[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                 BROKEN PROMISES: EXAMINING THE FAILED
                  IMPLEMENTATION OF THE PUBLIC SERVICE
                        LOAN FORGIVENESS PROGRAM

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

                                HEARING

                               BEFORE THE

       SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE INVESTMENT


                         COMMITTEE ON EDUCATION
                               AND LABOR
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, SEPTEMBER 19, 2019

                               __________

                           Serial No. 116-40

                               __________

      Printed for the use of the Committee on Education and Labor
      
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         Available via the World Wide Web: www.govinfo.gov; or
              Committee address: https://edlabor.house.gov             
              
                               __________
                               

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                    COMMITTEE ON EDUCATION AND LABOR

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

Susan A. Davis, California           Virginia Foxx, North Carolina,
Raul M. Grijalva, Arizona            Ranking Member
Joe Courtney, Connecticut            David P. Roe, Tennessee
Marcia L. Fudge, Ohio                Glenn Thompson, Pennsylvania
Gregorio Kilili Camacho Sablan,      Tim Walberg, Michigan
  Northern Mariana Islands           Brett Guthrie, Kentucky
Frederica S. Wilson, Florida         Bradley Byrne, Alabama
Suzanne Bonamici, Oregon             Glenn Grothman, Wisconsin
Mark Takano, California              Elise M. Stefanik, New York
Alma S. Adams, North Carolina        Rick W. Allen, Georgia
Mark DeSaulnier, California          Lloyd Smucker, Pennsylvania
Donald Norcross, New Jersey          Jim Banks, Indiana
Pramila Jayapal, Washington          Mark Walker, North Carolina
Joseph D. Morelle, New York          James Comer, Kentucky
Susan Wild, Pennsylvania             Ben Cline, Virginia
Josh Harder, California              Russ Fulcher, Idaho
Lucy McBath, Georgia                 Van Taylor, Texas
Kim Schrier, Washington              Steve Watkins, Kansas
Lauren Underwood, Illinois           Ron Wright, Texas
Jahana Hayes, Connecticut            Daniel Meuser, Pennsylvania
Donna E. Shalala, Florida            William R. Timmons, IV, South 
Andy Levin, Michigan*                    Carolina
Ilhan Omar, Minnesota                Dusty Johnson, South Dakota
David J. Trone, Maryland             Fred Keller, Pennsylvania
Haley M. Stevens, Michigan
Susie Lee, Nevada
Lori Trahan, Massachusetts
Joaquin Castro, Texas
* Vice-Chair

                   Veronique Pluviose, Staff Director
                 Brandon Renz, Minority Staff Director
                                 ------                                

       SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE INVESTMENT

                 SUSAN A. Davis, California, Chairwoman


Joe Courtney, Connecticut            Lloyd Smucker, Pennsylvania,
Mark Takano, California                Ranking Member
Pramila Jayapal, Washington          Brett Guthrie, Kentucky
Josh Harder, California              Glenn Grothman, Wisconsin
Andy Levin, Michigan                 Elise Stefanik, New York
Ilhan Omar, Minnesota                Jim Banks, Indiana
David Trone, Maryland                Mark Walker, North Carolina
Susie Lee, Nevada                    James Comer, Kentucky
Lori Trahan, Massachusetts           Ben Cline, Virginia
Joaquin Castro, Texas                Russ Fulcher, Idaho
Raul M. Grijalva, Arizona            Steve C. Watkins, Jr., Kansas
Gregorio Kilili Camacho Sablan,      Dan Meuser, Pennsylvania
  Northern Mariana Islands           William R. Timmons, IV, South 
Suzanne Bonamici, Oregon                 Carolina
Alma S. Adams, North Carolina
Donald Norcross, New Jersey
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on September 19, 2019...............................     1

Statement of Members:
    Davis, Hon. Susan A., Chairwoman, Subcommittee on Higher 
      Education and Workforce Investment.........................     1
        Prepared statement of....................................     4
    Smucker, Hon. Lloyd, Ranking Member, Subcommittee on Higher 
      Education and Workforce Investment.........................     5
        Prepared statement of....................................     6

Statement of Witnesses:
    Appel, Mr. Jeff, Director of Policy Liaison and 
      Implementation, Offices of Federal Student Aid, Department 
      of Education...............................................    57
        Prepared statement of....................................    59
    Chingos, Dr. Matthew M., Ph.D, Vice President for Education 
      Data and Policy Urban Institute............................    17
        Prepared statement of....................................    19
    Emrey-Arras, Ms. Melissa, Director of Education, Workforce, 
      and Income Security, Government Accountability Office......    65
        Prepared statement of....................................    68
    Finlaw, Ms. Kelly, Teacher, New York, NY.....................     8
        Prepared statement of....................................    11
    Shavit, Ms. Yael, J.D., Assistant Attorney General, Office of 
      the Massachusetts Attorney General.........................    13
        Prepared statement of....................................    15

Additional Submissions:
    Chairwoman Davis:
        Prepared statement of....................................   106
    Foxx, Hon. Virginia, a Representative in Congress from the 
      State of North Carolina:
        Timeline: Education Department's Implementation of PSLF..   107
        The PSLF Program.........................................   109
    Jayapal, Hon. Pramila, a Representative in Congress from the 
      State of Washington:
        Letter dated April 12, 2019 from the Department of 
          Education..............................................   114
    Questions submitted for the record by:
        Chairwoman Davis 

        Bonamici, Hon. Suzanne, a Representative in Congress from 
          the State of Oregon....................................   117
        Fudge, Hon. Marcia L., a Representative in Congress from 
          the State of Ohio......................................   119
    Responses to questions submitted for the record by:
        Ms. Emrey-Arras..........................................   120
        Ms. Shavit...............................................   127

 
                 BROKEN PROMISES: EXAMINING THE FAILED.
                  IMPLEMENTATION OF THE PUBLIC SERVICE
                        LOAN FORGIVENESS PROGRAM

                              ----------                              


                      Thursday, September 19, 2019

                       House of Representatives,

       Subcommittee on Higher Education and Workforce Investment,

                   Committee on Education and Labor,

                            Washington, D.C.

                              ----------                              

    The subcommittee met, pursuant to call, at 10:15 a.m., in 
Room 2175, Rayburn House Office Building. Hon. Susan A. Davis 
(Chairwoman of the subcommittee) presiding.
    Present: Representatives Davis, Courtney, Takano, Jayapal, 
Harder, Levin, Omar, Trone, Lee, Sablan, Bonamici, Adams, 
Norcross, Smucker, Guthrie, Grothman, Stefanik, Comer, Cline, 
Watkins, and Mueser.
    Also Present: Representatives Scott, Shalala, Foxx, and 
Keller.
    Staff Present: Tylease Alli, Chief Clerk; Stephanie 
Cellini, Higher Education Policy Fellow; Emma Eatman, Press 
Assistant; Christian Haines, General Counsel; Kia Hamadanchy, 
Oversight Counsel; Ariel Jona, Staff Assistant; Stephanie 
Lalle, Deputy Communications Director; Andre Lindsay, Staff 
Assistant; Jaria Martin, Clerk/Assistant to the Staff Director; 
Richard Miller, Director of Labor Policy; Max Moore, Office 
Aid; Veronique Pluviose, Staff Director; Benjamin Sinoff, 
Director of Education Oversight; Banyon Vassar, Deputy Director 
of Information Technology; Joshua Weisz, Communications 
Director; Cyrus Artz, Minority Parliamentarian; Kelsey Avino, 
Minority Fellow; Courtney Butcher, Minority Director of Member 
Services and Coalitions; Dean Johnson, Minority Staff 
Assistant; Amy Raaf Jones, Minority Director of Education and 
Human Resources Policy; Hannah Matesic, Minority Director of 
Operations; Audra McGeorge, Minority Communications Director; 
Carlton Norwood, Minority Press Secretary; Brandon Renz, 
Minority Staff Director; Alex Ricci, Minority Professional 
Staff; Chance Russell, Minority Legislative Assistant; and 
Mandy Schaumburg, Minority Chief Counsel and Deputy Director of 
Education Policy.
    Chairwoman Davis. Good morning, everybody. Thank you all 
for being here. The meeting will come to order. I note that a 
quorum is present and I also note for the subcommittee that Ms. 
Shalala of Florida and Mr. Keller of Pennsylvania be permitted 
to participate in today's hearing with the understanding that 
their questions will come only after all Members of the higher 
education subcommittee on both sides of the aisle who are 
present have had an opportunity question the witnesses.
    The committee is meeting today in a legislative oversight 
hearing to hear testimony on and I quote Broken Promises: 
Examining the Failed Implementation of the Public Service Loan 
Forgiveness Program.
    Pursuant to Committee Rule 7(c) opening statements are 
limited to the chair and the Ranking Member and this allows us 
to hear from our witnesses sooner and provides all Members with 
adequate time to ask questions.
    I recognize myself now for the purpose of an opening 
statement. And welcome again to all of you. We thank you for 
being here as well as our next panel.
    This morning we are here to examine just what went wrong 
with a certain program. A program that many of us on this 
committee hoped would act as a catalyst for young people to 
channel their expertise towards serving our Nation.
    This program's goal was to steer talent into the public 
sector, particularly in healthcare and education, with the 
reward of loan forgiveness for 10 years of their public 
service.
    I am talking of course, about the Public Service Loan 
Forgiveness program that we call PSLF.
    Again, I would like to thank our witnesses who made time to 
be here today. I must say that we are disappointed that the CEO 
of the Pennsylvania Higher Education Assistance Agency known as 
PHEAA, the sole loan service charged with implementing these 
programs, declined our invitation to testify.
    While I understand the problem with PSLF does not lie with 
this entity alone, I don't underway why a taxpayer funded loan 
servicer would turn down a request to present their side of the 
story.
    If PHEAA believes the problems with the PSLF resides with 
the Education Department, then this would have been their 
opportunity to state so--that clearly and publicly.
    In 2007, Congress created this loan forgives program, PSLF 
and since its inception, we have seen an influx, tens of 
thousands of citizens financially able to dedicate their lives 
to public service. This includes our Nation's teachers, our 
first responders, service members, and many, many others. 
Healthcare professionals included. These Americans made life 
changing professional and financial decision made--based on the 
promise that we made 12 years ago.
    And unfortunately, as a result of the failure to adequately 
implement this program, thousands of active public servants 
have been denied the benefits originally promised.
    10 years since the passing of PSLF when the first wave of 
eligible student borrowers applied in 2017 only 96 of 28,000 
applicants received loan forgiveness. That is a 99.6 percent 
denial rate. That doesn't make sense to people.
    A 2018 Government Accountability Office report on this 
program identified a critical breakdown in communication 
between the Education Department, loan servicers, and student 
borrowers. It recommended the Department make four critical 
reforms to the program.
    First, the Department should provide loan servicers and 
borrowers with comprehensive information about qualifying 
employers.
    Second, the Department should issue a standardized manual 
for loan servicers.
    Third, the department should standardize payment 
information for loan servicers.
    And finally, the Department should ensure borrowers receive 
sufficiently detailed information to help identify potential 
payment counting errors.
    While the Department agreed with all these recommendations, 
it has yet to fully implement any of them, nor have they 
provided a timeline for doing so.
    In response to the extremely high PSLF denial rates and 
understandably widespread confusion among frustrated borrowers, 
Congress created the Temporary Expanded Public Service Loan 
Forgiveness Program in 2018. We appropriated $700 million to 
the Education Department with clear instructions to simplify 
and expand the program to increase rates of loan forgiveness.
    Earlier this month, however the GAO released another report 
and this time they analyzed the expansion. The GAO found that 
yet again that ED was denying 99 percent of the new TEPSLF 
applicants. Of the 53,523 student borrowers who applied, 661 
were approved.
    So our goal here today is to collectively make it easier 
for the public servants of this country to take advantage of a 
promise made to them back in 2017.
    And as sometime happen, of course people are going to 
search for blame. And in fact there are plenty of folks who 
actually didn't produce and do what we wanted them to do. What 
the American people expect of them to do.
    But we want to solve this problem and that is why we are 
delighted that you all are here before us today, to help engage 
with this discussion and we would hope that everybody who is 
connected to his has an opportunity to listen to what you have 
to say as well.
    The Executive Branch's implementation of this law which was 
supported by both Democratic and Republican administrations, 
have not lived up to its standard. That is why I encourage my 
colleagues in Congress from both sides of the aisle to come 
together today and offer positive solutions.
    Today, while we plan to ask tough questions on precisely 
what went wrong, we also wish to present an opportunity for the 
Department of Education to initiate a publicly good faith 
effort to finally implement PSLF program correctly.
    PSLF is a popular bipartisan program that is critical for 
ensuring communities everywhere in the United States have 
access to education, healthcare, and other fundamental 
services.
    We know that President Trumps own Defense Department 
agreement with this sentiment--that the Department agrees 
actually with this sentiment. It was under Secretary Mattis 
that the Pentagon stated the Public Service Loan Forgiveness 
program and I am quoting here, has been an important 
recruitment and retention tool for the military to compete with 
the civilian sector predominately in specialty fields such as 
the Judge Advocates General Corps, for whom graduate degrees 
are required.
    So that is why we are here today. We are here to look for 
answers on how we can better support the thousands of public 
servants who support all of us every day. We appreciate again 
your all being here.
    I now turn to the Ranking Member for his opening 
statements. Mr. Smucker. I want to recognize the distinguished 
Ranking Member for the purpose of making an opening statement.
    [The statement of Chairwoman Davis follows:]

Prepared Statement of Hon. Susan A. Davis, Chairwoman, Subcommittee on 
               Higher Education and Workforce Investment

    This morning, we are here to examine just what went wrong with a 
certain program.
    A program many of us on this committee hoped would act as a 
catalyst for young people to channel their expertise toward serving our 
nation. This program's goal was to steer talent into the public 
sector--particularly in healthcare and education--with the reward of 
loan forgiveness for 10 years of their public service. I am talking, of 
course, about the Public Service Loan Forgiveness program that we call 
P-S-L-F.
    Again, I would like to first thank all our witnesses who made time 
to be here today. I must say that we are disappointed that the CEO of 
the Pennsylvania Higher Education Assistance Agency (PHEAA)--the sole 
loan servicer charged with implementing these programs--declined our 
invitation to testify. While I understand that the problems with the P-
S-L-F program do not lie with this entity alone, I don't understand why 
a taxpayer-funded loan servicer would turn down a request to present 
their side of the story. If PHEAA believes the problems with the P-S-L-
F program resides with the Education Department, then this would have 
been their opportunity to state that clearly and publicly.
    In 2007, Congress created this loan forgiveness program, the P-S-L-
F. And since its inception, we have seen an influx--tens of thousands--
of citizens financially able to dedicate their lives to public service. 
This includes our nation's teachers, first responders, service members, 
healthcare professionals, and many others. These Americans made life-
changing professional and financial decisions based on the promise that 
we made 12 years ago.
    Unfortunately, as a result of the failure to adequately implement 
this program, thousands of active public servants have been denied the 
benefits originally promised.
    Ten years since the passing of the P-S-L-F, when the first wave of 
eligible student borrowers applied in 2017, only 96 of 28,000 
applicants received loan forgiveness. That's a 99.6 percent denial 
rate. That doesn't make sense to people.
    A 2018 Government Accountability Office report on this program 
identified a critical breakdown in communication between the Education 
Department, Loan Servicers, and student borrowers. It recommended the 
Department make four critical reforms to the program.
    * First, the Department should provide loan servicers and borrowers 
with comprehensive information about qualifying employers;
    * Second, the Department should issue a standardized manual for 
loan servicers;
    * Third, the Department should standardize payment information for 
loan servicers; and,
    * Finally, the Department should ensure borrowers receive 
sufficiently detailed information to help identify potential payment 
counting errors.
    While the Department agreed with all of these recommendations, it 
has yet to fully implement any of them, nor have they provided a 
timeline for doing so.
    In response to the extremely high P-S-L-F denial rates, and 
understandably widespread confusion among frustrated borrowers, 
Congress created the Temporary Expanded Public Service Loan Forgiveness 
program in 2018. We appropriated $700 million to the Education 
Department with clear instructions to simplify and expand the program 
to increase rates of loan forgiveness.
    Earlier this month, however, the GAO released another report. This 
time, they analyzed the expansion. GAO found, yet again, that ED was 
denying 99 percent of the new TEPSLF applicants. Of the 53,523 student 
borrowers who applied, 661 were approved.
    So, our goal here today is to collectively make it easier for the 
public servants of this country to take advantage of a promise made to 
them back in 2007.
    And, as sometimes happens, people are going to search for blame. In 
fact, there are plenty of folks who actually didn't produce or do what 
we wanted them to do--what the American people expect them to do. But, 
we want to solve this problem, and that is why we are delighted you all 
are here before us today to help us engage in this discussion. We would 
hope that everyone connected to this has an opportunity to hear what 
you have to say as well.
    The Executive Branch's implementation of this law, which was 
supported by both Democratic and Republican administrations, have not 
lived up to its standard. That is why I encourage my colleagues in 
Congress, from both sides of the aisle, to come together today and 
offer positive solutions.
    Today, while we plan to ask tough question on precisely what went 
wrong, we also wish to present an opportunity for the Department of 
Education to initiate a publicly good faith effort to finally implement 
the P-S-L-F program correctly.
    The P-S-L-F is a popular, bipartisan program that is critical for 
ensuring communities everywhere in the United States have access to 
education, health care, and other fundamental services.
    We know that President Trump's own Defense Department agrees with 
this sentiment. It was under Secretary Mattis that the Pentagon stated: 
``The Public Service Loan Forgiveness program has been an important 
recruitment and retention tool for the military to compete with the 
civilian sector predominantly in specialty fields, such as the Judge 
Advocates General Corps, for whom graduate degrees are required.''
    That's why we are here today. We are here to look for answers on 
how we can better support the thousands of public servants who support 
all of us every day.
    Thank you.
    I now turn to the Ranking Member for his opening remarks.
                                 ______
                                 
    Mr. Smucker. Thank you, Madame Chair. Thank you for 
yielding. Each year Americans take on more and more student 
debt so it's no surprise that borrowers have demanded help. 
College costs continue to surge, so Congress has stepped in. 
But too often, overreaching government intervention may not 
lead to positive reforms and you can just look at Public 
Service Loan Forgiveness program which is indeed a broken 
promise intended to help borrowers working in public service 
professions struggling with their student loan debt.
    Congress then doubled down on that same broken promise when 
700 million was pumped into a new program called the Temporary 
Expanded Public Loan Forgiveness OR TEPSLF.
    The purpose of today's hearing should be to come up with 
solutions to solve program confusion for borrowers because our 
constituents are working towards loan forgiveness--are the 
constituents who are working towards loan forgiveness are the 
ones who we should be here to serve.
    But whether you support or oppose the programs is 
irrelevant for the purposes of today's conversation and I have 
sincere hopes that today's hearings will really be an attempt 
to resolve these issues and not be used to grandstand or to 
point fingers.
    My colleagues, based on some of the information we have 
seen in advance, we will repeatedly point to one GAO statistic 
that 99 percent of TEPSLF application were rejected since the 
program began in 2018.
    Well, that is certainly not the outcome that we had hoped 
for and certainly makes for great headline but sadly, it 
stretches the truth and only tells a fraction of the story. So 
I will highlight some of the important facts and figures that 
my colleagues will conveniently leave out.
    71 percent of TEPSLF applicants were denied because they 
did not submit a PSLF application. According to the law, TEPSLF 
is only available to applicants who are ineligible for PSLF. Of 
the 29 percent of applicants who cleared the first hurdle by 
submitting a PSLF application, roughly only 4 percent were 
ultimately eligible for TEPSLF. This number illustrates just 
how tightly Congress defined that eligibility.
    Also, the GAO report determined that the Department of 
Education followed the law precisely. And nowhere in the GAO 
report did they find the Department of Education was improperly 
denying borrowers forgiveness or slow walking the 
implementation process.
    So we can't blame the Department of Education, we can't 
blame PHEAA for high loan forgiveness rejection rates when it 
was narrowly designed legislation and in fact combined then 
with years of the Department of Ed under the Obama 
Administration, years of inaction that brings us to today's 
problem.
    So again, PHEAA, Department of Education, there is not a 
scapegoat that we should be working, trying to pin the issues 
on. The Department of Education is following what is a very 
complex law in fact, as written by Democrats. It is just not 
the law that Democrats wish they had passed in 2007.
    Spinning data to drive a political agenda doesn't serve the 
American people. Might make for some great headlines and 
Twitter material but it certainly does nothing to help 
frustrated and struggling American borrowers. Talk is cheap but 
failing policies such as in a case like this are costly. Thank 
you. I yield back.
    [The statement of Mr. Smucker follows:]

Prepared Statement of Hon. Lloyd Smucker, Ranking Member, Subcommittee 
              on Higher Education and Workforce Investment

