I do think we need to 
have caps on the borrowing for the reasons just described. But 
some way to make sure, if we are using the full force of the 
Government to collect loans, that we are on the other side 
making sure we are regulating carefully the providers, so that 
nobody is being forced to pay for an education they didn't 
actually get.
    Senator Bennet. Just along those lines, Dr. Chingos 
mentioned in his testimony just briefly that as part of 
whatever we do, we need to protect against I think what he 
described as ``low-value institutions.'' I just wonder, with my 
last minute and a half, whether there is anybody on the panel--
maybe I will start with you, Dr. Chingos--could tell us how we 
could better protect people from low-value institutions?
    Dr. Chingos. Well, I think that is more than a minute and a 
half question. But I think one thing that is really important--
--
    Senator Bennet. Unfortunately, it is all I have.
    Dr. Chingos ----is to look at the outcomes of students from 
different----
    Senator Bennet. That is what----
    Dr. Chingos ----colleges, seeing how well do people do in 
the labor market. Now we have to--college isn't just about 
getting a job. It is not just not about earning money, but I 
think people go to a college with an expectation they are not 
going to live a life in poverty afterwards. So if we see 
colleges or programs of study where people go, and they enter 
in poverty and they leave in poverty, well, that is probably 
not a place where we want people spending their own money, and 
it is certainly not a place where we want to be spending 
taxpayer money.
    Senator Bennet. Do you have--do we have the longitudinal 
datasets to be able to understand that now?
    Dr. Chingos. So through the College Scorecard, we have a 
partial version for people who participate in the aid programs, 
but as I am sure you know, there are limitations right now on 
the Government's ability to link data that it already collects. 
That could be used to provide a much more robust data system 
both for consumers and for policymakers.
    Senator Bennet. Is there anybody else? Yes, Ms. Keane?
    Ms. Keane. Yes. I would say that the best way to do it is 
to arm consumers with the information to have choice. Right 
now, students are so overwhelmed getting through--as well as 
counselors and financial aid administrators--getting through a 
complicated FAFSA and verification that they don't have time to 
look at the quality of institutions as they are going through 
that process. That is a big problem.
    I have tried in our work when I was at Mastery Charter 
Schools to include information about the quality of the 
education, and students just are already saturated. They are 
exhausted. It has been so complicated, they can't concentrate.
    Senator Bennet. I am out of time. I appreciate it. Mr. 
Chairman, let me say that I regret for many reasons that we 
have not been able to get our FAFSA bill finished, but now my 
greatest regret is that we are now in the process of having to 
fill one of those forms out.
    [Laughter.]
    The Chairman. Well, if we work really hard and fast in a 
bipartisan way, maybe we can help you and get it done quickly.
    Senator Collins.
    Senator Collins. Thank you Mr. Chairman.
    Dr. Dynarski, this year the authority for the Federal 
Perkins Loan Program expires. I joined a bipartisan group of 
Senators in pressing for an extension of that program in 2015, 
and I have done so again while this Committee continues to 
wrestle with higher education reauthorization proposals.
    Every single campus of the University of Maine participates 
in the Perkins Loan Program. Eighteen Maine educational 
institutions made $8.6 million in Perkins loans to 4,500 
students. So when they hear us discuss One Loan, One Grant, it 
makes them very nervous about whether they will be able to fill 
the gaps in financial aid packages for their students.
    What they liked best about the three forms of campus-based 
aid--Perkins, the Federal Supplemental Educational Opportunity 
Grant, and work-study--is the flexibility to make institution-
specific decisions that meet the needs of their students. There 
is also institutional buy-in because the college or university, 
as you know, has to match a percentage of the funds.
    In your judgment, is there any place for campus-based aid 
like Perkins and work-study programs as we revamp these 
programs?
    Dr. Dynarski. Nobody likes to get rid of any programs once 
they are in place. Everyone wants to hang onto them. The main 
challenge with the campus-based programs is that they make it 
impossible at the Federal level to tell somebody up front what 
aid they are eligible for because they have to instead first go 
to the institutions to get their campus aid packaged.
    I have full faith in the inventiveness of Congress to find 
ways to hold institutions harmless and convert those funds 
perhaps into other forms that would give them the flexibility 
to help students who are in need. So the work-study program, 
for example, is very small at this point, and it is inequitably 
distributed across institutions. So there needs to be some 
revamping of the campus-based programs so that they are 
actually serving the goals that they are supposed to.
    Senator Collins. Well, I have no faith in Congress to come 
up with--that is not really fair, given the track record of the 
Chairman and the Ranking Member of this Committee, which is a 
spectacular one. But having worked at a university before I was 
elected to the Senate, I had a work-study student. It gave me 
the opportunity to encourage her to stay in college when she 
was under a lot of pressure to leave and get to work, get a 
job. I think these programs, in Maine's experience, have been 
absolutely critical in filling gaps and thus allowing students 
to complete their education.
    Ms. Keane, let me switch to an issue that you raised. You 
raised so many excellent--by the way, Senator Casey is one of 
those who worked with me on Perkins Loan Program. You raised so 
many very good program points about the need for more 
transparency so people know what they are getting into. I have 
seen firsthand students becoming discouraged from completing 
their degrees because they start to feel overwhelmed by college 
costs, debt going up, repayment. Sometimes I have heard their 
parents say, ``Why are you accumulating all of this debt when 
you could be working right now and earning money and getting a 
job?'' That is particularly true of the first-generation 
college students.
    So Hudson University in Bangor, Maine, which is where I 
worked prior to my election to the Senate, requires all 
freshman students to enroll in a one-credit student success 
seminar, and it includes financial literacy and other essential 
life skills development. What do you think of efforts like 
that?
    Ms. Keane. I absolutely applaud the institution for doing 
that. I know our Vice President of Knowledge, Holly Morrow, at 
uAspire is often talking with me about the importance of 
financial literacy support for students. It is hard to counsel 
students if they don't know the terms. We need to do better to 
set them up for success.
    Senator Collins. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Collins.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    So I think we should run our student aid programs with two 
goals in mind. First, help more students graduate from good 
schools and with less student loan debt; and second, help 
students get out from underneath their debt burdens faster and 
easier.
    Simplification could help us achieve that goal, but it goes 
the other way, too. I want to build on what Senator Collins was 
asking about and the point she made. If it isn't done right, 
simplification can also increase student debt loans. So I want 
to talk about both sides of the coin.
    Let me start with you, Dr. Dynarski. There are nine student 
loan repayment plans. Do you think that is too many?
    Dr. Dynarski. Yes, it is too many. It is too confusing. It 
is too complicated for borrowers to figure out which program 
they should be enrolled in.
    Senator Warren. Right. So the Federal--under the current 
system, the Federal Government pays private student loan 
companies like Navient, hundreds of millions of dollars a year 
to help borrowers navigate all those complicated repayment 
plans and to pick out the one that would be best for them. So 
in your view, Dr. Dynarski, is that system working?
    Dr. Dynarski. No, it is not. And CFPB, I think, has done a 
good job at showing that it is not working. This is very much 
like what happened during the mortgage crisis where we had a 
goal of getting people's loans restructured so that they 
wouldn't lose their homes. But doing so very much depended on 
the servicers doing the restructuring, and it just didn't 
happen.
    Senator Warren. Right.
    Dr. Dynarski. That is exactly what we are seeing right now 
with the loan companies often shifting people into the programs 
that require the least paperwork rather than the one that might 
be best for the borrower.
    Senator Warren. So the loan companies' incentives are not 
the same as the students' incentives? So let me ask you, Dr. 
Chingos, if the student is in a good income repayment plan--let 
us say they navigated, got to the right place--is it simple for 
that student to stay in the plan until she is able to pay off 
her loan or the loan is forgiven?
    Dr. Chingos. It is not simple. You have to recertify every 
year, submit documentation every year about your income from 
the prior year, and I think the data show us between 2013 and 
2014, about half the people failed to do that. And if you fail 
to do it, you get kicked automatically back into the 10-year 
plan when you probably can't afford the payments.
    Senator Warren. Okay. So too many repayment plans, too much 
money for private student loan servicers who don't help 
students navigate these plans, and too hard for people to stay 
in the best repayment plans. Got it.
    Ms. Darcus, that does not make sense to me. Does this sound 
to you like a place where simplification is needed?
