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tv   House Education Labor Committee Hearing on College Affordability  CSPAN  March 13, 2019 10:53am-12:00pm EDT

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>> the house is back at noon eastern. we will have live coverage on c-span. on thursday, the house will vote on a resolution to block president trump's national emergency declaration. at least four republican senators plan to vote in favor of that measure. the president says he will veto it. we take you to a hearing on education and college costs. >> american colleges and universities are nearly unmatched. their potential to create opportunity and raise living standards.
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over the last generation, we had a sea change in how we pay for college. states have cut funding for public college and universities, driving tuition for the three quarters of students with 10 public colleges and universities. higher costs mean many students do not enroll. other students work long hours or enroll part-time, often at the expense of academic success. some go hungry or homeless. only 58% of our students earn a degree within six years. the most common reason they get for dropping out is to earn more money. it's not surprising that students with high earning parents are five times more likely to hold a college degree. latino adults are only half as likely to hold a college degree as other americans.
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black adults only two thirds is likely. have created ats concentrated pricing and student debt. while most students benefit from college and repay their loans, millions of students fall behind on their loans, default or see their balances grow over time because their payments are smaller than accrued interest. others attended low-quality programs. one study found that certificate programs at for-profit colleges becauseudents worse off their increased learnings -- earnings are smaller than their student debts. yearone million per default on their loans. blackperience of borrowers in particular is
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particularly disturbing. these problems were a generation in the making. reversing them will not happen quickly. i offer three recommendations. congress should set a goal of doubling the pell grant, the level needed to end disparity in college affordability. it should increase pell grant's faster than inflation every year. it should make them a --itlement to prevent them congress should build a new relationship with states. federal efforts to make college more affordable cannot succeed without robust assessments aside them. a new partnership should prioritize low income students, consider the full cost of college and address inequities and how the states fund colleges -- in how the states fund
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colleges. congress should make it easier to repay loans as a share of income. students are less likely to fall behind on their loans, they pay back more as a result and they are financially healthier overall. improvements are needed. the five existing programs should be combined into a single plan that sets payments for all borrowers at 10% of income above a living allowance. it should be easy for students to enroll and certify their incomes. payments, any of remaining balances should be forgiven. too many unnecessary defaults occur because of the low-quality of the private companies that collect student loans for the deferment -- department of education. i urge congress to hold these companies to high standards. the public service loan forgiveness program encourages graduates to become teachers,
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first responders. the program is far too calm complicated. 99% of applicants were denied. we should retain this program but simplify it. the issue of affordability is intertwined with the question of accountability for student outcomes. investing in pell grant's, partnering with states and ensuring loans are affordable are a realistic path to bring about the society we want. thank you very much. >> we thank all of our witnesses for their testimony. we will begin with members
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questioning -- i will call on the chair of the higher education subcommittee, miss davis. here,nk you all for being particularly our students. i want to also mention
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have to be sure we have the resources available to make sure they are awk sessful in heir time to graduation.
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resources need to be put in place so they are successful, graduate on time, and leave to get good jobs. mrs. davis: you were talking about accountable as well. in terms of the ability of students who actually attend some of the for-profit institutions to be able to graduate and be able to pay back loans because of their earning. reasonable amount of money that represents their effort. and how we know our veterans, active duty personnel and families are affected by this. that they have really been shortchanged on many levels and really a target of some of these institutions. how is that affecting them? >> we have seen some of the deceptive and high pressure recruiting tactics of
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for-profit colleges focused on service members and veterans. and there are really two reasons for that. one is g.i. bill benefits and military education benefits can be quite generous. dr. kvaal: the second reason is for-profit colleges by law can only receive up to 90% of their revenue from federal student aid. but that limitation does not apply to veterans or military benefits. for every veteran they enroll, the g.i. bill benefits, they can can enroll an additional nine students with federal student loans. so that has led to some of the extreme pressure on military service members and veterans. mrs. davis: i know my time is up and sometime we can talk about how the federal government can address that better. chairman scott: thank you. the ranking member will defer. dr. roe. mr. roe: thank you, mr. chairman. first of all, miss parker, you
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hang in there. you're going to make it. i want to confess that if it weren't for the small university, austin peay in my hometown, i would not be sitting here today. i was -- i went to dinner the other night at a not very expensive place. two of us had no alcohol and cost more than a quarter to college. i was able to go to college, stayed home. worked the whole time i was in school, medical school, and graduate in seven years with both of those with zero debt with a father who was a factory weerning mother who was a bank teller. college was very affordable. you could work your way through school. the average medical student where i taught in johnson city graduates with $175,000 in debt. that's a huge debt. i think the question is, is college going to be relevant anymore? i think it's a question to ask. i think at western carolina, by the way east tennessee state beat you the guys the other day
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in basketball, want to point hat out, i do want to offer -- offer my condolences to you. i booed him many times to basketball games. but a great man. in tennessee we decided that education had to be affordable for our citizens. we put the tennessee promise in. and tennessee reconnect. you can now go to community college in our state for free. i'll just give awe couple little things. our local technical school, one of them, i just sought other day, 77% finish on time, 97% are placed into jobs, and 100% graduate with no debt. can you can go out in our state -- you can go out in our state. if you go from -- east tennessee state university, tennessee tech, wherever, you have the hope scholarship. we have tried to make it
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affordable for our students in our state. i think it's being successful. i really do. and we're paying for that with our lottery scholarship. another confession i served on two foundation boards, been the president of one, and i think that college investment is the best investment i ever made without a doubt. i have not heard any of you-all talk about it. know you know dr. zepos at vanderbilt university who complains about the administrative cost. at vanderbilt it adds about $10,000 or $11,000. they spend $150 million a year complying with federal mandates and check the box. i heard no one talk about that or didn't see it in your testimony. how much does that with 100-plus questions and on and on. could we streamline that for you and help with the cost a little bit? a lot of the reporting doesn't add any value to the students. anyone can take that question.