    ``Each year Americans take on more and more student debt. It's no 
surprise borrowers have demanded help. College costs continue to surge 
so Congress has stepped in. But rarely does overreaching government 
intervention lead to positive reforms.
    Look at the Public Service Loan Forgiveness (PSLF) program - a 
broken promise intended to help borrowers working in public service 
professions struggling with their student loan debt. Congress doubled 
down on that same broken promise when $700 million was pumped into a 
new program called the Temporary Expanded Public Service Loan 
Forgiveness (TEPSLF).
    Whether you support or oppose these programs is irrelevant for the 
purposes of today's conversation, and I have sincere hopes that today's 
hearing will not be used to grandstand or point fingers. The purpose of 
today's hearing should be to come up with solutions to solve program 
confusion for borrowers, because our constituents working towards loan 
forgiveness are who we are here to serve.
    My colleagues will repeatedly point to one GAO statistic: 99 
percent of TEPSLF applicants were rejected since the program began in 
2018. Well, that makes for a great headline. Sadly, it stretches the 
truth and only tells a fraction of the story, so I'll highlight some of 
the important facts and figures my colleagues have conveniently left 
out.
    Seventy one percent of TEPSLF applicants were denied because they 
didn't submit a PSLF application. According to the law, TEPSLF is only 
available to applicants who are ineligible for PSLF. Of the 29 percent 
of applicants who cleared the first hurdle by submitting a PSLF 
application, roughly only 4 percent were ultimately eligible for 
TEPSLF. This number illustrates just how tightly Congress defined 
TEPSLF eligibility.
    Also, the GAO report determined that the Department of Education 
followed the law precisely. And nowhere in the GAO report did they find 
the Department of Education was improperly denying borrowers 
forgiveness or slow walking the implementation process.
    There is no scapegoat to pin the issues on. We can't blame the 
Department of Education for high loan forgiveness rejection rates when 
it was narrowly-designed legislation, combined with years of Obama 
administration inaction, that brings us to today's problem. The 
Department of Education is following the complex law, as written by 
Democrats, it's just not the law the Democrats wish they had passed in 
2007.
    Spinning data to drive a political agenda doesn't serve the 
American people. It might make for some great headlines and Twitter 
material, but it certainly does nothing to help frustrated and 
struggling American borrowers. Talk is cheap, but failing policies are 
costly.
    Thank you, I yield back.''
                                 ______
                                 
    Chairwoman Davis. Thank you, Mr. Smucker, and without 
objection, all other Members who wish to insert written 
statements into the record may do so by submitting them to the 
Committee Clerk electronically in Microsoft Word format by 5 
p.m. on October 3.
    I am now delighted to introduce our witnesses for the first 
panel. First is Kelly Finlaw. Ms. Finlaw started her 14th year 
of teaching middle school art in New York City. She teaches at 
the B. Ford Rogers School IS 528 which is a public middle 
school located in Washington Heights.
    She has taught middle school in Washington Heights since 
she started teaching and has lived in the same neighborhood as 
her school for the past 11 years.
    As a public school teacher in NYC, she is an active member 
in the United Federation of Teachers and the delegate for her 
schools chapter.
    Next we have Yael Shavit. Yael Shavit is an assistant 
attorney general in the Consumer Protection Division of the 
Massachusetts Attorney General's office. Her work addresses a 
wide range of consumer protection issues with a focus on 
student loans and higher education matters.
    Before joining the Massachusetts Attorney General's office, 
Yael held a Ford Foundation public interest fellowship at the 
National Consumer Law Center and served as a San Francisco 
Affirmative Litigation Project Fellow and lecturer in Yale, at 
Yale Law School. Lecturer in law, I am sorry, at Yale Law 
School.
    Finally, Matthew Chingos, directors the Center on 
Education, Data, and Policy at the Urban Institute. He leads a 
team of scholars who undertake policy relevant research on 
issues from pre-kindergarten through post-secondary education 
and creates tools such as the Urbans Education Data Portal.
    Chingos is coauthor of Game of Loans, the Rhetoric and 
Reality of Student Debt and Crossing the Finish Line. 
Completing college at America's public universities.
    He has testified before Congress and his work has been 
featured in media outlets such as the New York Times, the 
Washington Post and NPR.
    Before joining Urban, Chingos was a senior fellow at the 
Brookings Institution. He received a BA in government and 
economics and a Ph.D. in government from Harvard University. 
Pursuant to rule 7D, the witnesses will please stand and raise 
their right hands. Thank you.
    [Witnesses sworn.]
    Chairwoman Davis. Let the record show that the witnesses 
all answered in the affirmative.
    We appreciate all of the witnesses for being here today and 
we look forward to your testimony. I want to remind the 
witnesses that we have read your written statements and they 
will appear in full in the hearing record.
    Pursuant to Committee Rule 7(d) and committee practice, 
each of you is asked to limit your oral presentation to a five 
minute summary of your written statement.
    Before you begin your testimony, you probably see the 
button in front of you. If you remember to press it to the 
microphone so it will turn on and the Members can hear you. As 
you being to speak, the light in front of you will turn green 
and after four minutes, the light, excuse me, the light will 
turn yellow to signal that you have one minute remaining. When 
the light turns red, your five minutes have expired and we ask 
that you please wrap up.
    We will let the entire panel make their presentations 
before we move to Member questions. When answering a question, 
please remember to once again turn your microphone on.
    I will first recognize then Ms. Finlaw.

       TESTIMONY OF KELLY FINLAW, TEACHER, NEW YORK CITY

    Ms. Finlaw. Good morning, Chairwoman Davis, and Members of 
the committee. My name is Kelly Finlaw. I'm a middle school art 
teacher at IS 528 in New York City. I am a proud member of the 
United Federation of Teachers and the American Federation of 
Teachers.
    On behalf of the 1.7 million members of the AFT, I thank 
you for inviting me here today to share my experience with the 
Public Service Loan Forgiveness program.
    Apart from being with my family, with people that I love, 
my classroom is my favorite place on earth. Being a teacher is 
one of the most difficult professions in the world but I clawed 
tooth and nail to make it and I am doing what I was meant to 
do.
    There are moments every day that overwhelmed me, that stop 
me in my tracks. They are moments of gratitude that this is how 
I get to spend my life.
    Going to college was my only option after high school. My 
mother made sure of that. But even though she worked several 
jobs to make ends meet, there wasn't anything leftover to pay 
for my education. So student loans kept me in my classes every 
semester.
    I didn't go into education so that the government would pay 
my loans for me. The PSLF program didn't even exist when I 
started teaching during the 2006, 2007 school year. I took on 
the debt that I have because it was a means to an end. I 
expected to carry this debt with me for the rest of my life, a 
small price to pay for a life that already feels like I have 
won the lottery every day when I walk into my school.
    In 2007, after I had already started teaching, a bipartisan 
law was sent into motion that it believed would alter the 
course of my financial future.
    A promise was made to me, to my colleagues, and to all 
public workers that should we continue to serve our communities 
for at least 10 years and make 120 quality payments on our 
student loans, our debt would be forgiven.
    Teaching isn't a career that garners much respect from 
anyone outside of the profession but this promise was 
validation that the work that we do every day is valuable. The 
promise that Congress made to me and to all public sector 
workers gave me hope for my future.
    When I learned about the law, I called my loan servicer and 
said I'm a teacher, what do I need to do to quality for the 
PSLF program? I made these calls repeatedly to different loan 
servicers over the span of several years. The answer was always 
that same. Just keep making payments and after 120 you will 
quality.
    After 10 years of making student loan payments, October 
2017 was my month, my light at the end of the tunnel. I 
received an email from my servicer, Nelnet, letting me know 
that I was eligible to apply for PSLF. I filled out my 
paperwork immediately.
    Once I applied, my account was transferred to Fed Loan, the 
exclusive servicer for PSLF. I received a letter from Fed Loan 
a few weeks later, a letter I had dreamed of for 10 years. I 
remember standing in my living room when the light at the end 
of the tunnel went dark.
    The Department of Education denied my application for 
public service loan forgiveness. The reason which no loan 
servicer had ever raised was that one of the loans was not a 
direct loan.
    I called Fed Loan immediately. I was told to reconsolidate 
so that all of my loans would qualify. Once I reconsolidated, I 
was transferred to Nelnet and I called and asked all of my 
loans qualify, what do I need to do now?
    I was told that my qualifying payments had ben reset to 
zero and I would have to keep paying for 10 more years. I have 
now made 5 payments toward my second round of 120 payments. 
According to Nelnet, I am 115 payments away from forgiveness 
while simultaneously being 5 payments past.
    I dream of owning an apartment in my neighborhood but how I 
can I afford a mortgage when I recently had to decrease what I 
contribute to my pension in order to cover my monthly bills. I 
do not share my story with you today to seek sympathy. I 
wouldn't trade my life with any other person on this planet. I 
share my story because there was a promise that was made to me 
and to millions of other public servants and that promise is 
being broken every day.
    As of March 2019, the Education Department had forgiven the 
debt of 518 public servants, less than 1 percent of its 
applicants.
    I vacillated between anger and despondence when I was 
denied forgiveness. I tried to find answers on my own but it 
wasn't until my union reached out that I felt like I had a 
voice again.
    I never thought I would say this but I'm a plaintiff in a 
lawsuit against Betsy DeVos and the Department of Education. 
The Weingarten v. DeVos lawsuit is seeking a court order that 
will hold the Education Department accountable for the errors 
and misrepresentations of its loan servicers and allow 
borrowers who have been denied due process.
    Congress has already made an effort to rectify the issues 
in this program allocating $700 million for the Temporary 
Education PSLF program. Yet no one proactively talked to me 
about applying for TEPSLF. I had to research on my own.
    I do not understand why Secretary DeVos would not do 
everything in her power to help teachers like me who did 
everything right, receive the loan forgiveness we were 
promised. I urge her to take action which is within her 
authority to fix this broken system.
    As I stated before, I do not come from a wealthy family. I 
took out students loans because it was the only way that I 
could earn a degree and to date, I am the only member of my 
family to have that honor.
    If the PSLF program wasn't meant for me, a teacher who 
loves her job, pays her bills, and comes for a family where 
loans were her only option, who was it meant for?
    I'm extremely grateful to have this opportunity to speak 
before you today but the truth is I would prefer to be in my 
classroom right now. Today will likely by the only day I am not 
in my classroom for the rest of the year.
    I am here today because I have no other option. No other 
hope for my own future. I am here today so that you can see the 
face of a person who has been impacted by the gross 
mismanagement of PSLF. Thank you for your time.
    [The statement of Ms. Finlaw follows:]
    
    
    
    
    
    

    Chairwoman Davis. Thank you, Ms. Finlaw. Ms. Shavit, please 
proceed.

  TESTIMONY OF YAEL SHAVIT, J.D., ASSISTANT ATTORNEY GENERAL, 
          OFFICE OF THE MASSACHUSETTS ATTORNEY GENERAL

    Ms. Shavit. Chair Davis, Ranking Member Smucker and Members 
of the subcommittee, thank you for inviting me to testify 
today.
    My name is Yael Shavit and I am an Assistant Attorney 
General in the Massachusetts Attorney General's Office. On 
behalf of Attorney General Maura Healey, I appreciate the 
opportunity to share our serious concerns about the 
implementation of the PSLF program.
    Advocating on behalf of students is a central priority of 
our office. Our office has brought some of the first 
enforcement actions against student loan servicers and works 
directly with borrowers to help resolve issues that arise with 
their loans. Through this work, we regularly see firsthand both 
the importance of the PSLF program and the profound financial 
injuries suffered by public servants due to the mismanagement 
of the program.
    As you know, Congress created the PSLF program to allow 
public servants to manage their student loan debt by providing 
them with loan forgiveness after 10 years of service. Without 
this program, people interested in dedicating themselves to 
public service careers often would be unable to do so because 
of the steep costs of higher education.
    The PSLF program is critical not only to the borrowers who 
rely on it but to the broader societal interest of ensuring 
that skilled workers can serve in public sector jobs.
    Nonetheless, we have seen time and again how diligent, 
hardworking public servants who had every reason to believe 
that they were meeting the programs requirements are being 
denied the benefit of PSLF after years of work.
    Our offices investigations have revealed widespread 
mismanagement of the PSLF program by both student loan 
servicers and the Department of Education.
    In 2017, we brought an enforcement action against PHEAA 
also known as Fed Loan Servicing which is the exclusive--has 
the exclusive contract to manage the PSLF program. Our lawsuit 
alleges that PHEAA, by engaging in widespread loan servicing 
failures has caused financial harm to thousands of 
Massachusetts residents seeking to rely on PSLF.
    Despite being aware of these problems, the Department has 
failed to adequately oversee its servicers and it has failed in 
its own administration of PSLF.
    Borrowers have been misinformed about the requirements of 
PSLF and have been told incorrectly that their loans or 
employment qualified for the program when they didn't. 
Borrowers have had their payments miscounted and their 
applications delayed. They have been excluded from qualifying 
repayment plans through no fault of their own.
    In short, the system is deeply broken. The problems with 
the administration of PSLF came into sharp relief in 2017 after 
the first participants in the program became eligible for loan 
forgiveness.
    Only 96 people out of over 28,000 initial applicants had 
their loans forgiven. This extraordinary denial rate should 
have served as a wakeup call to the Department that it needed 
to overhaul its oversight and management of PSLF. 
Unfortunately, the Department has failed to demonstrate a 
commitment to the program or to public servants.
    We have seen this lack of commitment first hand. Rather 
than working with our office when we identified PHEAA servicing 
failures, the Department instead empowered PHEAA in its failed 
efforts to evade our enforcement authority by invoking 
inapplicable Federal preemption principles and privacy 
statutes.
    It is now clear that the Department is also impeding 
Congress's efforts to help public servants. Despite Congress's 
appropriation of $700 million to temporarily extend PSLF, the 
Department has once again denied approximately 99 percent of 
applications for relief.
    The Department's continued failure to administer the PSLF 
program appropriately is disheartening and unacceptable. We 
appreciate the subcommittees focus on this issue. The PSLF 
program is important and we believe that it is essential that 
the programs administration be fixed not only for those public 
servants who have already relied on the program, but also for 
future borrowers who are willing to committee themselves to the 
public good and the countless Americans who benefit from their 
service.
    On behalf of the Massachusetts attorney general's office 
and the borrowers we represent, we urge Congress to continue to 
use its oversight authority and demand accountability from the 
Department and its servicers. Students across the country are 
counting on it. Thank you.
    [The statement of Ms. Shavit follows:]
    
    
    
    
    
    

    Chairwoman Davis. Thank you, Ms. Shavit. Dr. Chingos.