    Ms. Darcus. I agree that simplification could help, but 
only if we preserve the programs or enhance the programs that 
deliver the maximum benefit for borrowers. That includes 
preserving forgiveness. There needs to be a light at the end of 
the tunnel.
    Senator Warren. I think that getting rid of these plans 
makes sense, but it can go either way on this. If you get rid 
of the plans with the best terms for students, then will the 
students actually be worse off?
    Ms. Darcus. Yes.
    Senator Warren. Yes, that is what is going to happen here. 
So thank you.
    You know, this is also true when it comes to simplifying 
the number of loans that we offer. Right now, for example, low-
income students can get interest waived on their loans while 
they are still in school. That is a pretty good deal for those 
students. But some Senators have proposed scrapping that 
program as part of simplification. Ms. Darcus, would students 
be better off or worse off if this program were ended?
    Ms. Darcus. Absolutely worse off. That is a program 
designed to benefit the lowest-income borrowers, and they would 
just graduate with more debt. We already know what that--the 
world of hurt that causes.
    Senator Warren. Good, anyone else want to weigh in on this? 
All right. We got it. Go ahead, Mr. Chingos.
    Dr. Chingos. Sure.
    Senator Warren. Dr. Chingos.
    Dr. Chingos. I mean, the argument I was making in my 
testimony is that a benefit people get down the road for low-
income students is best done up front. So I think low-income 
students would be better off if we gave them a bigger Pell 
Grant, even if they paid a little more interest down the road.
    Senator Warren. Okay. So I understand the point that there 
are a lot of different ways to design this. But what I think is 
most important here is that we not use simplification as a ploy 
to leave students with more debt. The way to simplify the 
student aid system is to make it cheaper for students, to make 
it easier to find a high-quality school, and to make the path 
out of debt smoother.
    It seems to me that should be our principal focus here, Mr. 
Chairman. Thank you.
    The Chairman. Thank you, Senator Warren.
    Senator Cassidy.
    Senator Cassidy. Well, I am glad Senator Warren didn't 
steal my thunder. I wanted her to because it is a thunder that 
we are both ``by Jove-ing,'' if you will. Which is to say that 
we have a bill that would increase transparency; that would ask 
that a student who is enrolling in a university would have a 
sense of how much she or he is going to earn if they complete; 
what is the likelihood of someone in their situation completing 
the course; how much debt would they end up with, et cetera.
    It has been endorsed by multiple organizations, including 
uAspire, and is with Hatch, Whitehouse, Cassidy and Warren. So 
anyway, Senator Warren--and it really speaks to a lot of what 
you spoke of.
    By the way, almost all of you, your testimony, I agreed 
with. We need more transparency. We need more simplicity, et 
cetera. So I am here not to challenge, but just kind of push 
the envelope a little bit of our understanding of what you are 
saying.
    Ms. Keane, it sounds like since a third of the universities 
have a letter like this and a third like that and a third like 
this, and most of them entirely inadequate, you are suggesting 
that there be a standardized letter that would go out. That 
would perhaps be prescribed by the Department of Education, but 
ideally, universities would agree to it. Kind of a Good 
Housekeeping, if you will, Seal of Approval of ``This is what 
you can expect.'' Fair statement?
    Ms. Keane. Yes. I want to note that we are very clearly 
stating terms with federally defined definitions, as well as 
format practices that show the important equations that need to 
be clear to students are what is a must. In terms of whether it 
is an entire exact form like a HUD-1 Settlement Sheet, I want 
to respect that institutions really want to communicate their 
school and important things that are very specific to their 
context to students as well. So I don't know if it has be an 
absolute requirement----
    Senator Cassidy. But your broad categories, which is 
transportation, books--my daughter just bought a book for 200 
bucks. I'm sitting there thinking, ``200 bucks, give me a 
break.'' So anyway, that said, it would be nice if you had, 
okay, tuition, fees, if you are in science, this is what your 
books would count; if you are in art--you see what I am saying?
    Ms. Keane. Yes, absolutely.
    Senator Cassidy. That seems like it would give itself to, 
one, you don't have to be incredibly detailed, but it still 
says--it seems it would give itself to standardization.
    Ms. Keane. Yes, standardization, absolutely. In terms of 
what needs to be on cost of attendance, including both direct 
cost to the college and then indirect expenses. In terms of the 
terms of level of detail of how deep that needs to go, I really 
recommend consumer group testing and talk with students and 
multiple stakeholders to understand what is going to work best 
for the student.
    Senator Cassidy. Sounds like a great project for uAspire, 
who will then bring the data back to us to attempt to 
implement.
    Ms. Keane. Senator Cassidy, I really appreciate that. And 
we are about to embark on some focus groups with students due 
to a project that we are doing with New America, as well as 
some work we are doing with Colorado State University, who is 
choosing to make their financial aid notification programs more 
student friendly in how they communicate. So some folks do this 
electively as well.
    Senator Cassidy. Mr. Chingos, you suggested a belief in the 
so-called ``Bennett Effect,'' that the more money that is 
available, the more tuition will rise. I always compare it to 
Tantalus. That is a Greek myth in which that which the 
gentleman wants is always just beyond his reach--from which we 
get the word ``tantalize.'' Do you except that?
    Dr. Chingos. I think the research on the Bennett Effect is 
mixed. But I think it is mechanically true if you make it 
easier for people to pay for something, they are going to be 
able to pay more for it. So it is something we ought to be 
worried about, and I think it makes the case for targeting 
these programs to the greatest extent possible. When we have 
universal benefit to lots of people, I think that creates more 
risk of a Bennett Effect than programs that are targeted to 
achieve particular purposes.
    Senator Cassidy. Got it. And now on the other hand, Ms. 
Dynarski points out very provocatively that really it is not 
the guy that graduates from med school and then neurosurgery 
with $200,000 in debt who is defaulting. It is actually 
somebody who owes 5K and can't make that last payment.
    Now a couple of things about that Ms.--Dr. Dynarski, it 
almost seems, I bet you that there is a characteristic 
demographic. I think--Ms. Darcus, I smile, a Philadelphia 
lawyer, I am sure you have heard that before. But you said it 
is people of color, people of first generation. You can kind 
of, okay, these are the folks who really need counseling. To 
what degree could we take this complexity and use big data just 
to focus it down and say you are going to be at high risk of 
not passing?
    We had, a couple of years ago, a great committee. Georgia 
Southern came here in here. They got like a 200-point thing, 
and they can really guide people through. And sometimes it is a 
$500 loan that allows them to complete. To what extent does all 
this complexity boil down to maybe just knowing which kids we 
need to counsel?
    Dr. Dynarski. Colleges have done a great work with their 
internal data to understand who is at risk of dropping out and 
to steer them toward enhanced mentoring resources, tutoring 
resources, emergency loans. So I think colleges could be 
helping out more.
    Senator Cassidy. You say--I just heard two things. Colleges 
could be helping out and that colleges have done a great job.
    Dr. Dynarski. Some have done a great job using their data. 
All of them could do a great job, and there is a lot more 
progress to be made.
    Senator Cassidy. I will just finish with this quick 
question. If that were done, if all colleges did this great 
job, would we have this panel today?
    Dr. Dynarski. Absolutely. Because incomes, earnings, the 
labor market, it is uncertain. Young people come out, their 
hours are uncertain. Their wages are uncertain. They don't have 
crystal balls, and there is going to be people who fall through 
the net no matter what, and we need to make sure they are 
protected.
    Senator Cassidy. Thank you. I yield back. Thank you.
    The Chairman. Thank you, Senator Cassidy.
    Senator Smith.
    Senator Smith. Thank you, Mr. Chair and Senator Murray.
    This is a very interesting--it has been very, very 
interesting to hear from all you of you. What I am taking out 
of this is that certainly there is lots that we can do around 
simplification. Simplification is a good thing, reduces 
complexity that is a barrier to people that are trying to apply 
for loans and grants. But that also affordability is a driving 
issue, and also there is an accountability problem that a lot 
of you are talking about.
    Ms. Keane, I wanted to just start with you. You have some--
the examples that you have of documents that students and 
families might get explaining, I am saying in quotes, kind of 
what the ``financial packages'' are completely discombobulating 
and hard for anybody to understand. So my question is--and you 
have some also very good suggestions for ways to move toward 
simplification and make that easier for people to understand.
    But my question is usually complexity happens for a reason, 
it doesn't just happen. So what do you think are the underlying 
reasons for all of this complexity, and how can we address 
those so that it doesn't kind of just recreate itself again?
    Ms. Keane. My experience is very much on the receiver end 
as a practitioner and with students, not on the building of 
system side. So it is not exactly my area of expertise as to 
