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






 
                   A $1.5 TRILLION CRISIS: PROTECTING

                     STUDENT BORROWERS AND HOLDING

                   STUDENT LOAN SERVICERS ACCOUNTABLE

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 10, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 116-46
                           
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]      




                          ______                      


              U.S. GOVERNMENT PUBLISHING OFFICE 
42-314 PDF             WASHINGTON : 2020 
 
                           
                           
                           

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                   
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 10, 2019...........................................     1
Appendix:
    September 10, 2019...........................................    75

                               WITNESSES
                      Tuesday, September 10, 2019

Delisle, Jason, Resident Fellow, American Enterprise Institute...    11
Frotman, Seth, Executive Director, Student Borrower Protection 
  Center.........................................................     4
Harrington, Ashley, Senior Policy Counsel, Center for Responsible 
  Lending........................................................
          .......................................................
Minhaj, Hasan, Writer, Producer, and Host........................    10
Yu, Persis, Staff Attorney, National Consumer Law Center.........     6

                                APPENDIX

Prepared statements:
    Delisle, Jason...............................................    76
    Frotman, Seth................................................    86
    Harrington, Ashley...........................................   110
    Minhaj, Hasan................................................   130
    Yu, Persis...................................................   132

              Additional Material Submitted for the Record

Loudermilk, Hon. Barry:
    Letter from the Consumer Bankers Association, dated September 
      9, 2019....................................................   184
    Letter from the Consumer Bankers Association, dated September 
      10, 2019...................................................   187
Tlaib, Hon. Rashida:
    Letter from James Sancricca..................................   190


                   A $1.5 TRILLION CRISIS: PROTECTING

                     STUDENT BORROWERS AND HOLDING

                   STUDENT LOAN SERVICERS ACCOUNTABLE

                              ----------                              


                      Tuesday, September 10, 2019

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:11 a.m., in 
room 2141, Rayburn Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Scott, Green, Cleaver, Perlmutter, 
Himes, Foster, Beatty, Heck, Vargas, Gottheimer, Gonzalez of 
Texas, Lawson, San Nicolas, Tlaib, Axne, Casten, Pressley, 
McAdams, Ocasio-Cortez, Wexton, Lynch, Adams, Dean, Garcia of 
Illinois, Garcia of Texas, Phillips; McHenry, Posey, 
Luetkemeyer, Huizenga, Duffy, Stivers, Wagner, Barr, Tipton, 
Williams, Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, 
Budd, Kustoff, Gonzalez of Ohio, Rose, Steil, Gooden, and 
Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``A $1.5 Trillion Crisis: 
Protecting Student Borrowers and Holding Student Loan Servicers 
Accountable.'' I now recognize myself for 4 minutes to give an 
opening statement.
    Good morning. Today, this committee convenes for a hearing 
to examine the student loan debt crisis. It appears that this 
may, in fact, be the first-ever Full Committee hearing focused 
on student lending and the many financial ramifications it has 
for student borrowers. Given the scale of the crisis at hand, 
it is long overdue. I thank Congressman Al Green, chairman of 
our Subcommittee on Oversight and Investigations, for convening 
the subcommittee hearing on this subject earlier this year, and 
I look forward to building on the insights from that hearing 
during our conversation today.
    According to the Federal Reserve, Americans collectively 
have $1.6 trillion in student loan debt. That is more than 
credit card debt and more than car loan debt, trailing only 
mortgage debt. More than 44 million people carry student debt 
averaging almost $33,000. Around 9 million borrowers with 
Federal student loans are currently in default. The burden of 
student loan debt is preventing young people from saving for 
retirement, starting small businesses, starting families, and 
becoming homeowners. This crisis is affecting people across the 
country, and ultimately, it negatively affects our entire 
economy.
    Nevertheless, Trump's Education Secretary, Betsy DeVos, has 
consistently taken actions that are harmful for those with 
student loans, and the Trump Administration's appointees to the 
Consumer Financial Protection Bureau have also undermined key 
protections. Just last month, the Trump Administration 
appointed as student loan ombudsman, a former executive of a 
major student loan servicer that is being investigated by 
several State attorneys general for illegal student loan 
servicing practices.
    I am pleased that we are joined by an outstanding panel of 
witnesses today, including witnesses who have personally dealt 
with student loans, who have used their positions to raise 
awareness about the student crisis, or who have fought on 
behalf of consumers against the harmful practices of student 
loan servicers. The Education and Labor Committee has an 
important role to play in this matter, but this committee does 
as well, given the need to strengthen protections for student 
loan borrowers and conduct oversight in the area of student 
loan servicing.
    Today, we will discuss a series of bills that are designed 
to help student loan borrowers in a variety of ways, including: 
creating a comprehensive student borrower bill of rights; 
strengthening credit reporting standards; stopping private debt 
collectors from going after vulnerable student borrowers; 
protecting private student loan borrowers; and helping 
borrowers with student debt to purchase their first home. 
Congress and this committee have a responsibility to take 
action to ensure that student loan borrowers are better 
protected.
    I now recognize the ranking member of the committee, the 
gentleman from North Carolina, Mr. McHenry, for 4 minutes for 
an opening statement.
    Mr. McHenry. Thank you, Madam Chairwoman, and I appreciate 
the opportunity to discuss the student loan crisis.
    Let's rewind. It is 2009. It is 2010. There were 
supermajorities by the Democrats in the U.S. House and the U.S. 
Senate, and a Democrat in the White House. And at that moment, 
in the midst of the Affordable Care Act, the nationalization of 
our student lending was added to that bill as a pay-for. It is 
a consequence of Democrat policies that have nationalized the 
student debt lending in this country, and as a consequence of 
those actions, we have saddled a generation with unaffordable 
debt, and an education that does not match the cost of that 
education.
    This is a crisis, but it is a crisis that Congress created 
and foisted upon a generation, yet without that generation 
actually having the decision-making nor the Federal Government 
the underwriting standards to ensure that good decisions were 
made, and that we were going to give them a loan that they 
would be able to repay. So if you think about the consequences 
of the mortgage crisis that led to the financial crisis, part 
of that was constitutional lawmaking, yes. But most of that was 
in the private sector.
    This matches that mortgage crisis, but it was Federal 
action on the whole that has foisted debt upon a generation. It 
is unconscionable that Congress would do that. We have to fix 
the law and ensure that the Federal student debt market is much 
more like the private student debt markets.
    Although we don't have jurisdiction over the Department of 
Education where this is primarily done, we know the statistics. 
Nearly 43 million individuals, 1 in 6 Americans, have Federal 
student debt, and according to the Institute for College Access 
and Success, the Class of 2018 averages almost $30,000 of debt 
per student. The Federal loan portfolio now exceeds $1.4 
trillion, and 5.2 million borrowers of the 43 million total 
Federal student loan borrowers have loans in default.
    A significant portion of that debt is at risk of default as 
well, and not only is the Federal Government the lender of 
these loans, it is now the largest consumer lender in the 
nation.
    [Disturbance in the hearing room.]
    Mr. McHenry. They are not cheering for what I just said in 
the hallway, trust me.
    [laughter]
    But think about that, the largest consumer lender in the 
nation. We don't adhere to the same laws that we demand of the 
private sector in how we foist this debt upon students and 
young people.
    The Federal Government is the largest consumer lender, and 
the folks responsible for the stability of these loans are in 
the Department of Education, which does not issue student loans 
or issue any type of underwriting standards. The Federal 
Government must become a responsible lender as we demand of the 
private sector. And we have to make sure the costs match the 
benefits in education.
    We cannot address the student loan crisis in higher 
education unless we also talk about the cost of higher 
education. That, too, is not within our jurisdiction, but it is 
important for us to agree that it is something that we should 
discuss and debate. Student loan servicers do not set interest 
rates or loan terms. Student loan servicers are subject to 
strict rules and regulations. Mechanisms exist to ensure they 
are held accountable. That isn't the case for the loan 
originator, the Federal Government. We have to fix this.
    I look forward to hearing from the witnesses and, again, I 
would highlight the fact that the jurisdiction of student 
lending is not within this committee's jurisdiction. I yield 
back.
    Chairwoman Waters. Thank you. I now recognize the Chair of 
our Subcommittee on Consumer Protection and Financial 
Institutions, Mr. Meeks, for 1 minute.
    Mr. Meeks. Thank you, Madam Chairwoman, for holding this 
very important hearing. The rapidly increasing growth of 
student debt is indeed a national crisis, and it is not 
something that we should be playing politics with at all. It is 
something that we should be focused on doing something about, 
because young people today make decisions that affect their 
lives because they are in debt, many of them. Eighty-five 
percent of African-American young folks who have bachelor's 
degrees are in debt. It causes them to have to make decisions 
to not be able to buy a home or start a family or take a job 
they want to just because they need a job to pay back the debt. 
It also causes them to be in a situation where they cannot 
achieve the American Dream.
    We must stop this pointing of fingers and trying to figure 
out what is going on, and blaming this one or that one. We have 
to fix this problem because a whole generation of Americans, 
young Americans, are not going to have the benefit of the 
United States of America and that American Dream. It is time 
for us to fix it, Democrats, Republicans. Don't let our young 
people suffer because of our own disagreements. I yield back.
    Chairwoman Waters. Thank you. I now recognize the ranking 
member of the subcommittee, the gentleman from Missouri, Mr. 
Luetkemeyer, for 1 minute for an opening statement.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. The 
foundation of the American Dream is the idea that a free market 
economy will allow entrepreneurs, businesses, and workers to 
succeed. Time and time again, competition and innovation in the 
private market have provided American consumers with the best 
possible products and services.
    A decade after the government takeover of student lending, 
the Federal Government is the largest consumer owning or 
guaranteeing 92 percent of all student loans, or $1.4 trillion 
of student debt. The reality is the Federal Government has 
taken over a massive loan portfolio without practicing anything 
that even resembles sound lending. The government is lending to 
millions of students without adequate underwriting, resulting 
in 22 percent of Federal borrowers being seriously delinquent 
in comparison to 1.5 percent of private loans, according to the 
Frazer Bank of New York.
    I can tell you as someone who made student loans 30-plus 
years ago, that we tried to help students, not hurt them. The 
system today is broken. In my opinion, the government doesn't 
need to be in the business of direct lending at all, and there 
are numerous mitigating factors that contribute to student debt 
today. We must start looking and start producing some reforms 
that actually help our students and our citizens. With that, I 
yield back.
    Chairwoman Waters. I want to welcome today's distinguished 
panel: Mr. Seth Frotman, executive director, the Student 
Borrower Protection Center; Ms. Persis Yu, staff attorney at 
the National Consumer Law Center; Ms. Ashley Harrington, senior 
policy council, Center for Responsible Lending; Mr. Hasan 
Minhaj, writer, producer, and host, who has shed light on the 
issue of student loan servicing; and Mr. Jason Delisle, 
American Enterprise Institute.
    Without objection, all of your written statements will be 
made a part of the record. Each of you will have 5 minutes to 
summarize your testimony. When you have 1 minute remaining, a 
yellow light will appear. At that time, I would ask you to wrap 
up your testimony so we can be respectful of both the 
witnesses' and the committee members' time.
    Mr. Frotman, you are now recognized for 5 minutes to 
present your oral testimony.

STATEMENT OF SETH FROTMAN, EXECUTIVE DIRECTOR, STUDENT BORROWER 
                       PROTECTION CENTER

    Mr. Frotman. Chairwoman Waters, Ranking Member McHenry, 
members of the committee, thank you for the opportunity to 
testify today.
    Over the course of the last decade, I have traveled all 
across this country talking to thousands of people in big 
cities, small towns, and nearly every slice of America in 
between. And from these conversations, I have found that one 
aspect of life cuts across interweaving those communities with 
seemingly little else in common: the fallout from 
extraordinarily high student debt. I have heard this in town 
halls across the Bible Belt, in State capitals coast-to-coast, 
and in quiet corners amid hushed conversations.
    Sixty-thousand consumer complaints tell the same story: 
borrowers who did everything right--went to school, took on 
debt, got the degree. Now, they are desperately trying to pay 
it back, but are derailed at every turn. And in each story, a 
common question: how could this happen to me after I did 
everything I was supposed to do? The answer is one we are often 
too unwilling to acknowledge: we encouraged millions of 
students to take on billions in debt. And then to add insult to 
injury, we sent them into a market with a piecemeal consumer 
protection framework that buckled under the weight of this 
historic burden. This is the story of our nation's student debt 
crisis.
    We must put aside the notion that simply because investment 
bankers are not lining the sidewalk of 7th Avenue while holding 
the contents of their desks in boxes, that somehow this not a 
crisis, that somehow our nation does not need to act. Action 
should not be triggered only when a market is deemed as 
systemically risky, such as subprime mortgage-backed 
securities. The call to action lies with the impact student 
debt is having on our neighbors and neighborhoods. It lies in 
the collective weight of $1.6 trillion.
    Last year, more than 1 million borrowers defaulted on a 
student loan. That is more than the population of each of your 
districts. In fact, every 28 seconds, another borrower 
defaults. That is every 28 seconds of every hour, every day, 
every week, every year. However, it is more than that. It is 
also the 3 million borrowers who are at least 2 payments 
behind. It is the impact that student debt is having on 
everything from starting a family to buying a home. It is the 
way that student debt is hurting rural communities, driving 
income inequality, and propelling the racial wealth gap.
    Like kerosene on a fire, student debt is driving the 
systemic economic and racial inequality that is tearing our 
communities and our country apart. But it is more than 
ballooning balances. It is also the bullseye we have placed on 
the backs of 44.7 million people. The student debt crisis is a 
consumer protection crisis because too many, for too long, have 
allowed predatory players to have nearly free rein to prey on 
the struggle of student loan borrowers.
    You should know the names of the companies that have 
targeted your constituents: Aequitas, Bridgepoint, Citibank, 
Conduit, Corinthian Colleges, Discover Bank, Higher One, ITT, 
National Collegiate Student Loan Trusts, Navient, PHEAA, 
QuinStreet, Sallie Mae, SoFi, TransWorld, Wells Fargo, and the 
list goes on. Throughout America, big banks and small scams 
hurt millions of borrowers at every single point of their 
financial lives, from the day a student receives her first bill 
until the day she pays off her last loan. Regulators, law 
enforcement officials, scholars, and consumer advocates have 
all documented how student loan borrowers have less rights and 
fewer protections than exist in other markets.
    I will say it again: the student debt crisis is a consumer 
protection crisis, and that is where this committee comes in. 
From credit cards to debt collection, credit reporting to 
mortgaging servicing, this is the committee that has taken a 
stand when consumers are getting ripped off. This committee's 
actions have helped consumers avoid billions of dollars in 
credit card fees, and have kept tens of thousands of families 
in their homes. In all of these instances and in so many 
others, this committee took decisive action on behalf of the 
American people. The 44 million Americans with student debt and 
the millions more who are affected by it need you to do the 
same.
    That is what this hearing and the legislation before you 
today is about, creating the protections and accountability 
that millions of Americans who receive a student loan bill 
deserve. This is the unfinished work of financial reform, the 
unwritten chapter that 44 million Americans need Congress to 
write.
    I would just like to close with this: We cannot continue to 
be lobbied into believing that the companies getting rich off 
the misery of millions of Americans are not part of the 
problem. We cannot continue to ignore this trillion-dollar 
black hole in our financial markets. As it has done time and 
again, this committee must protect those chasing the American 
Dream from those who only seek to prey on its pursuit. Millions 
of Americans across this country need you to act. Thank you.
    [The prepared statement of Mr. Frotman can be found on page 
86 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Frotman. Ms. Yu, you are 
now recognized for 5 minutes to present your oral testimony.

 STATEMENT OF PERSIS YU, STAFF ATTORNEY, NATIONAL CONSUMER LAW 
                             CENTER

    Ms. Yu. Thank you. Chairwoman Waters, Ranking Member 
McHenry, and members of the committee, thank you for inviting 
me to testify today regarding how to protect student loan 
borrowers and hold student loan servicers accountable. I offer 
my testimony here on behalf of the low-income clients at the 
National Consumer Law Center (NCLC).
    Borrowers are struggling. As the director of the NCLC's 
Student Loan Borrowers Assistance Project, I see and hear the 
human toll of the tattered student loan safety net. Vulnerable 
students, like our clients, attempting to better their lives 
and better provide for their families through education, face 
severe consequences if they default on their student loans. 
Loan servicers play a critical role in ensuring student loan 
borrowers are aware of their options for repayment and can 
avoid default.
    Unfortunately, as has been extensively documented, the 
student loan servicing industry has been rife with misconduct. 
When servicers act abusively and deceptively, the harm can be 
long term and irreparable. The devastating consequences are 
intensified for Federal student loan borrowers because the 
government has collection powers that far exceed the collection 
powers of most unsecured creditors. The government can garnish 
a borrower's wages without a judgment, seize tax refunds, such 
as the earned income tax credit, and portions of Federal 
benefits, such as Social Security. Racial disparities in 
default rates disproportionately expose borrowers of color to 
these government offsets and other damaging collection 
practices, which systemically strip wealth from families and 
communities that are already economically disadvantaged.
    The amount the government seizes using these tools is often 
far greater than the amounts borrowers would be required to pay 
under an income-driven, or IDR, plan. Borrowers who might 
otherwise qualify to have a zero-dollar payment in IDR could 
have hundreds of dollars seized from their wages or thousands 
taken from vital tax credits. IDR is critical for keeping 
Federal loans affordable, but remains inaccessible for too many 
borrowers. Many borrowers never learn about IDR and are steered 
into forbearances or deferments. At NCLC, most of our clients 
were in a series of forbearances and deferments prior to 
defaulting on their loans.
    Even borrowers who do learn about IDR have trouble staying 
enrolled in the program, with more than half of borrowers 
failing to recertify on time. Critically, servicer misconduct 
is not limited into income-driven repayment. Borrowers struggle 
to access vital loan cancellation programs because servicers 
fail to provide them with critical information or improperly 
deny their applications.
    Unlike other credit products, there are few laws 
specifically governing student loan servicer conduct for either 
Federal or private loans. This lack of protection has 
exacerbated the now well-documented problems borrowers face 
accessing public-service loan forgiveness. One common problem 
borrowers are experiencing is errors in counting their 
qualifying payments. Unfortunately, borrowers do not have easy 
access to basic payment histories that could help correct these 
errors. NCLC has been working with one such client since 
February just to get her full payment history and determine how 
many qualifying payments she has made on her loans.
    There are some protections in the contracts that the 
Department signs with its servicers. However, borrowers rarely 
know about these rights or have any way to enforce them. Those 
who are able to find a lawyer to assist them still face an 
uphill battle because the Higher Education Act provides no 
explicit right of action. Borrowers can raise State law claims, 
including those based upon fraud, and misrepresentation, but 
contrary to much of the State law, the servicers and the 
Department of Education claim that those claims are preempted 
by the Higher Education Act. Fairness and justice requires that 
servicers have the ability to enforce their rights when these 
rights have been breached by servicers.
    Problems are even greater in the private loan market. 
Without comprehensive Federal laws requiring private student 
lenders to offer flexible repayment options, borrowers are at 
the mercy of their creditors. A few lenders claim to offer 
disability cancellation programs, but in our experience those 
programs can be hard to access, and, critically, there are no 
standards for these programs for private loans. Importantly, 
even where private student loan borrowers do have rights under 
State law, they are prevented from raising those claims in open 
court because of forced arbitration clauses. These clauses 
deprive people of their day in court when a company violates 
the law, and force victims into a system that is often biased, 
secretive, and lawless.
    In conclusion, the problems facing individual borrowers are 
often symptoms of systemic problems to which systemic responses 
are required. These problems threaten the financial security of 
some of the most vulnerable student loan borrowers and keep 
them from fully participating in the economy. Accountability is 
critical to ensuring that borrowers receive qualify servicing. 
Borrowers need real rights and consumer protections, and they 
need the legal tools to enforce those protections.
    Thank you for the close attention you are paying to the 
student loan servicing market, and for the bills that you are 
considering today. I appreciate the opportunity to provide this 
testimony, and I look forward to your questions.
    [The prepared statement of Ms. Yu can be found on page 132 
of the appendix.]
    Chairwoman Waters. Thank you, Ms. Yu. Ms. Harrington, you 
are now recognized for 5 minutes to present your oral 
testimony.

 STATEMENT OF ASHLEY HARRINGTON, SENIOR POLICY COUNSEL, CENTER 
                    FOR RESPONSIBLE LENDING

    Ms. Harrington. Good morning, Chairwoman Waters, Ranking 
Member McHenry, and members of the committee. Thank you for the 
opportunity to testify today about the nation's student debt 
crisis. With more than 44 million borrowers carrying almost 
$1.6 trillion in outstanding student loan debt, Congress has 
the responsibility to do its part to solve this crisis.
    Just a decade ago, we all watched the devastating ripple 
effect of the 2008 financial crisis. People lost their homes, 
pensions and savings accounts were wiped out, and a generation 
of family wealth was gone almost overnight, and college 
graduates, many with a mountain of student loan debt, were 
entering a bleak job market. A key lesson from the Great 
Recession is that skillful loan servicing could have 
dramatically mitigated the impact of foreclosures and their 
spiraling spillover effect on neighborhoods and the economy. 
Despite this relatively recent lesson, the principles we 
learned seem to have already been forgotten as we face the 
current student debt crisis.
    Student loan servicers have consistently failed to fulfill 
their obligations and have engaged in a variety of abusive 
practices that have long-term negative consequences for 
borrowers. While servicing reform is not the sole answer to the 
student debt crisis, servicing failures contribute 
substantially to the growing student debt burden and the 
creation of undue harm to millions of borrowers.
    Today, 2 in 5 borrowers are in default or seriously 
delinquent, and many borrowers are not reducing their principal 
even after almost a decade of repayment. Twenty-seven percent 
of borrowers who entered undergraduate higher education in 
2003-2004 had defaulted on their student loans by 2016. Up to 
40 percent of this cohort are projected to default by 2024. 
When we spend $700 million on collection activities and more 
than $800 million on loan servicing activities annually, 
Congress can and should require more from these contractors.
    We should also have concerns that the student debt crisis, 
already a byproduct of the racial wealth gap, is also further 
entrenching these inequities and perpetuating the cycle of 
poverty and economic instability that results from systemic 
lack of access to resources, capital, and affordable credit. 
Rather than creating a pathway to opportunity, student 
borrowers of color are more likely to default and take longer 
to pay back their loans. For instance, for Black students who 
entered undergraduate higher education in 2003-2004, almost 49 
percent had defaulted by 2016. Up to 70 percent of this cohort 
is projected to default by 2024. Nearly half of Black graduates 
with a bachelor's degree owe more on their undergraduate 
student loan after 4 years than they did at graduation, 
compared to 17 percent of white graduates.
    Student loan servicers have been notorious for putting 
borrowers into deferment or forbearance. These practices have 
led to billions of dollars in extra interest and fees being 
added to the principal balances of already-indebted borrowers. 
They have also prevented borrowers from accessing affordable 
repayment plans that will allow them to take part in other 
wealth-building activities. Servicers should enroll struggling 
students in income-driven repayment plans, not forbearance. 
While reforms are definitely needed, IDR plans are an essential 
tool for preventing delinquency and default.
    Despite these documented failures, the current Department 
of Education has revoked existing policies meant to protect 
student loan borrowers. It has acted to the benefit of private 
companies over students and taxpayers, and it has attempted to 
prevent Federal and State enforcement of consumer protections. 
States that have passed reforms hold nearly 30 percent of the 
$1.5 trillion in outstanding student loan debt. States have 
historically played a critical role in protecting consumers 
from abusive and predatory practices, from mortgage servicing 
to payday lenders.
    Student loan servicing is no different. Since 2015, 11 
States and D.C. have passed laws to oversee student loan 
servicers. This is combined with multiple State enforcement 
actions against servicers like Navient and PHEAA. Their 
approach to addressing this crisis will shape the lives of 
millions of borrowers and the health of our economy for decades 
to come. Federal efforts must complement these State-level 
actions, not preempt them.
    Many of us in this room can attest that good servicing 
makes a real difference in borrower outcomes. This is 
especially true for student loan servicing where there are 
already many options to help students avoid default and be 
successful in repayment. By failing to hold servicers 
accountable to basic consumer protection laws and 
responsibilities, we increase the likelihood of more defaults 
and that this crisis will worsen. Rather than repeat mistakes 
from the mortgage crisis, we should learn from that experience 
and work to achieve a sounder, more effective student loan 
system. Congress must ensure that Federal dollars are truly an 
investment, not just a payout. Our nation's future depends on 
it. Thank you.
    [The prepared statement of Ms. Harrington can be found on 
page 110 of the appendix.]
    Chairwoman Waters. Thank you, Ms. Harrington. Mr. Minhaj, 
you are now recognized for 5 minutes to present your oral 
testimony.