  TESTIMONY OF MATTHEW M. CHINGOS, PH.D., VICE PRESIDENT FOR 
           EDUCATION DATA AND POLICY URBAN INSTITUTE

    Mr. Chingos. Chair Davis, Ranking Member Smucker and 
Members of the committee, thank you for the opportunity to 
testify today about the Public Service Loan Forgiveness 
program.
    I direct the Center on Education, Data and Policy at the 
Urban Institute here in Washington, D.C. I'm proud of the work 
we do at Urban but I should emphasize that the views expressed 
in this testimony are my own and should not be attributed to 
any organization with which I am affiliated, its trustees or 
its funders.
    My testimony will provide an overview of PSLF and the 
Temporary Expanded PSLF program with a focus on program design, 
tradeoffs and options for reform.
    I am not an expert on student loan servicing but I believe 
that the complex design of loan forgiveness programs place an 
important role in the challenges faced both by borrowers trying 
to navigate these programs and by the Federal Government 
administering them.
    PSLF sounds like a simple program. Work in public service 
for 10 years and have your loans forgiven. But the program is 
complicated and has only become more complex over time. First, 
Congress limited the program to borrowers who took out loans 
under the direct loan program and it may not be obvious to 
borrowers which kind of loan they have.
    Second, borrowers need to prove they worked in public 
service which the Federal Government defines based on the legal 
status of the employer, not the job being done.
    For example, nurses at nonprofit hospitals are eligible but 
nurses doing the exact same work at for profit hospitals are 
not eligible.
    Third, borrowers need to spend at least some time in an 
income driven repayment plan. Payments made under the wrong 
plans do not count towards PSLF.
    Such a complex program has led to borrower confusion. A 
2018 GAO report on PSLF found that of the borrowers who applied 
for forgiveness, only half had any qualifying employment in 
loans and less than one percent had made 120 qualifying 
payments. Congress attempted to address borrower concerns about 
PSLF by creating TEPSLF, a first come, first serve pot of money 
for borrowers who met all of the requirements of PSLF except 
they were in the wrong repayment plans.
    As with PSLF, few TEPSLF applicants have been approved for 
forgiveness. But the denial rates alone don't tell us whether 
these programs have reached their intended beneficiaries. To 
judge success, we need to know how many borrowers are actually 
eligible under the terms of the programs, how many are applying 
and how many are being approved.
    It is impossible to precisely estimate how many borrowers 
are eligible for these programs because the Federal Government 
does not collect comprehensive data on borrowers sector of 
employment.
    This has left the press and Congress to focus on the fact 
that 99 percent of applications were rejected and not on why 
they were rejected.
    The recent GAO report does not tell us much about the share 
of eligible borrowers who were able to access the program but 
provides insight into why so many borrowers were rejected.
    71 percent of TEPSLF applications were denied because the 
borrower had not yet submitted an application for PSLF. Of the 
applications that did meet the requirements the first applying 
for PSLF, 96 percent did not meet the other eligibility 
requirements including making 10 years of qualifying payments 
on eligible loans and meeting payment size criteria set by 
Congress.
    The hard truth is that a program as complex as TEPSLF is 
likely to continue to be confusing as evidence by borrower 
confusion about the PSLF program which has been in place for 
much longer.
    In addition to creating confusion, PSLF distributes the 
largest benefits not to the neediest borrowers or those who 
contribute most to the public good but to borrowers with the 
largest debts who know how to navigate the system by obtaining 
the right kind of loan, picking the right repayment plan, 
working for the right employer and even filing their taxes the 
right way.
    Programs like PSLF could be more effectively administered 
if the onus was on the government rather than borrowers to 
measure eligibility.
    For example, Congress could consider modifying the program 
to simplify eligibility rules and provide forgiveness using 
administrative data such as from the IRS rather than using a 
cumbersome application process.
    A more ambitious option is to shift the resources currently 
dedicated to PSLF to alternative policies aimed at the same 
goal. Research shows that targeted scholarship programs are 
more effective than loan forgiveness.
    In my view, efforts to reward socially valuable employment 
such as social work and teaching will be better accomplished 
through grants or through carefully tailored wage subsidies. In 
conclusion, many of the challenges of implementing PSLF and 
TEPSLF stem from the complex design of these programs. 
Discussions about how to improve the administration of loan 
forgiveness programs should be accompanied by careful 
consideration of how these programs might be reformed to reduce 
confusion and make them work better for both borrowers and tax 
payers.
    Thank you for the opportunity to testify today. I look 
forward to answering any questions.
    [The statement of Mr. Chingos follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    Chairwoman Davis. Thank you very much. Thank you to all of 
you staying within time limits and we look forward to the 
questioning.
    Under Committee Rule 8(a), we will now question witnesses 
under the five minute rule. As chair I have decided to go at 
the end so I will yield to the next senior Member on the 
Majority side and then we will shift over to the Ranking Member 
and go back and forth.
    Again, I want to now yield to Mr. Courtney of Connecticut 
for the first questions.
    Mr. Courtney. Thank you, Madame Chairwoman, and to Mr. 
Smucker for holding this hearing today, to all the witnesses 
particularly, Ms. Finlaw, for really telling the human side of 
this.
    Again, I think most Members I would assume, certainly my 
office has gotten these calls and, I mean, the crushing 
disappointment that people experience when they built their 
whole life plan and professional career for 10 years, you know, 
to get that rug pulled out from under them is just devastating.
    Before I begin my questioning, I want to join the chair to 
express my frustration with the CEO of PHEAA, known to 
consumers as Fed Loan Servicing for refusing to testify today. 
Fed Loan is the loan, sole loan servicer implementing PSLF. If 
a borrower hopes to obtain PSLF they have to speak to Fed Loan.
    So I think as Ms. Finlaw maybe knows from some of her 
colleagues, there are other loan servicers that deal with Title 
IV loans, Stafford loans, Perkins loans, all of them, but if 
you want to apply for discharge under PSLF, the loan has to be 
given to this one sole gatekeeper, Fed Loans.
    And, you know, that is why their refusal today to be 
accountable on a public forum when the program they administer 
fails more than 99 percent of the borrowers that again, have to 
go through that bottleneck is really outrageous.
    According to USA Spending, Fed Loan has collected over $1.3 
billion in tax payer dollars because of the servicing contracts 
that they have with the Department of Education and yet they 
refused to appear today to publicly discuss how they actually 
spent the tax payers money.
    Fed Loan is currently competing today also for the 
Department's next gen loan servicing platform. This is a multi-
billion dollar contact that the Department claims will address 
many of the problems leading to PSLF's failure and yet Fed 
Loans chief executive officer refuses to engage with Congress 
about the problems implementing the last billion dollar 
contract that it received.
    And I want to just note for the record, again the refusal 
to testify here today occurred on September 13 and that was 
before the witness list was released and I just again want to 
leave that on the record.
    So today, since they're not here, Ms. Shavit, who is suing 
Fed Loan servicing in the state of Massachusetts, and since 
they are unwilling to share their side of the story, I would be 
interested in hearing what you have to say about their 
practices.
    Can you explain how Fed Loans practices have prevented 
borrowers from qualifying for PSLF and are there other ways 
that Fed Loan practices costs borrowers money?
    Ms. Shavit. Sorry, certainly. Fed Loan servicing failures 
affect a number of facets of PSLF. So as we allege in our 
complaint, Fed Loan failed to timely process borrowers' 
applications to participate in qualifying repayment plans. As a 
result of the backlogs and the delays that this caused, PHEAA 
decided to place some borrowers in forbearance status which is 
itself not a qualifying repayment status.
    The effect of these servicing failures was to deprive 
borrowers of the opportunity to make payments that would 
qualify for PSLF. In effect, what this does is prolong a 
borrower's repayment obligations inappropriately and increase 
the likelihood that they will never qualify for PSLF. 
Additionally, PHEAA failed to correctly count and track 
borrowers qualifying payments causing borrowers to be credited 
with fewer qualifying payments than they actually made. Again, 
this throws borrowers off track.
    I think it is also important to note that the problems that 
effect PSLF borrowers aren't just servicing failures that are 
specific to PHEAAS's management of PSLF. Servicing failures 
across PHEAA's platform, across their work, have ripple effects 
at throw PSLF borrowers off track.
    So additional servicing failures that have been recorded 
including the misapplication of payments can also have the same 
effect of throwing borrowers off track.
    Additionally, we are aware of borrowers as Ms. Finlaw has 
described who have been misinformed by PHEAA about the 
qualification of their employment or their loans for PSLF and 
relying on this information borrowers have spent years, 
sometimes up to a decade thinking that they were on track to 
get PSLF forgiveness only to discover the error when so much 
time had passed that they were unable to make the critical 
changes in their lives to actually become eligible for PSLF.
    I would also like to note a different failure which I think 
is important to recognize and that the failure that happens 
when PHEAA recognized its servicing errors and didn't 
immediately take measures to both identify the entire 
population harmed by its servicing errors and to then make sure 
that those borrowers were made whole.
    It should be PHEAA's priority to make sure that those 
borrowers are made whole and frankly, it should be the 
Department's priority to make sure that PHEAA does so.
    Mr. Courtney. Thank you. I again just also want to add 
quickly for the record, the Administration has submitted two 
budgets since taking office in 2017 for fiscal year '19 and '20 
and both at times that have zeroed out the PSLF program which 
again I think kind of screams out about what their, you know, 
support and priority for this program is and I yield back the 
balance of my time.
    Chairwoman Davis. Thank you. I will now, I would now turn 
to the Ranking Member, but he has decided to go further down 
the line and I now call on Ms. Stefanik of New York.
    Ms. Stefanik. Thank you, Chairwoman Davis and Ranking 
Member Smucker. I believe that all of my colleagues understand 
the frustration and confusion this program has caused for 
borrowers.
    And while Congress created the Public Service Loan 
Forgiveness Act in 2007 with a noble intent, I believe that we 
must fundamentally reform and improve this program so that we 
are understanding its shortcomings and it actually reaches what 
the intent is that is easier of the student and incentivizes 
public service.
    So, my first theme I wanted to cover today is what 
qualifies as public service and what should? Dr. Chingos, you 
talked in your testimony about how the government defines 
public service based on the legal status of the employer, not 
the actual job being done. Can you elaboration this and explain 
how it may cause confusion for employees?
    Mr. Chingos. That's exactly right. It's about the legal 
status of the employer so if your employer is a government 
employer, or a 501C3 and there's another category we don't have 
to talk about, you're eligible. And if you're not--so for some 
borrowers that's pretty obvious. Right. If you're a teacher, 
you're going to probably be a teacher for the government or for 
a private school which is probably going to be a nonprofit 
private school. You're clearly eligible at least on that 
component.
    But if you're a nurse, some nurses are at for profit 
hospitals, some are at nonprofit hospitals. So there is a 
number of kinds of occupations that's very much the same kind 
of work.
    So if you're a journalist at NPR, you're eligible. If 
you're an investigative journalist doing the great work that 
the Washington Post does, you're not eligible. So that is maybe 
sometimes could be lost on borrowers and could lead to some of 
the confusion we have seen.
    Ms. Stefanik. So, you know, GAO has noted that about 25 
percent of the work force in this country is encompassed in 
this broad definition of public service. It seems that defining 
public service more precisely would be necessary to focus the 
programs intent and eliminate confusion for borrowers.
    What are some of the factors that we should consider when 
trying to address this nebulous definition that exists today?
    Mr. Chingos. I think it is really about tradeoffs. So as 
you mentioned, a quarter of the economy currently falls into 
the current definition so that is going to be a pretty wide net 
you're casting.
    So, if Congress wanted to be more targeted, you could think 
about trying to encourage, you know, certain kinds of more 
targeted public service.
    So, let's say we decide there is a shortage of nurses and 
doctors in rural areas. We could create a program for that 
population.
    And indeed, there is a, several examples of programs like 
this. So, there is a, you know, a program for nurses in high 
need areas. There is a teacher program that's just for teachers 
that's separate from the PSLF program.
    And actually, if you sign up for that you can lose your 
payments towards PSLF. That's a whole other tangled web of 
competing, conflicting programs confusing borrowers.
    But the point is we have examples of more targeted programs 
and there's just a real tradeoff between trying to capture as 
many people as possible and trying to do this in a way that's 
more targeted to clear goals.
    Ms. Stefanik. I think creating more flexibility in what the 
needs of the particular communities are, so I represent a very 
rural district. We need healthcare experts. We need healthcare 
provides. We need nurses. We need farmers in our district. 
Those needs are very different than other parts, perhaps more 
urban regions accords the country.
    The second theme I wanted to focus on today are specific 
ideas about how we can reform the program. You know, one of my 
concerns is that the lump sum payment of forgiveness on any 
unpaid debt if we shifted that to more of an annual payment 
towards a borrowers balance, are we then able to reduce the 
incentive to over borrow and provide a more even distribution 
to the benefits of the program
    Mr. Chingos. I think there would be some advantages of 
moving to, you know, more staged forgiveness. It would simplify 
things certainly so that it's not you wait 10 years and then 
found out that you either were confused or you had gotten bad 
information so it could be helpful in that way.
    It would, there is certainly a tradeoff there in that it 
would alter the distribution so it wouldn't just be for people 
who made reasonably low incomes over a longer period of time, 
you know, a doctor who was in residency for four years could 
get it even though they're making a lot of money later. So 
there's a tradeoff there but it could certainly be part of an 
effort to simply the program.
    Ms. Stefanik. What do you think about the proposal to cap 
the amount any one borrower may receive?
    Mr. Chingos. I mean, that could help focus the benefits on 
a sort of broader set of people and really on people who 
borrowed for college. The way that you get the most benefits 
now is by borrowing a lot of money.
    So, if you come out with a typical debt of $30,000 and 
start with a salary of say $45,000, you're not going to get any 
loan forgiveness.
    So really in order to be eligible for say the six figure 
amounts of forgiveness or just the average PSLF forgiveness we 
have already seen of about $59,000, you have to borrow for 
graduate school.
    So, the current program is very tilted towards people with 
lots of debt, people with graduate degrees and in some cases, 
people who have made, you know, not very high incomes, but 
reasonably high incomes. So putting a cap on it would focus it 
more on folks who just borrow it for undergrad.
    Ms. Stefanik. Thank you very much and I yield back the 
seven seconds.
    Chairwoman Davis. Thank you. I now turn to Mr. Takano of 
California.
    Mr. Takano. Thank you, Chairwoman Davis, for this very 
important hearing on the Department of Education's 
mismanagement of the public service loan forgiveness program. 
This program was created as a way for Congress to say thank you 
to the many dedicated public servants in this country that 
sacrificed high paying jobs and who instead work in their 
communities.
    Unfortunately, Congressional Republicans and the 
Administration do not like this program. It is evident from 
every attempt that the President has made to eliminate the 
program in every budget he has put forth since being in office. 
As well as the Ranking Members proposal to eliminate the 
program in the PROSPER Act.
    Unfortunately, it is this Administration that is tasked 
with implementing this program. Any from where I sit, it is 
evident that they are purposely sabotaging this program. It is 
shameful.
    Ms. Shavit, my first question is for you. It appears that 
PHEAA has engaged in deceptive practices. What type of 
oversight do you believe the Department of Education should 
have over PHEAA and other loan servicers?
    Ms. Shavit. I believe it's critical that the Department of 
Education play a rigorous oversight role. It's important to 
remember the Department of Education selected these servicers 
to manage these student loans on its behalf. And in the context 
of PSLF, the Department has entrusted the entire PSLF program 
to one servicer.
    So, the Department needs to play an active oversight role 
and part of that active oversight role in the context of the 
failures of PSLF, should have involved the Department stepping 
in when it saw that PHEAA was mismanaging the program.
    And the Department should have required the follow things 
from PHEAA. It should have required PHEAA to get at the root 
causes of the servicing failures that were harming borrowers. 
It should have required PHEAA to identify the entire universe 
of borrowers who had been harmed and then it should have 
required PHEAA to take steps both to make those borrowers whole 
and to make sure that the problems were fixed so they wouldn't 
affect future generations of borrowers.
    Mr. Takano. Wow, it is an inconceivable it's just one 
contractor, one company that is the loan servicer for these 
loans. And what recourse does the Department of Education, what 
should it do if loan servicers are just not compliant with the 
terms of their contract?
    Ms. Shavit. The Department has significant powers to create 
consequences for the mismanagement. Actually, earlier this 
year, the Department's own Office of Inspector General came out 
with a report that included the conclusion that the Department 
was failing to create incentives for servicers to comply with 
servicing requirements by failing to create consequences and 
accountability when servicers weren't compliant.
    We see this playing out in the context of PSLF. There 
should be consequences to PHEAA for its continued failure to 
manage this program correctly.
    The Department is authorized and to the best of my 
knowledge has not undertaken to exercise its authority to 
penalize PHEAA both financially and quite frankly the 
Department should consider in the context of future bids of 
these contracts whether PHEAA is up for the task of continuing 
to manage this program.
    Mr. Takano. Thank you very much for your testimony. I want 
to move on to Ms. Finlaw.
    Ms. Finlaw, the Department of Education has a 
responsibility to people like you to ensure that we keep our 
initial promise and provide loan forgiveness, the loan 
forgiveness that Congress intended.
    So, Ms. Finlaw, as you have noted, you have had several 
loan servicers over your 10 year period of your loan. Did any 
of those loan servicers ever send you information about PSLF?
    Ms. Finlaw. I was notified in the fall of 2017 that I was 
eligible to apply for this program.
    Mr. Takano. And can you give us a sense of was that, how 
long had you had the loans taken out at that point?
    Ms. Finlaw. I started taking loans out in 2001.
    Mr. Takano. 2001.
    Ms. Finlaw. But I started teaching in the 2006, 2007 school 
year so I was eligible at the 10 year mark because it went into 
law in 2007. So, at the 2017 at that year, I was sent an email.
    Was I notified throughout those 10 years? No. I had to fill 
out an application every year to be on an income-based 
repayment plan which meant that I had to submit my taxes and 
proof of employment every year and those conversations centered 
around this makes me eligible for PSLF. I'm on track and the 
answer was always yes.
    Mr. Takano. Okay. So, this is a question you may not know 
the answer to but you had different loan servicers. Did you 
ever encounter these other loan servicers that were unaware of 
the loan forgiveness program?
    Ms. Finlaw. No one ever said that they were not aware, it 
was always a conversation.
    Mr. Takano. Okay. Did they ever proactively reach out to 
you to let you know that what your status was?
    Ms. Finlaw. No.
    Mr. Takano. No. Or did you have a call to inquire--did you 
have to call to inquire that you were still on track?
    Ms. Finlaw. I called every year when I had submitted my tax 
forms and my employment because it's, you have to be on an 
income-based repayment plan so those conversations happened 
yearly with a variety of different loan servicers depending on 
where my loan was at that time.
    Mr. Takano. And you were never informed about your 
eligibility.
    Ms. Finlaw. No.
    Mr. Takano. Okay, thank you.
    Chairwoman Davis. Thank you. Mr. Grothman.
    Mr. Grothman. Before I start, I would like to briefly yield 
to Congressman Smucker.
    Mr. Smucker. Thank you. I just wanted to take the 
opportunity just share a little bit about PHEAA which is a 
Pennsylvania state agency, the state that I come from who has 
as its core a public service mission to create affordable 
access to higher education.
    PHEAA's responsible to a bipartisan board of directors and 
responsible to the Commonwealth of Pennsylvania. In fact, as 
chair of the Education Committee in the state Senate, I served 
on PHEAA's board, saw firsthand the work that they did in 
promoting access to higher education.
    Just one statistic. Since the financial crisis PHEAA has 
used $1 billion of its resources in benefitting students to 
supplement need based programs which provide direct cash 
assistance to students.
    Really there is very few if any organizations in the 
student loan servicing space that have really, that have given 
so much benefit to so many.
    I know personally that PHEAA would like to be a 
constructive partner in helping to improve this system and 
helping to improve the law but as a servicer of the Department 
of Education, they must follow the rules and requirements of 
what is a Congressional program. Rules put in place by Congress 
and administered by the ED Department.
    In addition, with PHEAA as you all are aware by now is 
engaged in active litigation with one of the witnesses who is 
here today, and the Majority Staff was aware of that fact when 
they chose to invite the panel of witnesses that they selected. 
Yet, and I think shamefully, decided to make a spectacle as 
opposed to conducting good oversight. With that I yield back.
    Mr. Grothman. Thank you. I was not in Congress at the time 
this program was originally instituted. I apparently and I will 
take the Chairman at her say so, I think apparently the design 
of the program was to discourage people from going into the 
private sector.
    As someone who represents a lot of manufacturers strong in 
the agriculture community, I hope when we get done introducing 
legislation, the committee and I suppose the goal is to 
introduce legislation, we should not treat people who go into 
the very difficult sectors like manufacturing and agriculture 
as second-class citizens.
    I think a lot of times it is very difficult to go into 
those fields as the economy goes up and down, frequently people 
in manufacturing lose their job. Rarely do people in public 
sector lose their job. And I hope when we reintroduce 
legislation here, we do not continue down the path of 
discouraging people to going into the jobs that are so vital to 
keep our economy moving.
    Whenever I tour my factories or agriculture facilities, I 
feel so grateful to the people who go into those areas and I 
hope the new bill we introduce doesn't treat them like second 
class citizens. Okay.
    Now, Dr. Chingos, to your knowledge, how much action do the 
Department of Education take regarding PSLF in the first few 
years of the amended--of the Obama Administration?
    Mr. Chingos. So, the exact implementation of this law is a 
little bit outside of my area of expertise, but my 
understanding is that it was a few years from when it was 
passed in 2007 until I think it was 2012 is my understanding 
when action was first taken.
    Mr. Grothman. Okay. So, for several years and I don't mean 
to pick on them, it's very difficult to run this Federal 
Government. It is far too big. But for many years after the law 
was passed, the Obama Administration really didn't get up and 
running and kind of left a little bit of a mess for Secretary 
DeVos to deal with it. Do you think that is accurate?
    Mr. Chingos. Once again, I'm not a scholar of the kind of 
history of this program but obviously it's been in place for a 
long time and the data we have from, you know, a GAO report 
back in 2015, the current GAO report indicate that some of the, 
you know, questions, challenges, are certainly not something 
new.
    Mr. Grothman. Sure. One more time lesson. If you want 
something done, don't ask the Federal Government to do it but 
okay.
    Now we are hearing that 99 percent of the borrowers have 
been denied. Do you feel denied is the right word for these 
borrowers or were they just not eligible?
    Mr. Chingos. So, the data we have from GAO indicate that at 
least the 71 percent who first--hadn't first applied for 
PSLF's. We don't know whether they would have been eligible. 
They would have had to apply again and some of them indeed may 
have.
    But for the other 29 percent who met that first 
requirement, the data we have indicate that 96 percent of them 
were not eligible.
    Mr. Grothman. Were not eligible. So, it was a poorly 
designed program by Congress. We shouldn't put the blame on the 
Department of Education today because Congress did a bad job or 
overpromised in 2007 when the law was passed. Do you think that 
is accurate?
    Mr. Chingos. I think it's pretty clear from the design of 
the law that a lot of the challenges, maybe not all the 
challenges, but certainly a lot of the challenges come from the 
complex design of the program.
    Mr. Grothman. Okay. Thank you.
    Chairwoman Davis. Thank you. Thank you, Mr. Grothman, your 
time is up. Ms. Jayapal.
    Ms. Jayapal. Thank you, Madame Chair, and I would like to 
yield--
    Chairwoman Davis. From Washington state.
    Ms. Jayapal. Thank you. I would like to yield to you 
briefly for your comments.
    Chairwoman Davis. Thank you, Ms. Jayapal. I just wanted to 
clarify because it is my understanding and I believe that the 
staff is well aware that as Mr. Smucker stated, we actually had 
quite a number of signals that PHEAA had chosen not to show up 
today and that was well before Ms. Shavit was invited to be 
here so had no relationship to that.
    I think as we can tell from the testimony it would be very 
helpful to have them there and I think that, you know, they 
were in error to not be here because it again they are the sole 
company that is engaged in this effort and it is important to 
hear from them. They may have that, have suggestions that would 
be very helpful to us to here.
    Ms. Jayapal. Thank you, Madame Chair.
    Chairwoman Davis. Ms. Jayapal.
    Ms. Jayapal. Thank you and thank you all very much for 
being here. And I wanted to just start out by laying out the 
situation as I see it.
    12 year ago, years ago Congress passed a law that would 
encourage people to take relatively lesser paying jobs in 
public service. That is not diminishing any other profession, 
it is saying that public service is an important public good 
and we want to encourage people to go into public service, but 
there was a contract in exchange for that, full forgiveness of 
their student loans after 10 years of repayment.
    Thousands of Americans then enrolled in this program. And 
they worked full time for 10 years in public service, they 
dutifully made their payments on their student loans only to 
find out at the end of the 10 years that they had a 1 percent 
chance of achieving the promise of freedom from student debt. 
And I think, Ms. Finlaw, your story perfectly demonstrates the 
problem with this.
    It was a promise, it was a contract, people followed the 
rules and then at the end of the game, they were told that they 
didn't qualify.
    I want to thank you for taking time away from your students 
to be with us today, Ms. Finlaw. I know how much you love that 
job and you said that in your testimony.
    Ms. Shavit, you are an Assistant Attorney General in the 
Consumer Protection Division of the Massachusetts Attorney 
General's Office which brought some of the first enforcement 
actions against student loan servicers. And your office also 
works directly with borrowers to help resolve issues that they 
encounter with their loans.
    You have heard about the timeline of the invitation to 
PHEAA's CEO and I just would like to get your opinion about why 
that their CEO has rejected Congress's invitation to testify 
today. Were you surprised by that and if so why?
    Ms. Shavit. I wish I could say that I was surprised by that 
but frankly its consistent with the approach that I believe 
PHEAA took during our investigation. While I might not be 
surprised, I am disappointed. I think it's critical that we get 
to the bottom of what has gone wrong with the implementation of 
PSLF.
    I think that PHEAA has unique insights into this and I 
would have hoped that they would prioritize the interests of 
borrowers and the interests of this program to come and share 
those insights today and it's discouraging that they chose not 
to.
    Ms. Jayapal. It sounds like you are saying that perhaps 
they are scared and rightfully so of being exposed for 
wrongdoing.
    You are sitting next to one of the many individuals 
rejected for the PSLF after making on time payments for 10 
years. I wanted to lift up the story of one of my constituents 
who earned a master's in education to teach at a local 
community college.
    She told me he was instructed by her servicer to 
consolidate her loans into direct loans and she would be all 
set. Several years later she received a letter telling her that 
none of her payments counted because she was in the wrong 
repayment plan. And after calling her servicer again and again 
she was told that they didn't know who she talked to before, 
but she must have been given the wrong information.
    This is a very common story. Can you tell me specifically 
what are, you know, the top one or two practices by Fed Loan 
that are hurting borrowers, Ms. Shavit?
    Ms. Shavit. I think it's hard to rank them because quite 
frankly there are so many servicing failures that are 
compounding to make really, really serious problems and 
obstacles for borrowers to be able to avail themselves of this 
program.