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>> can i chime in. something to think about with the administrative costs, we often see people pointing their finger as potentially the driver of the rising cost that is are getting passed on to students. i think we want to realize that if we're looking at institution that was providing tremendous outcomes for students and they happen to have large expenditures, we probably wouldn't be questioning whether or not that's an appropriate place for the institution to be doing their finding. dr. akers: what happens inside the school is a black box in terms of their finances. i think what he we want to be concerned with is the outcomes they are producing. the thing i want to ask is what is it about the demand side of the equation that's enabling these institutions to drive up their spending because of the increases in revenue that's coming from the increased sticker price and tuition students are charged? mr. roe: when i send my children to college, all i was interested in when i drew the bottom line was how much of a check do i have to write? and that check keeps getting big earn bigger.
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i looked at the inflation rate, i thought we were bad in medicine. we were pretty good compared to colleges. colleges increase their costs almost 8% per year for the last 40 years. annually. that's a huge increase. and it is putting college out of the reach of people like ms. parker. i think college is going to have to rethink with all the technology on this p.d.a. i have in my hand right here, i can learn a lot at no cost. if you look at going to georgetown, i just pulled it up, don't want to pick on them, but 75 grand a year. if you tiche school in scombronson city, tennessee, that's hardly a return on your investment. if you end up being an investment banker in new york it probably s but you may want to be a teacher. you have to rethink where you go. another thing we're doing both sides of the aisle do is to educate these young people when they come in about you don't have to borrow the maximum amount of money. you can borery this much to get along because you have to pay for it sooner or later.
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mr. chairman, my time has expired. thank the gentleman from kentucky -- connecticut. >> thank you, mr. chairman and for holding this hearing early in the congress. hopefully this will be the year that the 116th congress re-authorizes the higher ed, it was 2008 was the last time. we're way overdue for an issue that, again, every part of the country is looking for help and action. mr. welch: first you of all i wanted to know -- mr. courtney: my friend from tennessee cited the vanderbilt report. if you drill down a little bit in terms of the numbers that they used in terms of the $146 million in terms of added cost, most of those regs they identified were actually -- had to do with the research component of the universities and colleges. for things on human subjects,
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which i think all of us would probably agree that's not a bad idea. that number, which, again, there is a report, i don't dispute that. the number is actually more complicated than i think. some of the reporting on it. so i checked this morning, the u.s. treasury is selling 10-year notes for 2.6%. sort of use it as a benchmark when we talk about the stafford student loan program because those are 10-year term notes that the government offers. again, even today we're still getting back around 4% to 5% in terms of some students. so that differential, that delta between what the government is paying when it borrows versus what students are paying when they bore re from the same government, again just pure sort of windfall for the federal government. g.a.o. reported that between years of 2007 and 2012 the federal government had a windfall of about $66 billion.
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in terms of that differential that's there. this morning, myself along with a lot of my colleagues on this committee, are reintroducing the bank on students emergency loan refinancing bill. senator warren is interduesing a companion bill in the senate. which would allow people both private and -- both public and private student loans to write down their interest rate to 3.7%, which was the rate back in 2016. we know from last year's analysis by c.b.o. that would-b put about $50 billion into the pockets of students and folks who graduated and struggling with student loans. it is not the panacea, but certainly if you look -- if you talked to widell last people -- middle class people who are trying to lower their monthly expenses, refinancing their home mortgage, car loans, credit card debt. that is a tool that is normal. yet in the student loan market, because it's restricted in the
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public side by law, and the private side by the fact that you have to have equity to go in and refinance, some other piece of property in terms of writing it down, this is the year we should move forward on that. it's just at least one way of trying to stop the bleeding. i guess dr. kvaal, you talked about the horror numbers in terms of default. at least being able to refinance down an interest rate i think would provide some mitigation of that problem. would you agree? dr. kvaal: yes. mr. courtney: don't know if anyone would disagree. i think that would hopefully be the case. ms. parker, you talked about your story. thank you for being here. i don't mean to -- private student loan interest rates are far higher than even the inflated stafford rates. maybe just could comment if having that ability to write down the interest rates would be a benefit to you and your friends? ms. parker: thank you.