why the complexity exists. That said, I do want to support 
arguments already made by others testifying that simplification 
does not necessarily work for students if it means one thing 
for all. Equity needs to be at the core of how simplification 
occurs to ensure that those who need it most get what they 
need.
    Senator Smith. Yep. Thank you.
    I think Senator Murray started out by talking about how 
this needs to be student focused in the way that we do things. 
I must say as I listen to some of this, it sounds as if some of 
this is more lender focused.
    Maybe, Ms. Darcus, could you comment a little bit on ways 
that we could take--you have some great information in your 
testimony--ways in which we can take this whole process and 
make it more student focused and get that accountability in the 
system that we really need.
    Ms. Darcus. We definitely need a system that serves 
borrowers like my clients who are struggling with debt, deep in 
debt that they can't afford to repay, and they are not getting 
the help they need. So we could start out with improving 
accountability by ensuring that those students have a private 
right of action, so that they can go after the companies that--
that mislead them, the schools that defraud them, if necessary. 
We also need to hold other players accountable, including the 
Department of Education, for their role in ensuring students' 
success in repayment.
    Senator Smith. Great. Thank you.
    Does anybody else want to comment on that?
    Dr. Dynarski.
    Dr. Dynarski. I would agree with student centered. The 
whole point of--the simplification is not an aesthetic. You 
know, it is not that we want things simple because it is 
pretty. We want to make the given dollar that we give to 
students work well, and that is my goal, is that if we are 
going to spend a certain amount of money, do it in a way that 
makes it work for students.
    Senator Smith. Thank you.
    Dr. Lowery-Hart, I was really struck by what--your 
conversation about Amarillo College, and it reminds me of a 
visit that I made to the community and technical college in 
Minnesota, Alexandria Community and Technical College, where 
the typical student there is very similar to the typical 
student at your institution. They have an incredible rate of 
placement. The kids, the students, not kids--they used to be 
kids, they are now adults--that graduate, they have like a 98 
percent placement rate.
    But what happens with those students sometimes is it is 
just, one, they are living so much on the edge. And one little 
thing goes wrong. They lose their apartment or their marriage 
goes through a crisis or their childcare goes away, and their 
entire academic life falls apart when really all they need is 
just--it could be sometimes just a couple of hundred extra 
dollars for a couple of months in order to keep it all 
together.
    Could you just talk a little bit about that and help us 
understand how we might consider those kinds of needs as we 
also try to simplify and make this all work better?
    Dr. Lowery-Hart. Well, in looking at our data in student 
success, I think the misnomer is dropping out or failing out is 
often as a result of poor academic preparation when the data 
that I have collected on my students is exactly as you 
describe. It is the loss of childcare, or their car breaks 
down. It is one--because they are living on the edge 
financially, they need everything to go perfectly in order to 
finish their degree. And as we know, life isn't perfect. So we 
have to have resources that allow us to meet those emergency 
needs when they come up.
    Now for us at Amarillo College, that is a partnership with 
our Amarillo College Foundation and people in the community, 
where if there is a repair that needs to be made on a car, we 
have people at the college that are calling specific dealers 
that can fix the car, or we are cutting a check to that 
student. That is a daily effort on our part----
    Senator Smith. Thank you.
    Dr. Lowery-Hart ----and it can't drown in bureaucracy to 
get there.
    Senator Smith. Thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator Smith.
    Senator Scott.
    Senator Scott. Thank you, Mr. Chairman.
    Before I start with my comments and thoughts with the 
panel, I wanted to welcome to the Committee our new colleagues, 
Senators Tina Smith and Doug Jones. I look forward to working 
with you on this Committee.
    To the folks on the panel, I had an interesting experience 
about 2 weekends ago in Charleston, South Carolina, where a 
young student who works at the gym where I work out is applying 
for colleges. This is an incredibly bright young lady. She is 
third in her class. She is a student government president for 
the student body, and she is absolutely overwhelmed with this 
application process, deciding how much she may need to borrow 
depending on which college she goes to.
    So the entire process, even for the brightest of our 
students and their parents, is so cumbersome and so difficult 
to navigate that, really, I wonder how in the world 58 percent 
of our seniors complete their FAFSA. That number seems low, but 
when I finished my conversation, that number seems kind of 
high. It takes so much effort, so much commitment and 
assistance to get to a place where you are in a position not 
only to apply to college, but to understand and appreciate what 
loans are available, what scholarships are available, and what, 
pray tell, you are going to have to do to repay all of these 
obligations and responsibilities is a very different 
responsibility.
    I think I understand that there are--when you graduate and 
finish, there are more than 30 variations and combinations of 
repayment plans. One of the reasons why in 2015 I sponsored 
legislation to develop best practices by universities around 
financial literacy so that students would have an understanding 
and appreciation for what it means to be the borrower and how 
to understand how to navigate that process when you are 
leaving.
    We need to empower both parents and students well before 
the student reaches the senior year in high school with 
financial aid and workforce information to ensure they can make 
well-informed decisions on their educational and vocational 
careers. That entails getting applicants thinking about the 
cost, the true cost of college, the best education path, and 
their career objectives earlier than we currently are seeing.
    Ms. Keane, how do we inform students and parents earlier 
about the financial aid resources, the career options available 
to them, and the responsibilities that will be incurred through 
taking on the student loan debt?
    Ms. Keane. You are absolutely right. That is an 
overwhelming experience for students and for families early on. 
I believe that it is also important to think about 
communication strategies for once they become borrowers. So--
excuse me. Specifically, entrance and exit loan counseling are 
the only things required right now by the Federal Government, 
and we see that is insufficient and not enough. We really truly 
believe that annual loan counseling for students is critical. 
We do this work with postsecondary students ourselves.
    We have a student, Miranda, that has worked with a uAspire-
trained practitioner in New Mexico, who didn't know that she 
could have options to deal with her loans and so was too scared 
to look. So rather than go into the national student loan data 
base to find out what her loans were, she just stayed away. 
Once she had someone to help her, she realized there were plans 
to help, and she moved very quickly and got re-enrolled in 
school. This needs to happen for more students.
    Senator Scott. Thank you. Anyone else want to dive into the 
topic?
    Dr. Dynarski. I would agree that the complexity is 
challenging for students at both ends. In terms of coming into 
college, we have got evidence that radically simplifying the 
aid process increases enrollment and persistence. So it appears 
this actually matters.
    On the other end, when it comes to paying off loans, people 
who are having a financial meltdown at least temporarily are 
probably those who are least equipped to navigate a bureaucracy 
in order to get the assistance that they need.
    The evidence we see right now, in fact, is that the people 
who are most likely to be enrolled in IDR are those with the 
highest debts and the highest capacity, actually, to pay. So it 
is people who are financially savvy and who can handle the 
process who are currently enrolling in the income-driven 
programs. The fact that we still have a high default rate is 
prima facie evidence that we are not getting at the people who 
really need it the most.
    Senator Scott. Thank you.
    Ms. Darcus.
    Ms. Darcus. I would only add that if as we consider the 
role that automatic withholding might play in the scheme, we 
should also think about the most vulnerable borrowers and the 
extent to which a scheme like that would serve them. If they 
don't have taxable income, if they are working in the gig 
economy, if they have uneven cash-flow, then they might not be 
well served by a system of automatic withholding.
    We have seen that with our clients who experience 
administrative wage garnishment. They already--are already 
subject to that process, and we would be shifting from relying 
on servicers to deliver benefits to borrowers to relying on 
employers to do that. I don't know if small businesses can 
withstand that burden, but that is something that we should 
also keep in mind.
    Senator Scott. Thank you, ma'am.
    Mr. Chingos.
    Dr. Chingos. Just going to add second your concern about 
people understanding what they are getting into on the front 
end. You know, I worked on a study a few years ago using 
Federal data. We knew who had Federal loans, but they were also 
asked, ``Do you have Federal loans? How much do you have?'' 
Most people were way off.
    Twenty-eight percent of people who we know have a Federal 
loan said, ``I don't have a Federal loan.'' Fourteen percent 
said, ``I don't have any loan.'' This is national 
representative data on first-year students. So there is a real 
