[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
BROKEN PROMISES: EXAMINING THE FAILED
IMPLEMENTATION OF THE PUBLIC SERVICE
LOAN FORGIVENESS PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE INVESTMENT
COMMITTEE ON EDUCATION
AND LABOR
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, SEPTEMBER 19, 2019
__________
Serial No. 116-40
__________
Printed for the use of the Committee on Education and Labor
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: www.govinfo.gov; or
Committee address: https://edlabor.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
37-856 PDF WASHINGTON : 2021
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COMMITTEE ON EDUCATION AND LABOR
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
Susan A. Davis, California Virginia Foxx, North Carolina,
Raul M. Grijalva, Arizona Ranking Member
Joe Courtney, Connecticut David P. Roe, Tennessee
Marcia L. Fudge, Ohio Glenn Thompson, Pennsylvania
Gregorio Kilili Camacho Sablan, Tim Walberg, Michigan
Northern Mariana Islands Brett Guthrie, Kentucky
Frederica S. Wilson, Florida Bradley Byrne, Alabama
Suzanne Bonamici, Oregon Glenn Grothman, Wisconsin
Mark Takano, California Elise M. Stefanik, New York
Alma S. Adams, North Carolina Rick W. Allen, Georgia
Mark DeSaulnier, California Lloyd Smucker, Pennsylvania
Donald Norcross, New Jersey Jim Banks, Indiana
Pramila Jayapal, Washington Mark Walker, North Carolina
Joseph D. Morelle, New York James Comer, Kentucky
Susan Wild, Pennsylvania Ben Cline, Virginia
Josh Harder, California Russ Fulcher, Idaho
Lucy McBath, Georgia Van Taylor, Texas
Kim Schrier, Washington Steve Watkins, Kansas
Lauren Underwood, Illinois Ron Wright, Texas
Jahana Hayes, Connecticut Daniel Meuser, Pennsylvania
Donna E. Shalala, Florida William R. Timmons, IV, South
Andy Levin, Michigan* Carolina
Ilhan Omar, Minnesota Dusty Johnson, South Dakota
David J. Trone, Maryland Fred Keller, Pennsylvania
Haley M. Stevens, Michigan
Susie Lee, Nevada
Lori Trahan, Massachusetts
Joaquin Castro, Texas
* Vice-Chair
Veronique Pluviose, Staff Director
Brandon Renz, Minority Staff Director
------
SUBCOMMITTEE ON HIGHER EDUCATION AND WORKFORCE INVESTMENT
SUSAN A. Davis, California, Chairwoman
Joe Courtney, Connecticut Lloyd Smucker, Pennsylvania,
Mark Takano, California Ranking Member
Pramila Jayapal, Washington Brett Guthrie, Kentucky
Josh Harder, California Glenn Grothman, Wisconsin
Andy Levin, Michigan Elise Stefanik, New York
Ilhan Omar, Minnesota Jim Banks, Indiana
David Trone, Maryland Mark Walker, North Carolina
Susie Lee, Nevada James Comer, Kentucky
Lori Trahan, Massachusetts Ben Cline, Virginia
Joaquin Castro, Texas Russ Fulcher, Idaho
Raul M. Grijalva, Arizona Steve C. Watkins, Jr., Kansas
Gregorio Kilili Camacho Sablan, Dan Meuser, Pennsylvania
Northern Mariana Islands William R. Timmons, IV, South
Suzanne Bonamici, Oregon Carolina
Alma S. Adams, North Carolina
Donald Norcross, New Jersey
C O N T E N T S
----------
Page
Hearing held on September 19, 2019............................... 1
Statement of Members:
Davis, Hon. Susan A., Chairwoman, Subcommittee on Higher
Education and Workforce Investment......................... 1
Prepared statement of.................................... 4
Smucker, Hon. Lloyd, Ranking Member, Subcommittee on Higher
Education and Workforce Investment......................... 5
Prepared statement of.................................... 6
Statement of Witnesses:
Appel, Mr. Jeff, Director of Policy Liaison and
Implementation, Offices of Federal Student Aid, Department
of Education............................................... 57
Prepared statement of.................................... 59
Chingos, Dr. Matthew M., Ph.D, Vice President for Education