     STATEMENT OF HASAN MINHAJ, WRITER, PRODUCER, AND HOST

    Mr. Minhaj. Thank you so much. I want to thank Chairwoman 
Maxine Waters for the opportunity to testify, and I would like 
to thank Ranking Member Patrick McHenry for taking the time to 
Google who I am.
    [laughter]
    Mr. McHenry. Cute. Very cute.
    Mr. Minhaj. My name is Hasan Minhaj. I am a Muslim, and I 
condemn radical Islamic terrorism. That has nothing to do with 
anything. I just want that on the record. It is good to get 
ahead of these things.
    [laughter]
    Chairwoman Waters invited me here today because I host a 
political comedy show on Netflix called Patriot Act, which 
means I may owe some of you guys royalties. DM me, we can talk 
later. We recently did an episode on the student loan crisis, 
and it really hit home with our audience, because 44 million 
Americans owe more than $1.6 trillion in student loan debt. In 
fact, the day we shot our episode, we polled our studio 
audience. It was only about 200 people. And that room alone had 
over $6 million of student loan debt. Now, granted, our 
audience is mainly unemployed poli-sci majors, but that is 
still a lot of money.
    [laughter]
    This issue is sidelining millions of Americans. People are 
putting off marriage, kids, home ownership, and retirement, 
especially my generation. I am 33, and growing up it was 
drilled into our heads that you have to go to college if you 
want a middle-class job. And we even tell kids today, look, if 
you don't go to college, you might as well get a face tattoo. 
And then they point to Post Malone, and we are like, okay, that 
is one guy. He is a very popular musician.
    [laughter]
    But it is true: two-thirds of all jobs in America require 
at least some college. This is the standard now, and that 
wasn't the case when most members of this committee were in 
school, and you paid far less for your degrees. That is not 
speculation. We looked up where the 60 members of this 
committee went to college and what your school's tuition was at 
that time. Even adjusting for inflation, college cost way less 
across the board.
    So, Chairwoman Maxine Waters, your tuition at Cal State 
L.A. in 1971 was the equivalent of about a thousand dollars a 
year. Today, Cal State costs well over $6,000. That is more 
than a 500 percent jump. Congressman King, right, in 1965, 
Congressman King paid the equivalent of almost $10,000 a year 
at St. Francis College. Today, St. Francis costs over $25,000. 
On average, this entire committee graduated from college 33 
years ago and paid an inflation-adjusted tuition of $11,690 a 
year. Today, the average tuition at all of your same schools is 
almost $25,000. That is a 110-percent increase over a period of 
time when wages have gone up only 16 percent.
    So people aren't making more money, and college is 
objectively way more expensive. Do you see what has happened? 
We have put up a pay wall to the middle class. And if there is 
one thing Americans don't deserve more of it, is pay walls. 
That is why we put up our entire show for free on YouTube. It 
is also because you can't really find anything on Netflix.
    [laughter]
    It is like the lost-and-found bin of entertainment. You are 
like, great, another show about people who love cake.
    [laughter]
    Now, despite these numbers, you often hear the idea that 
these kids wouldn't be in trouble if they just took some 
responsibility. But they are trying to be responsible. They are 
investing in education. They are trying to pay their loans 
back, and yet many borrowers are still treated like deadbeats 
because the government has put their financial futures in the 
hands of predatory, for-profit loan servicing companies. 
Companies like Navient and other companies you will hear from 
today, have a history of misleading borrowers and pushing them 
into repayment plans that in some cases have cost individual 
borrowers tens of thousands of dollars in unnecessary interest.
    And the worst part is borrowers don't even get to choose 
their loan servicer. The Department of Education chooses for 
you, so there is no competition that makes these companies 
provide better service. Now look, we know the deck is stacked 
against student borrowers in ways that it wasn't 10 or even 15 
years ago, and they deserve some basic protections. Americans 
should not have to go bankrupt pursuing higher education, and 
they should never be preyed upon by underregulated loan 
servicing companies.
    So, members of this committee, we know that government is 
capable of stepping in during a financial crisis. All I am 
asking today is, why can't we treat our student borrowers the 
way we treat our banks, because 44 million Americans, that is 
too big to fail. Thank you so much for your time, and I will 
now go back to where I came from.
    [laughter]
    [The prepared statement of Mr. Minhaj can be found on page 
130 of the appendix.]
    Chairwoman Waters. Thank you, Mr. Minhaj. Mr. Delisle, you 
are now recognized for 5 minutes to present your oral 
testimony.

     STATEMENT OF JASON DELISLE, RESIDENT FELLOW, AMERICAN 
                   ENTERPRISE INSTITUTE (AEI)