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yes, it would be a benefit to myself and my pearce. - peers. mr. courtney: congresswoman shalala is very excited about this bill. . parker: i have accrued now -- you said in private. mr. courtney: both private and public can write down to 3%. ms. parker: i'm about $66,000 and i have an associate's degree. it would be beneficial to me. mr. courtney: thank you. >> i agree. also want to say that the north carolina promise is a first dollar plan. where other free programs tend to be last dollar and rely on existing aid first. so north carolina promise, actually better and more generous particularly for low-income students.
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i think your comment financial literacy is something that we also need to be making sure that we're educating our students. mr. courtney: i hope we're optimistic this is the year to move forward. thank you very much. yield back. chairman scott: the gentleman from michigan, mr. walberg. mr. walberg: thank you, mr. chairman. thanks to the panel for being here. this is an unbelievably important subject for us to be considering. and financial literacy absolutely is something that we have not done well. and we're seeing the challenges of that. dr. morrison shetler i often here the facts are form as a real obstacles to students continuing their real education. supported legislation that would allow the i.r.s. to share income information with the education department, thereby making it easier for students and families to accurately
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fleet the fasa form and access student aid. this policy would also improve accuracy and cut down on the ime spent on verifying income. doctor, has it been your experience at the western carolina university that the fafsa form can act as an obstacle for students? second, what advice do you have or us to simply fly -- simplify fafsa authorization? >> i'm in agreement the fafsa and protocol is for some people an insurmountable position. a loft our students, particularly at western carolina university, are first generation. they come from low-income backgrounds. and when faced with questions around the fafsa which they have to remember or they don't have the information, they just
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don't do it. as a result, they don't apply. and therefore they don't go to university or college. my recommendation for all of e federal grants and amply case, we could simplify them. help people with the process as needed. we do that to western carolina university. when people approach us. and so, yes, i would love to see us streel .streamline those, clines. make sure streamlined and allows people the opportunity to get the education that they deserve and have earned as their right. mr. walberg: thank you. dr. akers, would you have any addition to that? dr. akers: absolutely. i would endorse simplification. your initial comments about financial literacy are critically important. just some evidence from my earlier research we know through survey data that
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students are shockingly underinformed about their own financial circumstances. only about a half of students in their first year of college education know how much they are paying for their degree. about a third of students are able to accurately tell you how much they have bore red -- borrowed. this is an important crisis we have in higher education finance today. mr. walberg: a wake-up call, for instance of ms. parker, of $66,000, you mentioned that, it's amazing when you first started did you expect anything like that to be the case in the process? ms. parker: not only did i not expect it, i honestly had no idea. the financial literacy -- it's a big piece because i just wasn't aware. i wasn't informed. mr. walberg: you make the example very clearly why we have to move forward on this.
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dr. akers, in your testimony you note that in some cases students are spending money on college only end up worse off financially than if they hadn't gone to college in the first place. in looking at the federal student aid system, i'm concerned about perverse incentives to overborrow. can you expand a bit on what those perverse incentives are and discuss ways we can address them in re-authorization and do it in such a way i can explain it to my adult children in caring for their -- my grandkids? >> the most claring perverse incentives that exist in the current financial aid machine is that borrowers who anticipate that they'll be eligible for student loan forgiveness at the end of 10 or 20 years whether they are in public or private sector, basically face no marginal costs for every additional collar that they are borrowing. dr. akers: a student a very
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high cost institution, i have some understanding what my career path will be after i finish, because i'm in a profession like law or medicine where careers are relatively -- earnings are relatively well-known. i may reach a point in my borrowing if i have been at high cost institutions where every additional dollar that take on in debt to support my lifestyle, for instance, will very likely or with almost certainty be forgiven. in that case i have incentive to borrow as much as i'm able to borrow through the federal program. what is the solution? i think we need to consider limits on the eligibility for loan forgiveness both in pslf and income driven repayment plans. and cap and go would diminish that incentive considerably. mr. walberg: thank you. yield back. chairman scott: the gentlelady from ohio, ms. fudge. ms. fudge: thank you so very much, mr. chairman. thank you for being here today.