Data and Policy Urban Institute............................ 17
Prepared statement of.................................... 19
Emrey-Arras, Ms. Melissa, Director of Education, Workforce,
and Income Security, Government Accountability Office...... 65
Prepared statement of.................................... 68
Finlaw, Ms. Kelly, Teacher, New York, NY..................... 8
Prepared statement of.................................... 11
Shavit, Ms. Yael, J.D., Assistant Attorney General, Office of
the Massachusetts Attorney General......................... 13
Prepared statement of.................................... 15
Additional Submissions:
Chairwoman Davis:
Prepared statement of.................................... 106
Foxx, Hon. Virginia, a Representative in Congress from the
State of North Carolina:
Timeline: Education Department's Implementation of PSLF.. 107
The PSLF Program......................................... 109
Jayapal, Hon. Pramila, a Representative in Congress from the
State of Washington:
Letter dated April 12, 2019 from the Department of
Education.............................................. 114
Questions submitted for the record by:
Chairwoman Davis
Bonamici, Hon. Suzanne, a Representative in Congress from
the State of Oregon.................................... 117
Fudge, Hon. Marcia L., a Representative in Congress from
the State of Ohio...................................... 119
Responses to questions submitted for the record by:
Ms. Emrey-Arras.......................................... 120
Ms. Shavit............................................... 127
BROKEN PROMISES: EXAMINING THE FAILED.
IMPLEMENTATION OF THE PUBLIC SERVICE
LOAN FORGIVENESS PROGRAM
----------
Thursday, September 19, 2019
House of Representatives,
Subcommittee on Higher Education and Workforce Investment,
Committee on Education and Labor,
Washington, D.C.
----------
The subcommittee met, pursuant to call, at 10:15 a.m., in
Room 2175, Rayburn House Office Building. Hon. Susan A. Davis
(Chairwoman of the subcommittee) presiding.
Present: Representatives Davis, Courtney, Takano, Jayapal,
Harder, Levin, Omar, Trone, Lee, Sablan, Bonamici, Adams,
Norcross, Smucker, Guthrie, Grothman, Stefanik, Comer, Cline,
Watkins, and Mueser.
Also Present: Representatives Scott, Shalala, Foxx, and
Keller.
Staff Present: Tylease Alli, Chief Clerk; Stephanie
Cellini, Higher Education Policy Fellow; Emma Eatman, Press
Assistant; Christian Haines, General Counsel; Kia Hamadanchy,
Oversight Counsel; Ariel Jona, Staff Assistant; Stephanie
Lalle, Deputy Communications Director; Andre Lindsay, Staff
Assistant; Jaria Martin, Clerk/Assistant to the Staff Director;
Richard Miller, Director of Labor Policy; Max Moore, Office
Aid; Veronique Pluviose, Staff Director; Benjamin Sinoff,
Director of Education Oversight; Banyon Vassar, Deputy Director
of Information Technology; Joshua Weisz, Communications
Director; Cyrus Artz, Minority Parliamentarian; Kelsey Avino,
Minority Fellow; Courtney Butcher, Minority Director of Member
Services and Coalitions; Dean Johnson, Minority Staff
Assistant; Amy Raaf Jones, Minority Director of Education and
Human Resources Policy; Hannah Matesic, Minority Director of
Operations; Audra McGeorge, Minority Communications Director;
Carlton Norwood, Minority Press Secretary; Brandon Renz,
Minority Staff Director; Alex Ricci, Minority Professional
Staff; Chance Russell, Minority Legislative Assistant; and
Mandy Schaumburg, Minority Chief Counsel and Deputy Director of
Education Policy.
Chairwoman Davis. Good morning, everybody. Thank you all
for being here. The meeting will come to order. I note that a
quorum is present and I also note for the subcommittee that Ms.