    Mr. Delisle. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for the opportunity to 
testify today. My testimony today represents my own views and 
not those of AEI, which does not take any institutional 
positions.
    We have heard a lot today that there is a problem with the 
Federal Student Loan Program, that private companies, servicers 
that the Department of Education has hired to run this 
government program are cheating borrowers out of benefits, 
confusing them, and giving them subpar advice, leaving them to 
incur additional costs. But this common narrative we have heard 
today seems to assume the problem is entirely due to factors 
that are under the servicer's control.
    But I want to remind the committee, given that the Student 
Loan Program is not under the committee's jurisdiction, that 
all of the terms of the Federal Student Loan Program are set by 
Congress or the Department of Education, and servicers don't 
own these loans. They also don't get paid more if borrowers owe 
more. So what this means is the source of all of the perceived 
mistreatment that we are talking about today--the crushing 
debt, the misleading information, the confusion--may actually 
be Congress and the Department of Education, not the servicers. 
Now, servicers can make mistakes, absolutely. I am not denying 
that. They can get things. They can be sloppy. But I want to 
give you some examples of what I am talking about, where the 
terms of the program actually sow confusion and resentment 
among borrowers.
    The Consumer Financial Protection Bureau (CFPB) operates a 
complaint database where borrowers can lodge complaints against 
their Federal student loan servicers. I am going to read you 
one. It reads as follows: ``I have repeatedly requested that 
all overpayments get applied directly to principal, but my loan 
servicer, Nelnet, continually advances the due date. Then, they 
tell me that I don't know how payments work. I then have to 
educate a willfully ignorant rep on how compound interest 
works, that advancing my due date is not in my best interest.''
    So, I agree this looks strange. Make a larger payment on my 
loan, and my due date goes out into the future. Where did this 
come from? Well, it came from the Department of Education. This 
is the policy: The loan servicer is required to advance the due 
date if a borrower makes an overpayment. What a strange policy. 
Where did this come from? Well, like all of these things, 
someone was trying to help. They were trying to give borrowers 
extra flexibility in when they needed to make their next 
payment if they made an overpayment.
    This is not necessarily an example of a servicer 
mistreating the borrower, but that is what it looks like to the 
borrower. In fact, that is how many of the people on this panel 
describe the situation. I don't think it is quite accurate.
    Let me give you another example. Borrowers often complain 
that their servicer had misled them--you heard that today--and 
they are caught off guard by some term of their loan. I want to 
show you the Department of Education's application form for the 
Income-Based Repayment Program. I can't quite get it to fully 
extend to the floor.
    These are the terms of the Income-Based Repayment Programs. 
It runs some 10 pages. You will see on pages 7 and 8, there is 
a 60-cell matrix comparing all the terms. Is it fair to expect 
borrowers to understand all of that information? No. Is it fair 
to expect servicers to explain all that to the borrowers and 
make sure they understand it? I don't think so. But why do we 
have a 10-page form listing all of the terms? Because Congress, 
and the Department of Education, egged on by many of the 
advocates, required all of these terms. So, borrowers are 
utterly confused, but they are blaming servicers when it is 
really the terms of the program.
    I have many more examples of this in my written testimony. 
Those are just two. There are many. But I want to conclude 
today by telling you what I think Congress can do to solve this 
program. I think we need a much more straightforward student 
loan program. Now, this is not going to be easy. It is going to 
require tradeoffs. It is probably going to require fewer 
benefits, and fewer options. These are the things that are 
confusing borrowers. Or we could simply provide the most 
generous benefits to everybody all the time. That is going to 
cost a lot of money and probably isn't the best use of scarce 
resources.
    But here is what I want to say that is really important. 
These tradeoffs exist, and excellent student loan servicing is 
not going to make them go away. Blaming student loan servicers 
for the terms of the loan program is not going to make these 
tradeoffs go away. Congress is going to have to make them. It 
is up to lawmakers to ensure that borrowers are not misled or 
mistreated by the Federal Student Loan Program. Thank you.
    [The prepared statement of Mr. Delisle can be found on page 
76 of the appendix.]
    Chairwoman Waters. Thank you very much. I will now 
recognize myself for questions, and I am going to address my 
first question to Mr. Frotman.
    In March, you testified before this committee that the lack 
of action on behalf of student borrowers by the CFPB, 
``reflects a fundamental lack of seriousness in the work that 
Congress tasked the Bureau to perform and willful negligence in 
addressing the deep, systemic problems that plague borrowers 
owning the second-largest class of consumer debt in this 
nation.''
    Instead of vigorously enforcing the law to protect student 
borrowers, it appears the only notable thing that the Trump 
Administration has done is to install a high-ranking official 
from one of the nation's largest student loan servicers to be 
your successor at the CFPB.
    This committee and others are examining the activities of 
the CFPB, the Department of Education, and student loan 
servicers, and today's hearing appears to be based on records 
my staff reviewed going back to 1995, when the first Full 
Committee hearing was held on the topic of student lending.
    Mr. Frotman, given how student debt can affect a borrower's 
life, including their ability to get a home or start a new 
business in the broader economy, is the CFPB doing enough to 
help student borrowers, or is the Bureau coming up short and 
failing in its job? Are there particular areas that the CFPB 
and the Department of Education should be prioritizing when it 
comes to enforcement?
    Mr. Frotman. Thank you so much for the question, Chairwoman 
Waters. The student debt crisis is a big problem impacting all 
of your constituents. The student debt crisis knows no Party, 
knows no ideology, knows no Administration. And what we have 
seen is that the historic amount of debt is hurting all of your 
constituents in their ability to buy a house, or start a small 
business. And we see how student debt is driving folks out of 
rural counties.
    We usually talk about this in the form of ballooning 
balances, but it is more than that. It is a bullseye placed on 
the back of nearly 45 million Americans who are subjected to 
predatory tactics from the day they take out their loan until 
the day they pay it back. And what we have seen is that student 
loan borrowers have less rights and fewer protections than 
nearly any other type of borrower. You have more protections if 
you are paying back your credit card or your mortgage.
    While I was at the Consumer Financial Protection Bureau, 
this is an issue we worked on a lot, which was, there are big 
banks, Federal student loan servicers, you name it, up and down 
the line who are viewing the student debt crisis as their 
chance to get rich. I am proud of the work we have done. We 
were able to give back $750 million for student loan borrowers, 
and we worked with anyone and everyone, and sometimes we worked 
with the Obama Administration. Sometimes, we didn't make them 
happy, but that was the job.
    And what you see now at the Consumer Financial Protection 
Bureau is just walking away from that mission, walking away 
from the job to stand up for your constituents, when the only 
thing they have done wrong is taking on debt to chase the 
American Dream. And I think that is why this hearing and this 
legislation is so important because the CFPB is one piece of 
the puzzle. Borrowers need the same rights and protections they 
would have if they were paying back a credit card and a 
mortgage. They need to be able to enforce those themselves. 
They need their States to be able to enforce them because they 
are really struggling.
    Chairwoman Waters. Thank you very much. I wanted to get 
into a little bit about the disparities for minority student 
borrowers, and I will just get to Ms. Harrington in the short 
time that I have left on this question. The Center for 
Responsible Lending published its own report early this year on 
borrowers of color and the student debt crisis. In trying to 
help student borrowers of color, your report recommends that we 
improve repayment options, provide debt relief, strengthen 
servicing standards, and prevent abuses by for-profit 
institutions. Do you think the bills we are considering today, 
including the Student Borrower Bill of Rights, would 
successfully help student borrowers of color?
    Ms. Harrington. Absolutely, Chairwoman Waters. These bills 
go a long way in the right direction to ensuring that consumer 
protections are available to student loan borrowers, and that 
is particularly important for student borrowers of color who 
disproportionately take out student debt and take out higher 
levels of student debt than other populations. They have to go 
to college, and they have to have loans to go to college due to 
the systemic inequities that we have seen since the founding of 
this country. So, any extra work that can be done by this 
Congress to improve that system for everyone, but especially 
borrowers of color, is essential.
    Chairwoman Waters. Thank you very much. And now, I will 
recognize the gentleman from North Carolina, Ranking Member 
McHenry, for 5 minutes.
    Mr. McHenry. Thank you. And, look, I do think there is a 
commonality among the full panel here across perspective. The 
question of affordability of the institution is an important 
question. It is. I think we all agree on that. Now, how we 
resolve that becomes a bit of a challenge, but that is the 
nature of where we are in our society.
    Mr. Minhaj, as you outlined in your show, the question of 
cost is a fundamental issue, too, and you addressed that, and 
you also addressed the servicers. So you go from the question 
of the debt, but the key question as well is, and you get to 
this in some ways, but underwriting. There is no underwriting 
for a loan. There is a no question of a student being informed 
enough about the decision they are making that is a life-
changing decision.
    And we have the Federal Government creating a mechanism and 
then using private-sector folks to then service their decision, 
right? You don't say, ``underwriting,'' but you get at it, that 
these students are given way too many choices for their 
financial literacy basically, and don't have an understanding 
of what that will mean to their life for a decade, 2 decades, 
or 3 decades, and that the decisions they make as a 17-, or 18-
, or 19-year-old will have an impact on their ability to buy a 
house, or a car, or have children, or get married, and the 
societal impact of that. So, you do a great job of highlighting 
that, I have to say.
    Mr. Minhaj. You are a fan of the show.
    Mr. McHenry. I don't want to do that to you because it is 
probably not helpful.
    Mr. Minhaj. I will get you that tee shirt.
    Mr. McHenry. I will watch you right after I finish watching 
the Chappelle special, so we will move from there. Mr. Delisle, 
as you outlined, too, the question of affordability is a 
fundamental question, too. The form you outlined, you showed 
there, is massive. One example I would give you is until the 
CFPB attempted to rewrite how student debt servicers interact 
with their clients, servicers could not text the people they 
are trying to interact with. You ask the average 25-year-old if 
they answer their phone. Not a chance, right? So, texting is a 
very reasonable and responsible thing. They can't do it because 
the rules by which they are servicing the debt do not permit 
them to, and the regulations out of the CFPB have not been 
modernized so that they can do that. So, one simple change like 
that could make a major impact on the ability to service it. 
But, Mr. Delisle, let's talk about underwriting. What 
underwriting is done before this debt is given to students?
    Mr. Delisle. Basically none. It is almost a no-questions-
asked loan. It is an entitlement. There is no income check, no 
means testing. It is basically open-ended.
    Mr. McHenry. And does that mean there are no ramifications 
if they don't pay?
    Mr. Delisle. There is a ramification if they don't pay. 
They will accrue additional interest. They could have their tax 
refund seized. Most of the time, the government is able to get 
the money back.
    Mr. McHenry. How clearly is that outlined in the contract 
for these students?
    Mr. Delisle. It is listed in the master promissory note, 
which is about as long as this other form that I showed you.
    Mr. McHenry. So, there is no clear box like on a mortgage 
that gives you the key ingredients of what you are about to 
sign for?
    Mr. Delisle. Not really, no. The terms of the loan are 
listed there, but because of the sort of strange nature of 
student loans, it doesn't look like or walk like another loan. 
So, for example, the interest rate that you are going to borrow 
at is not listed on your master promissory note. That is 
because we don't actually know the interest rates that you are 
going to borrow at going forward because the interest rate is 
different each year you borrow because you take out a new loan 
every year. So, trying to make these things work and look like 
traditional financial products doesn't really work that well 
because we are trying to serve a sort of different market.
    Mr. McHenry. How do you reform the program to mitigate 
those risks?
    Mr. Delisle. I don't think there is a huge sort of 
affordability crisis in student debt, contrary to what everyone 
has said here. I think there is a lot of available--
    Mr. McHenry. What do you mean by that?
    Mr. Delisle. Well, I don't see sort of a widespread 
inability of people to pay their student loans. I hear a lot of 
complaining about it, but in terms of are people actually 
financially unable to pay the loan, I don't think that is as 
widespread as a lot of people believe.
    Mr. McHenry. But you admit there is a broader societal 
impact for this level of debt they are coming out of college 
with?
    Mr. Delisle. Yes, I am sure there is, but also, it is 
financing an asset. It is financing higher education, so all 
the concern about student debt, if student debt is harming 
people, it means higher education is harming people. That is 
what it paid for.
    Chairwoman Waters. Thank you. The gentlewoman from New 
York, Mrs. Maloney, who is also the Chair of our Subcommittee 
on Investor Protection, Entrepreneurship, and Capital Markets, 
is recognized for 5 minutes.
    Mrs. Maloney. Thank you, Madam Chairwoman, and I thank all 
of the panelists. The price of college education increased 8 
times faster than wages between 1989 and 2016. College tuition 
costs more than many people earn a year. And while we must 
address the underlying cost of college, student loans have 
become so unsustainable that millions of people are now putting 
off buying homes, starting families, or even starting their 
careers. That is why I support full loan forgiveness, and I am 
a co-sponsor of Senator Bernie Sanders' House companion bill, 
H.R. 3448, the Student Debt Cancellation Act.
    These solutions might fall out of the jurisdiction of our 
committee, but we do have oversight of student loan servicers. 
Student loan servicers don't own loans, set rates, or control 
the cost of college, yet they are a critical point of contact 
for borrowers repaying direct loans, and they are responsible 
for engaging with the borrowers experiencing difficulties 
making these payments.
    We recently held a hearing on student loan servicers, and 
one of the troubling things we heard was that some schools 
engage consultants to push forbearances to keep their default 
rates down even when other options are better for the borrower. 
That is because schools would lose access to Federal aid if 
their default rate is too high. And I would like to know, and I 
would like to ask Persis Yu, how often does this manipulative 
practice push borrowers into forbearance when it might not be 
in their best interest? Shouldn't the best interest of the 
borrower be the only factor that is considered, not 
artificially inflating numbers? And what role do the servicers 
play here?
    Ms. Yu. Thank you, Congresswoman. In the experience of the 
borrowers that I work with, many of them have attended 
predatory schools that have made big promises about the career 
goals that they will get and the big salaries they will get, 
and those promises fall through. Unfortunately, many of those 
schools also engage with default management companies that push 
borrowers into deferments and forbearances, and we see the 
fallout of that.
    Borrowers come to my office. They are in default. They have 
a series of these forbearances. They have never heard about 
income-driven repayment. Many of these borrowers would have 
qualified for zero-dollar income-driven repayments, but instead 
they defaulted because they exhausted their forbearances 
through these default management companies and now are in 
default. Servicers have the role of informing borrowers of 
income-driven repayment. Servicers are required to reach out to 
borrowers, and for too many borrowers, that is not happening. 
And that is why we are here today, and we are encouraged by the 
bills that are being offered by this committee.
    Mrs. Maloney. Also, the Department of Education recently 
withdrew a set of student loan servicing standards, and many 
States have since passed their own strong standards and 
procedures, including restricting forbearance steering and 
creating a compliance department. Wouldn't everyone, especially 
borrowers, benefit from a common set of minimum industry best 
standards that the draft Student Loan Servicing Reform and 
Consumer Protection Act calls for? Again, Ms. Yu?
    Ms. Yu. Absolutely. Thank you for this question. There is a 
desperate need for basic consumer protections for student loan 
borrowers. Borrowers do not have basic rights to dispute 
resolution solutions, to timelines for processing payments, for 
ensuring that borrowers are getting the best options presented 
to them. The bills that are presented, especially the Borrower 
Bill of Rights, which would present basic consumer protections, 
are vitally needed by the borrowers I work with.
    Mrs. Maloney. And in cases of forbearance, in many cases, 
it just adds to the cost and is not in the best interest of the 
borrower. Would you like to elaborate on that, Ms. Yu?
    Ms. Yu. Absolutely. There are some very limited 
circumstances where forbearances can be useful. However, for 
the most part, they add to the cost of the loan. The interest 
is capitalized, meaning the principal balance grows, and then 
interest is charged upon interest. Importantly, that time is 
not applied towards forgiveness like it would be under an 
income-driven repayment plan. Therefore, the loans become more 
expensive and it extends the life of those loans.
    Mrs. Maloney. Thank you. My time has expired. Thank you.
    Mr. Casten. [presiding]. The gentlewoman from Missouri, 
Mrs. Wagner, is recognized for 5 minutes.
    Mrs. Wagner. I thank the Chair. Let's be clear here. The 
Federal Government is responsible for almost $1.5 trillion of 
the overall $1.6 trillion in student loan debt, around 92 
percent of all debt. It is my understanding that only just over 
$100 billion of this debt is in private loans, which have a 98 
percent repayment rate. Meanwhile, stats from the Federal 
Reserve Bank of New York suggest that Federal borrowers are not 
faring well, as more than 20 percent of all borrowers are 
seriously delinquent or in default, and a large number of 
Federal borrowers are seeing their loan balances grow, not 
decrease, post-graduation.
    Mr. Delisle, given this bleak outlook for Federal 
borrowers, shouldn't more be done to protect consumers from 
assuming more Federal student loan assistance than they can 
reasonably pay back?
    Mr. Delisle. Yes. I think the place to look for a solution 
like that most obviously is in graduate school lending. For 
undergraduates in the Federal Student Loan Program, there is a 
limit. Congress sets a limit on how much people can borrow, 
recognizing the kinds of things that you are talking about. A 
dependent undergraduate can only borrow $5,500 their first year 
of school. When it comes to graduate school, Congress had the 
infinite wisdom to decide to lend unlimited sums to people to 
go to graduate school, and this is where the big problems are.
    Mrs. Wagner. Well, let's explore that for a minute, Mr. 
Delisle. Does the Federal Government evaluate a borrower's 
ability to repay a loan before issuing a loan?
    Mr. Delisle. No.
    Mrs. Wagner. A student who receives a needs-based Pell 
Grant could also have their parent take out a $100,000 Parent 
Plus Loan, even though they have demonstrated that they don't 
have the means to repay. Is that correct?
    Mr. Delisle. That is right. In fact, the Federal Government 
will assess your ability to repay using the financial aid 
application determining an expected family contribution for 
your child's education. And even if that number is zero, the 
Federal Government has determined you can contribute zero 
towards your student's education--
    Mrs. Wagner. Stunning.
    Mr. Delisle. --and then, they will lend you an unlimited 
amount to pay for your child's education.
    Mrs. Wagner. Stunning. It seems some Federal borrowers are 
set up for failure from the start by the rules put in place by 
Congress. What recommendations, briefly, would you make to 
Congress to prevent students and their parents from 
overborrowing?
    Mr. Delisle. I think they probably should restore some 
sensible limits to the amount that graduate students can 
borrow, and I think there is really no good public policy 
purpose served by having the Parent Plus Loan Program that we 
were talking about.
    Mrs. Wagner. The Federal Government took over the vast 
majority of student lending from private lenders in March 2020, 
as we have discussed. How does the design of these Department 
of Education contracts impact the ability of Federal loan 
servicers to provide individualized service to borrowers?
    Mr. Delisle. They have to carry out the terms that are set 
in law, so it can't be that individualized because they have to 
provide the borrowers the terms that they are entitled to. But 
because of all the different options and different situations 
that borrowers could find themselves in, people on the left and 
the right have decided that it is better that servicers have 
some discretion in how they counsel borrowers. So, there is 
some flexibility for servicers to make decisions.
    I actually think one of the sort of unintended consequences 
here of some of these debates, and I look at some of the 
legislation that was posted today for the hearing, and there is 
a tendency to want to be more prescriptive of how servicers 
operate. And I am just a little bit concerned about that, 
because I am not sure I would supplant lawmakers' judgment for 
servicers' judgment in the best way to handle each student's 
individual situation.
    Mrs. Wagner. Private student lenders make at least 18 
disclosures on 3 separate occasions before a loan is made, 
providing much clearer information than is provided for Federal 
direct loans. Would disclosures for Federal loans, like those 
private student loan borrowers make, lead to better outcomes 
for student loan repayment perhaps?
    Mr. Delisle. I don't really think this is an information 
problem. I held up the form today, the 10-page form with the 
60-cell matrix, and people still complain. There are thousands 
of complaints in the CFPB database about people saying they 
weren't informed.
    Mrs. Wagner. Let me ask this: Would it help to have 
disclosures of accumulating debt made during the course of 
study rather than just when a student first enrolls and 
graduates?
    Mr. Delisle. It may. The reason why, typically, the 
Government and Congress have shied away from doing exactly that 
is they were worried it would scare people from continuing to 
borrow and finish their education. So, I don't know what the 
right direction is on that.
    Mrs. Wagner. My time has expired. I yield back.
    Mr. Casten. The gentlelady's time has expired.
    The gentleman from Georgia, Mr. Scott, is recognized for 5 
minutes.
    Mr. Scott. Thank you very much, Mr. Chairman. It seems to 
me that we have a profound question here of, why? In an 
article, the very distinguished publication, Forbes, mentioned 
last year that that the price of a4r-year college education has 
nearly doubled since the 1980s, even though the average annual 
growth weight in wages and salaries over that same period 
increased only 3 percent. This means that the cost of this 4-
year college education has increased 8 times as rapidly as 
people working on their jobs earning wages and salaries.
    That, to me, is where we need to really pull the covers off 
and ask, why? Why did the cost of a college education explode 
over this period at a rate 8 times greater, if we are going to 
really get to the answers of how we solve this? And further, as 
a matter of fact, the cost of a 4-year college education--in a 
more narrow window between 2003 and 2017, the cost a 4-year 
college education rose nearly 50 percent--48 percent. But 
between this same smaller window, a 15-year period, wages and 
salaries rose only 6 percent. This means that the cost of a 4-
year college education has increased 9 times as fast as 
salaries.
    So, ladies and gentlemen, why? What has caused this? I 
think if you each could tell us quickly, if you could put your 
hand on one thing, so that we would know what to zero in on, 
because we can put legislation out forever and no one hand-
made, let's give free education, because nothing is free. But 
the issue here is what is causing this abnormality? Teacher 
salaries? Professor salaries? What has happened? Can we go 
quickly, and let's try to get on the record why, if you all 
could put your finger on just one thing, maybe you can give us 
five things that we can address.
    Mr. Frotman?
    Mr. Frotman. I think in many ways the answer is those five 
things, but there is one thing that this committee can do to 
tackle that, which is stop the predatory players that add 
zeroes to individual borrowers' bills. In the lawsuits against 
a company, Navient, in courthouses coast to coast, they 
documented how this company's practices added $4 billion of--
    Mr. Scott. Okay. Predatory lending. Great point. We can hit 
that.
    Ms. Yu?
    Ms. Yu. I don't have the one answer, but to the borrowers 
that we work with, certainly the fact that the Pell Grant has 
not kept up has been hurting the borrowers that we see, and has 
made it so that our borrowers have to take out loans in order 
to go to school, that it is not a choice for them to take out a 
loan. They are forced to take out the loans if they want an 
education, which they need.
    Mr. Scott. All right.
    Ms. Yu. And which is why, again, we need these vital 
consumer protections.
    Mr. Scott. Forced to take out the loan. All right.
    Ms. Harrington?
    Ms. Harrington. I think overall, we need to reframe 
education as an investment in our future, and that looks like 
many things--all of the things that my colleagues have said but 
also accountability for for-profit colleges, Federal-State 
partnerships that really invest in equitable higher education, 
and an ability for students across different backgrounds to 
really access higher education in an affordable way.
    Mr. Scott. All right.
    Ms. Harrington. And affordability at the front end and the 
back end.
    Mr. Scott. All right.
    Mr. Minhaj. Yes. One of the things we covered on the show 
is the fact that when a student borrower calls their loan 
servicer, say, Navient, Navient will rush you off the phone, 
oftentimes in 7 minutes or less, and they will advise you to go 
into loan forbearance instead of an income-based repayment 
plan, which would probably be better for you.
    So that simple misinformation is a problem, and I think 
student borrowers need a basic bill of rights, like a 
protection to not let that perpetuate.
    Mr. Scott. All right. Thank you.
    Mr. Delisle. I get the sense you would complain, though, if 
Navient kept them on the phone.
    Mr. Minhaj. No. You wouldn't even tolerate that from United 
Airlines.
    Mr. Delisle. And read all of these terms to them to make 
sure they knew exactly what they were getting into. I guess 
people would be very upset about that too.
    Mr. Minhaj. But they want their best option, not a CVS 
receipt.
    Mr. Scott. All right. Thank you. That's very helpful. I 
think that is very informative. Thank you.
    Mr. Casten. The gentleman from Florida, Mr. Posey, is 
recognized for 5 minutes.
    Mr. Posey. Thank you, Mr. Chairman. I am wondering why 
there have been no oversight hearings in the Education and 
Labor Committee on the role of the U.S. Department of Education 
in managing its loan servicing agents, and I just wonder if the 
panelists, beginning on the far right, would give me their 
comments on that?
    Mr. Delisle. Am I on the far right?
    Mr. Posey. Yes, you are far right.
    Mr. Delisle. I think the sort of nature of my testimony is 
actually probably why the Education Committee would have a hard 
time really going after loan servicers and blaming them for the 
problem, because so many of the things that are frustrating 
borrowers are actually terms that that committee put into the 
loan program themselves.
    I think that is one of the reasons why the loan servicing 
issue just is not--they sort of recognize it for what it is, 
which is not the major problem here.
    Mr. Posey. Thank you.
    Mr. Minhaj. What was the question again? What is the major 
problem?
    Mr. Posey. Yes. What are your thoughts on the role of the 
U.S. Department of Education in managing its loans?
    Mr. Minhaj. Just the fact that they outsourced it to 
private loan servicers?
    Mr. Posey. Your general thoughts?
    Mr. Minhaj. My general thoughts are this--are you familiar 
with the rapper Lil Uzi Vert?
    Mr. Posey. No.
    Mr. Minhaj. I think it is a huge problem that the youth of 
America have to bombard their favorite rapper, a pop musician, 
and ask them to pay back their student loans. They are not even 
asking for selfies anymore.
    Are you a fan of Taylor Swift? Are you a Swiftie, because 
even her fans have gone up to her and said, ``Will you please 
pay back my student loans?'' That is how desperate student 
borrowers are.
    Mr. Posey. All right. Next?
    Ms. Harrington. I think there is absolutely a role for the 
Department of Education in this, but there is also a role for 
the consumer agency that we have, which is the CFPB. Student 
loan borrowers are consumers and they are taxpayers, and they 
should be protected by the CFPB, and the CFPB should be 
required to have mechanisms to do so.
    And I think there hasn't been a lot of discussion about 
what the Department can do. Particularly, they can have better 
oversight and accountability for the bad actors in the system, 
and that servicers would also for-profit colleges. There are a 
few mechanisms that the current Department has actually rolled 
back that would have held these groups accountable--the 
borrower defense to repayment rule, the gainful employment 
rule, which would have gotten bad actors out of the system and 