problem that people don't understand what they are getting 
into.
    Senator Scott. Thank you.
    The Chairman. Thank you, Senator Scott.
    We have a vote at 12:15 p.m. We have several Senators--
several Senators left.
    Senator Baldwin.
    Senator Baldwin. Thank you. I want to thank the Chairman 
and Ranking Member for holding this important hearing on Higher 
Education Act reauthorization.
    I certainly believe that strengthening and improving our 
financial aid system will be critical to making higher 
education more accessible and more affordable for more 
Americans. I also believe that simplification must not result 
in paring back our support for students.
    I want to join Ranking Member Murray in urging the 
Committee to look at HEA reauthorization in a holistic manner. 
We cannot truly improve this law without addressing the 
numerous interconnected issues involving the entire life cycle 
of higher education and its many stakeholders. I look forward, 
Mr. Chairman and Ranking Member, to that broader conversation.
    I want to direct this to Ms. Keane because I think it is 
critically important that our Federal financial aid system 
include a way for institutions to identify and support students 
that are most in need. Sometimes a very small amount of money 
can make the difference between completing a semester or 
dropping out. It is one of the main reasons why I have been 
such a strong advocate for the Perkins Loan Program, which, 
unfortunately, was allowed to lapse last fall by Congress' 
inaction.
    This program has bipartisan support in both chambers, and 
it includes strong leadership of my colleagues on this 
Committee. I believe Senator Collins asked questions, a 
question related to Perkins Loan earlier in this hearing, and I 
believe that we have to get to the task of reauthorizing it 
without further delay.
    Institutions in my home State of Wisconsin and across the 
country value this loan program because it provides flexibility 
to target low-cost loans to students in need, including in 
cases of emergencies. Institutions are in a position to do that 
in a way that the Federal Government cannot from a distance.
    While we can and should look at ways to improve and better 
target aid through Perkins and other campus-based loan 
programs, I believe these unique programs must continue to be a 
part of a robust Federal financial aid system. Ms. Keane, do 
you agree that--I would like to actually hear you elaborate on 
both Perkins, specifically, but also the value of campus-based 
programs and the role that they play in our financial aid 
system.
    Ms. Keane. Thank you for your question.
    Absolutely. As school counselors advocate for students in 
K-12, financial aid administrators do an incredible job of 
advocating for students on higher ed campuses. We have been 
both impressed and grateful by the incredible efforts they make 
to direct campus-based aid toward students who need it most. We 
see it play out in many of our postsecondary students that we 
advise.
    Specifically, for example, of the award letters that we 
collect--so this is per letters, which comes--this dataset is 
coming from the class of 2016. We saw that for zero EFC 
students, 59 percent of them included an SEOG grant for over 
$1,000. That $1,000, per other comments made by other 
testimony, can make the biggest difference in the world to keep 
a student enrolled and persisting.
    Senator Baldwin. Thank you.
    I am also pleased that we have Dr. Lowery-Hart with us, as 
I believe community colleges play an incredibly critical role 
in providing accessible, affordable, and quality postsecondary 
opportunities in a manner that is responsive to local and 
regional needs. However, as you note in your testimony, 
students at community colleges, including many minority and 
first-generation students they serve, still struggle to afford 
the full costs of college.
    As we look at ways to make our Federal financial aid system 
work better for students and families, I believe that the 
Federal Government can and should do more to support these 
institutions, and that is why I will soon reintroduce 
legislation, the America's College Promise Act, which invests 
in communities--community and technical colleges in partnership 
with state governments while helping those schools strengthen 
their programs to best serve students. Do you agree that this 
sort of investment would help more American students obtain 
postsecondary credentials or degrees with less or, hopefully, 
no debt?
    Dr. Lowery-Hart. I agree and appreciate your advocacy of 
community colleges in the higher education ecosystem. What most 
people don't understand is that community colleges educate the 
majority of our higher education students in the country. And 
our economy is based on community colleges' ability to train 
workers for our employers, and your support of that is 
appreciated.
    The Chairman. Thank you, Senator Baldwin. I am going to ask 
that we keep the back and forth at 5 minutes so we can all ask 
questions before the vote at 12:15 p.m.
    Dr. Dynarski, Dr. Chingos, you have suggested that the 
United States take our nine loan repayment programs, which 
everyone seems to agree is very confusing, and replace it with 
a loan repayment system that is similar to Australia, Germany, 
Sweden, and the United Kingdom, where students would 
automatically have an amount of money deducted from their 
paycheck, except for those students who are suddenly finding 
themselves making very little money. There would be a level 
below which Ms. Darcus raised the point about what about lower 
income people or people who have suddenly find themselves 
without much income.
    May I ask you this, what happens--what would servicers have 
to do if we had a system like that? Dr. Dynarski, what would 
there be left for them to do?
    Dr. Dynarski. Well, if we simplify things and we have less 
bureaucracy, there is less bureaucracy to be taken care of. So 
not as much. This would really need to run through the 
Government just as payroll taxes do, and a lot of the 
challenges that were described in terms of having multiple 
jobs, gig economy come up when it comes to paying Social 
Security and FICA and so forth and taxes, the reconciliation 
that happens with those would be a model for what we need to 
do.
    The Chairman. So once the decision were made, either 
automatically for everybody or an option for everybody, there 
would be nothing--I mean, that would be the way it would be 
until a loan was paid off, and there wouldn't need to be annual 
verification or annual financial filings. It would just relate 
to the paycheck.
    Now if McDonald's were about to introduce a new gravy, it 
wouldn't introduce it in all 14,000 of its stores, or however 
many they have. They would do a pilot program in Philadelphia 
and one in Dallas and one in Nashville. So we have these nine 
programs. One of them is pay your loan off in 10 years, like a 
mortgage, plus these eight others that are hard to figure out.
    If you were the queen or the king of the system and could 
do just what you want to do and would take a prudent step in 
the direction you recommended, what would you do?
    Dr. Dynarski. I think piloting in a couple of states, 
couple of university systems would be a terrific idea.
    The Chairman. What would you do about the existing nine 
programs?
    Dr. Dynarski. In terms of the piloting? I think----
    The Chairman. Well, would you get rid of them?
    Dr. Dynarski. Yes. Narrow it down to one straightforward 
mortgage payment plan, if people, indeed, would like to have 
that option. But make the default--poor word--but the automatic 
option be an income-based repayment program.
    The Chairman. What if--so what if you had narrowed it down 
to two programs, one would be, say, the 10-year mortgage type 
program, two would be the income-based program, and three would 
be piloting your automatic program. Dr. Chingos, what do you 
think of that?
    Dr. Chingos. Yes, I mean, one place to start if you didn't 
feel comfortable doing this automatically for everybody right 
away would be to make it available for people, the automatic 
option. You could put them in there, then they could have to do 
paperwork to get out. Or you could put them in the 10-year and 
have them do paperwork to get in. But once you got in, you 
could see how it works.
    The Chairman. Well, wouldn't you want to pilot it first to 
see if it did work?
    Dr. Chingos. Well, I mean, I think we know that payroll 
withholding for Social Security taxes works in some sense. So I 
think we know this can work. I mean, so would you want to limit 
the number of people initially? I mean, perhaps, but I think 
there is uncertainty about the implementation. There is 
uncertainty about the specific parameters of the policy design. 
But I think the basic idea, we know it works because Dr. 
Dynarski told us about how it works in Australia and England 
and Sweden and Germany.
    The Chairman. Some Senators and some witnesses have 
expressed concern that if we simplify, we want to make sure we 
don't take money away from students. Dr. Chingos, if, in 
simplifying the loan repayment program the way we do, we save 
money, where would you put it? I gather from your testimony, 
you would put it--you would have a larger Pell Grant at the 
beginning?
    Dr. Chingos. That is exactly right.
    The Chairman. You think rather than have benefits at the 
end, like forgiveness at the end, you would take the money 
saved if you didn't have the forgiveness and create more Pell 
Grants or larger Pell Grants?
    Dr. Chingos. That is right. In general, when there are big 
windfall subsidies, I think those are better spent to help low-
income students pay college costs upfront, and any benefits on 
the back end should be incidental to people who got unlucky, 
who had a low income for a long period of time. Yes, they are 
going to get some forgiveness at the very end. But I don't 
think we should be writing big forgiveness benefits, say, after 
only 10 years when we know that there are struggling folks who 
don't have enough to pay for college, to pay for childcare, to 
pay for food.