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miss parker from ohio as well. it's a pleasure to see you and watch your daughter have such great pride when she hears you speak. ms. parker, surely if we can provide $13 billion to farmers because of the president's bad losing trade war with china, we can help you. surely if we can give $1.5 trillion in tax cuts to the wealthiest people in this country, surely we should be able to help you. and some of those very people we have just seen in the news cheat to get their children in college and you have done it the hard way. i am confident that you are going to be successful. i am confident that you are going to see your way out of poverty. because you have worked hard, you are committed, and a lot of these cheaters are not. be confident. just claim that, all right. ou are going to be successful. dr. kvaal, do you think that it is important for us to discuss loan forgiveness as we talk
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about income driven repayment plans? dr. kvaal: i do. ms. fudge: what should that discussion be like? dr. kvaal: my view is that students who are paying everything they are supposed to pay over a period of 20 years, should at that point in time have an opportunity to have the rest of their student loan forgiven. 20 years is a very long time. we know that student debt affects your credit score and makes it difficult to save for mortgage. after 20 years you may be trying to save for your children's education. i think there is an opportunity there where we need to say that we have collected what we can collect. ms. fudge: is this something we can do to help somebody like ms. parker? dr. kvaal: there are a couple of things that -- people that should qualify for special help. one is people who go into public service careers. and we know that student debt is an obstacle and does affect
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career choices and that can make it a challenge to recruit people into military and teaching careers. it impacts the diversity of those public service work forces. i think a second category is people who have been cheated by their colleges and are currently over offer 100,000 borrowers having applications pending at the education department claiming fraud or some other illegal conduct. those people need to have them forgiven as well. ms. fudge: just one more question for you, dr. kvaal. grant plus loans. how do you believe that those loans assist with students and underrepresented communities or feen fields for that matter -- or even fields for that matter to get to graduate school? what effect would there be if we eliminated them all together? dr. kvaal: graduate plus loans are an important source of finance for many people,
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pursuing graduate and professional degrees, especially people whose families are low in wealth. including communities of color. and we expanded access to federal loans for these communities because we were concerned that otherwise they would borrow higher costs, private loans that have interest rates that can be as high as 13% or 14%. ms. fudge: dr. morrison shutlar, since you represent with a university that deals with a loft first time and low-income students, what do you think we should look at to try to reduce the ongoing and sometimes exorbitant rate of loans that people have to take out, what do you think we should do differently? increasing pell grants? doing -- give me your ideas. dr. morrison-shutlar: i ertainly would approve of -- shetlar: reducing the costs.
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there are a lot of grants as we heard, loans out there. i would like to see those simplified in terms of applications and more investment in those pell grants is a good example. with over 40% pell grant eligible students at western carolina university, we could see tremendous amount of reduction in indebtedness with all of the results that occurs from people graduating on time. not having to do three or four jobs to be able to make it through. which distracts from their time of really focusing on their education and future careers. i'd like to see what we're currently doing expanded. and make sure that it's easy and relevant to be able to apply for those students. ms. fudge: thank you very much. i am ' going to close with ms. parker. we live in a country where people say if you work hard you'll be successful and do well. i want you to know that those people who believe, people like you are lazy, are you a perfect example of someone who is not. i wish you-all the very best.
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i yield back. chairman scott: thank you. the gentleman from kentucky, mr. guthrie. mr. guthrie: thank you, mr. chairman, for yielding time. thank you for the panelists for being here today. this is important hearing, aappreciate the chairman for calling it. dr. akers, according to a study by the brookings institute, only a quarter of first-year students can accurately report how much they had borrowed? 14% of students who borrowed money felt they had no debt at all? this information problem is very concerning to me which is why i have introduce add bipartisan counseling bill with my friend, congressman bonamici from oregon. in the last three kongs to enfans financial aid awareness and understanding. the bill would require more detailed and annual counseling for federal aid he recipients throughout their education. can you discuss the benefits of counseling students on their financial aid? dr. akers: sure. a lot of folks are looking into the fact that the provision of information about the cost the
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students are facing and the aid they are receiving is unnecessarily difficult to digest. they are receiving right now their acceptance letters to universities and also their financial aid award packages. these packages are not often completely transparent about the difference between loans and grants. this is leaving students questioning what exactly their financial circumstances are. it's leaving them questioning that because we were able to document that using survey data. if we want students to be able to police the market for higher education using their dollars, choosing to spend at institution that is are delivering good outcomes for students, they need to understand what it is they are paying. they need to understand what it is they are borrowing. we want them to understand what it is that institutions are delivering to students that they have served previously. i think it's critically important to the system and