lowered defaults--because defaults are actually directly 
correlated to the for-profit college growth and decrease. So, 
we need to look at the people--at the actors that are actually 
responsible for some of the burdens in the system.
    Ms. Yu. Thank you. I agree with my colleagues. We 
absolutely need the Department of Education to do a better job 
at protecting student loan borrowers, but as Ms. Harrington 
said, the current Administration has been shielding servicers 
from liability and rolling back consumer protections at every 
opportunity. Oversight by the Department of Education is 
necessary but not sufficient to solve the student loan crisis. 
These are private companies, working with borrowers in the 
second-largest credit market. We need strong consumer 
protections to protect all student loan borrowers from the 
private companies that are profiting off of their student loan 
debt.
    Mr. Frotman. I agree with all of my colleagues. There is a 
critical role for the Department, oversight of the Department, 
but we should remember that under--the FSA has called 
themselves the largest special-purpose consumer bank in the 
world, and this is the committee that deals with banks and 
regulation of financial services companies. And this isn't just 
a higher education policy issue. This is a consumer finance and 
a consumer financial protection issue, and borrowers need your 
help when they are ripped off, when they are trying to pay back 
their debt.
    Mr. Posey. Okay. I saw where the collections on the private 
is much greater than the public, and I am just concerned 
about--we can go back through again--the role of the borrowers 
in creating the problem.
    Mr. Delisle. I am not sure that the borrowers are really 
creating a problem here. I think what I see is borrowers 
frustrated with the terms of the loan program. And so I think 
that, really, what borrowers are saying is they want something 
simpler. We talked a little bit about people saying, oh well, 
they are steering people to the wrong option. Well, how do you 
know what the wrong option is? A lot of people would disagree 
on what the right situation is. There are so many options. 
There are so many different situations. It is almost impossible 
to tell.
    So I don't really think the borrowers are really to blame 
here. I think it is this sort of really crazy program that we 
are putting them into.
    Mr. Posey. Okay. And so the correct way to address that 
problem, you think, best, would be--
    Mr. Delisle. For example, one of the things you could do is 
stop--one of the repayment plans that people complain about--it 
is a benefit--sorry, lost my time.
    Mr. Casten. The gentleman from Washington, Mr. Heck, is 
recognized for 5 minutes.
    Mr. Heck. Thank you, Mr. Chairman. I want to follow up on 
some of the lines of questioning that Congressman Scott engaged 
in, but before I do that, I want to be very clear, very 
explicit, very up front, by stipulating to the need to a 
substantial increase in a consumer protection regimen to deal 
with this problem. It, in fact, just seems like common sense to 
me that absent those protections in a $1.6 trillion 
circumstance, that we can and should act.
    But there is this issue of the writ cause of the cost of 
higher education going up at a multiple of inflation. I have 
read 100 percent since 2000. We have specifically cited 50 
percent between the years of 2003 and 2016. The subsequent 
amount of overall student debt has skyrocketed as well. We know 
that wages have not kept up.
    The writ cause here seems to be wages aren't keeping up to 
the increased cost of tuition, and the cost of tuition has, 
frankly, skyrocketed way beyond inflation adjusted. In fact, 
that very chart there suggests that a decline in State funding 
is part of the culprit here. I would like to personally attest 
to that and offer kind of a framework for why this is 
happening.
    What happens in the west, where higher education is the 
principal delivery mechanism, is that when economies have 
recessions, State legislatures reduce their support for higher 
education and supplant that support with board of trustee 
increased tuition setting authority. And as a consequence, 
every time we hit a downturn they pull back on their support 
and say to the colleges and universities, ``It's up to you. You 
can increase tuition or you can cut your enrollment and reduce 
staff,'' the latter which is obviously not very tenable.
    So boards of trustees have hiked tuitions very 
significantly in the last 20 years, and even longer. This 
occurs every time we hit a recession. And lest you think that I 
am just trying to lay the blame off and point the finger at 
State legislatures, I happen to have been a member of the board 
of trustees of one of those institutions during the last 
significant downturn, and, yes, I raised my right hand in 
support of a substantial increase in tuition to compensate for 
the reduction in State legislative support. This is going to 
continue to happen if we don't come to grips with what overall 
tuitions are.
    One of the most insidious effects--and I am so grateful to 
those of you who have mentioned it--is that the substantial 
increased student loan debt burden has resulted in a 
significant deferment of home purchasing options. It is just 
one of the problems, but this is a big one, and this is one I 
want to point out. Ordinarily, what I would be sitting up here 
doing is telling you we have a housing crisis in this country, 
and it is a crisis of supply, and you know what? That is true. 
We don't have enough units. It messes with the market. There 
aren't enough starter homes for these young people who are 
debt-burdened. Rents are going up because people can't get out 
of their apartments into their starter homes. So, I would tell 
you it is a supply problem.
    There is this portion of the market, however, where it is a 
demand problem, and what I mean by that is that student debt is 
creating a material impediment for them to begin their home 
ownership. Here is why that is so important and how we have to 
view this holistically and keep this in mind, frankly, I think 
above and beyond just student loan servicers, which is a 
problem we ought to attack.
    Defined contribution pension programs in this country have 
fallen off the table. The increase has been in defined 
contribution levels. And as a consequence, the number one 
investment for the average American for their retirement 
security is home ownership, and they are being compelled to 
defer the beginning of the compounded interest that that 
investment, that asset provides them with toward their senior 
years. And this is, in no small part, being brought about as a 
consequence of increased student debt, which is driven by wage 
growth being inadequate and tuition skyrocketing.
    And I seek to highlight this, and consume all my time and 
none of yours, for which I apologize, because I think a 
dimension of this that should be considered, above and beyond 
the student servicing consumer protection reforms, which I hope 
we will enact in this committee, is how, in particular, to deal 
with the home ownership question for those who seek to do it? 
They are deferring it, far fewer are engaged in it, and it is 
going to hurt them in their retirement, and it is a ticking 
time bomb.
    Please give that some consideration. Thank you for your 
time.
    Mr. Casten. The gentleman from Missouri, Mr. Luetkemeyer, 
is recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. As I indicated in 
my opening remarks, I may be the only guy, or if not, maybe one 
of two on this committee who actually has made student loans, 
30-plus years ago, so I know a lot about student loan programs 
years ago as well as what is happening now.
    Years ago, our student loan past-due problem, collection 
problem, was similar to what is in the figures today, and 
according to New York Bank, less than 2 percent of the private 
loans have problems, where 22 percent of the Federal loans have 
problems. So it goes back, in my mind, to underwriting.
    Mr. Delisle, what kind of underwriting standards does the 
Department of Education have? Do they have any at all or are 
they like the no-doc loans that we got in trouble with during 
the Great Recession?
    Mr. Delisle. Right. It is a Federal entitlement, so you are 
entitled to the loan if you are enrolled in a school.
    Mr. Luetkemeyer. We had an example back in the crash of 
2008, where low-doc, no-doc loans were a huge problem, because 
you put people in housing who couldn't afford it. And now, you 
have people with student loans who can't afford them.
    One of the things that we did in my bank when we were there 
is, we would sit and advise people. It is kind of like if they 
are a youngster, 16 years old, and want to buy a brand-new 
Cadillac, and they can only afford a used Honda or whatever, 
what do you do? You sit there and explain to them what they can 
afford and what they can't afford. That kind of financial 
literacy, that kind of financial oversight, that kind of 
financial help is not there, I would assume, whenever they take 
out a student loan today.
    So, Mr. Delisle, can you tell me the process when somebody 
takes out a student loan today?
    Mr. Delisle. Yes. I think the way that the program has been 
designed to try to get at that is to impose some limits on how 
much undergraduates can borrow. So rather than saying, what is 
the right amount, they say, ``Look, if you are a dependent 
undergraduate, your first year of school is $5,500. That is 
it.'' It is fairly blunt and unsophisticated, but that is the 
policy we have for dealing with that. And as I pointed out 
before, for parents and graduate students, there are no limits, 
and that is where the problem is.
    Mr. Luetkemeyer. By the same token, though, if they go into 
an area of study that when they get a job in the real world, 
they are going to have difficulty paying back a $5,500-per-year 
student loan, they need to be told that. Do you not agree?
    Mr. Delisle. Yes. That is the thing.
    Mr. Luetkemeyer. And they need to understand what their 
ability to actually earn in the real world is there, so they 
understand how they can actually pay back these loans. There is 
not that kind of explanation in place today, is there?
    Mr. Delisle. No. There are some efforts to make more 
earnings information available to people who are attending 
institutions, but in terms of--no, nobody sits down and says 
exactly how much you are going to make. There is no requirement 
that they do that. Although, I am a little bit--I wouldn't 
imagine that writing something like that in legislation would 
be the best way to go either, because--
    Mr. Luetkemeyer. Well, I agree. I am old enough that I have 
the gray hair to prove it. I remember back in the 1970s, when 
the Federal Government was in the business of direct lending to 
farmers. That was an absolute total disaster. It absolutely 
ruined agriculture for 10 years, absolutely ruined it, because 
the government was making direct loans to whomever could walk 
in and sign their name, regardless of whether they could 
qualify, because if you walked in and you were breathing, you 
could qualify, and that is basically what you have here. It is 
ruining the student loan lending business, and it has put the 
taxpayers on the hook for lots of dollars.
    I would argue that whenever you have a blank check and you 
can hand it to the--you know, Mr. Heck and Mr. Scott were 
arguing here a little bit about the cost of education. Whenever 
you walk into a school and say, ``I have a blank check. Do you 
want to help fill it out, and let me know what it is like to 
get into school here?'', if there is no accountability on the 
school's part, or there is no ability of the consumer, the 
student, to go out and choose based on cost, what school they 
want to go to.
    I wanted to go to a better school that cost more. I 
couldn't afford it, so I went to a school that cost less, so 
that I didn't have this huge burden of debt. That is something 
that students need to be told, need to have explained to them, 
given to them as an option, and say, ``Look, when you get out, 
this is the problem you are going to have with this huge amount 
of student debt, or you can go to this school over here which 
is not going to charge you that much, and you will have the 
ability to repay much more quickly,'' and then they can go buy 
the house that Mr. Heck was talking about.
    A quick question for you also, Mr. Delisle, with regards to 
the contracted services by the servicers. Who sets those 
parameters in the contract?
    Mr. Delisle. The Department of Education does, but, by 
extension, Congress does as well because the servicers have to 
carry out--
    Mr. Luetkemeyer. I know some of the concerns were about 
repayment. I have a chart in front of me that has 50-plus 
repayment options that are given to the students--if I am not 
mistaken, I have 2 seconds yet. I think this delays, to me, the 
question of what we--if we need to put some more options in 
here, fine, but they already have over 50 repayment options. If 
that is not enough, let's talk about it. But I think we have a 
lot of them in there that they can fall into those categories, 
that they should be okay.
    I yield back.
    Mr. Casten. The gentleman from Colorado, Mr. Perlmutter, is 
recognized for 5 minutes.
    Mr. Perlmutter. Thank you, Mr. Chairman. I want to start 
where Mr. Heck left off with his soliloquy and ask you, Mr. 
Frotman, what do you and your study see to be the impact on 
housing of young people coming out of school with a big burden 
of debt around their necks?
    Mr. Frotman. The impact of student debt is more than just 
what appears on your bill every month, and a significant piece 
of that is the impact this is having on housing. There is one 
study that showed for every additional $1,000 of student debt a 
borrower takes on, they put off buying a house for 2\1/2\ 
months. We have raised a lot more than $1,000, obviously. And 
the impact of student debt isn't shared equally. So, you see a 
tremendous impact when it comes to African-American borrowers, 
and Hispanic borrowers. And I think as Congressman Heck pointed 
out, this is a tremendous way that people build wealth in this 
country, and when student debt is impacting their ability to do 
so, it should cause us all to think broader about the scope of 
this problem.
    Mr. Perlmutter. Thank you. And I kind of agree with a 
couple of things the gentleman from Missouri, Mr. Luetkemeyer, 
had to say--choose how big a loan, whether you can repay it, 
make some intelligent decisions at the beginning. But much of 
this occurred in the recession when people couldn't find a job 
and figured they should go retrain themselves so that they 
could find a job. And so, there are--the cohort is much broader 
than it used to be, of people seeking student loans, and it was 
at a time when jobs weren't available.
    I would like to turn to you, Mr. Minhaj, and ask you, in 
your investigations and your expos, what sharp practices, 
deceitful practices, deceiving practices, manipulative 
practices did you all see in connection with the servicing? So 
we start with should anybody have taken out the loan in the 
first place, and we can disagree about that, and the cost of 
higher education. But in terms of servicing, what did you see 
where there were improprieties?
    Mr. Minhaj. Specifically we saw, when it came to servicing, 
when a student who was actively trying to find the best 
possible option to repay, when they would get on the phone with 
their loan servicer, they oftentimes were given misinformation. 
So instead of telling them, ``Hey, you should probably do an 
income-based repayment plan,'' because they were trying to get 
them off the phone within 7 minutes or less they would say, 
``Go into loan forbearance.''
    So that is actively students are given bad advice that will 
hurt them later on down the road, and they think they are doing 
the right thing because the person on the phone told them to; 
the expert told them to.
    Mr. Perlmutter. Did you find any particular servicers to be 
more abusive than others, or maybe not abusive but--
    Mr. Minhaj. Navient was really bad. Do you have Comcast? 
Navient is like the Comcast of loan servicing. Do you ever feel 
that frustration when you are like, ah, they are the worst? You 
have no choices because the Department of Education put you in 
this arranged marriage that you can't get out of.
    Mr. Perlmutter. Okay. Because there are several different 
servicers, and we really want to get to the bad apples and to 
the sharp practices, or the practices that really hurt the 
students. Because first the debt is bad enough, and then to 
pile it on gets really impossible, because that gets me to my 
third question, and to the lawyers on the panel.
    In 2005, we made it very difficult for individuals to 
discharge their student loans in a bankruptcy, and actually we 
have seen the rise in sort of delinquencies go straight up from 
2005. So I would just turn to you, Ms. Harrington, or you, Ms. 
Yu, I don't know if you are both lawyers or not, but you seem 
like it, so I am going to choose you two to start on that 
question.
    Ms. Yu. We absolutely believe that there needs to be more 
discharge rights for student loan borrowers, and this is one of 
the ways in which student loan debt is treated differently than 
any other type of consumer product, and borrowers need the 
right--they need protections. They need bankruptcy protections 
and they need consumer protections, and right now, student loan 
borrowers don't have them.
    Mr. Perlmutter. Anybody else?
    Mr. Minhaj. For what it is worth, I was waitlisted to go to 
law school.
    Mr. Perlmutter. You were?
    Mr. Minhaj. Yes.
    Mr. Perlmutter. I could see why.
    [laughter]
    Because your professors would have had to take you on all 
day.
    Mr. Minhaj.  Actually, I think I was a great student. And 
for what it is worth, my fingers are still crossed. I am 
waiting. It has been 12 years, but you never know.
    Mr. Perlmutter. All right. I yield back to the Chair. Thank 
you.
    Mr. Casten. The gentleman from Kentucky, Mr. Barr, is 
recognized for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman, and Mr. Delisle, since 
the theme of today's hearing is holding student loan servicers 
accountable, and since some of your colleagues on the panel 
seem to be blaming the student loan servicing industry for the 
$1.5 trillion student loan crisis in this country, I wanted to 
drill down a little bit on the actual role of student loan 
servicers in contributing or being part of this crisis that we 
are here to discuss today.
    Do student loan servicers advise students as to which 
school to attend or which degree to pursue?
    Mr. Delisle. No. The servicer isn't involved on the front 
end of the loan disbursement.
    Mr. Barr. Do student loan servicers set tuition rates?
    Mr. Delisle. No.
    Mr. Barr. Do student loan servicers advise a student as to 
how much money to borrow?
    Mr. Delisle. No.
    Mr. Barr. Do student loan servicers underwrite student 
loans at origination?
    Mr. Delisle. No.
    Mr. Barr. Do student loan servicers actually issue loans to 
students?
    Mr. Delisle. No.
    Mr. Barr. Do student loan servicers set the terms of the 
loan?
    Mr. Delisle. No.
    Mr. Barr. Do student loan servicers set the interest rate 
for the loan?
    Mr. Delisle. No.
    Mr. Barr. Do student loan servicers create the income-based 
repayment plan?
    Mr. Delisle. No.
    Mr. Barr. Who did that?
    Mr. Delisle. Congress did, and--
    Mr. Barr. Congress did.
    Mr. Delisle. --the Department of Education.
    Mr. Barr. Did the student loan servicers, and that 
industry, did they create the graduated repayment plan?
    Mr. Delisle. No.
    Mr. Barr. Who did that?
    Mr. Delisle. It is in statute, so Congress.
    Mr. Barr. Did the student loan servicing industry create 
the extended repayment option?
    Mr. Delisle. No.
    Mr. Barr. Who did that?
    Mr. Delisle. It is in statute, so Congress.
    Mr. Barr. Did the student loan servicers create the 
forbearance option?
    Mr. Delisle. No.
    Mr. Barr. Who did that?
    Mr. Delisle. Congress.
    Mr. Barr. Do student loan servicers get paid more for 
informing students about the forbearance option?
    Mr. Delisle. No.
    Mr. Barr. Do they get paid less for informing students 
about the forbearance option?
    Mr. Delisle. They are paid less when students are enrolled 
in a forbearance--
    Mr. Barr. So, student loan servicers are actually not 
financially incentivized to inform student loan borrowers about 
forbearance?
    Mr. Delisle. My understanding is that is how the contract 
is structured right now.
    Mr. Barr. Data show that 9 out of 10 borrowers who were at 
risk of default can get back on track with their payments if 
they respond to servicer outreach in a timely manner. What 
impact has vilification of student loan servicers had on a 
borrower's willingness to engage with the servicer?
    Mr. Delisle. Well, we have actually seen evidence in the 
Consumer Financial Protection Bureau's database of borrowers 
being advised to take a forbearance when it is pretty clear 
they should, and they don't because they don't trust their 
servicer, and they have heard bad things about forbearance. So 
they don't do it, and then they default.
    Mr. Barr. Okay. So if student loan servicers are not the 
problem, let's explore what actually is the problem. Since the 
Democratic Congress and the Obama Administration orchestrated 
the government takeover of student loans in 2010, the total 
amount of student loan debt has exploded. The Federal 
Government is now the largest consumer lender and owns or 
guarantees 92 percent of the more than $1.5 trillion in student 
loans. The remaining roughly $100 billion are private loans. 
The number of Federal student loan borrowers has exploded by 50 
percent since the government takeover. At the end of 2018, 70 
percent of college students graduated with student loan debt.
    Private loans, in contrast, with underwriting standards 
that actually involve underwriting, that allow lenders to 
determine whether or not a borrower has the ability to repay, 
have a repayment rate of 98 percent. And, meanwhile, data from 
the Federal Reserve suggest that approximately 20 percent of 
Federal borrowers are seriously delinquent or in default. 
Actually, about 36 to 40 percent that are not fully in 
repayment are Federal loans, not private loans.
    So, Mr. Delisle, to what do you attribute the difference in 
the default rates of private loans versus Federal loans?
    Mr. Delisle. The Federal loans are open access. Even 
people--for example, if you lose your job, you become 
unemployed, you become an excellent candidate for a Federal 
student loan.
    Mr. Barr. I think all--
    Mr. Delisle. On the one hand, that makes sense--
    Mr. Barr. I just think all of this--if I could editorialize 
for a minute here--I think all of this is Exhibit A, of not 
just the total incompetence of the Federal Government but the 
victimization of students by Congress, by the Federal 
Government, by the U.S. Department of Education.
    I know everybody wants a boogeyman, and the student loan 
servicers are a convenient boogeyman. But guess what? Look in 
the mirror, Congress. Congress created this crisis. Congress 
created the forbearance option. Congress gave loans to students 
and didn't even care whether or not they had the ability to 
repay, and encouraged them to do so.
    Meanwhile, we have a dramatic shortage in the skilled 
trades. We have a dramatic shortage of nurses. We have a 
dramatic shortage of welders. We need to be reorienting 
workforce development and career and technical education to 
say, look, a 4-year college may be good. We need critical 
thinking skills. I am a product of a liberal arts college. But 
you know what? We need nurses. We need cybersecurity experts. 
We need welders and construction tradespeople. Let's graduate 
these people at $100,000-a-year jobs with no student debt. That 
might be a better solution than trying to blame an industry 
that is just following Federal law created by Congress.
    I yield back.
    Mr. Casten. The gentlewoman from New York, Ms. Velazquez, 
is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman. Mr. Frotman, last 
month the CFPB announced the appointment of Robert Cameron to 
serve as the private loan ombudsman. Until recently, Mr. 
Cameron had been deputy chief counsel and vice president of 
enterprise compliance at the Pennsylvania Higher Education 
Assistance Authority.
    In a statement, you were quoted as calling Mr. Cameron's 
appointment ``outrageous.'' Can you elaborate on your statement 
and explain why you believe this appointment is outrageous?
    Mr. Frotman. It is outrageous but not surprising. We have a 
Secretary of Education who has used every tool at her disposal 
to shield student loan companies from accountability, and now 
the Consumer Financial Protection Bureau has hired, as the top 
student loan official, someone from compliance at a company 
that is at the center of every scandal that has ripped off 
borrowers for a decade.
    We have heard a lot today about blaming borrowers or 
blaming Congress. Congress or borrowers did not force Sallie 
Mae to rip off 77,000 servicemembers. Congress and borrowers 
didn't force ACS to lie to public servants. Congress and 
borrowers didn't force public teachers to have their loans 
turned to grants, in violation of their rights.
    And I think what is happening across this country is that 
people took on debt to try to get a better life for them and 
their families, and some of the largest financial services 
companies in America have been ripping them off for too long. 
And I think the bills before this committee and this hearing 
show that those days need to end.
    Ms. Velazquez. And do you have any concern that the Trump 
Administration only seems to focus on private student loan 
servicers?
    Mr. Frotman. Absolutely. I think what we have seen now is 
private sector companies, where you have borrowers in all of 
your States who have alleged that they have been ripped off, 
and this Administration has used every tool at their disposal 
to say that the Federal Government can oversee these companies. 
Your State attorneys general can oversee these companies.
    If this was 7 years ago, and Arne Duncan told your State 
AGs that that they were unable to investigate a company for 
ripping off servicemembers, you would be outraged, and you 
should be. But that is what is happening today, is the Federal 
Government is trying to shield private sector companies from 
accountability for ripping off millions of people.
    Ms. Velazquez. Ms. Yu, do you have any comments?
    Ms. Yu. I absolutely agree. The fact that the Department of 
Education is shielding servicers from liability, both from the 
State AGs and from private borrowers who are attempting to 
protect their own rights, I think is outrageous, as Mr. Frotman 
said, and I think that is why it is so important for the 
borrower bill of rights and the other bills that this committee 
is considering today.
    Ms. Velazquez. Thank you. Ms. Harrington, in May the 
Federal Reserve produced a report on the economic well-being of 
U.S. households in 2018, which, among other things, discusses 
the state of student loans and other educational debt on the 
U.S. economy. The report found that individuals who did not 
complete their degree, or who attended a for-profit 
institution, are more likely to struggle with repayment than 
those who completed a degree from a public or private, not-for-
profit institution, even including those who took on relatively 
large amounts of debt. Do you have any sense as to why this is 
the case?
    Ms. Harrington. Absolutely. Non-completion is a big problem 
in this country, particularly, as you mentioned, in the for-
profit college industry. And so what you have is students who 
have the debt but not the degree, so they don't have the 
ability to then translate that into the job or the income 
increase that they hoped, because they were unable to complete. 
That students were unable to complete for various reasons is 
disproportionately a problem for low-income students who have a 
lot of other things that they are battling as they are trying 
to attend college. They are caretakers. They are single 
parents. They have to have a job as well. So, we have to be 
cognizant of the fact that that is absolutely a big issue, and 
there is a big issue particularly in the for-profit college 
sector.
    Ms. Velazquez. Thank you. I yield back.
    Mr. Casten. The gentleman from Texas, Mr. Williams, is 
recognized for 5 minutes.
    Mr. Williams. Thank you, Mr. Chairman, for holding this 
important hearing to help to deal with the trillion-dollar 
student debt crisis.
    In 2010, the government took over student lending. At that 
time, the Congressional Budget Office (CBO) predicted that 
federalizing this program would generate $58 million in revenue 
for the government. This initial prediction by the CBO has 
proven to be wildly inaccurate. The student loan debt crisis is 
now estimated to cost taxpayers $306.7 billion over the next 10 
years. This was a massive miscalculation made by the Obama 
Administration. While we can try to single out student loan 
servicers for contributing to this problem, the simple fact is 
that there are deep-rooted structural flaws that have allowed 
the crisis to grow to these levels.
    Mr. Delisle, what miscalculations were made back in 2010, 
when the government took over student lending?
    Mr. Delisle. It relates to the Obama Administration's 
decision and a Democratic Congress to dramatically increase the 
generosity of the income-based repayment program. Under the 
prior version of the program, borrowers paid 15 percent of 
their discretionary income, and had their loans forgiven after 
25 years. Under the Democratic Congress and the Obama 
Administration, in 2010 they changed that to 10 percent of 
income and 20-year loan forgiveness.
    Here is what that has done to the annual cost of that 
program. In 2009, it was about $1 billion a year. Today, it is 
$14 billion a year, and that is not what the Obama 
Administration promised us. The President's top domestic policy 
advisor went on MSNBC and said these changes will not cost 
taxpayers any money, and they have gone from $1 billion to $14 
billion.
    Mr. Williams. All right. Thank you. I think this is a prime 
example of the government trying to expand their influence in 
areas where the private sector can actually perform the task 
better. Many individuals on the other side of the aisle have 
been calling for greater government control over larger 
segments of the economy, such as allowing the post office to 
offer banking services. I hope everyone will see the disaster 
that has unfolded when we have allowed the Department of 
Education to become the largest consumer lender in the country.
    Mr. Delisle, do you think the private sector or the 
government is better equipped to handle lending?
    Mr. Delisle. I think on the graduate school side, the 
private market could do a much better job. In fact, I think 
students who already have college degrees, by definition, are 
excellent candidates for private lending. And in the parent 
loan program, I don't think the Federal Government has done a 
very good job at all there.
    Mr. Williams. So it would be safe to say you are a 
capitalist?
    Mr. Delisle. Yes, I am a capitalist.
    Mr. Williams. All right. Thank you.
    In a recent Bloomberg analysis, it was discovered that 
borrowers are collectively paying down about 1 percent of their 
Federal debt every year. At this rate, it would take 100 years 
to repay the loans. Some people in Washington think that simply 
forgiving student debt would solve the issue. However, I think 
it is a short-sighted approach to a much more complicated 
issue.
    I am a small business owner back in Texas, and in my world, 
if you borrow the money, you pay the money back. Pure and 
simple. So do you think that forgiving current student loan 
debt will do anything to ensure that we will not be in this 