    The Chairman. Thank you, Dr. Chingos.
    Senator Hassan.
    Senator Hassan. Well, thank you, Mr. Chair and Ranking 
Member, for holding this hearing. Thank you to all of our 
witnesses for being here today and for the work that you all 
do.
    I wanted to start with a question to Dr. Russell Lowery-
Hart. First of all, thank you again, sir, for being here.
    While college enrollment for some students has been on the 
rise, college completion rates continue to lag. More than a 
quarter of low-income students are dropping out before 
obtaining a credential. We know that 80 percent of all jobs 
require some form of postsecondary education or training, 
meaning a large number of those non-completers will find it 
difficult to find a job and, in turn, not be able to pay back 
their student debt.
    We see that, in fact, 60 percent of student loan defaults 
are by individuals who owe less than $10,000. And those 
students want to make a difference for themselves and their 
families, they run into countless barriers along the way. I 
know you all have talked about that today. So it is clear that 
our financial aid system isn't meeting the needs of today's 
students, and again, I thank you for outlining some of those 
cases.
    Doctor, I know you have already talked about some of the 
ways that we need to support students who are working to 
complete a degree. But is there anything you haven't mentioned 
in terms of helping these students who were talked about by 
these statistics that you would like us to think about?
    Dr. Lowery-Hart. The one thing that I would want to add 
that gives me great hope is over the last 3 years at Amarillo 
College, we have built a social services system that connects 
students to food pantries, clothing closets, childcare, and 
community resources that already exist. Since we have 
implemented an intensive social services system on a case 
management process, our completion rates have gone from 19 
percent in 3 years to 45 percent in 3 years. When you remove a 
barrier, you help a student complete, and then you solve long-
term issues and open up opportunities that student might not 
have otherwise.
    Senator Hassan. Well, thank you for that. That is 
consistent with some experiences we have had in New Hampshire, 
too, and I am very grateful for your work.
    Dr. Dynarski, I wanted to talk a little bit about graduate 
student loans. Our graduate students are often saddled with 
very high levels of loan debt, but they are also, as I 
understand it, the least likely to default on student loans. 
The current Graduate PLUS Loan was created so that graduate 
students can borrow up to their cost of attendance and have the 
protections of a direct loan rather than be forced to borrow in 
the much more selective private loan market subject--which is 
subject to underwriting criteria that are based fundamentally 
on whether you are already financially well-off.
    Under the House Republicans' proposal for the Higher 
Education Act, the amount graduate students can borrow would be 
capped at $28,500, far below what many graduate and 
professional programs actually cost. Supporters of this 
proposal say colleges will be forced to reduce their 
programmatic prices, but there is really no evidence to suggest 
that is actually going to happen.
    Capping what a graduate may--a graduate student may borrow 
will not automatically reduce their cost of attendance, and 
once again, graduate students will be forced into the private 
market, where interest rates could be well over 13 percent. 
This could further widen inequality in who is able to access a 
graduate-level degree. Those who pursue and need graduate-level 
degrees include teachers, nurses, social workers, and a lot of 
fields where we should be attracting more students, not putting 
up more barriers.
    How do you think the capping graduate school loans 
provision would impact low-income students who pursue a 
graduate degree? And do you believe caps would, in fact, drive 
down programmatic college costs or graduate program costs?
    Dr. Dynarski. Well, historically in our loan program we did 
have caps on graduate loans. So it is a fairly new innovation 
that the caps were taken off and borrowing took off as well. So 
it is, indeed, true that grad students have some of the lowest 
default rates. So in terms of actual defaults, we are looking 
at maybe 6 percent.
    There are problems concentrated in the for-profit sector. 
My concern is that people are being allowed to borrow too much 
for an education that is not doing them much good, all right? 
And caps serve as a crude way to indirectly protect people from 
ending up with more debt than they can handle, given what they 
have acquired in education.
    Senator Hassan. I guess my follow-up there would be--and I 
am just about out of time. So my follow-up there would be, but 
capping it at an artificially low place makes them incur debt 
in the private market, which is also harmful.
    Dr. Dynarski. The private market needs better regulation. 
So in particular, I think that private student loans should be 
able to be escaped through bankruptcy.
    Senator Hassan. Thank you very much. Thank you, Mr. Chair.
    The Chairman. Thank you, Senator Hassan.
    Senator Kaine.
    Senator Kaine. I want to ask a question, a couple of 
questions, and I am going to begin with a question for Dr. 
Lowery-Hart, and it is about Pell Grants and the expanded Pell 
Grant accessibility for short-term programs. On this Committee, 
my passion, one of my couple of passions, I guess, is career 
and technical education. I think we sort of perpetrated a myth 
that post-high school has to be college, when what we know--I'm 
the son of an ironworker and welder--is what we know is that 
there are all kinds of career and technical programs where 
there is significant need in the workforce. And yet the 
availability of financial aid for some of those programs is 
dramatically different. Pell Grants, for example, if you income 
qualify, but you--the course that is being offered is not the 
length of a college semester, you can't get a Pell Grant for 
that kind of a course.
    Senator Portman and I have a bill in that we hope to 
include as we have the Higher Ed Act discussion that would make 
Pell Grants available for shorter-term courses so long as they 
are highly rigorous and verified, and we believe that would be 
a real accessibility accelerator for students. I wonder what 
you might think about that.
    Dr. Lowery-Hart. Local businesses in Amarillo would agree 
with you 100 percent. The biggest jobs in my community--diesel 
mechanics, aviation mechanics, truck driving, and 
transportation logistics--those are all accelerated programs 
for us. Truck driving started out as a continued program 
ineligible for any financial aid. Those lead to jobs in our 
community from $60,000 to $100,000 a year with an investment of 
6 weeks to 6 months. Yet students can't afford without Federal 
aid and support to enter into those programs. So they enter in 
a program that takes longer or may not meet the economic needs 
of our community. And any aid that would allow students to 
enter those high-demand fields and give colleges the 
flexibility to accelerate their learning meets an economic need 
in my community.
    Senator Kaine. Appreciate that. Any other panelist have 
thoughts on that particular point?
    Ms. Keane. I would just echo that the importance of having 
some flexibility in terms of the Pell Grant to the reality of 
today's students is very critical.
    Senator Kaine. Thank you, thank you.
    Dr. Chingos, were you going to say something?
    Dr. Chingos. Yes, I was just going to add that I think--I 
mean, I agree with you completely. I think the challenge is how 
do you let in the good programs but not open up the flood gates 
so that we are here 10 years from now talking about all of 
these people who were claiming to do CTE and left people in 
debt with no good jobs.
    Senator Kaine. I think that is a real important point.
    Ms. Darcus, I have a question for you about public service 
loan forgiveness, if I could direct it your way. This program 
was created by Congress during the Bush administration, and it 
allows public servants to have loans forgiven. We have had a 
little bit of testimony about it. There might have been some 
when I was at an earlier hearing.
    For 10 years of qualifying monthly payments, the first set 
of borrowers has become eligible for loan forgiveness within 
the last few months, and there have been some stories about 
glitches that have been difficult. The New York Times 
highlighted a common technicality preventing some public 
service employees from qualifying for the program because they 
unknowingly were in the wrong repayment plan.
    How do we deal with that issue, and are there other 
barriers that prevent students from receiving anticipated 
forgiveness that we should look to clear up as we engage in a 
higher ed rewrite?
    Ms. Darcus. Forgiveness programs like public service loan 
forgiveness are incredibly vital. They support our economy. 
Public interest lawyers like myself, many folks who are 
delivering services to low-income borrowers rely on public 
service loan forgiveness so that they can afford their own 
livelihood. So we should certainly hold servicers accountable 
for doing their jobs, and this is just another window into the 
very, very common problems folks have during repayment. So 
enforcement, public enforcement and private enforcement to 
ensure that students and borrowers are able to access critical 
benefits like forgiveness is incredibly essential.
    Senator Kaine. Other comments on loan forgiveness?
    Yes, Ms. Keane and then Dr. Chingos.
    Ms. Keane. Yes. I will just add that we see for many of our 
students who are low income that they want to give back to 
their communities, absolutely. And losing the option of loan 
forgiveness is going to change what they can choose to do in 
the communities that they want to serve. This is the very thing 
we want to be having available in our country to lift America 
up.
    Senator Kaine. Thank you.
    Dr. Chingos.
    Dr. Chingos. I am the Grinch who thinks we ought to get rid 