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also to individual students themselves. mr. guthrie: dr. webber, with $1.4 trillion in outstanding student loan debt, no doubt students are struggling with debt. in your testimony you noted the large amount of misinformation on who is suffering the most from taking on loan debt. can can you please explain what level of education students with $60,000 or more debt are seeking compared to the average balance of defaulted loans? ms. willis-brown: sure. on average the -- dr. webber: an average student who has more than $100,000 in debt is very rare. we're talking 5% of borrowers. most are people who have gone to graduate school, received professional degrees, mid school going to pay off in spades. not all of them. i don't want to minimize the it's a that distraction from the much larger problem of people who say they have $5,000 or $10,000
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in debt but did not graduate, attended a low value institution, underresourced institution, and because the vast majority of the college premium is tied up in actually getting the degree, then having $5,000 or $10,000 in debt, which is not dischargeable in bankruptcy, are you going to be much, much more likely to default under that scenario than someone with graduate professional degree and much more debt. r. guthrie: doctor morrison-shetlar. could you elab nate brathe, i know in kentucky we -- a lot of people are getting their two-year degree and moving on straight into our four-year universities with transferring credit. when i was in the state legislature i worked with someone to do dual credit. we have people graduating from high school with their associates degree. i think there is some cost to
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it, but it's not typically if they graduate interested high school and went. could you explain what you guys are doing to keep college costs down by working with community colleges. dr. morrison-shetlar: the great thing about western carolina university we work with all of our community colleges. we set up m.o.u.'s through particular traction of education so students when they go to the community college know what they need to take at the community college that will count toward their four-year degree. and so we work very closely with the presidents and with the admissions office and with the advising office, which i think is a key component to anyone transferring from one institution to another. at western we have 42% of our students are transfer students and make sure that the curriculum aalignment is in place and also the advising that they are getting at the community college is an affiliation with that at western carolina university. a seamless transfer is really
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important. curriculum alignment is really important. mr. guthrie: thank you. my time has expired. i yield back. chairman scott: the gentleman from the northern mariana islands, mr. sablan. mr. sablan: thank you very much. mr. chairman, thank you for holding this hearing. good morning to all the panelists. i hope that you will remember forever this moment in your life and how your mother is sharing her story with us because that story is a part and major part. i'd also like to take an opportunity to, privilege to recognize in the audience a student from the northern mariana who is attending school here in washington, d.c. olivia. so your name is in the record for good. she doesn't like that. i come from a place where we have a community college,
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two-year college. all apply students for pell grant. and when i went to college, i was -- hi to come here as a foreign student. my father -- i had to come here as a foreign student. my father had a family of seven children to raise, and was making $1, $1.25 an hour. he lost his job. i couldn't just go and get a job because i needed to get immigration. it wasn't easy for me to finish college to be very honest. ms. parker, congratulations. are you in my prayers. will you succeed. i agree. our chancellor morrisson-shetlar, you may not know, this my district in northern marian and american samoa are the only two jurisdictions without a four-yearle public university.
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our students face the cost of nonresident tuition at four-year institutions. as well as the extra travel costs to attend school in hawaii, 4,000 miles away from home. or almost 8,000 miles away from your school. as a member of this committee, i worked and continue to worked on legislation to help reduce the cost for my constituents. i must compliment your state for committing the resources to be able to offer -- make college affordable and make as a the students are university chancellor do you believe the federal government has a role to play with assisting students with unique college costs such as those from american samoa and arianas?
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the dr. morrison-shetlar: i think the way to help people is to make sure those grants and loans are available and able to be easily attained. in north carolina we subsidize the in-state students up to $500 per semester. we also have a $,500 for out of state. -- $2,500 for out of state. we also have an 18% cap on the number of out-of-state students we can take into north carolina. that's something that one has to be aware of when we're funding the students in north carolina. i will say that we're very fortunate western carolina university and within the system, 50% of the students who come from out-of-state to north carolina end up staying in the state of north carolina. that is a great investment in north carolina. it allows people to give back to their economy.
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mr. sablan: thank you. we heard you educate your students and come back home and use what they learn. ms. parker, college students in the marianas and across the students ne in four nationwide are parents, more than one in three are older than 25, and almost two out of three work while in college. what supports maze it easier for to you remain in college, persist? ms. parker: thank you. thank you for your wishes earlier. i have been supported -- i have been connected to resource. and that's what's enabled to get me to completion. for example, the biggest help i would say was being connected to the jobs and family services representative on campus. i went to visit the
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representative for childcare costs. i needed help to get childcare costs to be approved while i was in school and journey was in daycare at the time. when i went to speak to the job and family services representative, she also let me know that i could enroll for additional benefits. so the health care, food stamps , and i was also referred to -- not through her but scholar student parent housing. it takes a platform for all of those together to be able to get to completion. mr. sablan: my time is up. i do -- will submit questions for the record. chairman scott: thank you. the gentleman from georgia, mr. allen. mr. allen: thank you, mr. chairman. hank you for this hearing.