exact same position for the next generations who take on these 
loans, and what message do we send that it is okay to borrow 
but not to pay back?
    Mr. Delisle. Yes. I think the real problem here, again, is 
graduate school. The Department of Education shows that about 
66 percent of the borrowers who are using this income-based 
repayment program, the one that is supposed to be a safety net 
for struggling borrowers, borrowed to go to graduate school. 
Many of them are projected to earn incomes of $100,000 and 
above.
    So this loan forgiveness program that was supposed to help 
struggling borrowers has essentially become a tuition 
assistance program for high-income graduate students, and that 
is another example of where the estimates from the Obama 
Administration were wildly off. They never told us that that is 
what was going to happen.
    Mr. Williams. Like I said, , borrow the money, and pay it 
back. Pretty simple formula.
    Mr. Delisle, on page 7 of your testimony you talk about how 
the forbearance lawsuit against Navient from the CFPB is 
misguided. Can you please elaborate on this statement?
    Mr. Delisle. Yes. I think there are many instances where 
forbearance is superior to income-based repayment. Many of the 
panelists today have told you it is one or the other. In fact, 
here is the amazing part. You can actually get a forbearance 
while using income-based repayment. You can use them 
simultaneously. In fact, many borrowers call their servicer, 
and they are using income-based repayment, and they say, ``I 
still can't afford it.'' And what do they do? The servicer 
offers them forbearance. In fact, the servicer can see that the 
borrower is already using forbearance. On the kinds of phone 
calls that you are listening to, you are not privy to that 
information. So the servicer is actually making the right 
decision, realizing there is no more option to lower this 
person's payment. Forbearance is the best option.
    Mr. Williams. Thank you. I yield back.
    Mr. Casten. The gentleman from California, Mr. Sherman, is 
recognized for 5 minutes.
    Mr. Sherman. Our prestigious and elite educational 
institutions are revered. They house the smartest and most 
articulate professors and administrators our society has. So, 
no smart politician would attack or criticize these revered 
institutions.
    Fortunately, this committee includes at least one low IQ 
member, so let me say that tuition is too damn high. It has 
doubled, in real terms, adjusted for inflation, since 1989. Is 
it any better? Health costs have also gone up faster than 
inflation, but at least, you live longer. At least, the 
operations are better. Are today's professors any better? I 
don't know. From 2003 to 2017, a 48 percent increase in 
tuition.
    Now these elite universities, and others, are able to 
create a self-perpetuating model that claims that they are 
accomplishing a lot. They admit only the folks they think are 
the smartest, the most likely to succeed, and then they brag 
that their graduates are smarter and more likely to succeed 
than the people who weren't admitted to their institution. And 
then they say that is because they provided them with such an 
outstanding education.
    Maybe we could do a test and just take all those admitted 
to Harvard and put them on an island for 4 years, take them 
back, they continue to be smart, they continue to, in most 
cases, be well-connected, from rich families, and guess what? 
Twenty years later, they are going to be rich people.
    Community colleges in California, for in-State students, 
charge $1,000 a year, in today's money; it was less back when I 
went to community college. The education is just as good. But 
what they suffer from, as the employers know, is that all of 
the best students are trying to get out of community college 
and get into something more prestigious.
    This is the investor protection committee. If some outfit 
got people to invest $100,000 in Zimbabwe currency, we would be 
all over them. If some outfit gets them to invest $100,000 in 
an art history degree, we think that is fine. We just want to 
make sure that the Federal Government ultimately pays for it.
    And finally, there are the struggles of families with 
student debt. What about the families who don't go to college 
at all? They are making less money. They, too, are delaying 
starting a family, buying a house, and they are from families 
who are less wealthy than those who are struggling with student 
debt.
    So we have a lot of issues, but we have limited 
jurisdiction here. Our jurisdiction is over the servicing 
process. One idea I will throw out there is, why don't we allow 
people, borrowers, to choose another servicer? If you are 
assigned to one servicer and that servicer isn't doing a good 
job, you should be allowed to say, ``I want this other 
servicer.'' Let the servicers compete.
    But, believe it or not, I have a question for Mr. Delisle.
    Private student loan lenders make 18 disclosures on 3 
separate occasions before the loan is made, providing more 
personalized information than is provided to those borrowing 
Federal direct loans. They are going to be on the hook for the 
loan either way so you would think the borrower would benefit 
from disclosures, whether they owe the money to one outfit or 
another.
    Would disclosures for Federal loans like those made to 
private student loan borrowers lead to better outcomes, and 
would it make sense to have disclosures on the Federal loans be 
made during the course of study rather than just at the 
beginning and the end?
    Mr. Delisle. We have a lot of disclosures already. I showed 
you the forms.
    Mr. Sherman. Yes. I am talking about the distinction 
between the Federal loans and the private loans.
    Mr. Delisle. I don't think you are going to do much good in 
providing borrowers more information at this point. I think we 
are at information saturation in the Federal loan program.
    Mr. Sherman. So should we provide less to those who have 
the private loans, or more to those who have the Federal loans, 
or should we continue to have the disparity?
    Mr. Delisle. Well, look. A borrower right now in the 
Federal loan program has to sit for 70 minutes of entrance and 
exit counseling.
    Mr. Sherman. Okay. I will ask another witness. Mr. Frotman?
    Mr. Frotman. What I have seen is that people are taking on 
debt because it is the only way they could get the degree. This 
isn't a bootstrap moment. This isn't a tightening the belt. 
People are taking on debt because they are going to school, and 
this is the only way they can.
    Mr. Sherman. I agree. Come to Pierce College, $1,000. I 
yield back.
    Mr. Casten. The gentleman from Arkansas, Mr. Hill, is 
recognized for 5 minutes.
    Mr. Hill. I thank the chairman. And I thank the witnesses 
for being here on this issue. Certainly, all of us sympathize 
with the challenges that student lending has brought to a lot 
of families across our country. I agree with a lot of the 
comments today that this really isn't the jurisdiction of this 
committee, and that this kind of debate really should be held 
firmly over at the Education Committee. And to paraphrase Mr. 
Frotman, you should know the names of who owes apologies to 
these families across the country. That is important.
    First of all, State legislatures. State legislatures, who 
don't fund higher education as they had over the entire post-
war environment. State legislatures, who instead of doing that, 
have regressive taxes called lotteries, and hand out 
scholarship money.
    The Congress and the Education Committee, and the 
Affordable Care Act proponents that sold a bill of goods to the 
American taxpayers and the American people, saying that this 
was a reform that would benefit families and pay for the 
Affordable Care Act. They promised $58 billion over 10 years to 
positive contribution to pay for the ACA. What is it? It is 
costing us $306 billion negative. So a $306 billion negative is 
what CBO says the student loan system has contributed.
    An apology from colleges and universities, who aren't 
educating people in that student aid office or in that 
admissions office about the cost of college and all of the ways 
to go about it. They don't do financial literacy training, 
which is why I support that bill so strongly with my friend, 
Bill Foster, from Illinois, for Pell and non-Pell, and all the 
student loan people that they have some sense of where they are 
going with this. Those people, our families are owed an apology 
for that group of people who have contributed over a long 
period of time to this crisis.
    I will also say that families bear a responsibility for 
sort of knowing what they get into. I agree with you that this 
is presented, for a lot of families, as this is the only way 
they are going to go to higher education or a 2-year school. I 
agree.
    And this gets into the comments we have all had about 
rising tuition at these rates. The rate of higher education 
since 1975, per annual income, is higher than the health care 
per annual inflation rate that we had collectively complained 
about as families. It is higher. And I would submit that 
scholarship lotteries, taking away State legislatures' support, 
promoting money with no strings attached, all of those things 
subsidize what? Higher tuition.
    So I admire people like Mitch Daniels at Purdue who says, 
``We are freezing tuition. We are going back to basics to try 
to make sure we are doing a better job.'' And so, our 
administrators owe us that.
    But fundamentally, there is no underwriting in these loans. 
I was at a panel yesterday talking about algorithmic lending, 
credit underwriting, and someone said, ``Boy, we have a 
terrible, atrocious problem with our student lending. We try to 
underwrite the loans on the back end, because there is no 
underwriting on the front end.'' And that is why these 
servicing companies have so many complaints about it.
    And finally I will say, as a community banker for a long 
time, nothing broke my heart more than a story. A nurse came to 
me. Her dad had asked her to come see me. She made $38,000 a 
year, working 4 days a week as a nurse at one of our big 
hospital systems. She went to the University of Arkansas, 
Little Rock, and she was a single mom, with a child. She lived 
with her mom, so she doesn't have a housing expense. She had 
$170,000 of student loan debt. Why? Pay for your rent. Pay for 
your child care. Pay for your food. Pay for room and board. Pay 
for all of these expenses plus tuition and books.
    So that is why I think financial literacy is so, so 
important here, and that personal responsibility.
    This is an interesting hearing. I thank you for bringing 
these subjects. I am sure the CFPB can do more about 
transparency. Maybe we can improve the forms that accordion 
out. We were promised, in 2009, that that would be a principal 
mission of the CFPB--transparency, shortening forms, and making 
it easier for consumers.
    But the fundamental issue, Mr. Chairman, is this should be 
dealt with in the Education Committee. We need to reform this 
plan and we need to let families get out from underneath this 
crushing misdirection of government policy in student lending. 
I yield back.
    Mr. Casten. The gentleman from New York, Mr. Meeks, who is 
also the Chair of our Subcommittee on Consumer Protection and 
Financial Institutions, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Mr. Chairman.
    This is a very, very important subject matter for me. Being 
a kid who grew up in public housing, not having any family 
member prior to me able to go to college, parents not making 
much money. I think my dad at the time might have made $125 a 
week. But they had hope for their son, their oldest son, to 
break the barrier and go to college.
    They surely couldn't pay for it. Had I gone to a bank at 18 
years old and said, ``Give me a loan,'' and they were going to 
go through a whole lot of pieces about whether or not I could 
pay it back, I would not have gotten a loan. I would not have 
had a chance at getting an education. At 18 years old, never 
worked in my life, parents poor, can't contribute anything, I 
would have been denied an education and, therefore, would not 
be sitting here today because the most significant thing to me 
is an education.
    I left, and I apologize, because there was a ceremony going 
on. That's why I have this Kente cloth on. About 400 years, 
when the first indentured Africans were brought here as slaves 
and talked about one of the first things that they were denied 
was the right to read and get educated. Anything to keep them 
enslaved was to prevent them from having an education, and that 
is ultimately what this is about.
    If you are rich, you are going to qualify for a loan. You 
wouldn't need to get one, but you will qualify. You will meet 
every metric. But if you are poor, you are in trouble.
    And I see every other nation focusing on their young to try 
to make sure they are doing everything that is possible so that 
they get an education because that is the key to their future. 
And we talk about being in a competitive world, if we are 
leaving the majority of our individuals uneducated because they 
can't afford an education, then we are endangered as a country.
    I think all of you on the panel will agree that when we 
talk about the current student debt, it is a crisis. Is that 
not correct? It is a crisis. It is a crisis for America.
    Mr. Frotman, let me ask you, and I hear my colleagues on 
the other side talking about all this. But if this was a 
crisis--and I think it is a crisis for us--right now, the 
Government of the United States is spending, and I guess they 
call them socialists, but it is $18 billion to farmers because 
of tariffs and other policies of the Administration. What would 
$18 billion do to help the crisis of student debt?
    Mr. Frotman. It is a great question, Congressman. I have 
traveled coast to coast talking to student loan borrowers in 
blue States and in red States, and they don't want apologies, 
they want help. They don't want to hear about a President who 
hasn't been in office in 3 years or policies from a decade ago. 
They are struggling now.
    And this is the committee that ensures that those who took 
on the debt don't get ripped off, and they are getting ripped 
off. They are calling their student loan company and getting 
bad information. They are getting harassed by debt collectors.
    So, $20 billion, sure. But this is the committee that 
stands up for those people who have taken on debt to try to 
make a better life, and student loan borrowers need you to do 
it again.
    Mr. Meeks. Would it help, because the FHA does not adjust 
to an income-driven repayment plan, which allows borrowers to 
pay a reduced amount for their student loans each month based 
on their income and family size. Instead, debt-to-income ratios 
are calculated using debt figures higher than the actual figure 
people are paying. This makes it difficult for many student 
borrowers to obtain an FHA mortgage.
    Shouldn't the FHA base debt-to-income ratios on the amount 
student borrowers actually pay?
    Mr. Frotman. Yes.
    Mr. Meeks. Ms. Yu?
    Ms. Yu. Absolutely.
    Mr. Meeks. Ms. Harrington?
    Ms. Harrington. Yes.
    Mr. Meeks. Mr. Minhaj?
    Mr. Minhaj. Sure.
    Mr. Meeks. Mr. Delisle?
    Mr. Delisle. Well, I think this is a good illustration of 
two complicated Federal programs not working well together 
because they are complicated, right? That is the source of this 
problem.
    Mr. Meeks. I will go back to my other issue because the 
focus is--and I see I am out of time. So I am not going to get 
a chance to do it, because he is anxious to bang that gavel.
    [laughter]
    Mr. Meeks. I yield back the balance of my time.
    Mr. Casten. The gentleman from New York, Mr. Zeldin, is 
recognized for 5 minutes.
    Mr. Zeldin. Thank you, Mr. Chairman, and Ranking Member 
McHenry.
    And I actually am going to want to pick up where Mr. Meeks 
just left off in a moment. I don't think anyone disputes that 
there is a student loan crisis in our country. A recent study 
in my home State of New York shows that the average graduate is 
graduating with approximately $30,000 in student debt.
    The Federal Government nationalized student lending as part 
of the Affordable Care Act in 2010. Since then, the Federal 
Government has become the largest lender in the nation because 
it owns or guarantees, as been pointed out earlier, $1.6 
trillion in student loans, and as has been said by others, only 
8 percent is held by private lenders.
    At home in my district on Long Island, we have the next 
generation trying to achieve the American Dream to be able to 
start their family, to buy a home, to afford a car that would 
get them to work. The burden of student debt certainly is a 
huge obstacle.
    It is clear we have a problem. Students are borrowing 
exorbitant amounts of money, and many don't fully comprehend 
what they are getting into in the first place. I would use this 
opportunity to put in a good word, as Brad Sherman was pitching 
a local college, we have the State University of New York. We 
have the City University of New York. In my home county, we 
have Suffolk County Community College.
    I was actually recently at a graduation ceremony for a 2-
year graduate at Suffolk Community College, and because he made 
the most of his experience, he was actually transferring to 
Cornell on a full ride, and he was going to have an Ivy League 
degree because he applied himself well at this great community 
college locally.
    There are an incredible number of requirements placed upon 
lenders in the private sector when they originate loans in 
consumer credit markets, notably the requirement that the 
lender approve a borrower's ability to repay at the time of 
origination. It doesn't make sense to me that we wouldn't hold 
the Federal Government to the same standards. The Federal 
Government lends to anyone without regard for their ability to 
repay.
    Disclosures for key loan terms, like APR or future monthly 
payments, are not required on Federal student loans either. I 
thought Andy Barr's line of questioning was great, as was 
French Hill's recent remarks. Though it is not in this 
committee's jurisdiction to pass here, I introduced the ExCEL 
Act, H.R. 4079. This is where I want to be able to pick up 
where my colleague from New York, Gregory Meeks, just left off.
    I believe that the system should allow people to be paying 
off their loan based on their ability to repay. For some 
people, they will be able to repay in a shorter amount of time 
than others will.
    There are periods of low income or unemployment over the 
course of your career. This is where you can rack up a lot of 
defaults where you owe a lot of money. We need to help people 
get through those periods of low income or unemployment so that 
they are not defaulting and that they are able to more quickly 
get back up on their feet.
    Also, as people are seeing increases, if we were able to 
move into a better system of factoring in ability to pay, as 
somebody is getting a promotion and they are getting more of a 
salary, you want to make sure that the increase that they might 
be paying towards their student loan is one that doesn't remove 
the incentive for being able to get that step-up in salary. So, 
there should be an increase there.
    Also, people need time to get their feet under them. You 
graduate, you get your job, and your first bill quickly comes 
due. But your ability to make that first payment in Year 1 or 
Year 2 is not the same as your ability to be able to make that 
payment, say, in Year 7 or Year 10 because now you are further 
along the career ladder. So, this flexible repayment approach 
focuses on the student's ability to repay loans based on their 
income to ensure the student is not being set up to fail.
    Everyone benefits when borrowers and lenders operate under 
a rational incentive structure, especially when it comes to 
servicing and loan repayment. Borrowers, servicers, and the 
taxpayer all benefit when borrowers stay current with their 
payments.
    This committee may not have--well, this committee does have 
purview over private student loans and their servicers. As 
French Hill pointed out, there is a lot that needs to get done 
under the jurisdiction of the Education and Workforce 
Committee.
    Mr. Delisle, I know you may not be able to comment 
specifically on the merits of the ExCEL Act, but what kind of 
lessons can the Federal student loan originating servicing 
market learn from the private loan originating servicing 
market?
    Mr. Delisle. I want to get at something you mentioned about 
the need for flexible repayment options in the student loan 
program. And I should point out that we have them. We have this 
income-based repayment program.
    But ironically, it is actually why we are having--my 
understanding is, why this hearing was called. Many of the 
borrowers who are complaining about student loan servicing are 
actually complaining about the terms of the income-based 
repayment program.
    They say, ``I have been making payments for years on time. 
I have never missed a payment, but my balance keeps going up.'' 
And they think the servicer is pulling a fast one on them. That 
is actually how this program was designed to work.
    Mr. Zeldin. I am out of time. But I just want to point out 
that we need to make some changes to that because it is not 
working for the government, it is not working for the 
borrowers, and many others.
    I yield back.
    Mr. Casten. The gentleman from Texas, Mr. Gonzalez, is 
recognized for 5 minutes.
    Mr. Gonzalez of Texas. I don't have a lot to comment. We 
shot arrows at each other and talked about all the issues that 
are wrong. If I had to ask one question, it would be, what is 
the solution?
    And I will ask Mr. Frotman. If you had to come up with a 
solution to the grave issue that has impacted everyone--I was a 
student loan recipient. I wouldn't have been able to go to 
school without one. I had $100,000 in student loan debt when I 
got out of law school, and had to live in a matchbox apartment 
and really just hunker down to eventually pay that debt. And 
you know, I did it with much gratitude because I certainly 
wouldn't be here if it hadn't been for that opportunity.
    But clearly, something is really screwed up in this country 
when it comes to student loan debt, and I don't know that we 
have the answers to it. Maybe some of you do. So, I want to 
hear your opinion and others on the panel.
    Mr. Frotman. Quickly, I think there is some truth to the 
fact that a lot of this problem doesn't rest with this 
committee, but a lot does. I think what we have seen is that 
student loan borrowers are getting ripped off. And one of the 
reasons why they are getting ripped off is because they don't 
have the same rights and protections as if they were paying 
back a credit card or paying back a mortgage.
    We have heard a lot about how servicers are just doing the 
right thing. Part of the lawsuit with all the States and the 
CFPB against Navient documents the incredible incentives that 
these companies have to try to drive a profit. There was one 
employee at Navient who described it this way, ``Do I help this 
borrower and answer their questions, or do I rush through it 
and afford my groceries?''
    These are the incentives that the call reps at these 
companies have to give bad information, no information, or 
little information at all. And borrowers need rights and 
protections that are enforceable so when they get ripped off, 
they can stand up for themselves.
    Ms. Yu. I absolutely agree. I think that there are numerous 
problems, and I sincerely do hope that we solve the tuition 
crisis. However, likewise, the borrowers that we work with, 
they took on this debt because they wanted to improve the lives 
of their families, and now they are saddled with that debt.
    Today, there is a hearing in the 11th Circuit where Great 
Lakes is arguing that they don't have to be held accountable 
when they commit fraud and misrepresentation because it is 
preempted by the Higher Education Act. And I think what this 
committee needs to do is to say that borrowers should not be 
cheated and lied to.
    Ms. Harrington. I would agree with my colleagues. I think 
that student loan borrowers deserve and need the same 
protections that all consumers are entitled to in this country. 
I think that the solution to the student debt crisis is working 
on both front-end and back-end affordability, and that is what 
we are talking about here.
    And affordability absolutely includes at the back end 
strong servicing protections and quality servicing for all 
borrowers. We do need to increase the amount of the Pell Grant. 
We do need to increase investment in HBCUs and MSIs. We do need 
to do a lot on the front end, but this committee has a big part 
to play in making sure the CFPB can actually protect student 
loan borrowers.
    Mr. Gonzalez of Texas. Thank you.
    Mr. Minhaj. Mr. Gonzalez, I am very passionate about this 
issue because I am lucky. When I left college, I didn't have 
any student loan debt because I have immigrant parents, and 
they made me live at home with them.
    So, I don't have crippling student loan debt. I have 
crippling emotional debt. And Congress has yet to stand up--
    Mr. Gonzalez of Texas. We all do.
    Mr. Minhaj. --and do anything about it and stand up to my 
parents and say what you did was wrong. But you don't have to 
have crippling student loan debt to have empathy for people who 
are investing in their futures, and that is why I am here 
today.
    Mr. Gonzalez of Texas. Thank you.
    Mr. Delisle. I mentioned in my testimony that I think we 
need a simpler system. The program has too many options, too 
many overlapping features that are just too complicated, even 
for Congress to anticipate the confusing way they interact and 
trip up borrowers. And actually, many of them almost look like 
the borrower is being scammed, where a borrower says, for 
example, ``Wait, my payment increased, and I didn't even know 
it was going to do that. How come I have been paying the same 
payment for months, and all of a sudden, my payment 
increased?''
    Those nasty student loan servicers. Actually, it turns out 
that the borrower is in the graduated repayment plan that is 
spelled out in statute, where their payment increases every 2 
years. The program has been designed to look like a scam to 
borrowers. So, I think the big solution is to stop blaming 
servicers and get busy fixing the terms of the program.
    Mr. Gonzalez of Texas. Thank you. I yield back.
    Mr. Casten. The gentleman from Georgia, Mr. Loudermilk, is 
recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And truly, this is a crisis. We are seeing and hearing it 
all around. Before I start my questions, Mr. Chairman, I would 
ask unanimous consent to insert into the record two letters 
regarding the student loan crisis by the Consumer Bankers 
Association identifying the crisis and some suggested solutions 
to it.
    Mr. Casten. Without objection, it is so ordered.
    Mr. Loudermilk. Thank you.
    I was meeting with some constituents about 3 years ago back 
in my district, and we were talking about the void we have in 
jobs in the nation. And I was talking about the need for a lot 
of technical skills.
    And after I got done, this young lady came up to me, and 
she said, ``Look, I have a twin sister. We both graduated high 
school at the same time. I went to a tech school, and went 
right into the workforce. In 4 years, I have made more than my 
sister has in student debt at this point.'' It was incredible 
to me that after 4 years in a professional field, that this 
young lady who went to tech school, now has made more than her 
sister had in student debt.
    I started looking into it more often and realized that we 
truly do have a crisis, and there is a lot we have to do.
    Mr. Frotman, you said something earlier that I want to 
follow up on. You said students have to have a loan to go to 
college. Is that true?
    Mr. Frotman. Sorry if I wasn't clear enough. I was saying, 
when I talk to people over the last half decade, that is what 
they feel like. I think Hua Sun said this best, which is people 
don't feel like they have a choice. For as long as I can 
remember, and I am sure for as long as many of you can 
remember, it was go to school, take on the debt.
    Mr. Loudermilk. Right.
    Mr. Frotman. And I think what is happening is that for 
enormous swaths of American society, that decision is premised 
on whether or not you take out a loan.
    Mr. Loudermilk. So it is more that people feel than 
actually--do we happen to know what percentage of students 
actually graduate with no debt? Does anybody know what that is?
    Ms. Harrington. In a 2016 class, 70 percent of graduates 
had student loan debt. So this is a--
    Mr. Loudermilk. Okay. So about 30 percent?
    Ms. Harrington. This is a vast majority of students, and it 
is something that is no longer a choice. Sixty-five percent of 
jobs by just next year are going to require some form of 
postsecondary education. That is only going to go up.
    Mr. Loudermilk. Okay. I was just wondering because of that. 
I started thinking about how 2 of my 3 children graduated 4-
year college institutions with zero debt and no scholarship. 
They actually worked--I couldn't pay for it. They actually 
worked and paid for their tuition, even from some colleges you 
would recognize.
    Mr. Delisle. Congressman, if I might add to that statistic?
    Mr. Loudermilk. Yes.
    Mr. Delisle. Many of the people who take out student loans 
come from high-income families, which should tell us that 
people aren't necessarily taking out student loans because they 
have to. They are making choices. They are maybe making choices 
to attend more expensive schools. They may think the government 
is offering such an incredible deal, that they can't turn it 
down.
    So I think it is important that we tend to cast student 
debt as this thing that only low-income people take on, and it 
is this huge burden, but many high-income families are choosing 
to use it.
    Mr. Loudermilk. Let us follow on what you are talking about 
there. So in their truth-in-lending that they have received--I 
assume they receive a truth-in-lending statement so they know 
what the repayment requirements are. You are talking about 
people calling back and saying, ``Why did my cost go up?'' Are 
they receiving documentation showing the requirements that they 
have to repay this loan?
    Mr. Delisle. Yes, they are receiving an overwhelming amount 
of documentation. They also need to sit for about 30 minutes of 
entrance counseling and about 30 to 40 minutes of exit 
counseling to get the loan, sign a master promissory note. And 
then any time they use a different repayment plan, they are 
also signing another form.
    So, we don't have an information deficit. We have as much 
information as we have options in this program, which is way 
too many.
    Ms. Harrington. Sir, could I add something?
    Mr. Loudermilk. Yes.
    Ms. Harrington. Yes, there are high-income individuals who 
do take out student loans. But there are a significant number 
of low-income individuals who have to take out student loans, 
and that is where the issue lies. Ninety percent of the 
defaulters are low-income students who were eligible for Pell 
Grants. So, those are the folks who are struggling to pay the 
most, and that continues to be the case because the student 
debt has not taken them to where they are supposed to go. We do 
have issues with this system.
    Mr. Loudermilk. Do you agree with Mr. Delisle that they do 
know going into it what the requirements are of repayment, 
their interest rates, their payment, the escalating payments? 
Is there enough disclosure there?
    Ms. Harrington. I don't think this is a question of 
personal responsibility or more disclosure. This is a question 
of how we make sure that private actors are acting in the best 
interest of consumers and students and, therefore, taxpayers.