of the Public Service Loan Forgiveness Program. And the reason 
I think that is because I think it provides arbitrary benefits, 
benefits that can be unfair.
    I think if you want to support public interest lawyers, you 
ought to create a grant program for public interest lawyers. 
Maybe for public interest lawyers from low-income families, 
folks you want to help get into certain fields, or you to want 
to provide wage subsidies for people in certain fields, you 
ought to do that directly. But to do it through a loan 
forgiveness program, I think, is not the most efficient way to 
do it, not the most effective way to do it. And it is outside 
the core mission of income-driven repayment, which is really to 
provide insurance for people against payments they can't 
afford.
    Senator Kaine. Thank you. I yield my time. Thank you.
    The Chairman. Thank you, Senator Kaine.
    Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman. This is 
a fantastic and interesting hearing.
    When I talk to my constituents about the complexity of 
student loans and our efforts to try to make that process 
easier, you get a lot of head nods. But then when you very 
quickly shift the conversation to the cost of higher education 
and the effort that we could undergo to try to reduce the 
sticker price, the heads start bouncing up and down. I just 
want to use my soapbox for a moment to express my hope and 
desire that as much focus as we put into this question of 
simplifying student loans, that we put double the effort into 
efforts to improve the cost and the quality of the degree 
itself.
    We are talking about complexity of student loans here 
today, but the Chairman has very rightfully pointed out a 
number of times that we also have just an unjustifiable degree 
of complexity when it comes to the regulation of college. And 
we have all sorts of innovative ways that colleges are 
discovering to lower the cost of college, partner with 
industry, and get kids to degree faster. And yet we have three 
regulators that are spending an awful lot of time forcing 
colleges to think about everything except for affordability and 
outcome after you graduate. I think there is a real interesting 
bipartisan conversation to be had about reducing the regulatory 
framework for colleges, but then making them think more about 
the cost and the outcome.
    I love Senator Cassidy's line of questioning because I also 
agree that we need to really think about putting students in 
the driver seat when it comes to understanding the value of the 
degree that they are getting. Students spend an awful lot time 
trying to manage through this process of student loan and 
student aid, and that takes up space that they should be using 
in order to think about what the actual value of the degree is 
going to be. That is complicated by the fact that we don't give 
them the information we actually have in our statute today, a 
ban on the Federal Government collecting information about how 
students do after college--the one thing that would be most 
interesting to students as they are deciding to select a 
program.
    So that is my soapbox for a second. I just hope we are 
laser-like focused on cost and quality in addition to doing 
this work, which I think is important, but not as important.
    Here is my question to the panel. I will sort of direct it 
to Ms. Keane and Dr. Chingos, and that will probably be my 
time. I just want to talk about the private student loan 
industry. The worry is that for many of us, that simplification 
ultimately leads to just a lower amount of money being 
available to students. And then you also have some proposals in 
the House, in particular the PROSPER Act, which would set an 
overall limit on the amount of Federal student loan 
indebtedness that a student could take on.
    I just want to ask what would happen if some of our efforts 
was to limit the amount of Federal indebtedness that a student 
could take on, either just by having less money available or by 
something like the PROSPER Act passing? What would the private 
student loan industry do, and why wouldn't we believe that they 
would simply fill that gap and that colleges would continue to 
raise cost and just push more of their students to ultimately 
take a private student loan that doesn't have--has worse 
repayment terms, higher rates, and none of the consumer 
protections? So that is my question.
    Ms. Keane. Yes. We are not financial advisers at uAspire. 
We are college affordability experts and advising students. So 
we are very careful in having our advisers give too much detail 
about different private loan options because we can't keep up 
with understanding different servicers and what is best for 
students.
    That said, the way that we counsel our students is to use 
the Federal loan options first. Second, pending their 
situation, they can consider the PLUS loan, knowing it is not 
guaranteed and that it involves family members to participate. 
And then we caution them about going to the private industry 
and really think about their option instead of taking on more 
debt.
    Senator Murphy. The idea behind the PROSPER Act and some of 
these, some of this line of thought, Dr. Chingos, is that if 
you just limit the Federal student loan indebtedness, they will 
be less likely to take a chance. And my question is why 
wouldn't they just pile on private debt, not changing their 
calculus about risk and about degree cost?
    Dr. Chingos. So my understanding of the PROSPER proposal is 
that it would impose--reimpose limits for graduate students. So 
I think that is what we are really talking about here, and I 
think we would see one of two things or a combination. One is 
that people go into programs where they could not get financing 
in the private market, wouldn't go to those programs. And in 
some cases maybe that is a good thing. Maybe those are low 
value, often for-profit programs that aren't very good. But 
maybe there are some people that we would want to be able to go 
who then couldn't go. Or they would turn to the private market, 
and I think we ought to be concerned about the private market.
    You know, I agree with what Dr. Dynarski has said and 
written about this, which is that the private loan should be 
dischargeable in bankruptcy. And maybe we shouldn't even allow 
people to market a private loan as a student loan, when really 
it is not really a student loan, it is unsecured consumer 
credit.
    Senator Murphy. Right.
    Dr. Chingos. Then a Senator earlier asked about income 
share agreements. I think that could be an innovation worth 
experimenting with, especially on the graduate side. Not as an 
alternative to Federal loans, but as an alternative to private 
student loans because of the protections for borrowers that 
they offer over a private loan.
    Senator Murphy. Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murphy.
    Senator Murray, do you have any other comments?
    Senator Murray. I just want to thank this panel for a very 
thoughtful discussion, and really good participation today from 
our Committee Members.
    Mr. Chairman, I just want to mention one more time that I 
hope we can work with the Department of Education to fully 
implement the ESSA law as Congress intended in order for us to 
have the confidence as we negotiate the Higher Education Act 
that the administration will implement it as we negotiate in a 
bipartisan way. I just--that is, I think, an important marker 
as we move forward. So I just wanted you to know I am concerned 
about that.
    The Chairman. Well----
    Senator Murray. But again, thank you to all of you for 
being here.
    The Chairman. If you are concerned, I am concerned. That is 
the way we normally do things. And as stated, of course, I 
agree with you. I want the Department to implement the law as 
we wrote it. So we will talk about that. I appreciate your 
bringing that up.
    Let me thank the witnesses. This has been a very good range 
of opinions, and you all know what you are talking about, and 
you have given us some interesting options to consider. I think 
you can tell from the reaction from Senators that there are 
some ideas that we hadn't thought as much about. Perhaps we 
understand them a little better.
    If you have additional ideas or you wish you had said 
something that you didn't, or you said something you wish you 
hadn't----
    [Laughter.]
    The Chairman ----we would welcome any further comment you 
would like to give us in writing. We hope to--this is such an 
interesting set of issues that we could talk about them for 
years, as we actually have. But we are coming to the point 
where we need to bring our thoughts together and come to a 
conclusion in the next few weeks, and we are going to work to 
do that.
    As I listened to the talk about mentoring, I think about my 
home State of Tennessee, which has free tuition for 2-year 
schools, technical institutes as well as community colleges. It 
is also the state with the highest completion rate for the 
FAFSA, and it is a state program that requires lots of 
mentoring in connection with the FAFSA. But of course, they 
spend all of their time not advising about what college to 
choose or what the professional course of study ought to be. 
All the mentoring time, almost all of it, is spent on how to 
fill out the FAFSA. And if we are able to simplify that--as I 
think we have pretty well agreed on a way to do that, we just 
haven't voted on it--that will make a big difference.
    Now we can do the same with loan repayment, that will be a 
significant step forward. And we will keep in mind all the 
counsel we have got about simplification doesn't equal cut 
money for students. We don't want to do that. We want to have a 
student-focused reauthorization that helps students in terms, 
and I thought Senator Murphy's words--``cost, quality, and 
simplification''--are all three good words for us to talk 
about.
    The hearing record will remain open for 10 business days. 
Members may submit additional information and questions to our 
witnesses for the record within that time, if they would like.
    [Additional Material follows:]