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it's important to find out what is actually got us to this point and try to fix it. it's a difficult situation. we have avenue got -- we've got .4 million jobs open in this country right now. we have college graduates that can't get a job. i cannot for the life of me understand that. and everywhere i go people need people. it's not necessarily a college graduate. you have skill people. of course the chairman put up a chart up there about the difference in the wages of college graduates versus those who maybe had technical training and all that. that gap, in my opinion, is narrowing very quickly. i know when i was in college i had the opportunity to learn how to weld.
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and through that skill i was going to co-op and through that school and working basically double time and help from my parents, i was able to get through it. i thought it was terribly expensive back then. i'm sure i missed out on some of the college experience, but i had no college debt thanks to my great family and their support. i can't imagine, ms. parker, what you have been through. and also to straighten out one other thing that came up here today, i just have to do this, is that i did notice you were on the food safety nutrition program. one of my colleagues brought up the farm bill. 80% of the farm bill is funding the safety net nutrition program. it's not farmers. we're just trying to keep our farmers in business so we can produce the best, safest, most efficient food supply. it's a national security issue, actually.
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since you are here and learning from us and we're learning from you, i thought you probably needed to know that. with that, dr. akers, your testimony mentions ways to bring private capital back into the student loan space. increase competitive market participation in student lending. can you expand on those issues and discuss any challenges, policy lakers should think about are considering private sector participation and student learning? -- lending? dr. akers: the question about private sector participation in education or the financing? . mr. allen: in the financing. for example we were told that the student loan rate is somewhere between 7% and 8%. i know that -- i come from the business world. we borrowed money for much less than that. obviously you might have to get me small business government
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back loan, but you could reduce the interest rate substantially and provide a -- where ms. parker could go and say, well, the government is charging me this and you -- give her choices. also the financial institutions do a much better job, at least i have to do a portfolio and tell them how i pay the money back, maybe they could educate ms. parker on how to pay that money back. dr. akers: there is a bit of misconception about the idea that private sector capital was previously involved in the lending programs. depending how long you have been involved in this issue, we previously were providing federal student loans through the program in which the loans were originated and financed by the private sector. but those loans were originated using terms that were prescribed in legislation. in essence department of education was outsourcing to the private market, the creation of those loans. those loans were not private sector or private loans in any
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broader sense because they were not underwritten. what you are talking about is the process by which a private lender looks at a particular borrower and assesses their ability to repay in the fuhr. that does not happen in the federal lending program for student borrowers and did not happen even when private capital was involved. the way forward to think about private capital in higher education finance is in the income share agreements. income share agreements are a relatively newly employed mechanism that are an alternative to loans that help borrowers finance their education. rather than taking out a loan and having fixed payments to repay over 10 years or whatever the term of the loan is, a borrower takes cash up front in exchange for a promise to pay a fraction of their income over a set period of time this. provides an insurance policy for students that if they pace low-income or no income for whatever reason, they are not on the hook for unaffordable financial obligation. and also puts some skin in the
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game for institutions. in thinking about private capital going forward, i think that's the place to be. mr. allen: i had an amendment on the past a bill markup to -- ow put financial actually education into the student loan programs. like ms. parker would understand what she's up against. i'm out of time. i yield back. chairman scott: thank you. the gentlelady from oregon, ms. bonamici. ms. bonamici: thank you for holding this hearing. thank you to all of our witnesses. ms. parker and journey, especially thank you to you for being here and telling your story and reminding us of the costs of higher education are not just about tuition. housing, childcare. so many other costs as well. i also worked my way through. i started two years of community college, two years of college, three years of law school. combination of grants, loans,
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and work study. and ended up because it was a long time ago with a manageable amount of debt. my first job was with the federal government not with the law firm where i could have made moreon i. unfortunately that's not the story i hear frequently today. i'm glad we're having this hearing. especially when we're talking about students who remain underrepresented. i'm also glad that there seems to be a general recognition about the importance of higher education among people here today. we certainly need a short-term solution for people like ms. parker with existing debt. we also need long-term solutions to make sure that anyone who wants to go to college can do so without being burdened with debt. mr. kvaal, nice to see you. the federal work study program allows students to get work study experience and financial aid. i have introduced the opportunities for success act to reform work study program to modernize the funding formula which has not been done for
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quite some time. and also to make sure that work is going to -- the work study jobs are helping to align students' work with their career goals and interests. we want the aid to go to the students most in need. what are your suggestions about how to make sure that institutions are serving the largest number of low-income students and they are having to align their interest with their work study jobs? dr. kvaal: thank you for the question. i share your support for the work study program. work is an important strategy for getting students through college both because it fills important gaps in financial aid budgets, but also research shows that modest amounts of work can actually help retain students and give them an opportunity to explore career interests and improve their earnings potential after college. the challenge we have is many students are in the same low-wage work force as other low-income americans. we know those jobs are very unstable, can be difficult to get askedles. to have an opportunity for a
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work study program where jobs are designed around schedules students, they are often on campus, connected to career and academic interests is very valuable. the existing work study program funds colleges largely historically and it doesn't -- no longer sends the money where there are large numbers of low-income students. for example, new york university gets a larger allocation than cuny does. in you are -- if are you a low-income student at a four-year private university you are more likely to get work study than a low-income student at a public university. we know public university is disproportionately enroll low-income students. ms. bonamici: i want to get another couple message in. it's time to update the funding formula. thank you for mentioning my simple act that i have been working, i plan to reintroduce this bill, which will protect many borrowers from default by getting more students and keeping more students in income-driven repayment.