    Mr. Loudermilk. I think it is in a sense if--I was under 
the impression that they were just being given loans by statute 
or whatever, and they didn't know what they were getting into 
and the requirement to repay. So, that would be my question.
    When you buy a house, the TRID requirements are so 
expansive with the truth-in-lending that we have to have 
software to do it.
    But anyhow, I see that I am out of time. I can submit the 
rest of my questions for the record.
    Thank you.
    Mr. Casten. The gentleman from Florida, Mr. Lawson, is 
recognized for 5 minutes.
    Mr. Lawson. Thank you, Mr. Chairman, and witnesses, welcome 
to the committee.
    This is very interesting to me because I have probably over 
100,000 students throughout the Fifth Congressional District, 
so I talk to students all the time about problems they have. I 
didn't have any student loans because I was an athlete, but a 
lot of my friends who were in the dorm at night would be 
talking about what is going to happen to them and how they 
would have to pay it back.
    I have taken a great deal of interest in this particular 
area, and I don't think the Federal Government caused any 
problem because--and Congress because we are the good guys, and 
everybody else is bad. But I have introduced several bills to 
address various angles of the student loan problem.
    These include a bill to refinance Federal loans with a 
fixed interest rate, excluding income of dependent students in 
the expected family contribution calculation, and most 
recently, a bill to extend the interest-free grace period for 
Federal loans. And the reason why I introduced those is because 
6 months after the student graduates from college and they 
don't have a job, they are expected to pay. So, hopefully, we 
can delay it for at least a year so you can give them the 
opportunity to get a job.
    And also, you can refinance just about everything. So, they 
should be able to refinance student loans. I would like to hear 
the panel discussion on delaying student loans for at least a 
year so they can find a job and the ability to refinance 
student loans.
    And I will start with you, Mr. Frotman.
    Mr. Frotman. I think we often get stuck in this mindset 
that you need to have a silver bullet to solve every problem. 
There is no silver bullet to solve a $1.5 trillion student loan 
problem. So I think bills like these should be encouraged. I 
think we need to try to attack all of the different ways that 
student debt is not only impacting individuals, but our larger 
society.
    I would love to learn more about these bills and work with 
you.
    Ms. Yu. Thank you for your question.
    Certainly, borrowers need more assistance getting off the 
ground. Interest rates for some borrowers are way too high, but 
also, for the borrowers that we see, it is the fact of their 
debt. It doesn't matter if it is $5,000 or $50,000, whether or 
not it is a 5 percent or 10 percent interest rate. The 
borrowers that we work with are just struggling with debt all 
around, and they need to make sure that they are able to access 
the programs that already exist.
    They would greatly benefit from income-derived repayment. 
They would greatly benefit from a lot of the cancellation 
programs that already exist, and they are just not able to 
access those because of lack of consumer protections.
    Ms. Harrington. I would agree with my colleagues, and I 
would just add that there definitely does need to be 
streamlining and improvement of the income-based repayment 
program, to make it actually affordable, based on 8 percent of 
discretionary income, not 10 percent, and increasing the line 
above which income starts to 250 percent of the poverty line.
    There are a number of things we can do, making it one plan. 
But again, all of that only matters if students actually can 
access these programs and plans, if their servicers are 
actually doing their job and if they have the information they 
need to be successful.
    Mr. Minhaj. I am not an expert when it comes to 
refinancing, although I am very good with Microsoft Excel and 
macros.
    Mr. Delisle. You can refinance a Federal student loan. A 
Federal student loan has no prepayment penalty. So you are free 
to go out into the private market and shop for a better rate, 
obtain the better rate, use all the proceeds from the new loan 
to pay off the old loan, and you have refinanced exactly like 
you would refinance a mortgage.
    I don't know why it is this common misperception that you 
can't refinance a student loan. It is actually happening all 
the time. It is happening right now.
    There is a company called SoFi sending out mail all over 
the place saying, refinance your Federal student loan with us. 
You wouldn't build a whole company around something you can't 
do, right? So I think there is ample evidence that you can 
actually refinance a Federal student loan.
    Mr. Lawson. With everything that I have heard from you this 
morning, you all are the good guys because it seems like 
everything that has been discussed here, students don't know 
about it, and the people who have been on this panel and 
talking about it, and even some of the Members, have no idea 
about all the things that are available for student loans.
    What I have heard is oftentimes, they are not able to 
refinance a student loan, and the Federal Government should not 
be making a profit off the backs of students. And I know I am 
running out of time. I would like to have more discussion with 
you in the future.
    And with that, I yield back.
    Mr. Casten. The gentleman from Ohio, Mr. Davidson, is 
recognized for 5 minutes.
    Mr. Davidson. I thank the witnesses, and I thank the 
committee for talking about a major problem in the country, the 
student debt crisis. We have seen it accelerate in the past 
decade, and I think we can go back and pinpoint the point in 
time when the rate of growth of the problem began to 
accelerate.
    The question is, do we have the resolve to actually go to 
the root cause, or do we want to do things the way Congress 
normally does, which is akin to the fire department showing up 
at a burning building and looking at the building burn while we 
blame one another or try to figure out whose fault it is. We 
just need to put out the damned fire.
    And so when you look at it, how do we do that? The 
structure in Congress actually prevents getting to the root 
cause. We have a committee that can only deal with the 
jurisdiction of servicers. We are sitting here talking about 
the issue of how--Mr. Barr highlighted the very limited ability 
of servicers to actually end this problem. We are spending 
hours talking about servicers here instead of talking 
holistically about the root cause of the problem and how do you 
deal with that.
    What we did is, as a country, we decided that we wanted 
students to be able to get loans that the private sector 
wouldn't make because the default rates would be too high. When 
I was a young person, and I looked at how much debt I would 
need to take on, and I looked at the alternatives I had, one of 
the reasons that I loved my options--one of the reasons I chose 
to march for free college back in the day is because the Army 
had the College Fund. And I was able to go to the Army and have 
a path to not go into debt as my first act as an adult, but to 
defend our country.
    And that led me to go to the United States Military 
Academy, and all that is part of why I am here today. So I do 
want to thank the American taxpayers who paid for me to have a 
great, high-quality education.
    I think when we think about the taxpayers of America, we 
need to forget about the forgotten men and women who are 
actually being defrauded here, and it is the taxpayers. Because 
they are fronting all this money for no sound underwriting to 
people who do not have a realistic expectation of paying the 
money back.
    Now that doesn't mean that those students are committing 
fraud, though some may be. But they do not have a realistic 
prospect of repaying the loan. And when you have market 
principles at work, people don't make the loan. They don't. 
They say, you know, I love you, it is not about you as a 
person, it is that you do not have a realistic expectation of 
paying for this.
    And when we lost those principles, that is how we crashed 
the housing market in the United States, and that is how we are 
crashing the education market in the United States. There are a 
lot of people being hurt because lawmakers are making half-
baked solutions to real problems because the way this place is 
structured with jurisdictions doesn't allow solutions to the 
whole problem.
    We should be structuring and say, the student debt crisis 
is a problem. We have a committee for that. That committee has 
jurisdiction to deal with the whole problem.
    We should talk about healthcare and say, the status quo is 
broken. We should have a healthcare committee. It is 20 percent 
of the U.S. GDP, 20 percent. And instead, we divvy it up 
amongst three committees.
    You look at immigration, same story. So on and so forth, 
the spending problem, the broken welfare system, the means-
tested programs, the poverty assistance that we have, divvied 
up amongst 12 of 16 committees. You can't even get a bill to 
holistically deal with it to appoint a commission, four 
Republicans, four Democrats. You can't cut spending. You can't 
launch new programs, but you could refine it to fix the benefit 
cliffs that are in there. No one can convene it because there 
is not a single committee with jurisdiction.
    And yet, Congress sits here. We demonize each other. We 
point cameras and say, see, here is the problem. That is the 
problem, but we don't go to the trouble to put out the fire and 
solve the problem.
    If we want to do it, colleagues, we have to change the 
structure of the way this place works and do bills that get to 
the root cause because the American people are being defrauded. 
We are going to bankrupt our country by spending more money 
than we have the same way these students are being bankrupted 
right out of the gate, the earliest stages in life, by taking 
on more debt than they can afford. That is exactly what this 
nation is doing today, and we need to change the broken status 
quo, and that starts right here in this body.
    I yield back.
    Chairwoman Waters. Thank you.
    The gentleman from Guam, Mr. San Nicolas, who is also the 
Vice Chair of the committe, is recognized for 5 minutes.
    Mr. San Nicolas. Thank you so much, Madam Chairwoman.
    I don't think anybody's hands are clean in all of this. I 
don't think anybody's hands are clean. I think that politics 
has a way of making us try and pigeonhole the problem and make 
it be the previous guy's problem or try and identify some other 
reason why things are the way they are. But the reality is that 
our entire system is kind of designed to create this mess that 
we have here today.
    Ms. Harrington, when you say 90 percent of the defaulters 
are low-income Pell Grant recipients, I think that speaks 
volumes to how systemic this problem is. We have people in this 
country who are looking for opportunities. They see education 
as the way to go, which is how we are all raised. We are all 
raised and told to go and get a good education. It is going to 
open doors for you, and it is going to create a better life 
than the life that we have now.
    We have these, as Mr. Sherman pointed out, institutions of 
higher learning that see all this money available, and they 
keep increasing tuition rates. As a local lawmaker back home, I 
remember trying to introduce legislation to reduce the amount 
that our students had to pay for tuition. And one of the 
individuals in the university said, ``We don't want to drop it 
below the Pell Grant rate because that is free Federal money 
that we are bringing in, and we want to bring that money into 
the territory.''
    And you kind of sit back and you look at how the system is 
almost designed to make the pursuit of capital on the front end 
the priority and the pursuit of the American Dream for all 
those people trying to find whatever way they can to get to 
where they want to go kind of falling into that trap. And of 
all things, I think that this is ultimately an indictment on 
our inability to provide significant financial literacy 
education in our community so that people don't make these 
individual choices that are hurting them.
    But when the whole system is almost designed where you need 
to go and you need to attend the best possible university you 
can just get accepted into so you can possibly get the best job 
that you are going to be able to get after you graduate, and 
then you borrow as much money as you need to borrow in order to 
get from here to there, it is that classic case of the ends 
justifying the means.
    Unfortunately, what has resulted from all of that is $1.5 
trillion in student loan debt and a lot of people who took that 
option trapped. They are trapped because now they have this 
debt, and it is affecting the debt-to-income ratios. They are 
not able to go out and borrow for a car to drive to work or to 
borrow to buy the home that they are dreaming of for their 
families.
    And as much as we talked about systemic risk in this 
committee, and as much as this committee has done so much work 
to address it when it was affecting the big banks, we need to 
really ask ourselves the hard question: Is it systemic risk for 
an entire generation to be lost to student debt and to hold 
them all back because they fell into a trap that our society 
has kind of created for them?
    So, we have asked the question of what can we do, and I 
know that the committee has kind of stayed focused on the 
servicers. And definitely, there is a service gap that we need 
to fill. But I wanted to ask the $1.5 trillion question, and 
this is the political question that I think a lot of people are 
talking about.
    There are some broad-stroke solutions that people mention, 
who are running for higher office, but I wanted to ask you 
folks, what would you do about the $1.5 trillion, I don't want 
to say elephant or donkey in the room, but just the $1.5 
trillion giant that we are all facing here? How do we address 
that?
    Mr. Frotman. I think it starts, first off, in hearing rooms 
like this. I think for years, when we started doing this work 
at the Consumer Financial Protection Bureau and you would talk 
about the impact of student debt, everything would always 
revert back to, let me tell you how we are going to make 
college more affordable for the next guy. An entire generation 
felt like we were writing them off.
    I am not trying to evade the question at all, but we just 
need to talk about the impact that this debt is having and then 
come together and realize that it is just an unacceptable 
outcome for 45 million Americans who have seen their chance at 
the American Dream hampered by student debt. And I think it 
starts there.
    It starts by talking about housing, impact on buying cars, 
on racial wealth gap, on income inequality. Because I think we 
hear about this issue sometimes talked about as like a 
generation eating too much avocado toast, right? And nothing 
could be further from the truth. The fastest-growing segment of 
student loan borrowers are older Americans.
    I think we need to come together and realize that this is 
impacting huge swaths of the American population and the 
American economy.
    Mr. San Nicolas. Well, I am almost out of time. Does 
anybody have a solution? We were talking about forgiving 
student loan debt, hitting the reset button. Does anybody here 
advocate for that or something similar?
    Ms. Harrington. Absolutely. We just put out a recent report 
with the NAACP, Unidos, the Leadership Conference on Civil and 
Human Rights, and the Urban League, where we argue for broad-
based cancellation, even of $10,000 across-the-board, which 
would have a significant impact for many borrowers, especially 
borrowers of color.
    Mr. San Nicolas. So, not full forgiveness, but even just 
partial would give the breathing room necessary.
    Ms. Harrington. Even just--because that is actually full 
forgiveness for a significant amount of people who are most at 
risk. The 90 percent of defaulters who are low income are--the 
median amount they are defaulting on is less than $10,000.
    So even at $10,000, we would have a significant impact on 
the lives of millions of borrowers, and we would help lift them 
out of poverty.
    Chairwoman Waters. The gentleman from Tennessee, Mr. Rose, 
is recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters.
    I am a graduate of Tennessee Tech University in my hometown 
of Cookeville, Tennessee. And fortunately, I graduated from 
Tennessee Tech with no student debt and just recently was 
looking at the statistics for that university and see that 
still today, 48 percent of their graduates graduate from the 
university without student debt. The cost is very reasonable, 
and it is a great university.
    It seems to me, and I think others have made this point 
today, but I want to bear down on it, that we are here swatting 
at something that is really not the problem. And this 
committee, unfortunately--or fortunately, depending on your 
perspective--doesn't have the jurisdiction to deal with the 
problem.
    I look back to July 2010 when the Affordable Care Act was 
signed into law, and since that time, all new Federal student 
loans have been made through the Federal Direct Loan Program, 
administered by the Department of Education. Today, nearly $1.4 
trillion of the $1.5 trillion in student loan debt is owed or 
guaranteed by the Federal Government, a Federal Government who 
did it explicitly because they thought they could make money 
and use that money to offset the cost of a new entitlement.
    And I think what we see, unfortunately, here in Washington 
is over and over again, the Federal Government occupies a space 
that the private sector was handling fairly effectively and 
turns it into a giant mess. Now, here we are trying to swat at 
the symptoms of this ill, and I am really kind of mystified by 
why we think beating up on the servicers is somehow the answer 
to this problem.
    By that logic, it is the people who work at the servicers 
who are the problem. It is those dastardly individuals who get 
on the phone with you that we should be blaming and we should 
be sanctioning because how dare they mistreat student loan 
borrowers when they have them on the phone? And so, I am just 
kind of mystified by this approach to the problem.
    Mr. Delisle, what is the relationship between the 
Department of Education and the student loan servicing 
companies?
    Mr. Delisle. It is a contract. The Department of Education 
hires them on contract to basically run the entire Federal 
student loan program according to the terms that are spelled 
out in the law.
    Mr. Rose. And what is the process by which the terms and 
conditions of those contracts of loan servicing are set?
    Mr. Delisle. It is the standard government contracting 
process. The Department takes bids and has an amount of money 
that Congress determines how much it can pay for these 
contracts and, using that amount of money, spells out what the 
servicers should do.
    Mr. Rose. And who sets the terms of the loan, such as the 
interest rate and the loan terms that the borrowers borrow 
under?
    Mr. Delisle. Congress does. They are set in statute.
    Mr. Rose. Do you think the majority of borrowers are aware 
that Congress sets those terms?
    Mr. Delisle. It is hard to say. There are certainly some 
who are unaware of that, who, in fact, the only entity they are 
interacting with is their servicer. So I think it is 
reasonable, although incorrect, for them to blame the servicer 
when they are frustrated with this process. It is the only 
entity they are interacting with.
    But as you can see in my testimony, I give a lot of 
examples where the servicer is just doing what they are 
supposed to do, and it looks like a scam to the borrower.
    Mr. Rose. And a servicer's role is ensure that the 
borrowers are acting according to their repayment plan or to 
suggest a better option. It is the duty of the servicer to 
inform the borrower of all of his or her repayment, deferral, 
and forbearance options. What is the process for choosing a new 
plan?
    Mr. Delisle. A borrower is entitled to choose any plan for 
which they are eligible pretty much whenever they want. They 
can get the information from the Department of Education's 
website. They can get the information from the servicer who 
will send them forms, and they can decide which one they want 
to use. They can ask the servicer about the options.
    Servicers generally aren't in the position of telling you 
which one is best for you. That is a really difficult kind of 
calculation. I am an expert in this. I would have a hard time 
determining what the ideal option is for every borrower in 
every circumstance.
    Mr. Rose. Is there any connection between the compensation 
structure for the company's employees, the servicer's 
employees, and the repayment plan that the borrower chooses?
    Mr. Delisle. It is mostly based on, are you in good 
standing, are you in forbearance, or are you delinquent? My 
understanding is the contract is less about which plan you 
choose. It is more about whether or not you are in good 
standing on the loan.
    Mr. Rose. Thank you. I yield back.
    Chairwoman Waters. The gentlewoman from Michigan, Ms. 
Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you so much, Madam Chairwoman.
    I sincerely appreciate this conversation, especially 
because my district, the 13th Congressional District--I call it 
13 districts strong--is the third-poorest congressional 
district in the country. And it is very dangerous when we start 
blaming borrowers unfairly, when the system is really set up 
against them and set up for complete failure.
    There was a 52 percent increase in college debt in Michigan 
from 2007 to 2017; I'm just putting that out there. What is 
really hard in these conversations is we forget about the human 
impact. And I think, Mr. Frotman, you were trying to put that 
forward, and so have you been, Ms. Harrington, you have been 
trying to put that forward as something that needs to be in 
this room because doing nothing has consequences on real 
people's lives.
    A Redford Township resident in my district came up to me, 
and he said he is so concerned about what is happening with his 
college debt. He is in his late forties, and he wants to buy a 
home, and he can't because of college debt. Another young woman 
who just graduated from law school said,`` I don't want to go 
into the court. I want to do free, legal pro bono work.''
    And she said, desperately, ``What can I do? Because I hear 
all these horror stories about people doing the forgiveness 
loan program if you do public service for 10 years, and I just 
saw a number that 99 percent of those applicants were being 
denied.'' Again, these are teachers, these are public servants, 
these are people who are giving back to the community that 
raised them.
    One of the things that we keep forgetting is that these are 
not people buying Ferraris--this is an education. These are not 
people buying fur coats, which I would prefer people--I have 
asked them not to buy those. But I am saying, that these are 
not luxury items.
    One of the most successful anti-poverty programs in this 
country is education. And so we have to continue to try to put 
the human face on this issue and not try to get so much into 
the technicality of it because I feel like when we do do that, 
because there are these different solutions to this, that we 
get far away from actually saying that there is a crisis here.
    And Madam Chairwoman, if I may, later on, I plan on 
submitting several letters for the record regarding this 
crisis.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Tlaib. Thank you.
    We saw in the mortgage crisis that doing nothing had 
consequences, and all of a sudden, our residents and our 
families were getting preyed on. And that is what is happening 
with college debt right now.
    Today, you cannot go on Facebook without seeing one of 
these ads. You cannot listen to a radio without hearing some 
sort of pitch. You cannot go for 48 hours without getting a 
robocall or text message congratulating you on the opportunity 
of a lifetime to help you with your college debt, right?
    And we have companies like the Pennsylvania Higher 
Education Assistance Agency already being paid hundreds of 
millions of dollars to service these loans and help borrowers. 
But all of a sudden, these folks are coming in, a lot of my 
colleagues will call them businesses. I am going to call them 
scams. They are scam artists. They are scams, period.
    We cannot deter from the fact that they are trying to prey 
on the most vulnerable because, guess what, we made them very 
vulnerable because we are doing nothing about this crisis.
    Mr. Frotman, do you think the reason that these student 
loan debt relief scams are so prolific, I mean just increased, 
is because servicers are failing to give borrowers the help 
they need?
    Mr. Frotman. Absolutely. I think one of the downstream 
consequences of the widespread abuses and mismanagement by 
student loan servicers is just this abundance of scams, of 
companies willing to prey on the most vulnerable borrowers and 
steal their last dollar.
    Ms. Tlaib. And then, Mr. Frotman, you know, Facebook, 
Google, Bing, Yahoo!, and others have allowed these con 
artists, scams to use their advertising platforms and search 
engines to target struggling borrowers. To what extent do you 
have concerns that these search engines are in large part 
responsible for profiting off of the abuses of student loan 
borrowers and making this crisis worse?
    Mr. Frotman. Without question, companies like Facebook and 
other technology companies are making a whole lot of money on 
ads by scammers, of people preying on student loan borrowers, 
and I think this is, to go back to a prior question, the 
building is on fire. The building is on fire now, and there are 
things that the committee could do to help constituents, your 
constituents across the country, and this is what is happening. 
To your point, this is the human face of people getting ripped 
off.
    Ms. Tlaib. And to what extent, and when you think of that 
list of legislation before us, what extent do you think that we 
can be doing here to protect them? Because it is going to be 
hard to get some of my colleagues really on both sides of the 
aisle to really try to handle this crisis because doing 
nothing, again, for so long, this is what you have before us.
    For me, I am a mom, and so I am trying to--even if band-
aids don't work, I am trying to stop the bleeding right now, 
and now I have so many of my residents falling into the trap of 
trying to refinance and do all these things.
    And by the way, Mr. Delisle, you keep saying that it is not 
a scam. If it looks like a scam and it acts like a scam, it is 
a scam. But one of the things that is really distressing is--
and I am so sorry, Madam Chairwoman. I can submit my questions 
later, but I really want to ask you what we can do in regards 
to these platforms and how we can protect our residents from 
scams like this.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Steil, 
is recognized for 5 minutes.
    Mr. Steil. Thank you, Madam Chairwoman. I appreciate you 
calling today's hearing to highlight what is a really serious 
issue. We have a $1.5 trillion student loan problem. Today's 
hearing, though, I think, digs into a false premise as to where 
the problem is.
    The problem is in the underlying cost of the education 
product in the first place that is driving students into debt. 
Misdirection works really well in comedy. It is not terribly 
effective at actually solving what is a very serious problem.
    When I was on the University of Wisconsin Board of Regents, 
what we did to address the student debt issue was we actually 
froze the cost of tuition, froze it dollar for dollar. And that 
allowed the cost of tuition to become more affordable for 
students in the State of Wisconsin. It had a direct impact on 
the total student loans that students were taking out and 
actually allowed students to come out with less debt than if 
they would if we just casually increased the cost of tuition. 
It is a real solution to a real problem.
    We see States go around and sue big, bad corporations 
because where you can't legislate and get the cost under 
control of the underlying product in the first place, you 
litigate. If you can't legislate, you litigate.
    And what we need to do is actually have a real, honest 
conversation about what the underlying cost of the product is 
that is driving students into debt in the first place. And if 
you kind of think through just our panel that is here today, I 
would ask you. at your alma mater, which is I think where we 
started off at the very beginning of this hearing, what the 
underlying cost of tuition is?
    Mr. Frotman, at the University of Michigan, do you know 
what the in-State tuition is for a student?
    Mr. Frotman. I'm not sure.
    Mr. Steil. It is $15,000. If you are out of State, it is 
$51,000.
    Ms. Yu, at Holyoke College, do you know what the cost of 
tuition is? It is $52,000.
    Ms. Harrington, at UNC-Chapel Hill, do you know what in-
State tuition is? It is actually pretty darned good. It is less 
than $9,000. That is solid work by the University of North 
Carolina and the University of North Carolina system that is 
getting that done.
    Mr. Minhaj, do you know what the cost of in-State tuition 
is currently at UC-Davis?
    Mr. Minhaj. Go, Aggies. Yes. So, 2003-2004, my freshman 
year--
    Mr. Steil. No, no, no. Today. Do you know what the cost is 
today?
    Mr. Minhaj. Today, it is $14,490.
    Mr. Steil. Boom. Do you know what the out-of-State--
    Mr. Minhaj. Do I get points for that?
    Mr. Steil. Bonus points, absolutely.
    Mr. Minhaj. Thank you.
    Mr. Steil. Do you know what the out-of-State tuition is?
    Mr. Minhaj. I don't know what the out-of-State tuition is.
    Mr. Steil. It is $44,000, and I think it is relevant.
    Mr. Minhaj. I don't think that is worth it, though, if you 
are out of State. I think you do what I do, and you just stay 
at home. You call it.
    Mr. Steil. I only have only so much time.
    Mr. Minhaj. You invest in the next case, and you just call 
it--
    Mr. Steil. Mr. Delisle, do you know what the cost of 
tuition is at Lawrence University?
    Mr. Delisle. For a poor student, I believe it is zero.
    Mr. Steil. And do you know what the cost would be--what is 
the sticker price, which is--
    Mr. Delisle. I don't--well, for a really high-income 
student, I hope it is really high.
    Mr. Steil. So, the sticker price?
    Mr. Delisle. Thirty thousand?
    Mr. Steil. It is $49,000.
    Mr. Delisle. If they are high income, good.
    Mr. Steil. And so there is a disparity between sticker 
price--I think you identify a good point there. There is a 
significant disparity between sticker price and the cost that 
students are paying. For the published rates that are the most 
easy to obtain and what is causing a problem for access for 
students is the sticker price in part.
    Mr. Delisle. But only high-income people pay those sticker 
prices.
    Mr. Steil. Absolutely. At the University of Wisconsin-
Madison, if you are below the median income in the State of 
Wisconsin, tuition and fees is zero dollars. Not one dollar, 
zero dollars. It is covered between a combination of the 
Federal Government, the State, and private donors.
    That actually addresses the underlying cost of the product 
in the first place. And so, where we are having a lot of 
misdirection into the processors because there are big, bad 
companies--and I am not telling you that they are perfect. I am 
telling you it is a misdirection to try to find a bogeyman for 
what is the underlying problem. And the underlying problem is 
the folks who are running these universities, whether or not 