    Certainly, the misinformation that you've identified just 
now is a crucial mistake. It's a very big problem for borrowers 
and it stops them from ever getting the benefit of the program.
    But in addition to that, a series of other more general 
servicing failures including the failure to process peoples' 
applications timely compound to create a scenario where 
borrowers lose multiple opportunities to make qualifying 
payments, dragging out their repayment obligations and 
decreasing the likelihood that they'll ever be able to benefit 
from the program.
    And of course, PHEAA's failure to accurately count 
borrowers qualifying payments, makes people, deprives people of 
actual credit that they should be entitled to.
    Ms. Jayapal. Thank you, Ms. Shavit. What is clear to me is 
that Fed Loan has raked in $1.3 billion over the past 10 years 
and has little to show for it. Overcharging borrowers, failing 
to process repayment applications, unacceptably long wait 
times. These findings point to an overburdened company that 
can't meet the terms of the contract to serve the American 
people and our public servants are suffering as a rest. Thank 
you, Madame Chair.
    Chairwoman Davis. Thank you. Thank you very much. Mr. 
Meuser of Philadelphia, Pennsylvania.
    Mr. Meuser Thank you, Madame Chairman. Thank you all. I am 
trying to get a better understanding of how this all 
originated, how it happened. How did borrowers become--Dr. 
Chingos, let me ask you this please. How would borrowers 
originally become aware of this program?
    Mr. Chingos. So, they could become aware and from reading 
about it and I think in some cases, they could learn about it 
for their servicer but as I said, the servicing piece of this 
is, my expertise is more on the program design than on the 
servicing.
    Mr. Meuser Let me ask you this then. How would a nurse in 
the private sector believe that they were eligible versus a 
nurse in the, in working for a nonprofit? Why would they think 
that they were falsely eligible?
    Mr. Chingos. Well, they might think they were eligible if 
they feel nursing is serving the public good which I think it's 
reasonable. A lot of folks probably think that, I certainly do.
    And perhaps they have some friends at another hospital who 
found out that they're eligible for this program.
    Mr. Meuser Would any of them, did any of them receive a 
letter stating congratulations you are eligible for this 
program? Any of those who were considered non eligible receive 
documentation that they were actually eligible? Was that 
mistake ever made?
    Mr. Chingos. So, the Federal Government doesn't collect 
data on sector of employment so to sort of prove your 
eligibility for this program it's the borrower that has to go 
to the Federal Government.
    So, you in theory could get a letter from the government or 
from your servicer saying hey, you should know about this 
program and look into whether you're eligible but the 
government would have no way in a comprehensive way of going to 
their borrowers and saying hey, you might be eligible.
    Mr. Meuser Right. So, there is no one claiming eligibility 
of all these thousands, perhaps a million that actually 
received the documents stating that they were eligible as far 
as you know?
    Mr. Chingos. Well, borrowers can certify their employment 
and their loans with their servicer before the 10 years have 
passed. So rather, I mean, so one of the problems with this 
complex program is it's a retroactive program so if you wait 
till the end of 10 years to do all the paperwork, you're 
probably going to, you know, potentially have some issues.
    You go to some employer from eight years ago and get them 
to fill out a form. So, their now is system in place where you 
can certify your employment and loans each year and have the 
government tell you yes, you're on track.
    Mr. Meuser Are you reviewing eligibility--is--to the best 
of your knowledge is PHEAA reviewing eligibility requirements 
now of those who are requesting the reimbursement?
    Mr. Chingos. My understanding is that's a process that's 
ongoing now but once again, not an expert on the details of it.
    Mr. Meuser Okay. Madame, chair, I yield the remainder of my 
time to Dr. Foxx.
    Mrs. Foxx. Thank you, Mr. Meuser. There are several things 
that I would like to put in the record right now about what is 
happening in this hearing.
    Number one, and we are going to say this over and over. The 
Secretary must follow the letter to the law. That is her 
constitutional duty. Accusations that she can do anything else 
are false.
    I want to enter into the record, Madame Chairman, a chart 
that has been prepared by the staff which outlines the 
Education Department's implementation of PSLF. And it shows 
from its beginning in 2007 when PSLF was established and then 
it shows--and it shows that under the Bush Administration a 
couple of rules were issued.
    The first one was defining public service organizations and 
full time.
    From January 2009 to January 2012, not one word out of the 
Obama Education Department on PSLF. No guidance whatsoever to 
anyone.
    Then in 2012, an employment certification form. Then 2013--
nothing in 2014 whatsoever. 2015. Then 2016, an email campaign 
targeting 3.3 million borrowers.
    So, it is I think mismanagement in the Department of 
Education long before this Administration came along than has 
created this problem.
    I would also like to enter into the record something from 
the Department of Education's website which I have read, and it 
is seven steps for PSLF success.
    I believe that anybody with a college degree should be able 
to read this and understand it and follow it. It is about as 
clear as it can be as to what the requirements of the law are. 
And then I would also like to submit for the record the 
statutory language for PSLF so that all of our colleagues can 
read it. It is pretty clear, complicated but clear.
    I would like to enter into the record Public Service Loan 
Forgiveness program statute 685.219 and the TEPSLF statutory 
language. It is really important that we understand the basis 
of these programs.
    Thank you, Madame Chairman, I yield back
    Chairwoman Davis. Thank you. Let us see. We are now 
turning--oh, without objection, we will certainly take those 
for the record. Sorry. If we turn back to Mr. Levin.
    Mr. Levin. Thank you, Madame Chairwoman, and thanks for 
holding this hearing.
    Ms. Finlaw, thank you so much for coming. I appreciate 
the--you really, you being here, you taking the time off. I saw 
your national president of the AFT here was, I really 
appreciate the support of the organization to help us figure 
this out.
    Let us just talk about this on a human level. So, when did 
you go to school? When did you, what is your education about 
teaching?
    Ms. Finlaw. I entered into a degree for art education in 
the fall of 2001. It's a 5 year program. I graduated in the 
spring of 2006. I started teaching that school year.
    Mr. Levin. And so, you have student loans from those years.
    Ms. Finlaw. I paid for 100 percent of my own education.
    Mr. Levin. Awesome.
    Ms. Finlaw. With loans.
    Mr. Levin. And so, when did you become aware of this public 
service loan forgiveness program?
    Ms. Finlaw. In the 2007 school year. It was a pretty common 
conversation amongst teachers. This is happening, this is 
happening, this could affect us, we stay in education. Some 
people don't go into education for the long haul. I knew right 
away that I would.
    Mr. Levin. So how long have you been working on trying to 
make sure you were eligible and stayed eligible?
    Ms. Finlaw. Since I started paying back my loans which is 
when I got my job teaching in New York City.
    Mr. Levin. Like 12 years ago.
    Ms. Finlaw. 14 school years ago.
    Mr. Levin. 14. Wow. Okay. And so, can you explain to me now 
why you are not eligible?
    Ms. Finlaw. I'm not eligible because one of my loans is not 
a direct loan. And like 100 percent of the people that applied 
for this loan, we all have college degrees and know how to 
read.
    However, when Nelnet tells you that you're on track and 
that's who is your servicer, and they tell you have nothing 
else to do but to fill out a form every year, and that in 5 
years, in four years, in three years, your loans will be 
forgiven, then you believe them.
    Mr. Levin. May I ask you how much outstanding loan debt you 
still have?
    Ms. Finlaw. I started with $120,000. I now have almost 90 
and a 7 percent interest rate. If I pay this off myself, I will 
still pay $130,000 more.
    Mr. Levin. Let me just express on behalf of the people of 
the 9th District of Michigan at least and hopefully most of 
your fellow Americans how sorry I am that we have had this 
program and that year in and year out you have done your best, 
thought, and been told by the loan servicer that you were on 
track and had done everything you were supposed to do and we 
completely failed you. I am really sorry.
    Ms. Finlaw. Thank you.
    Mr. Levin. I am really sorry. How--based on your best 
understanding, what do you have to do now to be eligible? Are 
your, do you think your payments now are eligible?
    Ms. Finlaw. Well, I have been told that I was accepted by 
Fed Loan as an applicant. They took my loans from Nelnet and 
then they told me that you're, that you've been denied and to 
reconsolidate and then Nelnet was my new servicers once again.
    And I called and said okay, so now I'm on the right payment 
plan and the one loan that did not qualify is now a qualifying 
loan, what do I do? And they said well, you just pay for 10 
more years.
    And it's income based so we are going to quote you at $600 
a month that you have to pay every month on these loans for the 
next 10 years and if you get a raise, you are going to pay 
more. So that's what I'm in right now. That's currently what 
I'm in.
    Do I believe that--I have to resign myself that I'm going 
to die with this debt. I have to just accept that I had to do 
this to get to where I am. I had no other option and that's my 
reality. So that's what I accept.
    However, if a program was meant to protect me, I had to 
protect myself from this program and I was unaware that was 
going to be one of the qualifications of making it--
    Mr. Levin. So, they say that you are now on the 10 years 
track again?
    Ms. Finlaw. Right.
    Mr. Levin. They claim that?
    Ms. Finlaw. Yes.
    Mr. Levin. And you would have how long to go still out of 
this year years? Nine and a half or what, where are you at now?
    Ms. Finlaw. After I was denied I went into forbearance to 
figure things out because I believed I qualified, and I wanted 
to make sure like I wanted to not waste payments.
    Mr. Levin. Right.
    Ms. Finlaw. So, after a year I resigned myself that I have 
to, that I am going to have to go back into this and I am 5 
payments in so I have 115 more payments.
    Mr. Levin. Which is 115 months.
    Ms. Finlaw. Yes, yes.
    Mr. Levin. Yeah. All right.
    Ms. Finlaw. You can't pay two payments in one month, you're 
not allowed.
    Mr. Levin. Let me just commit to you that we are going to 
do our best to get to the bottom of this and honor our 
commitment to you.
    Ms. Finlaw. Thank you.
    Mr. Levin. Our kids need you and we need you to keep 
teaching. Thank you. And I yield back, Madame Chairwoman.
    Chairwoman Davis. Thank you. Thank you. I now turn to the 
Ranking Member, Mr. Smucker.
    Mr. Smucker. Thank you. Two points I would like to make 
before I get to questions in regards to some of the comments 
made about PHEAA.
    The billion dollar figure has been raised several times, 
collars coming to PHEAA. Just like to remind Members here that 
those dollars were grants for students. Those dollars were 
expanded to ensure that students have access, have the ability 
to pay for their higher education.
    And secondly, I want to just point out that it is unusual, 
it is outside of common practice for this committee to call as 
witnesses the parties in an ongoing lawsuit.
    In fact, we don't know of any time in recent history, 
certainly in no time since have been here, has that occurred so 
just wanted to put that in the record as well.
    There is a lot to unpack here from accusations that have 
been leveled in the media to the very real and very personal 
experiences of borrowers like yourself, Ms. Finley, and I 
appreciate you--Finlaw--and appreciate you being here today. 
There is a very personal experience of trying to earn that loan 
forgiveness that loan discharge.
    I was, I did notice that it has been voiced here several 
times the commonly held perception that the PSLF program was a 
promise to all public sector works as if working in public 
service was the only requirement.
    And of course, we know that despite false advertising form 
wishful thinkers over the last decade, that is just simply not 
the case.
    For example, in--when the law was passed in 2007 and 
Democrats at that time made a legislative decision to tailor 
the program to direct loan borrowers only, but that is really 
only the tip of the iceberg when it comes to all of the 
eligibility requirements that have been placed on the program.
    Mr. Chingos, you seem to have a good understanding of those 
requirements, of the requirements hat borrowers must meet to be 
eligible for both PSLF or the TEPSLF loan forgiveness. Would 
you talked a little bit about the root cause of those issues?
    Mr. Chingos. Right. So, the first requirements having the 
right kind of loan. So back in 2007, only about 1 in 5 
borrowers were getting a direct loan. And their college, not 
they decided. So, the terms were the same, they wouldn't know 
the difference.
    Two, you have to be in public service for 10 years as 
defined by the Federal Government and be able to document that 
full time for those 120 months.
    And three, you have to be in the right kind of plan. And 
the plans themselves have become more complicated over time.
    So, I have talked a lot about the complexity of PSLF, but 
it really rests on a very complex, messy base of our Federal 
student loan program which is a really important program.
    It opens the gates to college to millions of students every 
year, but it can be really challenging to navigate because we 
now, I have lost track, whether we have 5, 6, 7 income driven 
repayment plans each with different requirements that work 
slightly differently. And ultimately affect how you--
    Mr. Smucker. So, would you agree that the root cause, the 
reason for some of these issues is that it is imbedded in the 
requirements of the program that was passed by Congress?
    Mr. Chingos. I think the complex design of the program is 
an important reason why this has been so challenging and not 
just for borrowers to get what they were promised but also for 
the Federal Government to administer it.
    Mr. Smucker. So, we have been hearing the turning down of 
students as denials. Wouldn't it be more accurate to able those 
borrowers as currently ineligible?
    Mr. Chingos. Right. The data we have certainly indicates 
that a large number of applications that have been rejected are 
because the applicant is not yet eligible and I would expect in 
the coming years folks who are, have not yet made the 120 
payments are going to cross that make and will be eligible.
    Mr. Smucker. Students as we mentioned are often unaware of 
the underlying basics of the aid they are receiving.
    You note in your testimony that a study you did found 28 
percent of Federal loan borrowers in their first year of 
college didn't even know that they had a Federal loan and 14 
percent did not know that they had any kind of student loan. 
One third of students could not provide an accurate estimate of 
how much they had borrowed. How much they had borrowed in the 
first place.
    Given that many borrowers do not have a good grasp of some 
of the basics of the Federal loan system, I am really not 
surprised that the PSLF and TEPSLF approval rates are low. Are 
there ways that we could bolster our current loan counseling to 
help students and provide more of a positive solution?
    Mr. Chingos. I think it's definitely better to provide more 
better information to people, but I think that's ultimately 
going to be a challenge because of the complex nature of the 
problem.
    So first, yes, we should try and do that but at the same 
time for borrowers going forward, I think we need to think can 
we make these programs better so they work better without 
having to, you know, pay tons of money to some other company to 
have to then explain it back to the American people.
    Mr. Smucker. Thank you.
    Chairwoman Davis. Thank you, Mr. Smucker. Before I turn to 
Ms. Adams in North Carolina, I just want to take the 
prerogative of the chair and just clarify that the 1.3 billion 
that we are talking about to PHEAA is just the payment that 
they receive for servicing the loans. So, I wanted to add that 
to the record. Ms. Adams.
    Ms. Adams. Thank you, Madame Chair, and thank you very much 
to all the witnesses for your testimony and for being here 
today. Thank you for the Ranking Member as well. I want to 
first direct my line of questioning to Ms. Shavit, is that the 
correct pronunciation?
    I first of all I want to commend you and your office in 
your investigation into is that PHEAA. I know that Attorney 
General Josh Stein of my home state of North Carolina similarly 
attempted to request information from the Education Department 
of look into PHEAA's and PSLF practices but was rebuffed.
    So, can you describe the process that your office went 
through in investigating PHEAA's conduct and how the lawsuit 
was pursued?
    Ms. Shavit. I'll answer that to the best of my ability to--
    Ms. Adams. Yes, ma'am.
    Ms. Shavit.--within the bounds of the litigation. But I 
think as a general matter, when we investigate any actor, we 
speak to borrowers who have been or sorry, not to borrowers, 
but to consumers who have concerns, who raise those concerns to 
our office.
    And then we look at available information about what's 
going on and we have the authority to file civil investigative 
demands which are like subpoenas to get information from the 
entities that we're investigating.
    We have received information about PHEAA's practices 
through the course of that type of an investigation as we were 
figuring out what was going on before we filed this lawsuit.
    Ms. Adams. Okay. All right, thank you very much. Ms. 
Finlaw, thank you very much for telling us your story. I share 
the sentiments and that my colleague expressed in terms of just 
feeling really bad about what happened and the fact that we do 
need to get to the bottom of it and thank you for being a 
teacher.
    I taught 40 years at a college, Bennett College in 
Greensboro, North Carolina. My daughter is an assistant 
principal and has taught for 18 years. It is a noble 
profession. I can't think of anything that I would have rather 
done for all of those years and like you, my degrees are in 
art, education, and multiculturalism, all three of them.
    So, I appreciate the fact of what you do with students and 
I know what that is because I have done that.
    As someone who has been a teacher, I do know how rewarding 
that work can be, but I also know how long the hours can be and 
how for someone who doesn't come from wealth, programs such as 
PSLF can be a godsend.
    So, I image how angry you were when Fed Loan told you that 
you basically threw 10 years of--worth of payments down the 
drain. That is not only sad, but it is very unfortunate that 
happened to you and to anyone else.
    So, what advice would you have for others considering 
applying for public student loan forgiveness?
    Ms. Finlaw. A friend of mine recently asked me that 
question and what I would do differently now is the same advice 
that I would give to someone applying. I would keep every 
document you've ever been given because I no longer have access 
to documents that were given to me.
    I would record every phone call when every person told me 
that I was on track and I was just year's away, months away. I 
would get names and ID numbers of who I'm speaking with and I 
would cover my own back in a program that was meant to cover my 
back.
    I have called Fed Loan within the past three months, 
requested information and been told certain information and 
called back later and received different answers. So, we talk 
about how this program can be approved and the guidance of the 
borrowers. Let's start with some accountability with our 
servicers.
    Ms. Adams. Okay.
    Ms. Finlaw. What information are they giving people and how 
can I talk to two different agents within a five minute period 
and get different answers. And I would have all of that 
documented.
    Ms. Adams. Okay.
    Ms. Finlaw. Every person that's going to apply document 
everything.
    Ms. Adams. Okay. So, what do you hope that will come out of 
your lawsuit and your testimony today? We have got about 15 
seconds.
    Ms. Finlaw. Okay. The lawsuit is asking for forgiveness of 
the eight plaintiffs on the lawsuit. But I don't want another 
teacher--I recently told my colleagues about this, what's 
happening and I said I hope that when you get to 10 years that 
you don't have to sit where I'm sitting, that you don't have to 
look over your back or to answer for all of those things. My 
hope is that this program is fixed for you.
    Ms. Adams. Thank you very much. I am out of time.
    Ms. Finlaw. Thank you. Thank you.
    Ms. Adams. Thank you very much of your testimony. Madame 
Chair, I yield back.
    Chairwoman Davis. Thank you very much. Mr. Watkins of 
Kansas.
    Mr. Watkins. Thank you, Madame Chair. Thanks for being 
here, everybody.
    Based on your insight, Dr. Chingos, about the extensive 
program criteria, could you please elaborate on what the early 
data tell us about borrowers who do qualify for forgiveness and 
what would a borrower today have to have done to be eligible 
for TEPSLF?
    Dr. Chingos. So, the first eligible payments could be made 
in October of 2007 so about 12 years ago. So, in order for 
someone to be eligible today, they would have had to pretty 
much either have a direct loan back in '07, '08, '09, or have 
known to consolidate into one of them right away. They then 
would have pretty much had to remain in a public service job 
for the 10 following years, make those 120 qualifying payments. 
As we have talked about, these have to be in the right kind of 
plan, an income driven plan, and they have to be on time 
payments. Not late payments, not early payments, on time 
payments. So, they would have had to check all of those boxes 
to be eligible now in 2019.
    Mr. Watkins. Okay. According to the GAO, 71 percent of 
TEPSLF applications were denied because a PSLF application had 
not been submitted first.
    However, looking beyond that, the remaining ineligible data 
is muddled. What is your analysis of the lesser discussed 
reasons why borrowers did not receive forgiveness and what do 
the outcomes of borrowers in the other 29 percent of 
application rejections tell us about the scope and future of 
the TEPSLF program?
    Dr. Chingos. So, if we look at the 29 percent of borrowers 
who did, who met that fist screen of having been applied and 
been rejected for PSLF, what we see is 35 percent had not been 
in repayment for 10 years. So, if you haven't been in repayment 
for 10 years, you couldn't possibly be eligible so they don't 
even look any further.
    A 19 percent failed to meet the payment size criteria set 
by Congress when they created TEPSLF, those new requirements. 
13 percent were below 120 payments, qualifying payments. 11 
percent didn't have any eligible Federal loans. 8 percent 
didn't provide the requested income information that Congress 
said they had to collect when they made TEPSLF, and a few other 
reasons and then four percent were approved.
    Mr. Watkins. Thank you, Dr. Chingos. Madame Chair, I yield 
the remainder of my time to Mr. Smucker.
    Mr. Smucker. Thank you. A point of clarification. We talked 
about the $1 billion from PHEAA. It is true PHEAA got paid in 
fees from the Department of Education $1 billion, we are not 
denying that. But it is also true that PHEAA over the last 
decade has given back $1 billion to students in Pennsylvania.
    And a second point the borrower on the panel has had 
interactions with multiple servicers which sounds like some of 
those interactions happened before Fed Loan became the 
exclusive PSLF servicer.
    So, seems that there have been obvious previous problems 
and the previous administrations did not properly make sure 
that all servicers properly implemented the program.
    I think we will hear in the upcoming panel from the 
Department of Ed about steps that they are taking to rectify 
some of those issues.
    Chairwoman Davis. I will now move to Mr. Scott, chair of 
the overall Education and Labor Committee. From Virginia.
    Mr. Scott. Thank you. Thank you, Madame Chair. The, this--
if a student applies and is denied, it is probably the 
student's fault. But if 99 percent are denied it is the 
programs fault.
    These aren't puzzles or contests, this is a program that 
you are supposed to benefit from. And having all these hurdles 
and barriers is just totally unreasonable.
    Ms. Finlaw let me get--verify. You were told that you were 
on track by your servicer. Dr. Chingos, did you say 96 percent 
were ineligible?
    Mr. Chingos. Under TEPSLF if you met the first requirement 
then 96 percent were still not eligible for TEPSLF.
    Mr. Scott. So, we have program where people think they are 
eligible when 96 percent of them are in fact not eligible.
    Mr. Chingos. That's right.
    Mr. Scott. Ms. Shavit, what is the basis of your lawsuit 
and what remedy are you--which remedy are you seeking?
    Ms. Shavit. Sorry. Our lawsuit is alleging that PHEAA has 
mismanaged its servicing of the PSLF program in addition to 
other servicing failures that we also allege.
    But relevant to this discussion, we are alleging that by 
denying borrowers the opportunity to make payments that qualify 
under PSLF, PHEAA is derailing borrower's ability to benefit 
from the program.
    What we are seeking is that PHEAA will correct this 
problem, that it will ensure that borrowers who have been 
harmed are made whole.
    We are also asking that PHEAA take measures to ensure that 
the same problems that are harming borrowers now and that have 
already been a problem for public servants won't repeat 
themselves.
    We are asking PHEAA to ensure that it is changing its 
policies in a forward looking fashion as well.
    Mr. Scott. In the meanwhile, obviously we need a change in 
the program. Are those needed changes regulatory or statutory 
and what would you suggest that we do?
    Ms. Shavit. I think as an initial matter, we have an 
important program that's been law for quite a while and while 
its complex, it's not impossibly so.
    The problems with this program have came to a head in 2017 
when it was clear that there was real servicing failure around 
the time that borrowers were first eligible to receive loan 
forgiveness.
    And the Department of Education didn't rise of the occasion 
to increase its oversight of PHEAA and its other servicers to 
ensure that borrowers weren't harmed. The program as it exists 
needs to be fixed.
    While there might be some statutory changes that could 
happen, first and foremost, the Department needs to do what it 
is tasked by Congress with doing which is ensuring that 
borrowers get the benefit of the PSLF program.
    And one thing that I might add is given both the Department 
and PHEAA's failures to fix these problems thus far, Congress 
might consider devoting some funding to a third party auditor 
who could go through and review PHEAA's practices to actually 
identify what's going on that's harming borrowers and to audit 
individual borrower accounts to make sure that every person is 
identified who has been harmed and can get the relief that 
they're entitled to.
    Mr. Scott. Are you familiar with the GAO report?
    Ms. Shavit. Yes, I am.
    Mr. Scott. They made recommendation--the GAO made 
recommendations?
    Ms. Shavit. Yes.
    Mr. Scott. Are there additional recommendations that need 
to be addressed?
    Ms. Shavit. I think it's more oversight by ED and I think 
it's more responsibility of servicers. I think as the 
Department's Office of Inspector General noted, the Department 
of Education needs to actually create consequences for servicer 
misconduct. It needs to be willing to penalize its servicers 
when they're failing borrowers. That's I think not mentioned in 
the GAO report, but I certainly agree with the recommendations 
in that report as well.
    Mr. Scott. Thank you, Madame Chair, I yield back.
    Chairwoman Davis. Thank you. I now turn to the ranking 
chair, Ms. Foxx of North Carolina.
    Mrs. Foxx. Thank you, Chairman Davis. I want to thank our 
witnesses for being here today. Dr. Chingos, much of the 
hearing today has focused on what GAO has reported regarding 
PSLF and TEPSLF implementation and the experiences of borrowers 
navigating the repayment progress.
    Lost in this conversation are some critical facts. The 
CBO's most recent baseline projects that under fair value, the 
direct loan program will cost tax payers over $300 billion over 
the next decade.
    The CBO recently estimated that eliminating PSLF for new 
borrowers would save a projected $23 billion over 10 years. 
Student loan borrowers as a group are paying down about 1 
percent of their Federal student loan debt every year.
    As of the second quarter of fiscal year 2018, 45 percent of 
borrowers were in active repayment. 56 percent of borrowers owe 
less than $20,000 of student loans and the top 6 percent of all 
people who borrowed at the most hold 23 percent of all the 
outstanding student loan debt.
    Taken together, these data tell me that tax payers are 
about to be on the hook for billions of dollars borrowed by 
graduate students. Do you agree with this assessment?
    Dr. Chingos. Thank you for the question. So graduate 
lending is a big piece of the story here. So, in the most 
recent data we see graduate students are 14 percent of all 
students, but they borrowed 47 percent of the loans. So nearly 
half. So that's really where the big dollar loans are among 
graduate students.
    Mrs. Foxx. If this is the case, what structural changes 
should Congress make to the lending and repayment programs to 
limit irresponsible borrowing and protect the interest pf both 
students and taxpayer alike?
    Mr. Chingos. Well, I think Congress can take a look at the 
loan limits in the program. So, one thing that happened around 
the time PSLF was put in place in '07, within a couple years I 
think in 0'6, a Congress expanded the grad plus or created the 
grad plus program.
    So where as undergraduates can't really borrow, it's pretty 
hard to borrow more than 45 and by law you can't borrow more 
than 57,500. But graduate students can borrow an unlimited 
amount up to the cost of attendance.
    And for a number of years that sort of worked okay. The 
graduate loan program was maybe even making some money for the 
government. People were borrowing but they were borrowing money 
that they could repay.
    But when you interact that with a loan forgiveness program 
that is potentially if implemented as generous as PSLF, you 
could create a situation where we are forgiving lots of debt 
and we are not forgiving debt of, you know, people with 30,000 
for a BA, we are forgiving debt with for people with 150, 
200,000 to be a doctor or lawyer.
    Mrs. Foxx. Right. Well, let us return to CBO's recent 
estimate that eliminating PSLF for new borrowers would save a 
projected 23 billion over 10 years.
    In your mind, is this another indication that the initial 
denial rate is temporary and as more time passes, these 
eligibility issues will get ironed out and borrowers will 
navigate these rules more successfully?
    Mr. Chingos. Right. So we know from the GAO and the 
Department of Ed that not many applications for PSLF and TEPSLF 
have been approved so far but I think it is pretty clear from 
the CBO saying this is a program that's going to cost 23 
billion over the next 10 years that they expect a lot more 
people to be approved in the coming 10 years.
    Mrs. Foxx. Thank you. I know some comments have been made 
about the PROSPER Act which we passed through this committee 
last session.
    Let me say that the main motivating factor in our 
eliminating PSLF going forward was exactly what we are hearing 
about today. And that is how complicated the law is and how 
unwieldy it has been for students.