                          ADDITIONAL MATERIAL

                  [testimony addendum of laura keane]
    This brief follow-up testimony is based on two themes that emerged 
in the Q&A segment:

          how to simplify Federal financial aid without 
        reducing it for the students it is designed to help; and
          Senators' inquiry and exploration of the value of 
        campus-based aid.
   Simplify the Bookends; Address Equity & Transparency in the Middle
    Based on years of advising students, the most pronounced 
complications for students occur in the beginning and end of students' 
experience with Federal financial aid. FAFSA and verification, as well 
as repayment, are the biggest obstacles for students and create 
inefficiencies for other stakeholders. A shorter FAFSA, coupled with 
streamlined verification (either by Federal data alignment and/or by 
FSA serving as single clearinghouse of documentation), is student-
centered and will increase access. Reducing the number of repayment 
options and adopting new systems of collection will help our students 
manage debt more successfully. Decreased delinquency and default is a 
win for both students and taxpayers--especially when public service 
loan forgiveness remains an incentive for completion, service, and 
reduced debt burden.
    By comparison, simplifying aid in the middle of the students' 
financial aid life cycle does not offer reform that matters most for 
students. Eliminating both campus-based aid and/or subsidized loans 
(estimated to cost students $23.4 billion over 10 years) \1\--will 
decrease likelihood for persistence and continue to leave students 
stuck facing financial obstacles that can lead to stopping out.
---------------------------------------------------------------------------
    \1\  ``Proposals for Education--CBO's Estimate of the President's 
Fiscal Year 2018 Budget.'' Congressional Budget Office. https://
www.cbo.gov/system/files/115th-congress-2017-2018/
dataandtechnicalinformation/52891-education.pdf.
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               The Need for and Value of Campus-Based Aid
    Today, Pell covers fewer than 30 percent of a 4-year public 
education, and it is only getting worse. Securing the Pell Program to 
mandatory funding and tying it to inflation is critical. National 
College Access Network (NCAN) research notes: ``Without a regular and 
planned increase, by 2024 the Pell Grant will cover only 23 percent of 
a 4-year public education.'' \2\ Given these gaps are real and 
widening; there is an ever-increasing demand to target dollars for 
students who need it most.
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    \2\  ``Protect the Promise of the Pell Grant Program.'' National 
College Access Network. http://www.collegeaccess.org/PromiseOfPell.
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    We see via our practice that campus-based aid addresses this gap 
and delivers much needed support to students. Our data from the Class 
of 2017 included over 5,800 letters with some form of campus-based aid 
awarded to Pell-eligible students:

          50 percent of Pell-eligible students received SEOG 
        for an average of $1,040;
          61 percent of Pell-eligible students received FWS for 
        an average amount of $2,582;
          24 percent of Pell-eligible students received a 
        Perkins loan for an average of $1,727.

    Students who receive campus-based aid desperately need it. Other 
students do, too--particularly those at community colleges. Students we 
advise make decisions with SEOG offers in mind. FWS also adds 
tremendous value to close the gap while incentivizing student behaviors 
research we know increases GPA and persistence. Institutions are 
closest to the students and have the best line of sight to assess 
circumstances and direct supplemental aid. This is especially so for 
returning students trying to persist in college. uAspire concurs with 
the NCAN recommendation that the campus-based aid formula needs to be 
redesigned to focus on institutions serving low-income students, not 
institutions that have been in the program the longest. That said 
realignment is not elimination. Too many grant and work opportunities 
are not complexities that hold students back, instead they increase 
students' ability to complete their degrees.
                                 ______
                                 
  A Court Recorder's Response to the HELP Hearing on Financial Aid \1\
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    \1\  Based on conversation with Laura Keane after the HELP Hearing 
on January 18, 2018 and interview with Ali Caccavella on January 
24,2018.

    Roxanne Green was the court reporter during the Senate HELP 
Committee hearing on Financial Aid Transparency & Simplification on 
Thursday, January 18th, 2018. As she explained to us, ``No one knows my 
name. No one ever speaks to me. No one interacts with the court 
reporter. Our goal isn't to be on the record.'' But when Roxanne heard 
the issues of financial aid being discussed in the course of her 
reporting that day, she felt compelled to come forward and share her 
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perspective.

    ``I listened to everyone and how (the testimonies) moved from 
filling out the form to paying back the loans. I remember thinking, 
`Where does it end?' (uAspire) struck me because you want people to 
understand how financial aid is going to work for them.'' Roxanne 
recounted her personal experience with financial aid, and how 
cumbersome and confusing it was. ``My parents didn't go to college. 
This was a totally new thing for them. My mom didn't know what to do.'' 
She explained that, though many people attempted to help her through 
the process, everyone gave her different information. ``It was like 
throwing things up in the air and hoping it landed.''

    More recently, Roxanne saw her nephew struggle through the 
financial aid process. ``I first did this 30 years ago, and it seems 
nothing much has changed. It's like an ever-revolving door.'' Roxanne 
is currently in deferment for loans she took to pay for court reporting 
school, and she described how she still struggles to keep up with the 
payments while also housing and feeding her family. ``I want and plan 
to pay off my loans, but I don't make enough--I'm just surviving--
living expenses are cut to the bone.'' She was tenacious and able to 
get Federal benefits, but explained how it can be difficult to get 
services as a college student, and with a family. ``I had to prove that 
my college was legitimate, and that I was a mother.'' Roxanne heard 
elements of her story resonated at the hearing. ``Ms. Keane, Dr. 
Lowery-Hart, and Ms. Darcus spoke of experiences I can relate to as a 
single-mother and person of color struggling to pay back my loans.''

    Now Roxanne faces the prospect of her eighth-grade son entering the 
higher education financial aid life-cycle. ``I am a member of the 
public that happened to have a front-row seat for this hearing. My son 
will be a senior in 2022. I really hope the policymakers vote to make 
this process less cumbersome--that would be awesome.'' But in the 
meantime, Roxanne expressed her gratitude for organizations like 
uAspire. ``If the colleges are not on board to make the financial aid 
more clear and direct, I'm glad uAspire is around to help people 
understand.'' She explained her desire to learn more about our work 
because uAspire ``wants to help people all the way around financial 
aid.'' We assured Roxanne that she can reach out to us as needed when 
the time comes for her son to start the process, and shared optimism 
and hope that the system will be simpler, clearer, and easier to 
navigate by then.
                                 ______
                                 
                                   January 17, 2018
Hon. Lamar Alexander, Chairman
Hon. Patty Murray, Ranking Member
U.S. Senate Committee on Health, Education, Labor, and Pensions,
Washington, DC.