they are State legislators, State senators, governors, boards 
of regents, they need to come in and address the underlying 
problem, which is the rising cost of tuition and fees, let 
alone as you get into housing and other issues.
    And so what we did in Wisconsin was to actually put forth a 
real program that addressed the problem, driving down the 
underlying cost of tuition, which brings down the debt level. 
It is darned effective.
    And in areas where States continue to see their cost going 
up, where they can't legislate or they can't put policies in 
place that actually help students be able to live out the 
American Dream, we litigate, we sue all these companies, we 
misdirect, we make a bunch of noise, it is not effective. It is 
pretty darned frustrating.
    And I yield back the remainder of my time.
    Chairwoman Waters. Thank you, Mr. Steil.
    The gentleman from Illinois, Mr. Casten, is recognized for 
5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman.
    And thank you so much to our panel.
    Mr. Minhaj, you mentioned in your initial comments that the 
median income is up 3 percent over the last 33 years. I think 
you are far too optimistic.
    Census data came out with information this week. The median 
income last year was $63,000. That is exactly the same as it 
was in 1999. To the extent it is up over 33 years, that was a 
creature of the 1990s. It isn't true anymore.
    Now during that period, as many have noted, tuition is up 
over 100 percent. Cost of housing is up 34 percent. The price 
of a gallon of milk is up 30 percent.
    We have about $1.5 trillion worth of debt. My colleagues 
across the aisle last term blew a $1.5 trillion hole in the 
economy so that we can remove the pain that the ultrawealthy 
have so they don't have to decide between their milk and their 
college tuition. The nation's 1 percent thank you.
    Meanwhile, we still have this problem. And while there are 
a whole lot of issues beyond the jurisdiction of this committee 
that are underlying that, and of course, we will look into all 
that, I think we have created a fiction that markets are 
perfectly efficient, and there is no emotion in decision-
making, and therefore, the entire marketing industry must be a 
sham.
    But we do have distortions in the system. The 2005 
bankruptcy bill says that you cannot discharge your debt in 
bankruptcy if it is debt associated with a student loan 
program. You can discharge your credit card debt. You can 
discharge your mortgage debt. You can discharge all sorts of 
other debts.
    Ms. Yu, can you talk about how that affects the 
underwriting process? If you know that underwriting a loan in a 
world where the median income is not keeping up with tuition 
growth, is effectively never going to default?
    Ms. Yu. I think that it is driving a lot of the abuses that 
we see in the private loan market because we know that 
borrowers are not going to get out from under their debt. So, 
low-income students are struggling to make payments, and 
lenders have no incentives to provide them with more flexible 
repayment options because they are going to be on the hook most 
likely for the rest.
    Mr. Casten. So when Mr. Delisle made the comment that, 
essentially, we are not doing underwriting for student loans, 
is it safe to say that the underwriting process has been 
distorted by the 2005 bankruptcy bill?
    Ms. Yu. I think that is right.
    Mr. Casten. Okay.
    Mr. Delisle. I was speaking about the Federal student loan 
program, not private loans.
    Mr. Casten. Fair enough. There are distortions in the 
system--
    Ms. Yu. Which also has no bankruptcy--
    Mr. Casten. I will get to you in just a moment, Mr. 
Delisle. There is a separate narrative going on, and we have 
heard it across this panel, and we have been talking about this 
for years that if you subsidize the cost of the loan, you will 
distort economic efficiency. If you give people access to debt 
that exceeds their ability to repay, they are going to make 
unwise financial decisions.
    And that sounds logical. We all took freshman economics. 
And yet, as Raj Chetty has pointed out in his sort of 
magisterial work on wealth and income inequality, the single 
best predictor that you are going to find yourself in the top 
quartile of income in your peak earning years is whether your 
parents were in the peak quartile of income when you were born. 
Some of us were so smart that we chose our parents wisely. Some 
of us were too dumb to do that.
    If it is the case that the access to an affordable 
education distorts your rationality, it makes you more prone to 
do foolish things, it makes you more prone to enter into 
careers that don't generate a useful income, if affordable 
education is so distorting, why are the children of the 
ultrawealthy so darned irrational?
    Mr. Delisle, you described yourself as a capitalist. Why is 
it that the ultrawealthy don't enter into lines of work that 
don't pay them an income?
    Mr. Delisle. I am not sure that is necessarily the case.
    Mr. Casten. I would note quite to the contrary. The best 
predictor that you are going to be in the top quartile of 
income--not wealth, although wealth is also true--is that your 
parents were born that way.
    We do not see data that people who have access to zero-cost 
loans and never have to repay them, get total loan forbearance, 
we see no evidence that those people are going into foolish 
lines of work. Why are they so irrational?
    Mr. Delisle. We see evidence that they are actually--they 
are doing quite well, which is why I think it is such a waste 
of money to forgive their loans, which is actually the current 
policy that we have.
    Mr. Casten. I am asking a different question. People who do 
not have to have a loan at all, the reason why they don't have 
to have a loan at all is because their parents were so wealthy. 
I am not talking about whether or not those families chose to 
take out loans they could afford to repay. Why isn't Donald 
Trump, Jr., working in a shoe store as a philosophy major 
writing poetry?
    Mr. Delisle. I think the data show--since we will talk 
about data and evidence here--that high-income families take 
out student loans.
    Mr. Casten. That is not the question I have asked.
    Mr. Delisle. You said, why don't they? And I am saying--
    Mr. Casten. I am asking why people who do not have the need 
to take out loans violate your theories of economics that 
assume everybody is rational?
    Mr. Delisle. I don't assume everybody is rational.
    Mr. Casten. I yield back.
    Chairwoman Waters. The gentleman from Wisconsin, Mr. Duffy, 
is recognized for 5 minutes.
    Mr. Duffy. Thank you, Madam Chairwoman.
    As a father who has his kids now going through school, I've 
got to tell you, the student loan system is jacked. It's a 
horrible system, and I think what it does is, if you're poor, 
you get great subsidies and college is more affordable, and if 
you're wealthy, you have parents who will help you pay. I think 
the middle class gets crushed in the way that this system 
works. That's just my personal opinion from going through the 
process.
    Would the panel agree that probably the smarter the kid, 
the better school they get into, and maybe the less smart the 
child, the not-so-great school they get into? Do you all agree 
with that? No?
    Ms. Harrington. I don't agree with that, given the history 
of racial injustices in this country and the fact that we have 
disparities across K-12 schools that are concentrated in low-
income neighborhoods, neighborhoods of color, and we haven't 
adequately prepared our students and so the smartness level 
which is usually measured by grade point average or SATs or 
things like that are inherently biased and they don't determine 
who is smarter. They determine who had wealthier parents who 
could put them in certain schools and give them access to 
certain programs.
    Ms. Yu. And even the data with those SAT programs show that 
there's also a mismatch between students who have the ability 
to get into higher schools but then don't for other reasons.
    Mr. Duffy. Great points. But the higher the SAT and the 
higher the GPA, the better the school, and the lower the GPA 
and the lower the SAT, it will be the lower-rung schools. Is 
that a fair assessment? Whether that's intelligence or 
smartness, I think you make a good point. Is that fair enough?
    Ms. Yu. Like I said, there is no--
    Mr. Duffy. If you have a 20 on your SAT, you're probably 
not going to Harvard.
    Mr. Minhaj. Or if your mom is Aunt Becky, you can just pay 
your way. What are we talking about here?
    [laughter]
    Mr. Duffy. Hold on a second here. What are we talking about 
here? But what I--
    Mr. Minhaj. You and I, we're both former MTV stars.
    Mr. Duffy. Let me tell you what.
    Mr. Minhaj. I was the star of Season 5. You know what it's 
like. We can't afford--
    Mr. Duffy. Mr. Minhaj, I'm going to claim my time.
    Mr. Minhaj. Okay.
    Mr. Duffy. I know you think it's a joke. It's not a joke 
but you think it is and you want to come in here and make light 
of a serious situation. I don't think it's funny. So, you can 
sit here and do your film and make people laugh, but we're 
trying to have a serious conversation and I only have 5 
minutes.
    Mr. Minhaj. Okay.
    Mr. Duffy. So, leave it alone. My point is, we do have a 
problem, and I would agree with my colleagues that the problem 
belongs with the cost of education, okay, and if you're going 
to let me go to your school and you're going to charge me 
$50,000 or $60,000 a year and give me a degree that I can't 
make a living with to pay the loans back, what skin in the game 
does the school have for letting me in, charging me the money, 
giving me the debt, and I can't pay it back? Who pays? Does the 
school pay? Mr. Frotman?
    Mr. Frotman. No. I think--
    Mr. Duffy. And should they? Should they have skin in the 
game?
    Mr. Frotman. I'm actually happy that you're trying to talk 
about solutions. I think--
    Mr. Duffy. So do they have skin in the game?
    Mr. Frotman. I think that--
    Mr. Duffy. Should we claw back some of that money?
    Mr. Frotman. I think that there needs to be more--
    Mr. Duffy. I have to hurry up. I only have a minute and a 
half. Should we claw back money from the schools? If you give 
me a degree that I can't pay back my loans with, why should the 
taxpayers--
    Ms. Harrington. There actually were a couple of rules that 
would have ensured that the worst-performing schools would have 
had to return that money--
    Mr. Duffy. So you agree--
    Ms. Harrington. --under the repayment rule and the gainful 
employment rule, which the Department--
    Mr. Duffy. So we should claw money back from the schools?
    Ms. Harrington. We should hold schools accountable--
    Mr. Duffy. Thank you.
    Ms. Harrington. --especially the worst actors, the for-
profit schools. It's not about clawing money back. It's about 
holding schools accountable for the fact that they have low-
quality programs that cost a lot of money--
    Mr. Duffy. I think this problem exists with all of the 
schools.
    Ms. Harrington. --with poor outcomes and target schools of 
color better than--
    Mr. Duffy. Whether you're going to the best schools, medium 
schools--it's my time. All schools have this problem and so we 
should claw money back from all the schools that give kids 
degrees with high debt and they can't pay it back, Number 1.
    Number 2, I think we should look at the endowments. You 
have billions of dollars in endowments and we're talking about 
what giving loan forgiveness to all students. So, University of 
Wisconsin, Marathon County, $5,000 a year to go there for 2 
years, then you go to the University of Wisconsin, Madison, for 
$18,000 a year. That's a really smart choice. Those are kids 
making really smart decisions for their financial future versus 
the kid who goes to Dartmouth and pays $58,000 a year.
    So why should those who became a union welder and went to a 
union welding school or the kid who went to UWMC pay for the 
kid who went to Dartmouth and has the pathway of Dartmouth? 
That's fundamentally unfair if you set up a system where you 
have kids getting great degrees and making big money and we, 
the taxpayers, or we, the union members, are going to pay back 
their school. That's insane. I yield back, Madam Chairwoman.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is recognized for 5 minutes.
    Ms. Pressley. I just want to say I'm very disturbed as we 
perpetuate the fiction that we live in a meritocracy and that 
people advance based simply on acumen when we are in the midst 
of quite literally some very high-profile people who have their 
children's SAT scores fixed and things like that have been 
going on by the powerful and the few for a very long time.
    Okay. So I want to say thank you, Chairwoman Waters, for 
your continued leadership, for making sure that this committee 
stays focused on those issues of care and consequence to the 
American people. I especially appreciate the frame and the 
titling of this hearing.
    Several months ago, when Director Kraninger of the CFPB was 
before this committee, I asked her whether or not we were in 
the midst of a crisis, and I could not get her on the record to 
even characterize student loan debt as a crisis when, in fact, 
it is.
    When we talk about the chokehold of this debt, and I've 
just spent 6 weeks in my district, the Massachusetts 7th, 
hearing from families who are struggling to put food on the 
table, to pay the rent, to take care of aging parents, to pay 
for childcare, and what does all this mean ultimately? It means 
that people are alive but not living. This debt is not just 
choking at our ability to build wealth or our purchasing power; 
it is quite literally choking people.
    We had a hearing in Oversight and Reform on trauma, and we 
learned that suicides are on the rise for many reasons, and one 
of those reasons is debt despair. So this is choking at the 
promise of our country, and quite literally, we are losing 
lives because of the debt that folks are burdened by. So it is 
a crisis, and for those across the aisle who perhaps think that 
we are being dramatic, you cannot overstate $1.6 trillion in 
debt crushing close to 45 million borrowers. You cannot 
describe that as anything less than a crisis.
    So I thank the chairwoman for her leadership, and for those 
across the aisle who question whether or not this committee is 
germane to this issue, when you overlay this with 
discriminatory policies like redlining, and then Ms. Harrington 
shares with us that 90 percent of defaults are 
disproportionately borne by students of color, there's no way 
that there's not an interconnectedness and intersectionality 
from homelessness to housing to many of the issues that this 
committee tackles and so this is exactly what we should be 
addressing as a committee.
    The facts of this crisis, and again it is a crisis, require 
no exaggeration. We are past the point of just paying 
attention. It's time to act.
    Madam Chairwoman, I'd like to ask unanimous consent to 
submit for the record a statement from Student Debt Crisis, a 
nonprofit organization dedicated to combating this crisis.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Pressley. Thank you. Mr. Frotman, you led the team at 
the CFPB whose sole responsibility was to watch out for all 
student loan borrowers and younger consumers. What were some of 
the trends that you and your team noticed?
    Mr. Frotman. Unfortunately, what we saw, just like we saw 
in the mortgage context, was when servicers fail, it hits the 
most vulnerable borrowers the most, and in the student loan 
context, these are borrowers of color.
    So we see now even holding for constants like income, and 
degree attainment, African-American borrowers have double-digit 
rates of default, and with that in mind, the Bureau announced 
that we were going to be looking at whether or not student loan 
servicers and student loan companies were in compliance with 
the nation's Fair Lending laws.
    Ms. Pressley. During your time there, did the CFPB begin to 
look into potential discrimination in the student loan 
servicing industry in violation of the civil rights laws, 
including the Equal Credit Opportunity Act?
    Mr. Frotman. In April of 2017, the CFPB announced that it 
would be prioritizing in our supervision work whether or not 
student loan companies were complying with the laws, the 
nation's fair lending laws, in particular whether or not 
borrowers based on their race were more likely to have 
difficulty getting an income repayment plan.
    Ms. Pressley. Okay. And to your knowledge, has the Bureau 
continued to look into these issues?
    Mr. Frotman. Unfortunately, not. Based on your own 
conversation with Director Kraninger, it appears as if the 
Bureau has just dropped this work.
    Ms. Pressley. Thank you. Madam Chairwoman, I'd like to 
request unanimous consent to include a letter from civil rights 
organizations, including the NAACP and the Leadership 
Conference of Civil and Human Rights, urging the CFPB to look 
into racial disparities in student loan outcomes and potential 
discrimination in loan servicing market.
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Pressley. Mr. Frotman, our friends across the aisle 
have mentioned that student loan servicers are supposedly not 
incentivized. Student loan borrowers have forbearance and that 
they are not financially incentivized to give borrowers poor or 
outright incorrect advice.
    Yet, an audit released by the DOE in February of this year 
found that more than 60 percent of the Department's oversight 
report contained examples of servicers acting improperly. If 
our friends across the aisle are correct and loan servicers are 
not incentivized to make mistakes and give poor advice, then 
why is this consistently happening?
    Mr. Frotman. Because they're wrong, because they are 
incentivized to give bad advice, they're incentivized to get 
their call reps off the phone as quickly as possible, which we 
see across the industry, leading to the outcomes we have today.
    Ms. Pressley. Thank you.
    Chairwoman Waters. The gentlewoman from Virginia, Ms. 
Wexton, is recognized for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman, for yielding, and 
thank you to the panelists for coming and for sticking with us 
throughout this very long hearing.
    I want to speak for a moment about the Public Service Loan 
Forgiveness Program, because this is something that's very 
important to a lot of my constituents. As you know, this 
program was intended to reward borrowers for public service, 
and the deal was if you spend 10 years in public service as a 
teacher, a nurse, a police officer, somebody working in a 
qualified nonprofit, make 120 monthly payments against your 
student loans, and the government would forgive what's left.
    Now obviously, it's not working out that way. We have 
evidence that 99 percent of those people who applied for 
forgiveness were rejected over what most of us would view as 
technicalities and things that should not be.
    So, Ms. Harrington, can you speak a little bit to the 
problems with the program and in particular the role of 
FedLoan, which administers the program for the Department of 
Education?
    Ms. Harrington. Absolutely. There are definite improvements 
that could be made to any of the programs the Department 
administers and right, but again it goes back to whether 
students have access to the plans and whether servicers are 
putting them in the--giving them the right information to make 
sure they are properly enrolled, that they are making the right 
payments, and that they are proceeding according to the 
requirements of the law so that they can receive that relief, 
and most of that information again comes through their 
servicer, whom they rely on to make sure they are in good 
standing.
    Ms. Wexton. And they didn't get that information on the 
front end, most of them, is that correct?
    Ms. Harrington. It's a big problem, yes.
    Ms. Wexton. Okay. Ms. Harrington, do you know who Kathleen 
Smith is?
    Ms. Harrington. Yes.
    Ms. Wexton. Who is Kathleen Smith?
    Ms. Harrington. She is a Senior Administrator at the 
Department of Education.
    Ms. Wexton. She was, but did you know that she's been hired 
by the Pennsylvania Higher Education Assistance Agency?
    Ms. Harrington. I had forgotten but, yes, I did know that.
    Ms. Wexton. Okay. So now she's their Director of Federal 
Relations, is that correct?
    Ms. Harrington. Yes.
    Ms. Wexton. So she's now a lobbyist for that private 
entity.
    Ms. Harrington. Yes.
    Ms. Wexton. In fact, FedLoan is a subsidiary of the PHEEA--
EAA--
    Ms. Harrington. Yes.
    Ms. Wexton. --that administers this faulty program, is that 
correct?
    Ms. Harrington. Yes.
    Ms. Wexton. Okay. And how about Robert Cameron, do you know 
who that is?
    Ms. Harrington. Yes.
    Ms. Wexton. Who's that?
    Ms. Harrington. He is the new student loan ombudsman at the 
CFPB.
    Ms. Wexton. Where was he before becoming the new student 
loan ombudsman?
    Ms. Harrington. He was also at PHEAA.
    Ms. Wexton. Okay. And now, he's overseeing consumer 
protection. Can you talk just very, very briefly about some of 
the things that the Department of Education has done, and the 
CFPB has done to stymie State attempts to hold student loan 
servicers accountable?
    Ms. Harrington. Absolutely. The Department has revoked a 
few memorandums that would have shared information with the 
CFPB and other agencies. They have attempted to preempt State 
enforcement and regulation of student loan servicers trying to 
curtail the States' ability to enforce consumer protection and 
protect their own citizens.
    The CFPB under this Administration got rid of the Office of 
Students and now it has hired again, as you said, a person with 
direct ties to one of the loan servicing companies and so 
there's a major problem and that's just the tip of the iceberg 
for action the Department has taken that kind of undermines our 
confidence that they are working to achieve their mission of 
supporting students and providing access to high-quality 
education, and that the CFPB is assuming its mission of 
protecting consumers, and student loan borrowers are consumers.
    Ms. Wexton. And are you aware that PHEAA's 10-year, $1.3 
billion contract expires in December of this year?
    Ms. Harrington. Yes.
    Ms. Wexton. The Department of Education and the CFPB have 
made it harder for States to go after bad actors. They have put 
a former executive from one of the bad actors in charge of 
enforcing consumer protection, right?
    Ms. Harrington. Yes.
    Ms. Wexton. And now a former top DeVos aide has gone into 
government relations with that bad actor, is that correct?
    Ms. Harrington. Yes.
    Ms. Wexton. Thank you, Madam Chairwoman. I'll yield back, 
but that sounds pretty swampy to me.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman.
    First, I want to submit for the record the Federal Reserve 
Bank of New York's Staff Report entitled, ``The Credit Supply 
and the Rise in College Tuition: Evidence from the Expansion in 
Federal Student Aid Programs.''
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Gonzalez of Ohio. Thank you.
    I guess one good thing about this hearing is that there 
does seem to be almost universal agreement that the effects of 
massive debt on young professionals' balance sheets has a 
horrible effect on their ability to (1) start families, and (2) 
buy homes, basically to get started in the American Dream.
    I have a constituent whom I talk to a lot about this and 
she went to my alma mater for law school, took out a bunch of 
student loans, and she and her husband are making real trade-
offs as far as, can we afford to have another child, can we 
afford to buy a home, and I think her story is indicative of 
stories all over the country, again somebody who did everything 
right, who continues to do everything right, but just can't 
quite get out from under the crushing debt.
    One interesting thing, though, is we seem to be focusing on 
what I think is just a weird--like the very end of the 
spectrum, the very final stage, which is the loan servicer, 
whereas all these other things happen in advance that lead to 
higher tuition, that lead to the fact that we can't refinance 
these loans, and so for some reason we're focusing here--I 
guess that's the only part that we have jurisdiction over, but 
it strikes me as just a strange place.
    So to summarize, Mr. Delisle, just quickly, and I know this 
has been said a lot, but no underwriting standards?
    Mr. Delisle. Right. That's right.
    Mr. Gonzalez of Ohio. Okay. The Federal Government is 
essentially guaranteeing the loans?
    Mr. Delisle. They're making them directly.
    Mr. Gonzalez of Ohio. And then all of this that we're 
talking about is fully controlled by Congress?
    Mr. Delisle. That's right.
    Mr. Gonzalez of Ohio. Okay. So, clearly, it's a problem 
that we have created. I want to focus on the rising tuition 
costs, which is why I submitted this for the record.
    Mr. Delisle, are you familiar with the study that I just 
mentioned?
    Mr. Delisle. Yes.
    Mr. Gonzalez of Ohio. Okay. So correct me if I'm wrong, but 
the premise of this study or the conclusion of this study is 
that as the Federal Government has taken over these loans, as 
they've increased caps, that has in fact resulted in 
skyrocketing tuition?
    Mr. Delisle. That's right. So more lending, higher tuition, 
that's the finding of that paper.
    Mr. Gonzalez of Ohio. Right. So the fact that we have 
gotten into this industry hasn't done a thing about the cost of 
tuition. All it essentially has done is transferred the debt 
over to the student.
    Mr. Delisle. Yes. I would say, though, that the tricky part 
with those analyses is that we know that student loans allow 
more people to go to school.
    Mr. Gonzalez of Ohio. Right.
    Mr. Delisle. So it raises tuition, but more people can go, 
and we know that when people get loans versus people who don't, 
they can finish and they tend to get better grades. So there's 
been a lot of complaining about student debt here but sort of 
fundamentally, it is a sound policy.
    Mr. Gonzalez of Ohio. Yes. I think that gets into the 
return on investment (ROI), right? Like that a big investment 
is okay if there's a real ROI there, and you're right, we 
haven't talked much about that.
    But I want to ask you specifically about an area that I 
know you researched, which is income-share agreements.
    Mr. Delisle. Yes.
    Mr. Gonzalez of Ohio. The thing I find interesting, that I 
like about them, is it sort of shifts the risk, right? So 
instead of the student taking out the debt, now the university 
or the institution is taking out the debt, if you will, and 
saying we will provide this education up front, provided you 
pay us XYZ over time.
    I guess from your research, my question would be, where 
have you seen this work best? As we're legislating or thinking 
about it, what should we be thinking about in terms of, these 
are best practices that are doing well by students and the 
universities?
    Mr. Delisle. Yes. I think you have it right, and I think it 
gets to what Congressman Duffy was talking about, that sort of 
the beauty of an income-share agreement where it is being done 
right is when the school is making it.
    Mr. Gonzalez of Ohio. Right.
    Mr. Delisle. When the school makes it, now the school has 
the risk. They have the skin in the game and the great part is, 
we talk a lot about sort of free tuition. An income-share 
agreement is a way to not charge students tuition, give them an 
income-share agreement, and they only have to pay it back if it 
works.
    Mr. Gonzalez of Ohio. Right. If it works and then you build 
in certain protections, which I know Purdue University, for 
one, has done, and I think again the beauty of that is, you 
graduate and you have no debt. You have a liability. You have 
to pay the income, but in fact when it comes to borrowing for 
other things, whether that's a house, a car, whatever, what is 
currently on people's balance sheets has now moved off. Great.
    With that, I will yield back.
    Chairwoman Waters. The gentlewoman from North Carolina, Ms. 
Adams, is recognized for 5 minutes.
    Ms. Adams. Thank you, Chairwoman Waters. Thank you for 
convening the hearing today, and to the witnesses, thank you 
very much for your testimony.
    As a former educator and somebody who educated primarily 
first-generation low-income students of color, this is a very 
personal issue for me. Student debt is a problem for all young 
people but particularly for low-income students who are 
predominantly people of color who look at a higher education 
degree as their ticket into the middle class, and that's the 
promise that we make to our young people, and so as Members of 
Congress, we need to start keeping our promises.
    Ms. Harrington, thanks for appearing before the committee. 
I want to thank you for your work on the Center's report 
detailing the student debt crisis in my home State of North 
Carolina.
    The report shows that of the 44 million Americans who hold 
$1.5 trillion in student loan debt, 1.2 million of those live 
in North Carolina, holding a debt tab of about $44 billion.
    You'll hear my friends on the other side of the aisle blame 
the Obama Administration's elimination of the Federal Family 
Education Loan Program as the cause for the student debt 
crisis, but can you explain what the Center's report showed are 
the key causes of the dramatic increase in the debt in North 
Carolina?
    Ms. Harrington. Our report showed that there are a number 
of key causes. Yes, tuition has risen, but there's been a 
drastic disinvestment at the State level in higher education. 
The purchasing power of the Pell Grant has been drastically 
reduced.
    I think we should remember that the Federal loan program 
was never meant to be the cornerstone of the HAE. It was meant 
to be the Pell Grant. It was meant to be actual grants, not 
loans, but we never allowed the Pell Grant to keep up with the 
cost of college and to keep up with the proportion that it 
should have covered from the beginning.
    It's the rise of for-profit colleges that again have 
disproportionately targeted low-income students and students of 
color with programs that are low quality and high cost and 
students are more likely to drop out of those programs. There's 
a completion crisis, and this is particularly concerning again 
in North Carolina where we have a number of alternate 
institutions that serve students of color and low-income 
students much better, namely our Historically Black Colleges 
and Universities (HBCUs).
    Ms. Adams. All right. Thank you. I'm HBCU-strong. You 
detail in your testimony that students of color are at the most 
risk due to ballooning student loan debt and in the report, you 
also mention how North Carolina's HBCUs do well in educating 
African-American students of limited resources.
    First of all, what impact does a high student debt burden 
for young people of color have on HBCUs?
    Ms. Harrington. Wwe've seen that across-the-board, the 
student debt levels of HBCU graduates are higher and that's 
because they disproportionately serve more low-income students 
and students of color.
    Over 70 percent of students at HBCUs are low income. Over 
80 percent are African American, and the biggest indicator of 
whether you're going to take out a student loan is how much is 
your Pell Grant eligibility, and so by disproportionately 
serving these students but serving them well, they are taking 
on students who have to take on more debt, so on the back end, 
it takes students of color, particularly African-American 
students, more debt and longer to pay it back and they are more 
likely to default, even when they have a degree.
    Ms. Adams. So what impact does it have on alumni giving?
    Ms. Harrington. It has an impact on the amount that 
students have of available resources to give back to their 
school and so I think we can--and this corresponds to the 