    We didn't want to hurt students who wanted to get an 
undergraduate degree and go into public service, that was not 
the intention.
    The intention was exactly to solve the problem that's here 
today. And we believe under income repayment plans, students 
would have--we know, we did the numbers. Would have been better 
off with a very simple loan program that was much easier to 
understand than it is clear as being described here today.
    I would also like to point out that a witness has said that 
the Department did not do what it should have done before 2017 
and we certainly agree with that.
    I would also like to enter, Madame Chairman, two other 
pieces into the record. These are graphics from the Department 
of Education. How to get your student loans forgiven and then 
process for obtaining TEPSLF loan forgiveness which puts in 
graphics what Dr. Chingos has been saying.
    Chairwoman Davis. Thank you. And that is so ordered for the 
record. Thank you. Unanimous consent. Ms. Bonamici from Oregon.
    Ms. Bonamici. Thank you very much. Thank you all for your 
testimony. I have a consumer protection background, so I have 
been deeply concerned about the implementation of the Public 
Service Loan Forgiveness program and the Temporary Public 
Service Loan Forgiveness program and have been incredibly 
considered about this being an empty promise to borrowers like 
Ms. Finlaw.
    Last Friday I had a roundtable discussion to hear from 
Oregonians who have been affected by this. A lot of people 
showed up. What I heard, stress, uncertainty, and a feeling 
like these borrowers have upheld their share of the bargain and 
they told me about putting off getting married, putting off 
home ownership, putting off starting families, all because of 
the burden of student debt and they spoke about their passion 
for public service.
    One of the borrowers, Sawyer, served in the military. She 
found out after paying her loans for eight years they told her 
she was in the wrong repayment plan. She had to start all over 
again on her 120 payments.
    There is a Ph.D. psychologist who works at the Federal 
prison. She loves her jobs, it is really hard. She is 
incredibly stressed because of the amount of debt she has from 
getting a Ph.D. Her payments are not even affecting the 
principle, so it is getting, the debt is getting larger and 
larger and the stories she is hearing she is really concerned 
about that.
    Other participates, some are told that they needed to 
consolidate their loans to participate and there are others 
said they didn't qualify because they consolidated their loans. 
Many lost years' worth of payments like you did, Ms. Finlaw.
    One of the borrowers, Susan, said she and her husband tried 
for a year to get confirmation that their payments were 
qualified.
    One borrower, a teacher, had her loans forgiven under the 
Temporary Public Service Loan Forgiveness program. I think she 
is one of 24 in the entire state. One of the, you know, one 
percent nationally.
    And she told her story. She said she had to fight tooth and 
nail. She said, she doesn't have any kids, she used all of her 
spare time. She worked with my office, she worked with the 
Consumer Financial Protection Bureau which I might note would 
not be particularly helpful at this period of time because 
President Trump recently appointed a PHEAA executive as the top 
student loan official at the Consumer Financial Protection 
Bureau.
    S he worked with the ombudsman at the Department of 
Education. She painfully detailed as you recommended, Ms. 
Finlaw, every interaction she had about her loans. It took a 
tremendous amount of time and patience. This is certainly not 
what Congress intended when the Congress passed the original 
program or the temporary program.
    I am really grateful for all of them, all the people who 
shared their stories in Oregon and Ms. Finlaw as a big 
supporter of arts education. Thank you for your important work. 
I am going to ask you a question but first I want to ask Ms. 
Shavit, is there any information you can share about how PHEAA 
got this very lucrative contract to administer the Public 
Service Loan Forgiveness program?
    Ms. Shavit. The information that I know is basic 
information. I'm sure that there is more detailed information 
available but there was a process by which servicers competed 
to get the exclusive contract to manage this program.
    And I'll note, that any complexity in this program was 
known at the time and PHEAA represented in order to get this 
contract that it would be able to do its job and administer it.
    So, you know, I think that's a critical piece of this, 
right. The representations made are that PHEAA is up to the 
task. That was the position I'm sure that they took in order to 
get that contract.
    Ms. Bonamici. Thank you. And, Ms. Finlaw, you know, you 
have heard this morning that PHEAA is not represented here 
today even though they were invited and decided not to come. 
What would you have said to PHEAA and to--what would you like 
to tell the Department of Education about your experience? What 
would you say to them directly?
    Ms. Finlaw. I think that it's interesting that if my 
principal called me into his office today and I just said nah, 
I am not going to show up, it would mean my job. And yet there 
is an empty seat next to me.
    And I'm someone that this organization deeply affected, and 
I don't get to look anybody in the eye. And that--he has to 
sleep at night. And all of the people that are going to hide 
behind legislation have to sleep at night.
    I sleep really well at night. My moral compass is strong. 
And I will be in school tomorrow morning at 8 a.m. greeting my 
kids at the door and no one is going to take that from me. And 
I would go back and do it all again for the right to stand 
there every day.
    And I just wonder what he would have to say to me, what he 
would have to answer to me to say hey, you didn't jump through 
every hoop. We know we told you, we told you did but games up 
like you didn't follow every rule like you got to the end and 
oops. Like you, can you really look at me and say that? He is 
not. He is not here to do it.
    Ms. Bonamici. Thank you so much for your work, for your 
passion, and for representing I know many others who are in the 
same or similar situations across the country.
    Chairwoman Davis. Thank you.
    Ms. Bonamici. Thank you, Madame Chair, I yield back.
    Chairwoman Davis. Mr. Cline of Virginia.
    Mr. Cline. Thank you, Madame Chair. Thank the witnesses for 
being here. As law makers, we are tasked with ensuring that all 
legislation we pass out of this body is able to hold the test 
of time within the framework of the constitution. And to that 
point, laws should not be written in such a manner that 
compliance is proven to be extraordinarily difficult 
particularly what the incentive is financial.
    I wasn't a Member of Congress when the Public Service Loan 
Forgiveness program was passed back in 2007. Unfortunately, 
PSLF and Temporary Expanded PSLF have seen dramatically low 
rates of full eligibility even when the participants have such 
a large financial incentive to be in compliance.
    Since coming to Washington and joining the Education and 
Labor Committee, I have committed to ensuring that laws are and 
remain navigable.
    PSLF and TEPSLF were intended to benefit nurses, 
firefighters, police officers, teachers, and other workers who 
have devoted their lives to serving the public. In many cases, 
these brave men and women are putting their lives on the line 
for others in their communities.
    That drive and motivation to serve is part of what makes 
this country so exceptional and we should recognize, commend, 
cherish, and empower all of our citizens who work to make the 
world a better place.
    Instead of drafting PSLF for specific occupations, the 
Majority designed and passed a program that delineated 
eligibility based on the tax status of the employer so not all 
nurses and not all teachers were eligible for forgiveness and 
depending on where they worked or how they had structured and 
were making their payments, their eligibility is even further 
magnetized.
    These are important distinctions that quite literally have 
very real costs associated with them. We need to have a serious 
conversation about solutions instead of attacking the 
Administration for executing the law that Congress wrote.
    A law of--a law creating a web of confusing requirements 
will inevitably reward those borrowers most skilled at 
navigating such a complex process instead of the borrowers who 
may be more in need of relief.
    Dr. Chingos, in your estimation, do PSLF and TEPSLF as 
currently structured lay out an easy to follow path and help 
the borrowers who most need repayment relief?
    Mr. Chingos. I think a lot of the requirements makes it 
clear that it's challenging. Look at the implementation of the 
program and look at the fact that 99 percent of the people who 
think they're eligible are not, in fact, eligible; or look at 
stories like Ms. Finlaw's which, you know, frankly, it's angry 
to hear the stories like that. And so really my interesting in 
all this is helping think about how do we design a program, so 
it doesn't happen again?
    Mr. Cline. And how has the complexity of compliance changed 
over the years?
    Mr. Chingos. I think it's become more complex. When the 
program was passed, around the same time they passed one of 
the--not the first, but I think the second or third income-
based repayment program. We now have a new income-based 
repayment program. We have a pay as you earn program. We have a 
revised pay as you earn program. So, the repayment system 
itself has become more complex and because you have to be in 
that system to be eligible for PSLF.
    And then TEPSLF, of course, also well-intentioned, created 
a whole other set of requirements around certifying that your 
payment size was the right size over the last 12 months. And as 
we saw, a number of people were rejected because they didn't 
send that information, or they didn't meet that requirement set 
by Congress.
    Mr. Cline. So, the PSLF program was enacted back in 2007, 
and the first time a borrower could verify they were somewhat 
on the right track for PSLF was after the Department released 
the employer certification form in 2012. How did this long 
delay in getting the implementation of PSLF start to contribute 
to the problems and confusion borrowers are grappling with 
today?
    Mr. Chingos. I think that fact, I mean, it highlights a 
broader issue, which is that retroactive programs are really 
hard to implement. So, it's one thing to say, okay, starting 
next year we're going to change the loan program in this way. 
We're going to give a forgiveness to someone who does something 
next year. But to say you have to look back 10 years, that's 
why I think it has been important that the Department over the 
last two administrations has worked to put those certification 
processes in place, but it's, you know, yet another example of 
how complicated and difficult it is to implement this program.
    Mr. Cline. Thank you. Madam Chair, with that I am going to 
yield the remainder of my time, if she would like it, to the 
Ranking Member, Congresswoman Foxx.
    Mrs. Foxx. Thank you very much. Dr. Chingos, would you 
state that again that you just said? Most of the time those of 
us in education know that you set up evaluations to begin with, 
you don't go backward and try to evaluate. Because I think that 
is a very important point that you made.
    Mr. Chingos. Well, I think this is an area where I'd love 
to have more data. I mean, I really want to know, you know, are 
there 10 Kelly Finlaws in the world? Are there a hundred? Are 
there a thousand? Are there a million? And GAO gave us a lot of 
data, but it didn't tell us anything about that. It told us 
about who applied and who was eligible. And what we really need 
to know is who is out there, who is eligible for this program, 
and are we reaching them?
    Mrs. Foxx. Thank you very much. That is very helpful.
    Chairwoman Davis. Thank you. I want to turn now to Ms. Lee 
of Nevada.
    Ms. Lee. Sorry about that. I wasn't expecting that. I 
thought you were going first. Thank you, Madam Chair. Thank you 
for all being here today.
    This issue is really important to me for two reasons. One, 
as a person who put myself through school with student loans 
and understanding the burden that it is placing on young people 
in our country, we have a student debt crisis in this country. 
But secondly, in my home state of Nevada we happen to have a 
public employee service crisis in terms of deficits in nursing, 
mental health professionals, and, most importantly, teachers 
like yourself, Ms. Finlaw. We just started the school year with 
700 vacant positions.
    This program, statutorily we can talk about the law, et 
cetera, but was created to incentivize people to go into public 
service careers. And in this committee, unfortunately, we heard 
many stories. And I think about one in particular in my 
hometown, Caroline Courtman, who worked for the Clark County 
School District. She took out loans in 1998 and thought she had 
paid them off entirely. Turned out that she had $130 left. 
Then, as many teachers who seek career advancement, she went on 
to get a certification in speech pathology, which required her 
to take out $25,000 in loans.
    And after that, she made--she signed up for the teacher 
loan forgiveness program, another distinct program, but also 
one that is run by a loan servicer, such as PHEAA. She went on 
to make her six minimum payments. And after that, she applied, 
but was denied because of that $130 from 1998, which she had 
already actually paid off. And I am sure, like you, she went 
through several iterations of trying to navigate the system.
    And finally, Nelnet told her that her servicer said 
essentially, she should start and apply for the PSLF and start 
the clock ticking again for 10 more years. And given what we 
know now, I can't blame her for giving up at that point.
    Loan forgiveness programs, let us be clear, were intended 
to encourage people to enter public service.
    Ms. Finlaw, first of all, thank you for your commitment. 
Your children must be incredibly fortunate to have you as a 
teacher. Your story is just one that is all too familiar.
    But most importantly, it is really about mismanagement and 
confusion and, in the end, hardworking people like you not 
being able to adequately benefit from a program that was 
created to help you.
    I just want to understand a little bit more. Can you walk 
me through what was your process of applying? But more 
specifically, how many times did you call? What was the length 
of those calls? And where do you stand? You already told us 
where you stand now.
    Ms. Finlaw. To be eligible for this program you have to be 
on an income-based repayment plan, which means that every year 
you have to reapply. So, every year they're reaching out to you 
and saying you need to submit your taxes and proof of 
employment. That conversation happens every year, and in that 
conversation, I say and this is putting me on for PSLF. And me 
submitting this, is there anything else that I have to do?
    No, just keep paying. You pay every month. It's auto-
deducted out of your bank account. Like, you're on the right 
track. As long as you fill out that income-based repayment 
plan, like you're on the right path.
    In 2017, I received an email from Nelnet that said you are 
eligible to apply for Public Service Loan Forgiveness. You've 
done everything right.
    Then I was taken over to FedLoan. Nelnet was no longer my 
servicer. So, Nelnet even said don't pay anymore because your 
loans will be forgiven. FedLoan sent me a letter that said, 
essentially, too bad, so sad.
    Ms. Lee. Clearly, very confusing. Here is my question. You 
believe this was a government program and was operating in good 
faith. At any time did you feel that you were lied to or 
misled?
    Ms. Finlaw. When someone earlier was speaking about other 
loan forgiveness programs, I was forgiven by Stafford loan. I 
was forgiven different loans. I had no reason to believe this 
wasn't going to work. I really believed that the couple 
thousand dollars that have been applied to my loans would be 
forgiven because they had been so far.
    And, yes, I was lied to several times, directly lied to. In 
fact, I was told to do things that in the end put me in a worse 
place.
    Ms. Lee. I thank you for the answer. I am out of my time. 
Thank you.
    Chairwoman Davis. Thank you. Mr. Sablan?
    Mr. Sablan. Thank you very much, Madam Chair, for holding 
today's hearing. Good morning--good afternoon, I think, 
everyone.
    My two youngest are public school teachers. My daughter 
works in a county sheriff's office. But, Ms. Finlaw, is there 
something that you would like to say that you have not been 
given an opportunity to? Do you want to say something for the 
record? And then I will share it with Ms. Shavit.
    Ms. Finlaw. Thanks for giving me that opportunity.
    Mr. Sablan. You are welcome.
    Ms. Finlaw. It feels a lot, as someone sitting in this 
seat, that it's really easy to write me off under what Congress 
put into law in 2007. It's just really easy to say they made it 
really complicated, end of story, period. I did what I was 
asked to do. I called. I made my payments on time. I pay every 
month and I was misled not just by FedLoan, but by other 
servicers, and lied to. And in what other sector of government 
are you able to lie to the people that you're servicing and 
then hold them responsible for the lies that you told them?
    And so, from someone sitting in this seat, it deeply 
effects my life and it's just infuriating to hear someone say, 
well, this is what the law said. If that's what the law said, 
I'm going to go back up what Mr. Scott said and say then how 
did 99 percent of people misread the law?
    Mr. Sablan. Right.
    Ms. Finlaw. Thank you.
    Mr. Sablan. I would probably throw a shoe against a wall, 
maybe on several occasions.
    Ms. Shavit, is there something you would like to add for 
the record?
    Ms. Shavit. I would like to reiterate the importance of 
this program. And I'd also like to say that, as Ms. Finlaw 
suggested, the complexity of a program shouldn't be an excuse 
for the Department not to do what it is responsible to do and 
ensure that the program is administered correctly.
    I disagree with the notion that this is a uniquely complex 
program. I think what we see here is a failure of good faith on 
the part of the Department to actually make sure that this 
program is implemented the way it should be and it's a failure 
of responsibility on the part of servicers to make sure that 
they're doing everything that they need to do to make sure that 
borrowers are getting the benefits of the programs that 
Congress intended.
    Mr. Sablan. Thank you. Madam Chair, thank you. I yield my 
time back.
    Chairwoman Davis. Thank you very much. Mr. Keller.
    Mr. Keller. Thank you, Madam Chair. Just a couple things.
    Congresswoman Foxx actually laid out a timeline and 
submitted items for the record, which I thought she very 
adequately pointed out the failures in what happened here in 
Congress and, quite frankly, in previous administrations in the 
Department of Education. A program that started in 2007 that 
was signed into law, regulations came out in 2008. And the 
Department of Education didn't have an employer certification 
form until 2012. Certainly, we can't say that it is one loan 
servicer over the other when you have the confusion. I mean, we 
are talking about people that 98 percent of them don't 
understand how the program works. If you have all the loan 
services that don't understand how the program works, there is 
definitely a problem with the program.
    And rather than try and place blame on one of those 
individuals or another, I think this body ought to be looking 
on how we fix it and now how we place blame. Because certainly, 
we can probably look at what happened with this law in 2007 and 
we can look at the Department of Education under previous 
administrations. Congress realized there were problems with it 
when, in 2018, we had the Temporary Expanded Public Service 
Loan Forgiveness program. So, Congress obviously knew that 
something was done incorrectly, and we did this.
    And I will say that the current administration is the one 
that signed that and the administration or the loan servicers 
cannot make up their own rules. They should not and they 
cannot. They follow the rules they are given. This is serious 
stuff. It effects lives, it effects people.
    And these are certainly from their government, but here 
again, we can point to numerous things in both of these 
programs that have been failures because of the ambiguity 
created here in this body.
    So, with that I want to go to Dr. Chingos. There is a 
question. You mentioned some data earlier and understanding 
that. How might the Department use available data to predict 
participation in the PSLF and the TEPSLF, you know, people that 
might be, you know, eligible for these loans, so that we can 
target making sure they have the adequate information?
    Mr. Chingos. So, the primary way the Department can do that 
now is for the people who have come forward to identify 
themselves, started to fill out those employer certification 
forms, started to count those qualifying payments, they can 
keep track of those people. We could get maybe a deeper look 
into the servicer data on those people. I think there's more--
you know, reading the GAO report, I thought there was more that 
could be learned from the data that currently exists about 
people who are applying.
    I'm really interested in better understanding that 99 
percent that's, you know, not being approved, understanding why 
because it's a huge number of people. And it's easy for me to 
sit and say, well, maybe people are confused and don't 
understand it, but I think there's a lot more we can use the 
data to learn, you know, why is that the case and what do we do 
about it.
    Mr. Keller. Is there any other data that we are not 
collecting that you think we should?
    Mr. Chingos. So, I think if there were a linkage between, 
say, IRS data and Department of Ed data, that would be an 
opportunity for the Federal Government to know things about 
borrowers it doesn't currently know. So, if someone is working 
in the public or nonprofit sector, they'd get a W-2 from their 
employer with an EIN, and so that's in--over in the Department 
of Treasury and the IRS. If the Department of Ed knew that 
information, well, then they could do more proactive outreach 
to people to say, hey, you're in this sector, make sure you're 
doing the right things to be eligible for this program that 
you're entitled to. But right now, they're not able to do that.
    Mr. Keller. Okay, I appreciate that. And a perfect example 
of how two Federal Government agencies aren't communicating and 
yet we want to--we put out rules to loan servicers that, 
obviously, multiple over the 10 years or, you know, prior to 
people could apply, and now we want to go after the loan 
servicer of PHEAA simply because they are the ones servicing 
the loans now.
    So, again, I just think that there is--we need not focus on 
who we contracted with, but why we made it so ambiguous that 
people don't understand it.
    Thank you. I yield back.
    Chairwoman Davis. Thank you very much. It is now time to 
recognize myself for five minutes. I am going to do that 
quickly and then we will turn to the next panel.
    While we still have you with and, again, you have all been 
very helpful, I wonder part of the full picture here really 
does mean that we need to hear from the Department of 
Education. And I wonder--and we also have the GAO with us, as 
well. I wonder if you could share with us, maybe just starting 
with Ms. Shavit, what you would like to know from them. What 
would be helpful in our further discussions to better 
understand the role that they have been playing and whether or 
not, in fact, there is something that they could have been 
doing along the line to communicate better with the Congress?
    Ms. Shavit. One thing that I would certainly like to know 
is what efforts are being taken right now in the Department of 
Education to make sure that borrowers like Ms. Finlaw are 
getting the benefits of the programs that they were reasonably 
relying on. I want to know what instructions the Department is 
giving to PHEAA with respect to making sure that these 
borrowers are made whole, but I want to know what the 
Department is itself doing or planning to do in that regard and 
how it thinks that the program can be fixed going forward. I 
want to know what plans the Department has to make sure that 
future borrowers who are willing to commit themselves to the 
public good will have access to this program.
    These are the primary pieces of information that I think we 
need to know. What plan is in place and what information needs 
to be gathered to make sure that people who are supposed to 
benefit from this program can?
    Chairwoman Davis. Thank you. Doctor, we have been saying 
``shin-goes,'' ``ching-goes.''
    Mr. Chingos. ``Ching-goes.''
    Chairwoman Davis. Chingos.
    Mr. Chingos. Chingos.
    Chairwoman Davis. Okay, thank you. Please, in just a minute 
or two, what is your sense? What would you like to know?
    Mr. Chingos. Sure. I would love to hear from, you know, 
GAO, Department of Ed, you know, what data would they need and 
how could they get it to more accurately measure how well PSLF 
and TEPSLF are being implemented. You know, we talk about this 
99 percent rejection rate. It tells us something about the 
program, but it doesn't tell us what we really want to know, 
which is who's out there? Who should be getting this program 
and are they getting it? And if they're not getting it, why?
    So, I would really want to know what data could help us 
better assess that, so that we can make improvements going 
forward.
    Chairwoman Davis. Thank you. And, Ms. Finlaw, what would 
you like to tell the Department of Ed? What would you like them 
to know that you haven't had a chance to say?
    Ms. Finlaw. I would like to know what I'm supposed to do 
when I'm lied to. I would like to know what recourses I have 
and, in 10 years, what will I do then? I'd like to know who's 
out--who's looking to protect the borrower from these 
organizations that mislead and misrepresent? And who's going to 
protect me in the next 10 years? How do I know I'm not being 
lied to again if I'm doing everything I'm told to do?
    Chairwoman Davis. Thank you. I want to thank all of you and 
certainly my colleagues who are here. This is often when we 
have a second panel it makes it difficult because Members have 
had to go into other committee hearings. And so, I hope the few 
of us who are here right now will have an opportunity to really 
understand and learn more.
    I have heard many different things. I mean, I have heard we 
should shelve the program; that, in fact, if people only read 
the Department of Ed's directions that, you know, they 
shouldn't have any problem.
    I have heard that, in fact, it is complicated. And there 
are probably reasons why in the process of even the initial 
legislations and on is that we know, you know, it started in 
the Bush administration and went through three administrations 
basically and, you know, we still have a role on the part of 
the Department of Ed to be able to, you know, kind of yell 
help, you know, we have got some problems here, we need to take 
a look at this. So that is what we want to know.
    I personally believe that as a country this is something 
important for us to continue to do, to pledge and then to act 
on that pledge that we are there to help along the way those 
people who go into public service and choose to make that their 
career, their lifelong careers; important for people to do and 
not everybody is able to do that.
    We do have--I know that the issue of graduate students 
maybe have more wherewithal, yes, some do, but probably the 
majority do not. And so, we need to be able to address that 
issue and how we deal with it, how we make this work. And you 
have been very helpful in helping us understand that. Thank 
you.
    I now want to remind my colleagues, I have a number of 
things I have to read here, so just bear with me for a second.
    I remind my colleagues that pursuant to committee practice, 
materials for submission for the hearing record must be 
submitted to the Committee Clerk within 14 days following the 
last day of the hearing, preferably in Microsoft Word. The 
materials submitted must address the subject matter of the 
hearing.
    Only a Member of the committee or an invited witness may 
submit materials for inclusion in the hearing record. Documents 
are limited to 50 pages each. Documents longer than 50 pages 
will be incorporated into the record via an internet link that 
you must provide to the Committee Clerk within the required 
timeframe. Please recognize that years from now that link may 
no longer work.
    What we have heard here today, of course, is very valuable. 
Members of the committee may have some additional questions for 
you, and we ask the witnesses to please respond to those 
questions in writing. The hearing record will be held open for 
14 days in order to receive those responses.
    I remind my colleagues pursuant to committee practice 
witness questions for the hearing record must be submitted to 
the Majority Committee Staff or Committee Clerk within 7 days. 
The questions submitted must address the subject matter of the 
hearing.
    And we will now take a very, very brief minute or two to 
seat our second panel. Thank you again.
    [Recess]
    Chairwoman Davis. All right. Thank you both for being here, 
for staying with us throughout the panel. I think it is helpful 
for you to hear them and for them to know that you are in the 
audience, as well, and appreciate that.
    I wanted to now introduce our introduce witnesses. Jeff 
Apple--Appel, Jeff Appel is the director of policy liaison and 
implementation at Federal Student Aid. Prior to joining Federal 
Student Aid in 2016, Mr. Appel worked in the Department's 
Offices of the Undersecretary as well as the Office of 
Planning, Evaluation, and Policy Development.
    Prior to working at the Department, he worked on Capitol 
Hill as a senior policy advisor with the House Committee on 
Education and Labor. And prior to working for the committee, 
Mr. Appel worked at the Government Accountability Office, the 
GAO, for over 20 years. And for several years, led much of 
GAO's higher education and student financial aid-related work.
    Next, Melissa Emrey ``ah-ross''--``air-us''? ``Air-us.'' 
Arras, okay. Thank you, Ms. Arras, is a director in GAO's 
Education Workforce and Income Security Issues team. She 
oversees GAO's higher education reports and has led studies 
examining the Public Service Loan Forgiveness program.
    Before joining in GAO in 2001, she worked at a private 
sector consulting company and conducted program evaluations for 
state and local governments.
    Pursuant to Committee Rule 7(d) I will now ask the 
witnesses to please stand and raise their right hands.
    [Witnesses sworn.]
    Chairwoman Davis. Let the record show that the witnesses 
all answered in the affirmative.
    We appreciate, again, your being here and look forward to 
your testimony. I wanted to remind you that we have read your 
written testimony, your statements, and they will appear in 
full in the hearing record.
    Pursuant to Committee Rule 7(d) and committee practice, 
each of you is asked to limit your oral presentation to a five-
minute summary of your written statement. I also wanted to 
remind you that pursuant to Title 18 of the U.S. Code, Section 
1001, it is illegal to knowingly and willfully falsify any 
statement, representation, writing, document, or material fact 
presented to Congress or otherwise conceal or cover up a 
material fact.
    Before you begin your testimony, please remember to press 
the button on the microphone in front of you so that it will 
turn on and the Members can hear you. As you begin to speak, 
the light in front of you will turn green and after 4 minutes 
the light will turn yellow to signal that you have 1 minute 
remaining. And when the light turns red, your five minutes have 
expired, and we ask that you please wrap up.
    We will let the entire panel, both of you, make your 
presentations before we move to Member questions. Please 
remember to turn the microphone on, once again, when you 
respond.
    I will first recognize Director Appel. Please begin.

