Transcripts For CSPAN2 Key Capitol Hill Hearings 20140605 :

I mean yes we are going to be living i mean i have an economic forecaster but everything i read suggests we are going to be living with an unusually high levels of unemployment, a lot of pain from over indebtedness and a quarter of the country is on food stamps. I mean its not a great depression. We are not repricing exactly what happened in the 30s but its a version of that. See the Consumer Financial Protection Bureau estimates that Student Loan Debt is more than a trillion dollars. Up next the Senate Budget committee looks at how that that affects borrowers and the economy as a whole. This is an hour and a half. [inaudible conversations] see this hearing will come to order. I want to thank senator johnson who is filling in today for my Ranking Member senator sessions. Welcome to you and all of our colleagues who are joining us today as well as a roomful. Welcome to all of you on a really important topic today. We are going to be talking about a challenge that 40 Million People around our country face today and for Many Americans who want to further their education and build their skills taking out Student Loans has become a college prerequisite. But that debt can have lasting consequences for borrowers and begin their chances of getting ahead. Insuring more americans get a fair shot at something many of us here in the senate are very focused on and a bill that is coming to the floor very soon which will allow borrowers to refinance their school loans is an important part of that fair shot agenda. I will be discussing that legislation and that more later but first i want to thank our witnesses who are here with us today who will help shed some light on the challenges that now now mounting student that can pose for borrowers and their economy. Today we are grit to be hearing from rohit chopra the student loan ombudsman for the Consumer Financial Protection Bureau and im pleased to welcome Britney Jones today. She is a recent graduate and former president of the student virginia education association. We are also going to be hearing from Richard Vedder a distinguished professor of economics at ohio university. A College Degree is a worthwhile investment and for many it can be a ticket to the middle class. We know that on average College Graduates earn more and they tend to have lower Unemployment Rates than their less educated peers. A highly educated work force is also good for our country. It strengthens our middle class, it strengthens the workforce will need to compete in the 21st Century Global economy. More and more jobs of the future will require postsecondary credentials or degrees and in fact in the coming years as many as twothirds of all jobs will require at least some College Education according to the center on education and workforce. But to afford college many people have to turn to Student Loans to help finance their education. In just a few moments you will hear from Britney Jones. Shes going to be talking about how taking out Student Loans made it possible for her to get a College Degree and britney id look forward to hearing more about your experiences. You were to start a teaching career and the same time paying down the student loan the but later college. Of course britney is not alone. Dealing with overbearing student debt is becoming a reality for growing number of americans. Statistics are staggering. Today the average College Graduate will have to pay back around 30,000 in Student Loans and a Record Number of young households owe student debt. Back in 1989, 16 of young households have student debt. By 2010 that figure had more than doubled according to the pew research center. More young people than ever before are dealing with more student debt than ever before and that can have lasting consequences. Americans who took out school loans lined it difficult to save and accumulate wealth. A recent study found College Graduates without student that had accumulated seven times more wealth than those who are paying back school loans. Crushing student student debt isnt just hurting borrowers. There is mounting evidence that student debt is holding back our economy. Historically Young Americans have been the source of Economic Activity as they set up a households and start their own careers but today many are finding it difficult to save even for a down payment on a home and hide monthly bills to pay back Student Loans can disqualify many people from many many even getting mortgage. And firsttime homebuyers arent able to get a mortgage it can adversely affect the housing industry as a whole. Thats why groups like the National Association of realtors and Homebuilders Association have expressed concern about the overbearing financial weight of Student Loans. Student debt can stifle entrepreneurship. Young people who dream of starting up their own business arent able to take the risks and the business they need when they launch a startup. They not student loan scam or that young people from saving for retirement while making the kinds of purchases that help further economic recovery. Mr. Chopra i know these economic consequences are what you and others in the Consumer Financial Protection Bureau have called the domino effect and im looking forward to hearing more details in your testimony about those negative Economic Impacts. To address these challenges as a starting point we need to ensure that student loan servicers, those are the companies that handle the billing to track borrowers payments are treating borrowers fairly and responsibly unfortunately there have been reports of student loan servicers mistreating borrowers. Some people have discovered their loan servers or hasnt properly process payments and complains that student lenders have for borrowers into default if a cosigner dies despite the barro being current on their loan payments. I was very troubled to hear recent reports that sallie mae was overcharging military members on their Student Loans. Sallie mae has agreed to pay nearly 100 million in fines after charging military members higher Interest Rates and ive asked secretary arne duncan to investigate to make sure other student Loan Servicing companies and hundreds and not doing the same but we can do more to help our wares. The bank on student emergency Loan Refinancing at is a bill from senator warned that i cosponsored along with several democratic colleagues. That bill will allow borrowers to refinance their federal student debt. The Congressional Research Service Estimates that this bill would let our wares save 4000 on average. Passing the legislation would put more money in borrowers pocket so they can make ends meet, make down payment on homes or start new businesses and help grow our economy. Right now people can refinance their home loans are their there Business Loans when Interest Rates drop. This bill will let our wares with federal student debt do the same and they should be a bipartisan issue. Last year for example republicans and democrats came together to pass the bipartisan student loan certainty acts. That bill allows far worse to take advantage of lower Interest Rates established by the free market. This refinancing legislation would use the same freemarket principles to help those with existing Student Loans. At a time when Higher Education is more important than ever to our nations longterm competitiveness a College Degree shouldnt drown far worse in debt. We need to make sure people who choose to further a their education and build skills are better able to afford college and manage their student debt. It is an economic imperative. To strengthen our middle class to strengthen our work orders and help spark Economic Growth Congress Needs to address these