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and you mentioned importance of automating the annual income recertification process and also automatically enrolling severely delinquent borrowers. these are both changes in the simple act. can you talk about how this will help students? dr. kvaal: the income driven repayment is an important safety net t allows us to tell students by think loans are an excellent investment, but if it doesn't pay off we guarantee loan payments will be affordable. they are a very important. changes that need to be made to the program to simplify the program for students, make it easier to enroll, auto enroll, delinquent students. i think the simple act has a lot of potential to reduce loan delinquency and default. ms. bonamici: i also heard retention several times this morning. that's a significant issue. especially if we look at the students with debt. if they don't graduate, they are less likely to be able to pay that back. who wants to talk about the importance of gear up and trio
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and programs that help with retention? dr. dr. morrison-shetlar: all of those programs with resention and it's key that if you have students who have debt that you get them through the process and you get them to a point where they can start to work and eastern money and pay back those debts. those programs you are talking about are essential. they include things like financial literacy. they include things like working, if you are going to work, work in something that will get you the experience that will help to you succeed in your career. their career pathway experiences. all of those things help with retention. making sure that students can focus on their studies. get their work done. without having to work on two jobs is important. any program that will help students be able to if he cuss and get through their degrees and be successful. i'm fully supportive of.
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ms. bonamici: thank you, mr. chairman. chairman scott: thank you. the gentleman from pennsylvania , mr. smucker. mr. smirk: thank you. question for dr. shetlar, i would like to learn more about your transfer program which helps students prepare for several high demand career fields. how did you term what jobs are in high command in the -- demand in the work force? dr. morrison-shetlar: within western north carolina we do surveys. we look to see what jobs are available. in particular what jobs are needed. in our particular area health care is a big industry and one which we're severely need for the citizens of western north carolina. and so we make sure that we're providing the right programs with the right qualifications and right experiences so that students will then graduate and go into those careers and be
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successful. that lifts up the whole economic development of our region. >> can you talk more about the agreements you have in place with some of the partner colleges? was it difficult to reach those agreements or talk about how that came about. dr. morrison-shetlar: we all have the same goal in mind four our students to be successful . to do that we need to make sure we have curriculum alignment. if you take two years of community college and your a.a. degree, those credits transfer into your four-year degreen and go through a seamlessly as possible. advising is really key on that. we do joint advising between the community colleges and university. making sure that the advisors know what to say to the students if they even are thinking about going to a four-year degree. a lot of students go to community college not thinking they are going to have that dream. advising is a real component. making sure that those memorandums of understanding between the colleges and universities are clear and
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updated regularly. as curriculum changes to meet the needs of our growing industry like health care. mr. smucker: in your mind, what could other regions learn from you? what obstacles would they have to setting up similar arrangements? dr. morrison-shetlar: it's all about communication. it's all about what's best for the student and making sure that pathway is one that is affordable. and m n.c. promise has been fabulous because the cost to the student can be similar to a community a college cost. and therefore if a student has managed to get through the two years with the cost of that, to be able to transfer to western carolina university, for example, as an n.c. promise school, means that they are already on that pathway. they know they can afford t they know how much debt they are going to incur and know they are going to get a high quality education provided by high quality faculty and staff
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to make sure they have the experiences needed to be successful. mr. smucker: dr. akers, innovation in any industry is critical to increasing competition among providers and delivering high quality product to consumers at a low price. and it appears that colleges and university, we know education is changing, but in some ways continue to use the same model that's been in existence for a long, long time, for decades, and maybe longer. how can we be helpful, or maybe to what extent do you think the federal government sort of constrains what colleges and universities can do, how can we work with you to encourage more innovation in higher education? dr. akers: in order for a new institution to come into existence, they need to be able to find and retain students. it's challenging for them to do that in the current space
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because they are competing with institutions throughout the eligibility for very generous aid through the pell grant program and success to student loans. the way to potentially allow them access to federal student aid is through the experimental sites initiative and equip program. this is an effort started under the obama administration to allow innovative institution that is don't fit the standard model of what higher education looks like in this country and therefore don't achieve the standards necessary to get access to financial aid, it allowed them to partner with traditional institutions and sort of play with federal student aid and experiment. that effort was not largely successful, perhaps because of the way it was designed. i would encourage that the federal government continue to support those types of initiatives, but don't just open the floodgates and allow federal student aid to be utilized by new and exciting business models without any accountability. but rather to continue to test out and using different sites