    TESTIMONY OF JEFF APPEL, DIRECTOR OF POLICY LIAISON AND 
 IMPLEMENTATION, OFFICES OF FEDERAL STUDENT AID, DEPARTMENT OF 
                           EDUCATION

    Mr. Appel. Thank you, Chairwoman Davis, Ranking Member 
Smucker, and Members of the committee for the opportunity to 
join you today. I look forward to discussing with you the 
Public Service Loan Forgiveness program, which we call PSLF, 
its temporary expansion, and our efforts to help borrowers 
understand and navigate their complexity.
    In 2007, Congress created PSLF to forgive any remaining 
balance on direct loans for borrowers who make 120 qualifying 
monthly payments. Under the law and regulations, a qualifying 
monthly payment is generally one that is made on time, under a 
qualifying repayment plan, and while working full time for a 
qualifying employer.
    While these requirements seem simple, the law and 
regulations surrounding PSLF pose obstacles to borrowers. A few 
such complexities are, first, not all loan programs qualify. In 
fact, only direct loans do. And when PSLF was enacted, the 
Direct Loan Program was a much smaller program. In 2007, about 
75 percent of borrowers participated in the nonqualifying FFEL 
program, a choice made by borrower's school. To qualify for 
PSLF, therefore, a borrower with one or more FFEL loan would 
have had to consolidate them into a Direct Loan. The FFEL 
program ceased making loans in 2010.
    Second, not all loan repayment plans qualify. Qualifying 
repayment plans for PSLF generally include the income-driven 
repayment plans, IDR plans, and the 10-year standard plan, 
which would pay off loans before PSLF would apply. Many 
borrowers don't choose qualifying plans because they're 
comfortable making their payment when not based on income or 
would find a payment based on income unaffordable to them.
    In light of these complexities and other disqualifying 
factors, the number of borrowers who have to date been eligible 
to receive forgiveness is low. As of June 30th, about 91,000 
borrowers have applied for PSLF, but only 845 have had loans 
discharged. Fifty-two million dollars has been forgiven.
    In 2018, to increase the number of borrowers who could 
receive loan forgiveness Congress created a limited temporary 
expansion of PSLF, or TEPSLF. The expansion forgives the 
remaining balance on Direct Loans for borrowers who would 
qualify for PSLF but for the fact that some or all of their 
payments were made under the graduated or extended repayment 
plan.
    In creating the expansion, however, Congress set other 
conditions. Under the law these borrowers must demonstrate that 
their most recent payment and the one 12 months prior to 
applying was at least as much as they would have paid under an 
IDR plan. And like the original program, the temporary program 
limited benefits to borrowers who made 120 qualifying payments 
on Direct Loans, which excluded many borrowers who had FFEL 
program loans or that payments they made prior to 
consolidation.
    Congress also required the Department to implement an 
application process for TEPSLF within 60 days of enactment. 
Thus, we stood up the simplest application process we could 
within that short timeframe. As of June 30th, we've received 
over 17,000 requests for expanded forgiveness. Of these, 681 
borrowers had their loans discharged for a total of $28.2 
million.
    While initial approvals have been low, we do expect that 
more borrowers will qualify for PSLF and its expansion in the 
future. Why do we expect this? Consider the following.
    Overall, among applicants without standing eligible loans, 
about 80 percent have not been in repayment for 10 years. 
Naturally, as time passes, more borrowers will have a real 
opportunity to meet the criteria of PSLF and the expansion. 
Regardless, we recognize that we must build on our improvements 
in administering the program. These improvements include 
implementing GAO's recommendations, which includes improving 
our communications and outreach, as well as streamlining 
processes. The GAO's recommendations were helpful to us and we 
will continue to meet them moving forward.
    Beyond the GAO recommendations, we recently developed a 
PSLF help tool to help borrowers understand PSLF eligibility 
requirements. The tool allows borrowers to generate employment 
verification forms to make it easier to provide annual 
certification and provides information about other actions a 
borrower should or must take if he or she wishes to receive 
forgiveness. Since launched in December 2018, borrowers have 
used the tool more than 216,000 times to generate over 82,000 
forms.
    The help tool is a first step for the type of service that 
we believe all borrowers deserve. To that end, we anticipate 
improving it as part of Federal Student Aid's Next Gen 
Initiative. The central focus of Next Gen is to improve the 
customer experience throughout every stage of the student aid 
life cycle.
    In short, we are committed to doing our job to help 
borrowers navigate the complex forgiveness programs the 
Congress established. We, as always, stand ready to provide 
technical assistance to you and any legislative change that 
would expand forgiveness to more borrowers who faithfully serve 
our country.
    In the meantime, we will continue to implement the law as 
written and continue to improve our administration of it. I 
appreciate the opportunity to provide you with an overview of 
our work, the changes we have made and plan to make, and 
welcome any questions you have today.
    [The statement of Mr. Appel follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    Chairwoman Davis. Thank you. Thank you. Ms. Arras.

   TESTIMONY OF MELISSA EMREY-ARRAS, DIRECTOR OF EDUCATION, 
   WORKFORCE, AND INCOME SECURITY, GOVERNMENT ACCOUNTABILITY 
                             OFFICE