wealth gap in higher education as a whole. So if you already 
are serving low-income students who will continue to be low 
income because of the way the system is set up, they often have 
fewer resources to give back.
    HBCUs on average have much lower endowments than larger 
institutions. That also contributes to the fact that students 
have to take on more debt and that these institutions continue 
to struggle unnecessarily.
    Ms. Adams. Okay. I'm running out of time, but can HBCUs 
actually be a part of the solution to decreasing the student 
debt burden, in your opinion?
    Ms. Harrington. Absolutely. And there is much we can do to 
better fund these institutions to make sure that they become a 
cornerstone of the way we address student debt and the way we 
address higher education in this country.
    Ms. Adams. All right. Great. Thank you, Madam Chairwoman. 
I'm just about out of time. I'll yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from New Jersey, Mr. Gottheimer, is 
recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Madam Chairwoman, and thank you 
all for being here today. We're all grateful.
    The Federal Reserve recently published a new report about 
home ownership which found that roughly 20 percent of the 
decline in home ownership among young adults can be attributed 
to the hefty increase in student loan debt. This is felt 
particularly hard in my home State of New Jersey.
    According to a 2018 study, 61 percent of 2017 college 
graduates in New Jersey graduated with student loan debt. 
Concurrently, recent Census data shows that the number of 
homeowners under 35-years-old in New Jersey decreased from 7.7 
percent from 2007 to 2016, and 47 percent of 18- to 34-year-
olds in New Jersey are living with their parents, the highest 
percentage in the country.
    Home ownership can be an incredible way, as you know, to 
achieve the American Dream, and I'm worried that not enough 
households are building wealth through home ownership due to 
increasing student loan debt.
    Mr. Frotman, if I can start with you, sir, one idea put 
forth by the committee is to direct the Department of Housing 
and Urban Development to work with the Consumer Financial 
Protection Bureau and the Federal Housing Finance Agency to 
review the barriers to home ownership for borrowers with 
student loan debt and make recommendations for policy changes 
that will responsibly reduce or eliminate hurdles.
    What do you think are some of the biggest barriers that 
HUD, CFPB, and FHFA should immediately address?
    Mr. Frotman. I think one of the issues that I've seen is 
the back end credit reporting system where borrowers are 
getting their payments reported to a credit reporting agency 
and it's all over the map and then when lenders go to try to 
figure out DGI calculations, they're also unnecessarily 
hamstringing borrowers.
    So, I think this is a perfect example of how this is this 
committee's job. I think there's an opportunity to reduce 
barriers that are being put in place because of these back-end 
problems, and I think, as you mentioned, that this bill is a 
good start.
    Mr. Gottheimer. Ms. Yu, you're nodding. You agree with 
that?
    Ms. Yu. Yes. One of the issues is, how do we consider 
negatively amortizing loans when we're looking at housing, for 
example, and borrowers have the right to an income-drawing 
payment plan, but then how's the housing market looking at that 
in terms of what the borrower can afford?
    Mr. Gottheimer. Thank you very much.
    According to the CFPB, 71 percent of student loan 
complaints between August 2016 and September 2017 involved 
complications to the lender or servicer, as we've heard about 
today. The servicers' misrepresentations of information related 
to the servicing of a loan are increasingly common, as you've 
all pointed out.
    Earlier this year, the Inspector General of the Department 
of Education reported that between 2015 and 2017, Federal 
student aid found instances of servicer representatives failing 
to adequately inform struggling borrowers about their available 
repayment options, which is very frustrating obviously, if 
you're not even presenting all of the options.
    Ms. Yu, I'll ask you this question. How would creating 
clear rules of the road prevent student loan servicers from 
omitting or misrepresenting loan servicing information to 
benefit student loan borrowers?
    Ms. Yu. Well, a couple of different ways. First of all, as 
the Borrower Bill of Rights proposes, we want to make sure that 
borrowers are informed about income-drawing payment options 
prior to forbearances. Even if a forbearance is ultimately the 
best decision, we need to make sure they're getting those 
options first.
    We also need dispute resolutions. Part of the problem is 
that borrowers are frustrated because things are going wrong, 
paperwork's getting lost, and they don't have a single source, 
a single point of contact to try to resolve those errors.
    Mr. Gottheimer. Thank you. I hope I have time for one more 
here. Some academics who work closely on the issue of student 
loans argue that there's not only a student loan debt crisis 
but also a student loan repayment crisis, and by forcing 
students to start paying back their loans right after 
graduation, we're setting our graduates up for failure.
    A 10-year repayment plan is the most common student loan 
repayment plan, but it could take several years at least after 
graduation to reach a point where a degree is paying financial 
dividends.
    Ms. Harrington, if I can ask this question to you, has the 
Center for Responsible Lending put any thought into potential 
solutions to this repayment crisis?
    Ms. Harrington. Absolutely. We recently released a report 
with several civil rights groups where we talk about ways to 
improve the income-driven repayment system, how to streamline 
it into one plan, how to decrease the repayment term to 15 
years rather than 20 or 25 years, to base the payments off of 8 
percent of discretionary income, and set it at 250 percent 
above the poverty line rather than 100 percent above the 
poverty line.
    These are all important reforms that make it actually 
affordable for borrowers to pay back their loans and do other 
things, like buy homes, start businesses, and save for 
retirement.
    Mr. Gottheimer. Thank you so much. Thank you all for being 
here. I yield back. Thank you.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from Iowa, Ms. Axne, is recognized for 5 
minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you also 
to the witnesses for being here today. We appreciate it.
    Just yesterday, I heard from Liz, she's a teacher in 
Urbandale in my district, about the issues that she's had with 
her loan servicer. In 2007, Liz began teaching and, of course, 
that's when the Public Service Loan Forgiveness (PSLF) Program 
began. So, she called her servicer to see what she needed to do 
to be eligible and was told she didn't need to worry about the 
paperwork yet and wouldn't be eligible for about 10 years or 
so, and to send in the verification forms when it gets a little 
bit closer to that date.
    Then, when she followed up closer to that date, 5 years 
later--she actually tried to get on top of it by calling in 
another 5 years--to make sure she was eligible, she was told 
her loans were now ineligible for the PSLF because they had 
been serviced by other loan entities, unbeknownst to her.
    I want to right here tell you a little bit about what she 
said. Liz further said that she was told there was nothing that 
could be done and that very few of her payments qualified and 
then she said, ``For a while, I thought I was the only one in 
that situation. I never grew up with money. I came from a 
single family household. I remember being so cold in the winter 
and going hungry. Nothing in my life was easy. So I figured 
this was just one more thing to add to my long list of unfair 
things to happen to me but put your head down, work harder, 
work longer, and somehow maybe you'll come out just a little 
bit ahead.''
    So, I thank you all for being here because this is truly 
impacting people's lives, as we've discussed, and, Mr. Minhaj, 
since you recently did a story on this and you pointed out in 
your opening testimony that the borrower does not control who 
their servicer is, does this story that I'm hearing from Liz 
sound familiar to anything that you heard when you were 
researching your show?
    Mr. Minhaj. Yes.
    Mrs. Axne. Can you tell me another story briefly that you 
may have heard that's similar?
    Mr. Minhaj. I can't say the name of the loan servicer 
provider that they were switched to, but it's very similar to 
that. It's very similar to the story that you mentioned where, 
because of misinformation, and they were told the wrong 
information, they were led down a path that was not beneficial 
to them in the long term.
    Mrs. Axne. Yes, thank you, and I'd ask any of you, because 
Liz has contacted me and I don't know what to do to help Liz at 
this point, and I'd ask any of you for this teacher of 13 years 
who literally never had a late payment, what can be done now to 
help her?
    Mr. Frotman. I think, unfortunately, we hear these stories 
all the time, and I think we've heard about consumer protection 
being a smoke screen or a distraction. This is the problem, is 
that borrowers are reaching out to private sector companies and 
they're getting lied to.
    We've seen the nation's largest teachers' union sue Navient 
for the exact practices that you are talking about. These 
companies have to follow the law. Just being an Education 
Department contractor doesn't mean you get to have a free ride 
in this country. You have to follow Federal law and State law 
and I think that borrower has rights, but I think there's more 
that this committee could do to make sure that this doesn't 
happen again.
    Mrs. Axne. So we've all heard, and I know this was 
discussed earlier, that more than 99 percent of PSLF 
applications are now being rejected, despite Congress 
explicitly expanding the program last year and, as discussed, 
President Trump just appointed Robert Cameron, who worked for 
an at-profit student loan servicer, to serve as the student 
loan ombudsman.
    Mr. Minhaj, does this seem like an Administration that's 
putting private companies ahead of the interests of its 
borrowers?
    Mr. Minhaj. I just think it's terrifying that the head of 
the predatory loan servicing company is now in charge of this 
thing that's supposed to protect you.
    Mrs. Axne. Moving on, I'd like to address another issue 
that we're facing and, Mr. Frotman, you brought this up 
earlier. I'm encouraged about the fact that we're having this 
discussion on both sides of the aisle, but Americans now owe 
more than $1.6 trillion in student loan debt and I think there 
are two ways that this debt impacts the overall economy 
explicitly.
    You mentioned many, but I wanted to get into housing 
briefly here. Do you feel, Mr. Frotman, that student loan debt 
is keeping borrowers from buying homes?
    Mr. Frotman. Absolutely.
    Mrs. Axne. Thank you. One estimate found that at least 
400,000 less Americans own homes because of this student loan 
debt. Does that sound reasonable?
    Mr. Frotman. That's correct.
    Mrs. Axne. Okay. And this is exactly why I joined my 
colleagues, Ms. Kaptur and Mr. Clay, to introduce the 
Transforming Student Debt to Home Equity Act. It's a 
legislation that creates a pathway for college graduates to 
purchase a home and then roll that loan into a lower-interest 
home mortgage rate.
    I am also encouraged, of course, by the discussion draft 
we're considering in this hearing to instruct Federal 
regulators to study the barriers to home ownership that student 
loan is creating.
    Ms. Yu, do you think these two bills will help students 
make the transition to home ownership?
    Ms. Yu. I think it's incredibly encouraging that we're 
talking about how to make home ownership more available to 
student loan borrowers.
    Mrs. Axne. Okay. Thank you so much.
    Chairwoman Waters. The gentlewoman from Pennsylvania, Ms. 
Dean, is recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. I appreciate the 
chance to talk about this really important subject.
    I come at it through the lens of a mother and a 
grandmother. Also, I was a university professor for 10 years in 
Philadelphia at LaSalle University before I got into public 
service. I met with students regularly who were worried about 
being closed out of their own education based on debt and the 
interest on that debt, and I worry about the chilling effect 
that has on students coming up.
    I met with students at my area high school, Norristown Area 
High School, shortly after I was sworn in this year and they're 
bright, they're engaged, they're inquisitive, and I asked them 
what are you doing next, you're seniors, and many of them said, 
``I cannot imagine taking on the burdensome debt that college 
would require. I see my own parents still struggling with their 
own student debt.''
    So I heard some conversation about what is the foundation 
of the American Dream. My parents taught me and I believe it 
for my own children that the foundation of an American Dream is 
an education. That's where it all begins because with that 
education, one that we can afford, that our children and our 
grandchildren can afford, that's how we become fully engaged 
members of the economy, and so many of you have so aptly 
described how we have saddled young people with debt such that 
they cannot fully engage in our economy.
    Ms. Yu, I wanted to talk to you. Early on in my tenure, we 
had a constituent come in our office. Her daughter had 
burdensome student loans, and became permanently disabled. The 
mother is now the full-time caregiver, and the student loan 
that they had was with a private lender, and while the daughter 
is forgiven from her debt, the mother as the cosigner is not. 
So now, she has the full-time economic and emotional 
responsibility of caregiving, and I've introduced legislation 
that I think you've talked about which would require private 
loan disability discharge.
    Can you talk about that and the inequities in the private 
loan system?
    Ms. Yu. Yes, absolutely. Private loan cancellation programs 
are absolutely at the discretion of the lender. Some private 
lenders offer discharge programs, and others don't. There's no 
standard, there's no clear standard between lenders, and even 
within lenders sometimes there's disparities between one loan 
program or the other.
    One of the first student loan borrowers that I ever worked 
with when I was a Legal Aid attorney was totally and 
permanently disabled due to complications from breast cancer. 
Her Federal loans were fully discharged because she qualified 
for that loan program and her private lender actually had a 
press release saying that they had a disability discharge 
program available for private loans, but when we went to apply 
for it for this borrower, they were only willing to offer her 
to waive interest. They weren't willing to waive any of the 
principal, which--she was totally and permanently disabled, she 
couldn't work, she was living on Social Security--didn't make a 
dent for her.
    Ms. Dean. So requiring private lenders to mirror the 
Federal requirement, which is discharge in the case of debt to 
permanent disability, you think that's the right way to go?
    Ms. Yu. Absolutely.
    Ms. Dean. Thank you. I have another bill that would end 
forced arbitration, the pre-agreement to arbitrate a dispute 
that has not yet appeared.
    Can any of you talk to me about how that would be helpful 
to our borrowers?
    Mr. Frotman. Sometimes, we overlook the private student 
loan market because it's only 7 or 8 percent, but 7 or 8 
percent of $1.6 trillion is a whole lot of money and there's a 
whole lot of borrowers who are getting ripped off in this 
market.
    We've seen private lenders make loans they know are going 
to fail, with literally 65 percent default rates. We've seen 
predatory practices from for-profit schools who have private 
student loan programs, and in each of these instances, these 
borrowers were ripped off and they can't access a courtroom to 
try to seek justice, and I think this is a considerable step. 
This committee took this step with regard to certain mortgages 
in terms of banning forced arbitration, and I think it makes a 
ton of sense in the private student loan market, as well.
    Ms. Dean. And just quickly, if I could follow up with you, 
can you describe some of the practices in terms of lack of 
repayment options that you had described with the private 
lenders?
    Mr. Frotman. In many ways, a private student loan is just a 
straight 10-year amortizing loan, and despite what you hear 
about industry talking points about charge-off rates, there are 
a lot of private student loan borrowers who are really 
struggling. The delinquency rates are much higher than what 
they advertise, and what we saw in the complaints is that 
people take on this debt kind of on the path to a better life 
and then something happens.
    They have a special needs child or they become totally and 
permanently disabled, a spouse loses a job, and they're really 
stuck, and we've seen time and time again that borrowers aren't 
getting repayment options. They're trying to pay something and 
a lot of this goes back again to the lack of protections and 
bankruptcy.
    Ms. Dean. Thank you, Madam Chairwoman. And thank you, sir.
    Chairwoman Waters. The gentlewoman from Texas, Ms. Garcia, 
is recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman, and thank 
you for holding this hearing. It was quite astonishing to hear 
from you when you utter the words that this was the first time 
we've had a hearing on this in the Congress. It just baffles me 
that we've not really done anything to wrestle with this 
problem.
    Quite frankly, after listening to all the questions and 
listening to the testimony, I think we're all to blame, and I 
think it's time for us to take action.
    So my question to all the panel members is, rather than 
repeal and replace, say we just get rid of the whole darn thing 
and start all over with a white board, what is the first thing 
that you would want to put on the white board, and let's keep 
it short because I only have 5 minutes and there's five of you? 
So, you have a minute each.
    Mr. Frotman. I think that the Student Loan Borrower Bill of 
Rights is where I would start. It's simply taking the 
protections that exist for other borrowers and making sure 
student loan borrowers have them. That shouldn't be 
controversial.
    Ms. Garcia of Texas. Borrowers' rights. All right. Ms. Yu?
    Ms. Yu. I think you need to target servicers towards the 
most vulnerable borrowers and then make sure that they're 
protected if they have to take on debt.
    Ms. Garcia of Texas. Vulnerable borrowers based on what? 
Financial ability to pay, income status, what?
    Ms. Yu. I think, income status. I think, race and gender. 
We see that borrowers of color, women, veterans, they have to 
take on more debt to go to school and I think we need to make 
sure that education is available for all of our students.
    Ms. Garcia of Texas. Okay. Ms. Harrington?
    Ms. Harrington. I agree with the Student Loan Borrower Bill 
of Rights targeting servicers to the most vulnerable, including 
low-income people and people of color. I think we also have to 
make sure that both Federal agencies and State agencies have 
the ability to enforce these rights as well as students have 
the ability to enforce their own rights and protect themselves.
    Ms. Garcia of Texas. Okay. Mr. Minhaj?
    Mr. Minhaj. I agree with everything they've said. I think 
it would be great if we could just go, ``Tools, Clear History'' 
on everyone's debt, and I also think we should have a digital 
clock in here. I think that's a bipartisan position we can all 
agree on. I don't know what time it is right now. For a second, 
I thought it was 7:10 and I started freaking out.
    [laughter]
    Ms. Garcia of Texas. Does it say 7:10?
    Mr. Minhaj. Well, it was--so if you follow the short hand, 
technically it's 1:40.
    Ms. Garcia of Texas. All right. We'll order a Mickey Mouse 
clock next time.
    Mr. Minhaj. Thank you so much.
    Ms. Garcia of Texas. Thank you.
    Mr. Delisle. I actually have a paper where I've laid out a 
complete redesign of the Federal Student Loan Program. It was 
published by the Manhattan Institute. I would convert the whole 
thing to an income-share agreement where you pay back one 
percent of your income for every $10,000 you borrow and then 
you pay it back on your income taxes. I think this would 
dramatically simplify the program. I would cap the amount 
people could borrow at $50,000, but--
    Ms. Garcia of Texas. You would put a cap at $50,000?
    Mr. Delisle. $50,000.
    Ms. Garcia of Texas. Have you seen tuition rates around the 
country?
    Mr. Delisle. What I've heard from the members of this 
committee is that people are being crushed by their debt. So I 
think the best way to solve the problem is to limit how much 
they can take out.
    Ms. Garcia of Texas. Do you know how much my law school 
cost me?
    Mr. Delisle. Sure. But people who--law school is a good 
bet, right, and those people should be able to get loans in the 
private market, if it's a good bet. If it's a bad bet, they 
won't get loans--
    Ms. Garcia of Texas. Well, I think it's always a good bet.
    Mr. Delisle. --and they're better off.
    Ms. Garcia of Texas. Well, no. So what else did you say 
now? You said the income-sharing thing?
    Mr. Delisle. An income-share agreement, so you pay back one 
percent of your income for every $10,000 you use in the 
program. So if you use $30,000, you would be signing up to pay 
back 3 percent of your income on your income taxes for a set 
period of time. So, we don't have all the different options.
    In fact, the amazing part about this plan is, if you pay 
the loans on your taxes, you get rid of loan servicers. They're 
gone.
    Ms. Garcia of Texas. I just think it's about time that we 
go ahead and start rethinking the whole thing.
    Ms. Harrington, one thing that I would want to make sure of 
is that when we're talking about vulnerable populations, I know 
that you talked a little bit about the disparate treatment, if 
you will, or the impact on African-American communities.
    Does it number differently for the Latino community, the 
Asian community, or how do we fare in all of this?
    Ms. Harrington. There are definitely a number of issues 
across the various communities. Latinos have struggled with the 
fact that they have higher rates of non-completion which then 
makes it harder for them to pay back their loans and they do 
have higher default rates than their white counterparts.
    We've also seen a high rate of student debt for Native 
American populations. Women tend to take out more student loan 
debt and take longer to pay it back and that also goes back to 
the income gap and how we pay for it. We've seen a 
disproportionate impact on older borrowers now who are seeing 
their Social Security benefits offset.
    Ms. Garcia of Texas. Is there a difference between 
community college debt, you know, junior college, 2-year 
schools, versus a 4-year university?
    Ms. Harrington. Yes, but what's driving the default is 
really the for-profit college industry and their issues, and 
also the lack of consumer protections with the servicing level.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman. I yield 
back.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman, and thank 
you to all of our witnesses here today. It's been a very long 
hearing, with some specious claims, I would add, but it's also 
been a very hard and long hearing for anyone who has student 
loan debt.
    I literally made a student loan payment while I was sitting 
here in this chair. I looked at my balance and it is 
$20,237.16, and I just made a payment that took me down to 
$19,000. So I feel really accomplished right now, but the thing 
is, is we saw two main arguments from the Republican side over 
and over again.
    One is the idea that this issue is not germane to this 
committee, that student loans are not germane to the Financial 
Services Committee, and it seems completely ridiculous, that 
loans are somehow--you know, this is not our job and I look at 
all the things that are going on right here and just article 
after article.
    Sure, there's some aspects that are not our job, like, one, 
what certainly seems like a very large amount of corruption 
coming out of the Department of Education but also in 
conjunction with the Consumer Financial Protection Bureau.
    I have an article right here from the Washington Post, 
``Education Department Awards Debt Collection Contract to 
Company with Ties to Betsy DeVos.'' Another one, ``Student Loan 
Behemoth Tightens Its Ties to Trump and Betsy DeVos,'' the 
company that rejected all but one percent of popular Federal 
student loan forgiveness is beefing up its already close ties. 
The third, ``Inside Investigations Inside the Education 
Department's Effort to Obstruct Student Loan Investigations.''
    What could they be obstructing? What investigations could 
they be obstructing? Well, in 2009, Sallie Mae's CEO said, ``If 
a borrower can create condensation on a mirror, they need to 
get a loan this year in order to put their subprime lending in 
place.''
    Navient forwarded wrong information to credit reporting 
agencies saying that permanently disabled veterans had 
defaulted on their loans when they hadn't. Then, you have ITT 
Credit Union issuing and using financial aid staff to rush 
students through an automated application process when they 
knew that they had projected default rates as high as 64 
percent, is that correct, Ms. Yu?
    Ms. Yu. Yes, that's right.
    Ms. Ocasio-Cortez. They knew that they were issuing loans 
that had a default rate of 64 percent?
    Ms. Yu. Yes.
    Ms. Ocasio-Cortez. So, they were setting people up to fail.
    Ms. Yu. They were.
    Ms. Ocasio-Cortez. And I'm hearing people on this committee 
saying, it's not our job. This is our job.
    Mr. Delisle, you are the Republican or Minority witness and 
we appreciate that you're here testifying at the Republicans' 
request.
    One of the things, the other argument that they say is that 
this is Obama's fault, #Obama. It's Congress' fault, 
congressional Democrats. One of the things that they say is 
that it's the congressional Democrats' fault and that ending 
the Federal Family Education Program and moving to the Direct 
Loan Program, that it's our fault that we're creating the $1.6 
trillion in student loan debt.
    Do you agree with those claims?
    Mr. Delisle. I think the terms of the loans for borrowers 
were identical under both programs.
    Ms. Ocasio-Cortez. So, that's a no?
    Mr. Delisle. I don't think we know, but borrowers were 
eligible for identical amounts of debt prior to the change.
    Ms. Ocasio-Cortez. Okay. Mr. Delisle, it seems like you 
knew in February 2007, in your report entitled, ``Private in 
Name Only'', where you stated even in the executive summary 
that, ``Critics also assert that the complete switch to the 
Direct Loan Program in 2010 led to record levels of outstanding 
student debt and defaults, a claim with no causal basis.'' You 
went on to emphasize that, ``Perhaps the most outrageous of all 
are the claims that the Direct Loan Program is to blame for the 
record level of outstanding student debt and a spike in student 
loan defaults.''
    So, I'll ask you again. Is it unfair to characterize the 
2010 policy changes leading directly to the record $1.6 
trillion in debt?
    Mr. Delisle. It wouldn't make sense that they caused an 
increase in debt. That's right.
    Ms. Ocasio-Cortez. Thank you very much, Mr. Delisle. I 
appreciate that.
    And with just a few seconds left, does anyone else have any 
closing commentary that they weren't able to get in today?
    [No response.]
    Ms. Ocasio-Cortez. All right. Thank you very much.
    Chairwoman Waters. Thank you.
    The gentleman from Texas, Mr. Green, who is also the Chair 
of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman.
    I am especially thankful that you approved our having the 
Oversight and Investigations Subcommittee hearing in Houston, 
Texas. I'd like to report that it was well-attended. Many 
Members had other places to be and I well understand, but I do 
want to thank Ms. Tlaib, Mr. Cleaver, Mr. Meeks, and Ms. 
Garcia, for being in attendance.
    I am a little bit concerned about persons who believe that 
you can somehow pass a skin test. We just left the Visitors 
Center where we were commemorating some 400 years since the 
first slaves arrived here and many persons talked about the 
vestiges of racism, invidious discrimination, slavery, lawful 
segregation, and how it impacts us today.
    At one time, as you well know, Black people were not 
allowed to learn, not allowed to get an education, and so we 
have a system now that requires people to do things that they 
can do. Great strides have been made, but there's still 
invidious discrimination.
    It exists, and unfortunately we don't like to acknowledge 
it, but it does. I'll give you one example that doesn't relate 
to education, but when Kareem, also known as The Center, was 
accepted into UCLA, they changed the rules. They changed the 
rules. They outlawed dunking the ball because they didn't want 
to see this Black man score all of these points. It's the 
truth. They changed the rules. The rules change for us all the 
time, but we've learned to live with it. Literally, I accepted 
it unfortunately for us.
    So I'm saying to you there's still a skin test and it can 
fail even our best. We find ourselves sending tax dollars to 
schools we can't get into but they benefit from our tax 
dollars, very unfortunate.
    Today, I hear people complaining about why we're having 
this hearing. Let me just share one piece of information, 
intelligence that the staff has accorded me, and the staff does 
great work. This piece of intelligence reads, ``Borrowers first 
became eligible for loan forgiveness under PSLF in September 
2017, 10 years after the program began. As of April 2018, the 
Department of Education had approved only 55 of 19,321 
applications--some things bear repeating: 55 of 19,321 
applications--for loan forgiveness under PSFL or 0.0028 
percent.'' That's reason enough.
    This number alone justifies some sort of intervention. You 
cannot justify 0.0028 percent. We have to do something. I'm 
concerned about persons who get degrees and can't pay their 
loans back, but I'm also concerned about people who don't get 
degrees and can't pay their loans back.
    If you get a degree, look, I'm concerned about you. Please 
don't misunderstand, but you're more likely probably in my 
world to be able to pay it back than the person who doesn't 
have the degree, who can't get bankruptcy, who's going to have 
to live with this and work with this throughout life sometimes.
    So quickly, if someone could just tell me this, there's 
some debate about whether or not persons who don't have degrees 
qualify for the forgiveness program, that there's some opinion 
that the law doesn't specifically allow it. If you think the 
law does allow persons who do not have degrees to participate 
in the forgiveness program, please raise your hand. I'd just 
like to get a quick survey if you think the law does allow it.
    Mr. Green. Okay. All but--well, maybe you don't know, sir.
    Mr. Minhaj. I don't know the answer.
    Mr. Green. Okay. That's good enough. Okay. Look, I am very 
much concerned about those who don't get the degrees.
    Thank you, Madam Chairwoman. I'll yield back.
    Chairwoman Waters. Thank you very much.
    I'd like to thank all of our distinguished witnesses for 
their testimony today.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
This hearing is now adjourned. Thank you.
[Whereupon, at 1:55 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           September 10, 2019
                           
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