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and trial programs for these new programs that have a proven track record of success. mr. smucker: i look forward to working with you. my time is up. thank you. chairman scott: the gentleman from california, mr. takano. mr. takano: thank you, mr. chairman. i do appreciate that you're holding hearings on this important topic. i want to thank all the panelists for being here today. i want to begin my question with mr. kvaal. it's good to see you again. thank you for being here to share your recommendations on improving college affordability. i have a letter from chancellor oakley of the california community colleges that describes how the california community colleges have been hit hard particularly by the for-profit closures in the state of california. when--what happens when for-profit companies suddenly shutter, community colleges, which are already underresourced, how they
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mobilize to provide support to affected students. without objection, i would like to enter this into the record. the ability of the community colleges to properly serve these students is severely hampered by the poor quality at tion stinets receive the -- students receive at the for-profit institution and the debt loads students carry after attending. i have heard too many stories about students attempting to transfer their credits only to find out that almost none of their credits transferred. and that they are nearing the maximum -- their maximum loan limit. impeding them to continue their education. in this case community colleges. mr. kvaal, what can the federal government do to provide better up front accountability of for-profit institutions to better protect students? dr. kvaal: thank you for that question, mr. takano. we have seen over the last few years for-profit colleges
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enrolling over 100,000 students close and leave them in the bind. the instances you mentioned in california are only the latest in a long chain. it is important to have strong accountability protections such as the gainful employment rule, which requires that typical graduates of for-profit programs be able to repay their loans. the borrower defense rule which holds colleges accountable for illegal conduct such as fraud. the incentive compensation rule which prohibits deceptive and high pressure recruiting. and the 90-10 rule which requires at least 10% of students being willing to pay for the education out of their own pocket. there are important combibble accountability rules, many of them are being neglected by the current administration and others need to be strengthened by congress. mr. takano: i'm aware. neglect and rollback of
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protections. i understand in the chairman's aim higher act we actually work to strengthen some of the protections you mentioned. how do we ensure students aren't left with burdensome debt after a for-profit closure? dr. kvaal: one important step is to make sure students have their loans discharged after a school closes. currents has been the right to choose whether to transfer or get their loans discharged. many students never actually do either. so it's important to guarantee them that automatic right to have the school discharged. we need to adequately fund tuition relief funds so students have that means. and we also shouldn't keep students in the dark. when the colleges closed last week, it wasn't a surprise, executives at those colleges. it wasn't a surprise to the department of education. it was a surprise to a lot of the students who were borrowing and dipping into their savings to go there. mr. takano: amazing. i want to talk about income
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share agreements or i.s.a.'s. that are contracts between college students and investors in which an investor agrees to pay a portion of the a student's tuition for a portion of the student's future income after graduation. speaking frankly i see i.s.a.'s another way to push the private market on to students which has never resulted in positive outcomes. in an effort to shore up profits, the private market has been inclined to irresponsible and unfair practices when lending to vulnerable students which is what led us to include consumer protections of the d.o.d.-frank -- dodd-frank act. i'm concerned with the potential abuse of students or i.s.a.'s. what other pitfalls of i.s.a.'s? dr. kvaal: i share your concerns. i think that private loans including i.s.a.'s will always have higher costs. and weaker consumer safeguards than federal student loans do. i.s.a.'s in particular are not
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transparent. and because students have very different earning trajectories sometimes because of labor market discrimination, i.s.a.'s have the potential to have higher costs for students and even exclude some students from some types of programs or colleges. mr. takano: my time has expired. i yield back. chairman scott: thank you. the gentleman from kansas, mr. watkins. mr. watkins: thank you, mr. chairman. thank you for being here. i represent eastern kansas. it's agrarian and lots of poverty issues there. i know personally what it's like to try and deal with mounting school debt. it seems to me the solution was a pro-economic growth policy characterized by low taxes and low regulation that allows the economy to thrive and does it work. well, pro-growth has led to record unemployment, we're enjoying over seven million job
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openings. the labor department when reporting on hiring competition says that there's an increase in average hourly pay by 3.4% from last year. which is highest in a decade. given the strong economy, dr. akers, are you seeing states beginning to thoughtfully reinvest into the higher education institutions given strong economic performance nationally? dr. akers: it does seem there was a decline in state support following the great recession. and we have seen recent indications of an increase in investment. r. watkins: chancellor morrison-shetlar -- >> this hearing set to continue another half our or so. streaming online at we'll lever here as the u.s. house is gaveling in next. they are going to take up later a nonbinding resolution that special counsel robert mueller's report should be made


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