    Ms. Emrey-Arras. Chairwoman Davis, Republican Leader 
Smucker, and Members of the committee, I am pleased to be here 
today to discuss GAO's reports on the PSLF program and the 
temporary expanded loan forgiveness process. I will focus my 
remarks on three issues.
    One, the extent to which borrowers' applications for loan 
forgiveness through the PSLF program and the temporary expanded 
process have been approved or denied.
    Two, the extent to which education provides the PSLF 
servicer with sufficient information to administer the program.
    And three, opportunities for improving service to 
borrowers.
    Beginning with a look at the data on loan forgiveness, our 
2018 analysis found that Education had denied about 99 percent 
of borrowers that applied for PSLF during the first 8 months 
that Education was accepting applications. According to 
Education's PSLF data, through March of 2019 PSLF program 
denial rates have continued to be about 99 percent. Similarly, 
when we looked at the temporary expanded loan forgiveness 
process, we found that Education had denied 99 percent of those 
requests as of May of 2019.
    Turning to Education's interactions with the PSLF loan 
servicer, we found shortcomings in the information Education 
provided to the loan servicer, which increased the risk of 
administrative errors. For example, in our 2018 report, we 
found that Education does not have a comprehensive document or 
manual to provide the PSLF servicer with guidance and 
instructions. This made it difficult to effectively administer 
the PSLF program and provide consistent service to borrowers 
according to PSLF servicer officials. We reported that 
Education's guidance and instructions to the PSLF servicer are 
dispersed in a piecemeal manner across multiple documents, 
including Education's original contract, multiple updates to 
the contract, and hundreds of emails to the servicer. As a 
result, PSLF servicer officials said that their staff were 
sometimes unaware of relevant PSLF program guidance and 
instructions in emails provided by Education.
    Consequently, we recommended that Education develop a 
timeline for issuing a comprehensive guidance and instructions 
documents for PSLF servicing. We also made recommendations to 
Education provide additional information for determining which 
employers qualify for PSLF and to standardize the payment 
information the PSLF servicer receives from other loan services 
for determining qualifying payments for PSLF. Education agreed 
with these recommendations but has yet to fully implement them.
    Now turning to opportunities to improve service to 
borrowers, we have found that Education can provide better 
service to borrowers by expanding outreach, streamlining 
processes, and sharing critical information with borrowers. For 
example, we found that Education does not include information 
for borrowers about the temporary expanded process and key 
online sources.
    Consequently, we made recommendations that Education 
include information on this process in its online PSLF help 
tool and require all loan servicer websites to provide 
information on the temporary expanded process.
    We also made recommendations that Education integrate the 
request for the temporary expanded process into the PSLF 
application, provide borrowers with sufficiently detailed 
information to be able to identify any errors in the servicer's 
counts of qualifying payments for the program, and provide 
borrowers more information on options for contesting denials of 
temporary expanded loan forgiveness. Education agreed with 
these five recommendations and has yet to fully implement them.
    In conclusion, large numbers of borrowers have pursued 
careers in public service, sometimes at lower pay than in the 
private sector with the hope of one day achieving loan 
forgiveness through the PSLF program. They have often had to 
navigate the PSLF program requirements with a lack of 
sufficient information from Education, only to be denied 10 
years later when they applied for loan forgiveness because 
their prior years of employment or loan payments did not 
qualify.
    In addition, some borrowers who were denied may not be 
aware that they may be eligible for loan forgiveness through 
the temporary expanded process, potentially missing out on this 
opportunity. Education needs to take action to better serve 
these borrowers and help smooth their long road towards loan 
forgiveness.
    We continue to believe that implementing GAO's eight 
recommendations would strengthen program administration, 
improve service to borrowers, and help fulfill the original 
goal of encouraging individuals to enter and continue tin 
public service. Thank you.
    [The statement of Ms. Emrey-Arras follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    Chairwoman Davis. To both of you, thank you very much, 
again, for being here.
    I am going to turn to Ms. Jayapal for the first questions.
    Ms. Jayapal. Thank you, Madam Chair. I do think it is 
unfortunate that the CEO of the Pennsylvania Higher Education 
Assistance Agency, which exclusively manages the Public Service 
Loan Forgiveness through FedLoan is not here. I would have 
really liked to ask him questions, especially given that 
FedLoan's performance under its contract with the Department of 
Education has, frankly, been abysmal.
    Dr. Appel, you say in your testimony that as of June 30, 
2019, about 91,000 borrowers have applied for PSLF and 845 
borrowers have had their loans discharged for a total of 52 
million. You realize that is a less than 1 percent approval 
rate, correct?
    Mr. Appel. Yes, Congresswoman.
    Ms. Jayapal. And you acknowledge that Congress provided an 
extra $700 million to help students who were enrolled in the 
wrong repayment plan and yet the Department of Education 
disbursed 28 million to forgive 681 borrower loans?
    Mr. Appel. Yes, Congresswoman.
    Ms. Jayapal. And you acknowledge that the Pennsylvania 
Higher Education Assistance Agency or FedLoan has made $1.3 
billion over the course of 10 years to service student loans, 
correct?
    Mr. Appel. Off the top of my head, I don't know the sum of 
the compensation they received.
    Ms. Jayapal. But it sounds about right?
    Mr. Appel. I wouldn't want to guess.
    Ms. Jayapal. Okay. I will tell you it is right. But you are 
aware that Mark Brown, the head of the Education Department's 
Office of Federal Student Aid, called FedLoan's performance 
``wholly unacceptable'' in an April 2019 letter to the company?
    Mr. Appel. I haven't seen the letter. I will take your word 
for it.
    Ms. Jayapal. Actually, Madam Chair, I would like to enter 
into the record that letter from Mr. Brown. I would like to ask 
unanimous consent.
    Chairwoman Davis. Oh, yes, I am sorry.
    Ms. Jayapal. Thank you. And based on these facts, Mr. 
Appel, how would you grade FedLoan's performance under its 
contract?
    Mr. Appel. Well, among the--if we were to go over some of 
the facts that you laid out, you mentioned the reflected and 
I--but I also mentioned it in my oral statement and in the 
written statement we've submitted, the approval rate is low. 
But I think in the earlier panel there were questions about 
terminology sometimes being unfortunate.
    Ms. Jayapal. I understand. And I am so sorry, I just have a 
little bit of time.
    Mr. Appel. Yeah.
    Ms. Jayapal. But if you had to grade FedLoan's performance 
how would you grade it on an A to F grading system?
    Mr. Appel. So, Congresswoman, the current contract process 
that is used to allocate loans among--new loans among servicers 
is based on a performance metric. In other words, as borrowers 
take out new loans and those are allocated among servicers, 
those are based on their performance against a set of metrics 
that include keeping repayment--keeping loans in repayment, as 
well as--
    Ms. Jayapal. I'm going to just--
    Mr. Appel.--as well as customer borrower satisfaction.
    Ms. Jayapal. Okay. I wanted to see if you were willing to 
endorse what Mr. Brown said in his letter. He called FedLoan's 
performance wholly unacceptable. I wanted to see if you were 
willing to say that.
    Has the Department of Education ever issued a corrective 
action plan to FedLoan or to its parent company, the 
Pennsylvania Higher Education Assistance Agency?
    Mr. Appel. I believe FSA has issued corrective actions with 
respect to a number of servicers.
    Ms. Jayapal. And I will just say in the letter that I 
submitted there are three outstanding corrective action plans: 
one, around deficiencies for improper servicing; two, around 
customer service as identified in Higgins v. Education; and 
three, the implementation of the Teach Grant reconsideration 
process. The fact that these warnings were even issued I think 
shows serious malfeasance at FedLoan.
    Has the Department of Education compensated the borrowers 
who were affected, or did you require FedLoan to do so?
    Mr. Appel. I don't know about the particular circumstances 
that you're referencing. I do know when there are cases of 
servicer error, there can be corrective action that requires 
keeping borrowers whole.
    Ms. Jayapal. Okay. Has the Department ever considered 
taking all or a portion of business away from FedLoan to 
improve the borrower experience?
    Mr. Appel. As you may be aware, Congresswoman, FSA is now 
engaged in a significant effort to remake and transform the 
student loan servicing function as part of its Next Gen 
Initiative.
    Ms. Jayapal. And do you believe that FedLoan should be 
under consideration for an ongoing contract given that it has 
been called wholly unacceptable in terms of its performance so 
far?
    Mr. Appel. So, the acquisitions process that's common 
across the Federal Government includes provisions that require 
solicitations to be open for competition that will be--past 
performance will be judged based on requirements of that 
solicitation.
    Ms. Jayapal. Thank you, Mr. Appel. It is unfortunate, and I 
think very disturbing to me, that $1.3 billion in taxpayer 
money is potentially going to be continued for an agency that 
has wasted that money as far as we can see from everything that 
has been put forward. And I hope that you would reconsider that 
at the Department of Education.
    Thank you, Madam Chair.
    Chairwoman Davis. Thank you.
    Ms. Jayapal. I yield back.
    Chairwoman Davis. Thank you. Mr. Smucker? The Ranking 
Member will now ask questions.
    Mr. Smucker. Thank you, Madam Chair. Mr. Appel, I would 
like to just get a few questions and your answers on the 
record.
    So yes or no, does the Higher Education Act, which is, of 
course, the act which authorizes PSLF, have specific criteria 
for borrower eligibility?
    Mr. Appel. Yes, Congressman.
    Mr. Smucker. Does that specific participation criteria 
include employment with specific types of organizations doing 
specific types of work, yes or no?
    Mr. Appel. Yes, Congressman.
    Mr. Smucker. And does the specific participation criteria 
include specific requirements about what counts as a payment 
for PSLF?
    Mr. Appel. Yes, Congressman.
    Mr. Smucker. And does that criteria include a requirement 
for a borrower to be in a certain type of repayment plan and 
how many payments need to be made to qualify for participation?
    Mr. Appel. Yes, Congressman.
    Mr. Smucker. Did the Department of Education add any 
requirements for participation in addition to what was already 
in the law?
    Mr. Appel. There were some additions as a result of 
regulations developed by the Department that further--
    Mr. Smucker. Could you go into detail about what some of 
those requirements may be, when they were established? And have 
any of those eligibility requirements been changed in the last 
decade?
    Mr. Appel. So, the Department of Education originally 
engaged in negotiated rulemaking to develop regulations for 
PSLF in 2007. I believe the final regulations were issued in 
2008. In defining eligibility requirements, an on-time payment 
is defined as a payment within 15 days of the due date.
    There are also requirements that address certain types of 
qualifying activities within work performed by certain types of 
organizations. So, for example, certain religious activities 
might not qualify under the program as--for employment 
purposes.
    Mr. Smucker. So, again, your testimony is that those 
regulations were implemented in 2008?
    Mr. Appel. Yes, sir.
    Mr. Smucker. Have any of those requirements changed since 
then, in the last decade?
    Mr. Appel. There are a few additions that I believe were 
added in 2015 that pertained to making some exceptions about 
how to count payments for Department of Defense loan repayment 
programs that were kind of given a special treatment in terms 
of how those payments would be counted.
    Mr. Smucker. Thank you. Let's go then to the requirements 
for the expansion, the Temporary Expanded PSLF. Were those 
requirements as specific as PSLF?
    Mr. Appel. Yes, Congressman.
    Mr. Smucker. Did the Department add any requirements to the 
Temporary Expanded PSLF criteria when implementing that program 
that are not related to the statutory requirements?
    Mr. Appel. No, Congressman.
    Mr. Smucker. Thank you. Mrs. Emery-Arras, also a few 
specific questions.
    Yes or no, in the report issued by the GAO, the GAO find 
that the Department was not following the law on TEPSLF?
    Ms. Emrey-Arras. We did not do a legal compliance review.
    Mr. Smucker. So, there was no finding that they were not in 
compliance with the law?
    Ms. Emrey-Arras. Correct.
    Mr. Smucker. Did the Department disagree with any of your 
recommendations in the report because they did not want to help 
borrowers?
    Ms. Emrey-Arras. The Department agreed with all of the 
recommendations.
    Mr. Smucker. And did the GAO find that the Department was 
actually denying, completely denying any eligible borrowers?
    Ms. Emrey-Arras. No.
    Mr. Smucker. Did the GAO do any analysis of whether the law 
as written is the reason that almost all applicants for the 
program have been found ineligible?
    Ms. Emrey-Arras. No, our focus was on the implementation of 
the law and how it was operationalized by the Department.
    Mr. Smucker. Thank you. And I yield back the balance of my 
time.
    Chairwoman Davis. Thank you very much. Mr. Scott?
    Mr. Scott. Thank you, Madam Chair. As I said earlier, I 
mean, we didn't create a puzzle or a contest. I mean, the odds 
of somebody getting through this process, they would be better 
off buying lottery tickets.
    Mr. Appel, when should a person know that they are on the 
right track to get a discharge under this program?
    Mr. Appel. So, Congressman, to help borrowers know whether 
they're on the right track the Department developed an 
employment certification form back in 2012 that we encourage 
borrowers to complete at least annually or more frequently if 
they change employers. That starts a process that allows them 
to track their progress towards forgiveness.
    Mr. Scott. Okay. And is that form sent to the servicer or 
to the Department?
    Mr. Appel. So, the form is sent to the servicer. It's made 
available on our website and borrowers can obtain the form from 
any loan servicer.
    Mr. Scott. And as soon as the student as the borrower fills 
out the form, when do they know whether they are on the right 
track or not?
    Mr. Appel. So, when they--after they complete the form, if 
it's accurate, completely filled out, the contractor will 
review and respond to the borrower typically within 30 to 45 
days, depending on whether the form is complete. It can take 
longer if there's any back-and-forth required to obtain more 
information.
    Mr. Scott. And so, the borrower should know when they sign 
up with an employer whether they are on track to a 10-year 
discharge?
    Mr. Appel. So, one of the things that we--in addition to 
the employment certification form that we've recently developed 
and implemented is a Public Service Loan Forgiveness help tool. 
And it's an automated tool that will guide a borrower towards 
the steps of completing the employment certification form, but 
it's almost an online tutorial that will help guide borrowers 
to recognize, we think, sooner and make sure that they're aware 
that they have the right loan, are in the right repayment plan, 
that their employer is likely to qualify or may qualify. And 
those are some of the--we plan on actually making additional 
improvements to that tool in response to some of GAO's 
recommendations.
    Mr. Scott. If that process starts taking place, what 
portion of the people who think they are in the plan will 
actually be in the plan?
    Mr. Appel. So, as we've kind of seen in some of the results 
to date with respect to applications that have been submitted, 
among those that have been found not eligible, several are 
because borrowers are not in the right repayment plan. Some of 
the new information that we've been making public is to help 
provide some transparency and clarity about those factors that 
are keeping borrowers from--
    Mr. Scott. Now, as I understand it, if you are in the wrong 
plan, you can consolidate into the right plan, right?
    Mr. Appel. So, if you have the wrong type of loan you can 
consolidate into the Direct Loan Program. For example--
    Mr. Scott. And then you would qualify for the 10-year 
discharge?
    Mr. Appel. You would have an eligible loan. Beyond that--
beyond--there are other requirements beyond having the right 
kind of loan. That includes being in the right repayment plan.
    Mr. Scott. Well, I guess the question is people ought to 
know whether they are going to get a discharge after 10 years. 
We all have constituents who have said they thought they were 
in the right plan. They are at the end of 10 years, they 
thought they had done what they--what was necessary. And all of 
a sudden, they are told, no, you have got another 10 years to 
make payments. That wasn't what we expected when we set up the 
program.
    Now, to fix this so that people who are in plans and have 
done what they are supposed to do, do we need statutory 
changes, or can this be done through regulation to fix the 
problem?
    Mr. Appel. So, depending on what problems or barriers there 
may be--
    Mr. Scott. Well, the problem is that 99 percent of the 
people that are applying for a discharge are told they are not 
qualified. And, you know, if it was 99 percent qualified, 1 
percent didn't get it right, you could say it was their fault. 
But 99 percent discharged, there is something wrong with the--
well, let me ask you this. Do you think there is something 
wrong with the program?
    Mr. Appel. Congressman, earlier in my oral statement and in 
my written statement we have information to the point of the 
low approval rates to date. So, among eligible--among 
applicants who have eligible loans, the right loans, about 80 
percent have not been in repayment for 10 years. So, meaning 
that 10-year repayment requirement is a significant criteria in 
order to earn forgiveness. So, for--
    Mr. Scott. Well, my time is expiring. Is there anything 
that--to get this thing fixed is there anything that needs to 
be done by statute or can you do it by regulation to fix the 
problem?
    Chairwoman Davis. Mr. Chair, I am going to go ahead and go 
to the next Member, but I also want you to respond to that in 
just a few minutes, okay?
    Mr. Appel. So, I--as I mentioned earlier, some of the 
obstacles borrowers are facing are because of the statutory 
requirements, and the Department is happy to provide Congress 
technical assistance if you'd like to contemplate legislative 
changes. There are steps that we're taking to improve our 
administration of the program, some of which are in the 
response to the GAO's recommendations. We're taking quite a few 
steps to try to increase borrower awareness about the 
requirements of the program and the steps that they need to 
take in order to earn forgiveness.
    Chairwoman Davis. Thank you, Director Appel. Dr. Foxx?
    Mrs. Foxx. Thank you, Madam Chairman. Mr. Emrey-Arras, the 
GAO completed a report in August of 2015 that said the 
Department of Education could do more to help ensure borrowers 
are aware of repayment and forgiveness options. In general, 
that report found that participation in the available programs 
was low and the conclusion of that report said the borrowers 
needed information PSLF to take advantage of the program.
    The report also found the Department had not assessed the 
efforts it had made to raise awareness of the program. Is that 
generally accurate about that 2015 report?
    Ms. Emrey-Arras. Yes.
    Mrs. Foxx. Ms. Emery-Arras, who was the Secretary of 
Education at the time this 2015 report was issued?
    Ms. Emrey-Arras. The prior administration.
    Mrs. Foxx. Who was the Secretary of Education in the time 
period looked at in developing the report, how long had that 
individual been in that position?
    Ms. Emrey-Arras. It was under the prior administration.
    Mrs. Foxx. But who was it and how long had that person been 
in the position?
    Ms. Emrey-Arras. I don't remember how long at that point in 
time.
    Mrs. Foxx. Okay. Well, I would appreciate it if you could 
get that for us for the record. Okay?
    Mr. Appel, you were at the Department when this report was 
issued, correct?
    Mr. Appel. Correct.
    Mrs. Foxx. In that 2015 report the GAO noted that the 
Department had taken some steps intended to increase borrower 
awareness of PSLF, but it had not notified all borrowers who 
have repayment about the program. The report noted that 
borrowers had to proactively seek out the information on PSLF 
that the Department had put on social media and its website. 
The report goes on to note that the Department was considering 
an email campaign to borrowers on income-driven plans.
    Mr. Appel, do you recall what actions the Department took 
in response to this report?
    Mr. Appel. So after--consequent to the report, the 
Department continued some of the direct outreach it was making 
to borrowers as part of a campaign to increase awareness of 
income-driven repayment and the link participating in that plan 
to Public Service Loan Forgiveness.
    Mrs. Foxx. If the Department had done more to inform 
borrowers earlier about all of their obligations under the law 
would the ineligible rates, we are currently seeing have been 
this high?
    Mr. Appel. So, I think one of these--Congresswoman, one of 
the significant and important details that we're offering today 
is--in terms of insight into the low approval rates, is the 
fact that a large majority of applicants haven't been in 
repayment for 10 years. So, there's either a confusion on the 
part of the borrower about what's required or borrowers are 
going ahead and applying, perhaps thinking they're taking the 
right steps in order to track progress.
    Mrs. Foxx. Right. And nobody in the last panel or this 
panel has said one word about student financial aid officers 
and what is their responsibility to the students and interns. 
And again, one of the things we did in the PROSPER Act was to 
talk about the financial literacy aspects and the importance of 
counseling to students.
    It seems to me that there is a big gap here in the people 
who are not here. We talked about PHEAA not being here. We 
should have had somebody from NASFA here to talk about what is 
the role of financial aid officers in explaining this to 
students?
    I will still contend students, from the material on the 
Department's website, could understand what the requirements 
are. And I do think it is important for us to stop using the 
word ``denied'' and start saying ``ineligible.'' Because, as 
you say, 80 percent have not even paid 10 years' worth, which 
means they are not denied. They simply have not become eligible 
for the program. And I think it is very important we do that.
    If the Department had done earlier a more robust outreach, 
I believe we would not have seen so many people incorrectly 
believing they were eligible and on track. But I also believe 
there would be very few people eligible for a discharge in 2019 
considering all the limitations included in the law.
    There would have been no need to create TEPSLF if Democrats 
in Congress in 2007 had done a better job writing the program 
and the Democrats in the executive branch cared about borrowers 
enough to move forward with implementing the program so 
everyone was aware of the legislative requirements from the 
beginning.
    Most of these problems stem from the beginning of the 
program and the lack of work done during the Obama 
administration. And that simply is--the blame is being put on 
this administration, which is incorrect.
    Thank you. I yield back.
    Chairwoman Davis. Thank you. Turn to Mr. Sablan.
    Mr. Sablan. Yeah, thank you, Madam Chair. We are all 
getting hungry. I will get right to the questions.
    Mr. Appel?
    Mr. Appel. Yes, Congressman.
    Mr. Sablan. Mr. Appel, why does the Department prevent 
prepayments from counting towards Public Service Loan 
Forgiveness through pay-ahead status? And why wouldn't the 
government want to encourage borrowers to pay their loans 
early?
    Mr. Appel. So, Congressman, I mentioned earlier one of the 
few additions to the statutory requirements that the Department 
had added through its regulations was to define what 
constitutes an on-time payment, and that was a payment within 
15 days of a due date. The idea behind that in part rests with 
the goal of the program and the requirement that a borrower's 
employment--that the 10-year service requirement is tied to 
their loan repayment.
    So, in order--so there's kind of two subparts of that 
requirement. A borrower needs to work for 10 years for a 
qualifying employer, but also make 10 years' worth of 
repayment. We've kind of combined that--those two elements are 
kind of combined in that one statutory requirement.
    Mr. Sablan. Fair enough, thank you. And, Mr. Appel, on page 
9 and 10 of GAO's report they talk about the benefits of 
integrating the Public Service Loan Forgiveness program, PSLF, 
and the Temporary Expanded PSLF, which allows borrowers to 
qualify for loan forgiveness through additional types of 
repayment plans. And it says that the Department basically 
knows that this should happen.
    However, GAO says that there are, and I quote, ``currently 
no specific plans to do so.'' How is that possible?
    Mr. Appel. So, I think, Congressman, to make sure I 
understood your question, the GAO did recommend that we combine 
the application process of both the Public Service Loan 
Forgiveness program and the temporary expansion of that program 
that Congress created.
    When Congress first passed the temporary expansion in 2018, 
they gave the Department just 60 days to implement a simple 
process. We did the best we could within that short timeframe. 
It's a challenge for a Federal agency to implement anything in 
60 days and comply with other statutory requirements, frankly, 
including the Paperwork Reduction Act.
    The simple process we've set up really--is really basically 
a borrower sending us an email. And given the statutory 
requirements in the appropriations language that conveyed that 
program, we felt, obviously, legally, we had to make sure that 
a borrower wasn't, first, eligible for Public Service Loan 
Forgiveness, but for using the discretionary appropriated funds 
included in the appropriations bill.
    Also, by making sure that we're kind of using one pot of 
money before we use the discretionary pot of money, we would 
make those funds go further anyway. So, we thought that was 
part of the goal of Congress, as well.
    Mr. Sablan. So, Mr. Appel, are you saying that GAO's 
statement that there are currently no specific plans to do so, 
to merge, for example, the two programs, is incorrect?
    Mr. Appel. So, I'd say their report and recommendation are 
fairly recent. I believe your final report just came out a week 
or two ago and includes that recommendation.
    We agreed with the recommendation. We don't have a 
timeframe yet. One of the our--one of the challenging things 
about trying to combine the two processes, frankly, is with the 
appropriated discretionary funds that pay for the loan 
forgiveness part of the bill is dealing with the first-come, 
first-served requirement.
    Mr. Sablan. All right.
    Mr. Appel. So, there's a queuing process that is part and 
parcel of the temporary expansion.
    Mr. Sablan. I have one more question, Mr. Appel. Thank you.
    Mr. Appel, we know that the Department itself has found 
that the loan servicer responsible for administering PSLF, 
PHEAA, that loan servicer, has miscounted payments towards PSLF 
contrary to their contract. Has the Department ever penalized 
PHEAA for not following its contract? And if not, why not?
    Mr. Appel. So, I'm aware that the Department has developed 
corrective action plans to work with PHEAA on payment counting 
issues. I'm not sure of the specific requirements of that. I'm 
happy to get back to you on that, if you'd like.
    Mr. Sablan. So, there is a potential possibility that they 
will be penalized?
    Mr. Appel. So, the Department in past has taken actions 
against servicers--
    Mr. Sablan. Money?
    Mr. Appel.--that proposed penalty. It includes recouping 
funds that they were paid to perform a service that we find 
they actually didn't perform.
    Mr. Sablan. My time is up, Madam Chair.
    Chairwoman Davis. Thank you. I am going to turn to Mr. 
Guthrie.
    Mr. Guthrie. Thank you, Madam Chair. Thank you for 
convening this hearing. I appreciate.
    I apologize. There is a couple of the--I know another 
committee and they had a couple subcommittees meeting and I 