Shalala of Florida and Mr. Keller of Pennsylvania be permitted
to participate in today's hearing with the understanding that
their questions will come only after all Members of the higher
education subcommittee on both sides of the aisle who are
present have had an opportunity question the witnesses.
The committee is meeting today in a legislative oversight
hearing to hear testimony on and I quote Broken Promises:
Examining the Failed Implementation of the Public Service Loan
Forgiveness Program.
Pursuant to Committee Rule 7(c) opening statements are
limited to the chair and the Ranking Member and this allows us
to hear from our witnesses sooner and provides all Members with
adequate time to ask questions.
I recognize myself now for the purpose of an opening
statement. And welcome again to all of you. We thank you for
being here as well as our next panel.
This morning we are here to examine just what went wrong
with a certain program. A program that many of us on this
committee hoped would act as a catalyst for young people to
channel their expertise towards serving our Nation.
This program's goal was to steer talent into the public
sector, particularly in healthcare and education, with the
reward of loan forgiveness for 10 years of their public
service.
I am talking of course, about the Public Service Loan
Forgiveness program that we call PSLF.
Again, I would like to thank our witnesses who made time to
be here today. I must say that we are disappointed that the CEO
of the Pennsylvania Higher Education Assistance Agency known as
PHEAA, the sole loan service charged with implementing these
programs, declined our invitation to testify.
While I understand the problem with PSLF does not lie with
this entity alone, I don't underway why a taxpayer funded loan
servicer would turn down a request to present their side of the
story.
If PHEAA believes the problems with the PSLF resides with
the Education Department, then this would have been their
opportunity to state so--that clearly and publicly.
In 2007, Congress created this loan forgives program, PSLF
and since its inception, we have seen an influx, tens of
thousands of citizens financially able to dedicate their lives
to public service. This includes our Nation's teachers, our
first responders, service members, and many, many others.
Healthcare professionals included. These Americans made life
changing professional and financial decision made--based on the
promise that we made 12 years ago.
And unfortunately, as a result of the failure to adequately
implement this program, thousands of active public servants
have been denied the benefits originally promised.
10 years since the passing of PSLF when the first wave of
eligible student borrowers applied in 2017 only 96 of 28,000
applicants received loan forgiveness. That is a 99.6 percent
denial rate. That doesn't make sense to people.
A 2018 Government Accountability Office report on this
program identified a critical breakdown in communication
between the Education Department, loan servicers, and student
borrowers. It recommended the Department make four critical
reforms to the program.
First, the Department should provide loan servicers and
borrowers with comprehensive information about qualifying
employers.
Second, the Department should issue a standardized manual
for loan servicers.
Third, the department should standardize payment
information for loan servicers.
And finally, the Department should ensure borrowers receive
sufficiently detailed information to help identify potential
payment counting errors.
While the Department agreed with all these recommendations,
it has yet to fully implement any of them, nor have they
provided a timeline for doing so.
In response to the extremely high PSLF denial rates and
understandably widespread confusion among frustrated borrowers,
Congress created the Temporary Expanded Public Service Loan
Forgiveness Program in 2018. We appropriated $700 million to
the Education Department with clear instructions to simplify
and expand the program to increase rates of loan forgiveness.
Earlier this month, however the GAO released another report
and this time they analyzed the expansion. The GAO found that
yet again that ED was denying 99 percent of the new TEPSLF
applicants. Of the 53,523 student borrowers who applied, 661
were approved.
So our goal here today is to collectively make it easier
for the public servants of this country to take advantage of a
promise made to them back in 2017.
And as sometime happen, of course people are going to
search for blame. And in fact there are plenty of folks who
actually didn't produce and do what we wanted them to do. What
the American people expect of them to do.
But we want to solve this problem and that is why we are
delighted that you all are here before us today, to help engage
with this discussion and we would hope that everybody who is
connected to his has an opportunity to listen to what you have
to say as well.
