Strengthening the Federal Student Loan Program for Borrowers
Published May 13, 2014
Washington, D.C., March 27, 2014—Today, Institute for Higher Education Policy (IHEP) President Michelle Asha Cooper, Ph.D., testifies before the U.S. Senate’s Committee on Health, Education, Labor, and Pensions (HELP) for the hearing titled “Strengthening the Federal Student Loan Program for Borrowers.” Dr. Cooper is sharing a national perspective on federal student loan programs, touching on issues ranging from counseling, repayment, and shared accountability. She is also providing several recommendations—all with the goal of helping Senate HELP Committee Members and all policymakers understand aspects of the loan process that are working well for students, and where the loan process can be improved.
Below is an excerpt from Dr. Cooper’s testimony, along with three recommendations:
- “Today, we have more than 16 million students receiving federal loans and 37 million holding outstanding debt. For them and those to come, we must ensure that our policies help them complete college with manageable debt levels that can be repaid in an affordable, easy, and timely manner. With this goal in mind, we recommend that the student loan programs to be reauthorized in the Higher Education Act to allow for three things: Informed choices, simplified options, and shared accountability.
- Starting with informed choices, I offer two recommendations one for better data and another for better student loan counseling. To help with better data, we should give students more complete answers to questions on college costs, debt levels, repayment, and outcomes, like graduation rates for those with Title IV aid and those without. Existing data provides some basic information on costs, but only for students in their first year. Given that, they are then left guessing about the amount they will pay in subsequent years and the debt they will likely accrue during their entire college career. We recommend straightforward fixes to existing data in IPEDS and the National Student Loan Data System that would answer these types of questions.
- Our second category of recommendations represents simplified options for loan repayment. At present, there are many repayment options. The income-driven repayment options, alone, offer four different programs, with a fifth to be added later this year. We believe that if the number of repayment options were reduced, it would also reduce complexity and make loan options and terms more transparent. We recommend maintaining the standard repayment plan and offering a single income-based plan, which would allow borrowers to benefit from more manageable monthly payments and the assurance of loan forgiveness if they experience extended financial hardship.
- The final category of recommendations relates to shared accountability. As state appropriations decline and tuitions increase, students are taking on more student debt to pay for college. As a result, they are bearing a substantial and increasing proportion of risk. While students do have a responsibility, so do the institutions. Cohort default rates provide some measure of accountability by spotlighting the worst institutional offenders. But, the all-or-nothing approach means that very few institutions receive sanctions, and other poor performing schools are then able to hide in the shadows.”
Today's hearing is being held at 10 a.m. EST in the 430 Dirksen Senate Office Building. Other speakers include James W. Runcie, chief operating officer, federal student aid, U.S. Department of Education, along with Marian Dill, director of student financial aid, Lee University; Roberta L. Johnson, director of student financial aid, Iowa State University; and Deanne Loonin, National Consumer Law Center.
Dr. Cooper’s full written testimony can be found on IHEP’s website at www.ihep.org. Also, follow IHEP on Twitter at @IHEPTweets for updates about the organization’s research on federal loan programs and student borrowing.