have been there, so I apologize for being late to be here. But 
glad to be here to ask some questions. I look forward to your 
responses.
    So, Ms. Emrey-Arras, this July, the GAO report--GAO 
completed another report relating to Federal loan repayments. 
In the report, on income-driven repayments the GAO found 
potential fraud in the program and suggested the Department of 
Education was vulnerable because of the weak verification 
measures of income-driven repayments. Is that correct?
    Ms. Emrey-Arras. That is correct.
    Mr. Guthrie. So, do you all stand by your findings and 
notes of potential fraud in this report, which you said you do? 
Do you believe Congress should be concerned about these 
deficiencies and that we should be looking for solutions to 
what you discovered?
    Ms. Emrey-Arras. We did make recommendations in that report 
that your referenced to help address potential fraud and error 
in the income-drive repayment plans.
    Mr. Guthrie. Thank you. So, Mr. Appel, was it the 
Department's reaction to that report on income verification and 
income-driven repayment plans--I mean, what was the 
Department's reaction? And did the Department make any changes 
or are they in the process of making any changes to eliminate 
or mitigation the risk of fraud in these repayment plans?
    Mr. Appel. Thank you, Congressman, for the opportunity to 
respond.
    We agreed with GAO's recommendations in that report and are 
in the process of taking steps to respond to those. We're still 
trying to figure out how best to do that.
    One of the things that GAO found, and that kind of 
highlights one of the challenges we have in implementing 
income-drive repayment programs, which has some impact with 
respect to the Public Service Loan Forgiveness program, is that 
the Department doesn't have access to income of borrowers 
unless borrowers provide it to us. That is sometimes an 
implementation challenge in terms of not only enrolling 
borrowers into an income-driven repayment plan but maintaining 
their enrollment because there's a requirement that they 
certify their income annually.
    We've taken steps to try to facilitate borrowers' provision 
of that income by using the same tool that we've used to help 
FASFA applicants provide IRS data to the Department for the 
purposes of applying for Federal student aid. So that's the IRS 
DRT tool that you may be familiar with.
    Mr. Guthrie. Right.
    Mr. Appel. So, borrowers can also use that for providing 
their income data for purposes of participating in an income-
drive repayment plan. There are times, of course, that we know 
that borrowers may lose a job and their financial circumstances 
change and they may not be earning any income. And they're 
still entitled to participate under the law in an income-based 
repayment program. And they may have payments that are 
legitimately zero dollars.
    We're taking steps based on the--GAO's findings that--there 
seem to be a potential for fraud or an indicator of fraud given 
the extent to which they found that for some borrowers who had 
certified on their applications, that they had very large 
family sizes or low or no income, that GAO found that they had 
earnings reported in the Department of Health and Human 
Services' New Hires database; another source of income 
information to which the Department of Education does not have 
access.
    Mr. Guthrie. Okay. One other question, Mr. Appel. In order 
to prevent fraud in any program it is important to carefully 
follow the law as written as the Department has done in the 
Public Service Loan Forgiveness.
    Further, I am just wondering, are you aware of any concern 
of potential fraud in the Temporary Expanded Public Service 
Loan Forgiveness or Public Service Loan Forgiveness as the GAO 
noted in the income-drive repayment report?
    Mr. Appel. So, Congressman, I'm not aware of any potential 
for fraud. But as I mentioned earlier, because of the issues 
that GAO had identified with respect to those borrowers that 
participated in income-drive repayment, being enrolled in it 
for--in order for a borrower to really benefit from the Public 
Service Loan Forgiveness programs, they need to be in an 
income-driven repayment plan. That lowers their monthly payment 
more than a 10-year standard plan would provide.
    So, to the extent that the information provided isn't 
accurate, then that's kind of a spillover from the potential 
concerns that GAO had about whether there's a chance of fraud.
    Mr. Guthrie. Okay, thank you. My time has expired, and I 
yield back. I appreciate your answers. Thank you.
    Chairwoman Davis. Turn now to Mr. Grothman. Ready?
    Mr. Grothman. Okay. Mr. Appel?
    Mr. Appel. Yes, sir.
    Mr. Grothman. Okay. There is a lot of confusion about the 
PSLF eligibility requirements. We should have a graph coming up 
here. Is there a graph coming up? Oh, here it is behind me. 
Okay.
    I want to make sure I understand everything here and even 
looking at this graph is going to lend credence to the idea 
that Congress did a bad job of putting this program together 
and it is too complicated. But are you familiar with this 
graph?
    Mr. Appel. Generally.
    Mr. Grothman. Yeah. The graph to me looks ridiculously 
complicated. Do you think it is ridiculously complicated?
    Mr. Appel. So, Congressman, in my written statement we've 
kind of laid out what the statutory requirements are.
    Mr. Grothman. And I am not blaming you for it. I am blaming 
Congress for it. I think the people who put together this 
program in 2007 didn't do a very good job. Do you think that is 
an accurate statement?
    Mr. Appel. Congressman, as we've mentioned, there's a 
relatively low approval rate and we've identified several of 
the statutory criteria as being responsible for why borrowers 
aren't obtaining forgiveness on their loans yet.
    Mr. Grothman. Right, and I want to qualify myself. I mean, 
I asked the previous panel. I am not for programs that 
discriminate against people who decide to go into manufacturing 
or agriculture or the private sector. I am not one of those 
private sector haters who thinks, you know, they should be left 
out of everything.
    But in 2007, a large percentage of students had been 
borrowing Federal loans through the FFEL program, not Direct 
Loan, correct?
    Mr. Appel. Correct. About three-quarters of students at 
that time were participating in the FFEL program because their 
schools participated in that program.
    Mr. Grothman. Yeah. And you think what happened is or part 
of the problem is here that the expectations were raised for 
people who were taking out their loans from the FFEL program 
and that is maybe a primary reason why we don't have those huge 
forgiveness that some people thought?
    Mr. Appel. I think we, Congressman, find in terms of 
reviewing the applications that are submitted, that one of the 
factors that are disqualifying applicants from receiving 
forgiveness is the fact that they have FFEL loans, which don't 
qualify for forgiveness.
    Mr. Grothman. Okay. Probably millions of people have either 
FFEL or combined FFEL and Direct Loans, right? You think 
millions of people are in that boat?
    Mr. Appel. So, the FFEL program ceased making loans in 
2010. It's a declining share of the overall outstanding balance 
of Federal student loans--
    Mr. Grothman. But still a high percentage. You have--
    Mr. Appel.--but not insignificant.
    Mr. Grothman. Over half?
    Mr. Appel. It's less than half of the current outstanding 
balance. At the time--
    Mr. Grothman. Of the balance. But the number of people who 
have some loans in that--from those programs?
    Mr. Appel. Congressman, that's also a declining share.
    Mr. Grothman. A declining share, but people who have 
least--
    Mr. Appel. It has millions of borrowers, Congressman.
    Mr. Grothman. Millions of borrowers, right. Did the 
Department say anything to those students during or after the 
transition about what that meant for repayment as we flip from 
FFEL to Direct Loans?
    Mr. Appel. So, part of our outreach and communications 
effort that we do is intended to be--to reach as broad an 
audience as possible. That's in part why we use--kind of rely 
on social media in order to reach as many people as possible.
    Mr. Grothman. Do you think there were a lot of people who 
didn't combine or blend their FFELs into Direct Loans? Is that 
part of the problem, too?
    Mr. Appel. Congressman, that is part of the problem in the 
sense of that's what we see as we're reviewing the applications 
borrowers are submitting to date.
    Mr. Grothman. Okay. If a borrower over or underpays in any 
given month, will that still count as a qualified payment 
assuming the borrower is in the correct repayment plan?
    Mr. Appel. It depends. It can. That has been an issue for 
some borrowers, and we are looking at taking steps to help 
those who may have inadvertently overpaid one month. That 
causes the--their payment bill the next month to decline to an 
amount that was lower than their regular scheduled monthly 
payment.
    Mr. Grothman. Okay.
    Mr. Appel. So there have been some issues.
    Mr. Grothman. Then I want to point out another area we 
might wind up people disappointed. Okay? Now, to get the PSLF 
you have to be working for a nonprofit or government agency, 
right?
    Mr. Appel. No, Congressman--yes, Congressman.
    Mr. Grothman. Okay. So that seems odd. So, if I am a 
journalist for NPR or a journalist for The Washington Post, 
theoretically you are doing the same thing, but it is not 
occupation, it is employer, right? So, you can have the exact 
same job, but because one guy was or gal was--you know, got 
involved working for a private sector corporation, they are out 
in the snow. Could that cause part of the confusion, too, if 
people didn't realize--
    Chairwoman Davis. Mr. Grothman, your time is well up. Mr. 
Appel, could you respond quickly to the first part of that 
question?
    Mr. Appel. Yes. For an employing organization to be 
eligible it needs to be nonprofit or government. For profit 
organizations would not be.
    Mr. Grothman. Could be confusing. Thank you.
    Chairwoman Davis. Thank you. Thank you. Ms. Adams.
    Ms. Adams. Thank you, Madam Chair, and thank you to the 
witnesses for being here.
    Mr. Appel, thanks for appearing before the subcommittee 
today. It is more than I can say for PHEAA. We know that the 
Department itself has found that PHEAA has miscounted payments 
toward the PSLF contrary to their contract. So, has the 
Department ever penalized PHEAA for not following its contract? 
And if not, why not?
    Mr. Appel. Congresswoman, thank you for your question. I 
responded to a similar question earlier. I'm aware that a 
corrective action plan had been developed for--with respect to 
PHEAA on payment counting issues. I'm not familiar with the 
specifics of that. It's not a function that I directly oversee 
at Federal Student Aid, but I do know there was a corrective 
action plan taken.
    I know with respect to some servicers and others there are 
penalties and consequences provided in cases where it's 
necessary. That has included reimbursing the Federal Government 
for fees they've been paid to perform services that we late 
find they failed to perform.
    Ms. Adams. Okay. So, you are saying that they reimburse as 
a way of correcting?
    Mr. Appel. That is a method of one of the consequences of 
failing to perform as contracted.
    Ms. Adams. Do you know if there are others?
    Mr. Appel. There are other examples, I believe, of that 
being the case with--for other servicers on other issues.
    Ms. Adams. Okay. Thank you. Ms. Emrey-Arras, the Department 
seems to lay off a lot of--to lay a lot of the blame on 
application denials on the borrower either because they were 
not in repayment for the required 120 months or their 
applications were incomplete. In GAO's estimation how much of 
that can be laid at the feet of the Department and PHEAA?
    Ms. Emrey-Arras. I think any confusion at the level of the 
borrower relates to the need for outreach by the Department. If 
people are applying for a program that they're not eligible 
for, it's because they're confused. And so, it's really 
important that the Department help them understand what the 
requirements are so that they can apply if they are eligible 
and not spend their time applying and have their hopes dashed 
if they are not.
    Ms. Adams. So now that the Department has begun 
implementing some of your recommendations, have we seen denials 
decrease accordingly?
    Ms. Emrey-Arras. It's still early, but the numbers have 
been very consistent in terms of the extremely high denial 
rates.
    Ms. Adams. Okay. So, it is more so than it was?
    Ms. Emrey-Arras. The denial rates have stayed constant at 
99 percent.
    Ms. Adams. Thank you very much. And, Madam Chair, I yield 
back.
    Chairwoman Davis. Thank you. Mr. Comer?
    Mr. Comer. Thank you, Madam Chair. Mr. Appel, the 
legislative language that created TEPSLF says, and I quote, 
``provided further that the Secretary shall provide loan 
cancellation under this section to eligible borrowers on a 
first-come, first-served basis based on the date of application 
and subject to both the limitation on total loan volume at 
application for such loan cancellations specified in the second 
proviso of the availability of appropriations under this 
section.''
    My question, does the first-come, first-served aspect of 
the law incent borrowers to act quickly rather than take the 
time necessary to understand their obligations under the law to 
be able to receive assistance under this program?
    Mr. Appel. Thank you for the question, Congressman. It 
seems we see an awful lot of applications that have been 
submitted among borrowers who have not yet been in repayment 
long enough to qualify. Because the first-come, first-served 
feature of the law was a key criteria in the statute, it is one 
of the things that we advised borrowers about in the 
information that we've posted and made available to them with 
respect to how to take advantage of the opportunity.
    Mr. Comer. So, it is safe to say that the incentive to act 
quickly caused people to apply for the program without knowing 
whether they were actually eligible or had met all the 
requirements to be eligible, is that correct?
    Mr. Appel. That potentially could be a factor in motivating 
applicants to apply sooner rather than later.
    Mr. Comer. Ms. Emrey-Arras, I know I probably mispronounced 
that. I apologize.
    Ms. Emrey-Arras. It's okay. Close enough.
    Mr. Comer. Would you agree that the GAO has issued a number 
of reports over the years that include a finding that the 
Department of Education could have better informed their 
grantees or stakeholders about the programs or requirements in 
a program?
    Ms. Emrey-Arras. We have found that the Department did not 
regularly inform people about PSLF when they were entering 
repayment. We also found--and we actually still have an open 
recommendation not this day that the Department still does not 
regularly notify everyone in repayment about income-driven 
repayment. That has been open for years.
    Mr. Comer. I see, yes. In our quick review we found more 
than 20 reports dating between 2007 and 2015 that included a 
finding along those lines. Given your expertise in this field, 
would you agree it is clear that the Department of Education 
has historically done a pretty bad job of providing clear 
information to its stakeholders?
    Ms. Emrey-Arras. We've had concerns over the years.
    Mr. Comer. All right. Would you say it is clear Congress 
should have known that the Department let us say struggles with 
providing information to people?
    Ms. Emrey-Arras. I would say our reports have talked about 
that over time.
    Mr. Comer. So to both of you all, would you both agree that 
if Congress wanted to ensure TEPSLF was implemented in an easy-
to-understand and straightforward manner, Congress could, and I 
would say should, have taken that body of GAO evidence and 
written a law that at least attempted to mitigate these known 
issues with the Department of Education under the Obama 
administration?
    Ms. Emrey-Arras. For GAO, that would be a policy call that 
we would leave to the Congress.
    Mr. Comer. Mr. Appel?
    Mr. Appel. Congressman, I work at Federal Student Aid, 
which is--we don't--we also don't do policy. That's the 
prerogative of other parts of the Department.
    I would say that a requirement to implement a program 
within 60 days is not a lot of time, so that's why we first 
established it the way that we did. And we did try to simplify 
the process for borrowers as much as we could within the 
timeframe given.
    And with respect to the requirements for a borrower to let 
us know that they're interested in TEPSLF, the requirement and 
application process is basically sending us an email with their 
name and date of birth. That was the requirement to start the 
process. If they hadn't applied for PSLF yet, we required that 
they do so since we needed to make sure that, before we spent 
the discretionary appropriated funds, that the borrower was 
ineligible for PSLF.
    Mr. Comer. Thank you, Madam Chairman. I yield.
    Chairwoman Davis. Thank you very much. I think everybody 
who wants to ask a question has asked a question. And so, I 
will ask my five minutes of questions. Again, thank you for 
being here.
    Mr. Appel, you obviously sat here during the testimony 
earlier and I am wondering as you listened to Ms. Finlaw, what 
did she do wrong?
    Mr. Appel. Congresswoman, unfortunately, given that matter 
is in litigation, I can't really speak to the specifics of 
that. I think you will see in our written testimony, in my oral 
statement, some of the factors that borrowers have had to 
navigate in order to become eligible for forgiveness under both 
Public Service Loan Forgiveness and its temporary expansion. 
And some of that has to do with the limited availability of 
benefits to the Direct Loan program and in order to access the 
benefits via that route--
    Chairwoman Davis. Yeah.
    Mr. Appel.--some of the additional steps that borrowers 
have to take to do that.
    Chairwoman Davis. As you listened to that, to her story, 
though, which I think probably is not unique, were there any 
thoughts that you had that perhaps more could have been done 
over the years to address those concerns?
    Mr. Appel. So, I think the Department has, over the last 
several years, taken an increasing number of steps that we at 
Federal Student Aid have to increase our outreach in terms of 
trying to help borrowers understand what the requirements are 
and what they need to do to access the benefits. We're trying 
to use the, to a large degree, social media so we can try to 
reach as broad an audience as we can using the, you know, most 
current communication tools and methods.
    One of the new tools that we're excited about and I think 
will be very helpful to assist borrowers navigate some of the 
complexities involved is the new Public Service Loan 
Forgiveness help tool. And that's something that we're making 
available on our website and are trying to promote and make 
other aware, so that they can make sure borrowers have that in 
order to use. It really is a very useful tool.
    Chairwoman Davis. Yeah. Thank you. And are you saying that 
this tool is available today?
    Mr. Appel. Yes.
    Chairwoman Davis. And are the instructions for using it 
clear as a bell?
    Mr. Appel. Congresswoman, I believe they are.
    Chairwoman Davis. Have you tested it on students?
    Mr. Appel. It has been user tested. And we're seeing it--
    Chairwoman Davis. In how many students?
    Mr. Appel. The test--in terms of user testing, I don't know 
what the size of the focus groups were on the user testing. We 
do know that it's already been used in the first half of this 
year almost a quarter of a million times and generated, as I 
mentioned before, the importance of the employment 
certification form, over 82,000 forms.
    Chairwoman Davis. I understand that you're often pointing 
to the Next Gen program. How far along is that?
    Mr. Appel. So, the Department has taken a critical first 
step towards that with the award of--
    Chairwoman Davis. Is that a baby step or a first step?
    Mr. Appel. I think it's a significant first step. It's the 
digital customer care solution, which is going to consolidate 
multiple websites on the Department now that are student-
facing. It'll be our way of being able to promote FSA as a 
single brand and have a single point of entry for borrowers, 
students, and families to receive more information about 
student aid.
    Chairwoman Davis. Okay.
    Mr. Appel. And we'll be able to streamline and make more 
consistent our communication and outreach.
    Chairwoman Davis. And that will be dependent, also, on 
people complying with a bid package as you go forward. Okay.
    Ms. Emrey-Arras, could you give us a sense, if you will, I 
mean, you have you been working with this for a long time, I 
get the feeling that in looking at all this, even though the 
Department has said they are taking steps, they are working on 
it, many, many of the recommendations have been very slow.
    Ms. Emrey-Arras. Right.
    Chairwoman Davis. Would you attribute that to being 
lukewarm to this program or do you think that they are 
committed?
    Ms. Emrey-Arras. I can't comment on that issue, but I would 
say that several years ago we pointed out problems in terms of 
the financial incentives for servicers to talk about PSLF, and 
actually pointed out that there was a financial disincentive 
for servicers to counsel borrowers about PSLF or about loan 
consolidation because they would lose those accounts. Those 
accounts would go to another servicer.
    We pointed that out. We made a recommendation to the 
Department years ago to address that issue. That remains an 
unimplemented recommendation.
    We also made recommendations last year to do things like 
have a single manual for the servicer to make sure that the 
servicer knew what the guidance was for the program. That has 
yet to be implemented.
    There's a lot of stuff that could be done at the ground 
level right now to fix this program, and we think those things 
should be done.
    Chairwoman Davis. And do you have--give us a sense. You 
think they are going to be done. When do you think they are 
going to be done?
    Ms. Emrey-Arras. I would defer to the Department on that. 
We've been told that by and large 2020 is the date for a lot of 
the activity. I don't know if Mr. Appel would like to add 
anything further on that.
    Chairwoman Davis. Would you confirm that?
    Mr. Appel. Some of the recommendations that Ms. Emrey-Arras 
mentioned that the FSA, the Department has agreed to do include 
developing a servicing manual, which we are planning to do by 
spring of next year, of 2020.
    Chairwoman Davis. All right. We will follow up. Thank you, 
Mr. Appel and Ms. Emrey-Arras, as well.
    I want to remind my colleagues that pursuant to committee 
practice, materials for submission for the hearing record must 
be submitted to the Committee Clerk within 14 days following 
the last day of the hearing, preferably in Microsoft Word 
format. The materials submitted must address the subject matter 
of the hearing and only a Member of the committee or an invited 
witness may submit materials for inclusion in the hearing 
record.
    Documents are limited to 50 pages each. Documents longer 
than 50 pages will be incorporated into the record via an 
internet link that you must provide to the Committee Clerk 
within the required timeframe and recognizing that link may no 
longer work after a number of years.
    I want to again thank the witnesses for their 
participation. And, you know, what we have heard is very 
valuable. I have to say that, you know, there is some 
disappointment, obviously.
    I don't know, Mr. Appel, whether you feel that it would 
have been good to have PHEAA here for this hearing, that, in 
fact--despite the fact that they adhere to regulations, 
obviously the law that Congress sent. Nevertheless, we would 
have gained some insights, I think, and perhaps the Department 
of Ed would have been in that position, as well.
    I think that we all would like to see more transparency in 
this regard. That hasn't existed. And only with the push of 
GAO, I think we have been able to--be able to really 
acknowledge the fact that there are real problems in this. They 
have been there for a long time and we are concerned that they 
haven't been addressed.
    Yes, and I will recognize the Ranking Member for his 
closings statement, but, again, it has been perplexing. And I 
hope certainly the next time that we meet--we all want to solve 
this problem and I think you all do, too. But there has been 
problems in trying to get to that point.
    Mr. Smucker.
    Mr. Smucker. Thank you, Madam Chair. And before I make 
those closing remarks, with your permission I would like to 
submit for the record a letter from NASFA which details the 
student and administrators' long concerns with the 
implementation of PSLF over multiple administration and 
includes recommendations to Congress for how to legislatively 
fix the program to help borrowers. I would like to submit that 
for the record, if I may.
    Chairwoman Davis. Oh, yes, I am sorry. So, ordered.
    Mr. Smucker. Staff has the actual report. Thank you.
    Thank you and I would like to just close by thanking each 
of you for being here, thanking the witnesses from both panels. 
I think we did hear a lot today. We learned a lot. I drew just 
a few conclusions from the conversation that we have had today.
    One is this was a law that created expectations which were 
far beyond what was laid out in the law. The law was more 
complicated than borrowers were led to believe, and it led to 
some unfortunate circumstances where borrowers did expect a 
benefit that they were not able to access.
    So, I think the first takeaway for me is that we as Members 
of Congress have an obligation to write laws that are clear, 
laws that are written simply and clearly. And I think there was 
a failure in this case for that to occur.
    And then that legislation must be faithfully carried out. 
It is a duty by the administration, all administrations, to 
carry out the intent--or the legislation that was passed by the 
administration. And I think in this case there was a failure 
there, as well. I think the--and it is unfortunate, the 
executive branch from the beginning fell short of providing 
borrowers the information that they needed to verify whether 
they were eligible, first of all. And then to start down that 
pathway to eligibility.
    The Department failed, as well, I think from the beginning, 
from 2007, to inform the entities that were carrying out the 
PSLF to inform them of what precisely they should be telling 
borrowers, what information that they should make available.
    The Department failed to notify borrowers that although 
they met some conditions for PSLF, that they perhaps were 
working for a nonprofit, there were also--there were also many 
other conditions that needed to be met, as well. They may have 
had the wrong type of loan. They may have been in the wrong 
repayment plan. They may have been working for a nonqualifying 
employer. Or they maybe, as was mentioned, hadn't been 
repayment long enough for that 10-year period to qualify for 
forgiveness.
    But, again, all of that is only part of the problem. As we 
said earlier today, the Secretary must follow the letter of the 
law. That is her constitutional duty. And any accusations that 
she is doing otherwise or can even do anything else are just 
absolutely false.
    It is the responsibility for Congress, of all of us here 
today, not loan servicers, not the Department, to fix a program 
that has clearly been overpromised and under-delivered. 
Republicans on this committee stand ready to discuss bipartisan 
solutions to provide relief to deserving borrowers struggling 
with student loan debt. I urge my colleagues on the other side 
of the aisle to drop this quest for scapegoats, realize that 
Congress created the PSLF mess, and come to the table with us 
to do what is right for borrowers across the country.
    Thank you, Madam Chair.
    Chairwoman Davis. Thank you. I want to ask unanimous 
consent to submit for the record a letter from the bipartisan 
PSLF Caucus expressing their support for the program; and also, 
a statement from Representative John Sarbanes on the PSLF 
program, as well. And since it is in my responsibility to also 
say without objection, we are submitting that for the record.
    And I have basically, you know, given you my sense of this. 
I think that despite the fact that--and I think we all are 
saying we want to work on this problem, there is a need to 
acknowledge where some of the failure has occurred and then to 
move forward. And I think that is what we are here to do today.
    It is disappointing to hear from so many young people that 
are out there that all they want to do is really serve their 
communities. They want to be teachers. They want to be able to 
provide for their communities' health and emergency services, 
whatever that may be. And clearly, despite all perhaps best 
intents, we have not lived up to the promises of what this 
legislation had hoped to do.
    So, we have work to do. I think you all have work to do. I 
know the Department also has work to do. I hope you would 
acknowledge that. And we will try and get on with that and be 
back and take another look at this next year.
    Thank you very much.
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    [Whereupon, at 1:42 p.m., the subcommittee was adjourned.]

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