    Dear Chairman Alexander and Ranking Member Murray: On behalf of the 
Higher Education Loan Coalition (HELC), a grassroots organization of 
practicing financial aid administrators dedicated to the continuous 
improvement and strengthening of student loan programs, I wanted to 
share our feedback and recommendations regarding Higher Education Act 
(HEA) reauthorization legislation. In response to the House Education 
and the Workforce Committee's passage of the PROSPER Act, I want to 
express what we see as its strengths and where we believe there is 
opportunity to improve the legislation. Finally, there are higher 
education issues that are not addressed in the PROSPER Act, and we 
would like to bring these forward as the HELP Committee works on its 
reauthorization measure. We support several provisions and aspects of 
the PROSPER Act, such as:

          the elimination of origination fees;
          the overall direction the bill takes in simplifying 
        and streamlining the financial aid process from application to 
        repayment, including:

             FAFSA simplification;
             the consolidation of student loan programs into 
        ONE Loan; and
             the consolidation of multiple repayment plans into 
        two options: a standard and an income-based repayment plan.

    We express strong concern, however, about provisions in the PROSPER 
Act that would increase the student loan burden and administrative 
burden for institutions. As the Senate crafts legislation, we would 
strongly urge you to reconsider the following aspects of the PROSPER 
Act:

          The elimination of the undergraduate in-school 
        interest subsidy adds to borrowers' student loan debt and takes 
        away one of the last need-based aid benefits available to 
        middle-class families.

          The annual and aggregate loan limits are too low. If 
        these loan limits become law, many students would be forced to 
        apply for additional private loans that do not provide the same 
        flexibility and protections as Federal loans and are often 
        based on credit history. This could radically reduce access to 
        higher education for many students from disadvantaged economic 
        backgrounds.

          The effort to assist students in better managing 
        their Title IV funds through weekly or monthly disbursements of 
        aid (Sections 401 and 465) would cause major cash flow issues 
        at institutions. Furthermore, some students may not have enough 
        money to meet critical living expenses such as rent and food 
        early on in the semester. For example, some landlords in 
        college towns require up front payment for rent.

          The requirement for annual Pell Grant counseling 
        would place an unnecessary administrative burden on financial 
        aid administrators and would be an ineffective use of both the 
        student and administrator's time. Such counseling could easily 
        be integrated into the FAFSA process, which improves the timing 
        and alleviates unnecessary delays in aid delivery. We believe 
        this requirement should shift to the Department of Education.

    Finally, we urge you to consider incorporating the following 
recommendations in the Senate's HEA reauthorization legislation:

          Create a Student Loan Line of Credit for 
        Undergraduate Students. Students in the first half of their 
        program of study would have an annual loan limit to protect 
        against over borrowing and defaults and have the ability to 
        bank unused eligibility for future use after completing 50 
        percent of the program. Access to line of credit should 
        increase with progress towards credential or degree completion. 
        The ultimate goal is to greatly reduce the reliance on PLUS 
        loans, as well as private loans, which have higher interest 
        rates and less favorable repayment terms.

          Ensure Fair Interest Rates. Interest rates should 
        continue to be based on the market while reflecting the 
        government cost of borrowing plus an additional fixed margin to 
        cover the costs of administering the student loan program. The 
        interest rate for students enrolled at least half-time should 
        reflect only the government's cost of borrowing, and 
        undergraduate students with a low expected family contribution 
        should not accrue interest while in school.

          Simplify Repayment Plan Enrollment and Payments. 
        Allowing borrowers to easily enroll in income- based repayment 
        for multiple years via IRS data match would simplify the 
        repayment process. Repayment plans also should allow borrowers 
        to add payments that automatically apply to principal first and 
        provide an option for borrowers to repay their loans via 
        payroll deduction if they so choose.

          Support Public Service Loan Forgiveness. Allow for 
        the continuance of the PSLF program, albeit with necessary 
        updates in place, to allow for the program to thrive as it was 
        intended.

          Ensure Loan Servicing Uniformity. The identity of the 
        loan servicer should be invisible to the student, and all 
        borrowers should have a single point of contact for all loan 
        repayment activities. All service levels, loan terms, and 
        borrower benefits should be uniform and equitable across all 
        servicers.

    HELC would welcome the opportunity to discuss these issues with 
you. We have additional information about all of our recommendations in 
our Reinventing Student Loans white paper. Please do not hesitate to 
reach out if we can be of any assistance as the Senate undertakes this 
legislation that is so critical to the success of our nation's 
students.

            Sincerely,
                                                 Jean Rash,
                                                             Chair.

                    Higher Education Loan Coalition
                   Executive University Director of
                             Financial Aid Rutgers,
                         The State University of New Jersey
                                 ______
                                 
 Award Letter Checklist: Critical Terms, Calculations, and Formatting 
                Practices for Every Financial Aid Offer
    1. Require federally set, student-friendly explanations of nine key 
terms--uAspire recommendations bolded with uAspire recommended 
definitions below though consumer-testing recommended

    2. Breakdown full cost of attendance:

          Line items for direct costs and indirect expenses
          Residency, enrollment, and housing assumptions listed

    3. List gift aid separately under its own heading with subtotal

    4. List loans separately under its own heading with subtotal

          Direct loans titled consistently ``Federal Direct 
        Subsidized Loan'' and ``Federal Direct Unsubsidized Loan''
    5. Calculate important cost information for the students:

          Net costs (Cost of attendance minus gift aid)
          Estimated bill (Direct costs minus gift aid minus 
        loans)
          Work-study and PLUS Loan are not included in any 
        calculations as money is not guaranteed

    6. List additional options to cover costs separately: may include 
work-study, tuition payment plan, PLUS Loan

    7. Identify critical next steps including:

          Any additional documentation required
          Decision deadline and/or deposit amount (if 
        applicable)
          Instructions for how to communicate decision to 
        accept, decline, or reduce aid

    Cost of attendance: Total estimated price for 1 year of college 
before financial aid is applied: tuition and fees, housing, food, and 
other additional personal and educational expenses.

    Direct costs: Billable expenses; money paid directly to college: 
tuition/fees and housing/meal plan, when applicable.

    Indirect expenses: Estimated additional personal and educational 
expenses needed throughout the academic year: books; transportation; 
living expenses, such as rent and food, if living off campus.

    Gift aid: Grants and scholarships that you do not need to pay back. 
Each grant and scholarship may have specific requirements to maintain 
eligibility/renew.

    Loans: Borrowed money that must be paid back, with interest. You 
can choose to reduce or decline amount offered.

    Net costs: Remaining costs for 1 year of college, after grants and 
scholarships are applied. Includes: any loans you borrow; money you pay 
directly to the college; and additional personal and educational 
expenses throughout the year.

    Estimated bill: The anticipated amount you will need to pay 
directly to the college to enroll; additional personal and educational 
expenses are not included.

    Work-study: You are eligible to earn up to $X after securing a 
work-study job through your college. The money earned is not typically 
available to pay your college bill; you will be paid directly via a 
paycheck for the hours worked.

    PLUS Loan: A Federal loan your parent may apply for that requires 
credit approval; if approved, your parent could be eligible to borrow 
the amount of your remaining costs.
                                 ______
                                 
    The next scheduled hearing before this Committee will be next 
Tuesday, January 23, 10 a.m., on 21st Century Public Health Threats: 
Our Nation's Preparedness and Response Capabilities.
                                 ______
                                 
    Thank you for being here today. The Committee will stand 
adjourned.
    [Whereupon, at 12:13 p.m. the hearing was adjourned.]

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