challenges. Im very delighted to have this hearing today and before i turn it over to our panel of witnesses i would like to hear from senator johnson. Thank you madam chair. Appreciate you holding this hearing. This is an extremely important issue. Its a tragedy that we have our children incurring Student Loan Debt. I had a finance professor in college before we talked about the cost of capital in the complex issues with Corporate Finance he spent a day talking about personal finance. He said the reason they call the debt instrument a bond is because you go into debt and you put yourself in the bondage and you want to avoid that. I took that to heart. I have course had the advantage of growing up and going to college in the 70s when college was a whole lot cheaper. I worked fulltime and rather than leaving college with close to 30,000 in debt i left college with 7000 in the bank. I wish that were more possible. I would like to start with a chart that i prepared an i been using this in my powerpoint presentations as i travel around the state of wisconsin. I just lay out some facts in a food for thought here. What this chart shows is that in 1963 the total cost of a fouryear undergraduate degree in Public College was 929 per year. This thats room, board and tuition. By 1988 the actual cost had risen to 4678 which was 27 higher than growing with the rate of inflation. You can see as of 2012 the cost of college outstrip the rate of inflation by 22 and have time so rather than costing 7000 which is what would it then growing at the rate of inflation one year of college now in 2012 with 17,474. 2. 5 times the rate of inflation and i guess the question im asking is why . What is so different about what colleges and universities spend their money on that their costs would outstrip the rate of inflation by 2. 5 by the way to the proponents room and board. Food and shelter in the rest of the economy not necessarily on College Campuses but the rest of the economy are growing at a lower rate than inflation because we have become so much more reductive in those sectors of the economy. Obviously productivity is not a word we use in education which is a shame. Just kind of asking the question of why all of our good intentions and lets face it what we spend in college in terms of of students is 2 trillion in 1963 was wellintentioned but it had a very serious negative unintended consequence. In trying to make College Marks of civil we make it less accessible because we have made it so much more unaffordable. Oh by the way to add more detail to that chart over the 2 trillion we spent over that timeframe about 200 million was spent through 1963 in 1988, 1. 8 china dollars was spent as College Costs skyrocketed. Cause and effect them i will leave that for the reader to judge. I think mr. Vedder is going to talk about that as well. Madam chair you are correct, its a shame that in 2011 which is the latest numbers i have from the College Board average Student Loan Debt after four is a colleges 25,000. Of those 57 of students that incurred debt and private institutions is 29,000900 incurred debt. Another statistic is how long its taking our students to graduate. About half graduate pretty much in the four year time period. In other words they graduate in about 4. 3 years but the other half raises the average time of graduating to 6. 3 years. Again just asking the question why is that particularly when you have so many kids leaving high school with College Classes in the bag. Have we made College Funds available so readily that people can dither in college . Is just a question im asking. Now part of the hearing is to talk about other types of pieces of legislation to supposedly solve the problem. When i thing i think its important to talk about is how those might be scored. Currently the cbo is constrained by having to score the cost of these college aid programs under the federal credit reform act and under that scoring for the tenure period 20 fort because it doesnt account really for varying Economic Conditions or loan defaults its showing that Student Loan Program saves the american taxpayer and reduces the deficit by 135 billion over 10 years but at the use of fair value basis and account for Economic Times in the fall to cost the government 88 ilya dollars timeframe so its important to look at each legislation and we take a look at the fair value cost and the effect it has on the deficit. I think finally the only thing i want to talk about is a potentially unintended consequence of some of these programs designed for loans. In 2007 Congress Passed into law the College Cost Reduction access active 27. Established a Forgiveness Program the discharges any remaining debt after 10 years of fulltime employment in the Public Service. The borrower must have made 120 payments in order to obtain this benefit. In other words they have to keep keep they cant be in default over the 10 year period while theyre working for the public sector. For luke over the end said law law schools look to the new laws and saw an opportunity. Incomebased monthly statements are lowered than standard payment so the schools could cover graduates payments entirely for the first 10 years. The money for law School Payment assistance programs usually comes out tuition mostly paid with federal Student Loans. You understand what im saying there are . The law school is gaming the system. They are saying so all we have to do is we will make the loan payments for our graduate students or 10 years and at that point the american taxpayer will pay for the law degrees. At berkeley for example its part of the fee the professionals agree to be paid. Georgetown 350 borrowers take advantage of this program in earthly there are 263. By the way the average student debt of a law graduate of georgetown is 150,000 it were we as 115,000. The wall street journal wrote about this also. The university of chicago is also doing that and until recently georgetown had on its web site basically talking about how the schools aid combined with the federal plan quote means publicinterest borrowers might not pay a single penny on their loans ever back. Again i understand this 3. 5 trillion and Student Loan Program in the aid packages are all wellintentioned programs but i think we have to honestly take a look at the situation and look at the very severe and serious negative unintended consequences of our good intentions. Part of that is we have collectively enticed her children to incur 1. 5 chilean dollars in Student Loan Debt and now we are trying to figure out how to solve that problem. Thank you. We are going turn to our witnesses. Ms. Johnson thank you for coming and sharing your personal experiences. We are going to start with you. Good morning chairwoman mari senator johnson and members of the committee. My name is Brittany Jones and i thank you for inviting me today. My story starts as a second Grade Student at an Elementary School and the decision was made i Brittany Jones self proclaimed mathematician drama queen would declare to the world that i would become the second grade teacher. With little deviation i pursue this plan throughout my studies and is a teacher in turn followed by receiving my bachelors degree from Virginia Commonwealth University in Early Childhood education. During high school when my counselors began the conversations about attending college. They talk to me about the details color shifts in grants and financial awards. Naturally i assumed everyone to attend college. It was not as i was accepted and learned the amount of financially they would be offered that i feared i could not attend. After conversations with my Financial Aid counselor and various chats with my parents regarding the necessity of a College Degree