The Executive Branch's implementation of this law which was
supported by both Democratic and Republican administrations,
have not lived up to its standard. That is why I encourage my
colleagues in Congress from both sides of the aisle to come
together today and offer positive solutions.
Today, while we plan to ask tough questions on precisely
what went wrong, we also wish to present an opportunity for the
Department of Education to initiate a publicly good faith
effort to finally implement PSLF program correctly.
PSLF is a popular bipartisan program that is critical for
ensuring communities everywhere in the United States have
access to education, healthcare, and other fundamental
services.
We know that President Trumps own Defense Department
agreement with this sentiment--that the Department agrees
actually with this sentiment. It was under Secretary Mattis
that the Pentagon stated the Public Service Loan Forgiveness
program and I am quoting here, has been an important
recruitment and retention tool for the military to compete with
the civilian sector predominately in specialty fields such as
the Judge Advocates General Corps, for whom graduate degrees
are required.
So that is why we are here today. We are here to look for
answers on how we can better support the thousands of public
servants who support all of us every day. We appreciate again
your all being here.
I now turn to the Ranking Member for his opening
statements. Mr. Smucker. I want to recognize the distinguished
Ranking Member for the purpose of making an opening statement.
[The statement of Chairwoman Davis follows:]
Prepared Statement of Hon. Susan A. Davis, Chairwoman, Subcommittee on
Higher Education and Workforce Investment
This morning, we are here to examine just what went wrong with a
certain program.
A program many of us on this committee hoped would act as a
catalyst for young people to channel their expertise toward serving our
nation. This program's goal was to steer talent into the public
sector--particularly in healthcare and education--with the reward of
loan forgiveness for 10 years of their public service. I am talking, of
course, about the Public Service Loan Forgiveness program that we call
P-S-L-F.
Again, I would like to first thank all our witnesses who made time
to be here today. I must say that we are disappointed that the CEO of
the Pennsylvania Higher Education Assistance Agency (PHEAA)--the sole
loan servicer charged with implementing these programs--declined our
invitation to testify. While I understand that the problems with the P-
S-L-F program do not lie with this entity alone, I don't understand why
a taxpayer-funded loan servicer would turn down a request to present
their side of the story. If PHEAA believes the problems with the P-S-L-
F program resides with the Education Department, then this would have
been their opportunity to state that clearly and publicly.
In 2007, Congress created this loan forgiveness program, the P-S-L-
F. And since its inception, we have seen an influx--tens of thousands--
of citizens financially able to dedicate their lives to public service.
This includes our nation's teachers, first responders, service members,
healthcare professionals, and many others. These Americans made life-
changing professional and financial decisions based on the promise that
we made 12 years ago.
Unfortunately, as a result of the failure to adequately implement
this program, thousands of active public servants have been denied the
benefits originally promised.
Ten years since the passing of the P-S-L-F, when the first wave of
eligible student borrowers applied in 2017, only 96 of 28,000
applicants received loan forgiveness. That's a 99.6 percent denial
rate. That doesn't make sense to people.
A 2018 Government Accountability Office report on this program
identified a critical breakdown in communication between the Education
Department, Loan Servicers, and student borrowers. It recommended the
Department make four critical reforms to the program.
* First, the Department should provide loan servicers and borrowers
with comprehensive information about qualifying employers;
* Second, the Department should issue a standardized manual for
loan servicers;
* Third, the Department should standardize payment information for
loan servicers; and,
* Finally, the Department should ensure borrowers receive
sufficiently detailed information to help identify potential payment
counting errors.
While the Department agreed with all of these recommendations, it
has yet to fully implement any of them, nor have they provided a
timeline for doing so.
In response to the extremely high P-S-L-F denial rates, and
understandably widespread confusion among frustrated borrowers,
Congress created the Temporary Expanded Public Service Loan Forgiveness
program in 2018. We appropriated $700 million to the Education
Department with clear instructions to simplify and expand the program
to increase rates of loan forgiveness.
Earlier this month, however, the GAO released another report. This
time, they analyzed the expansion. GAO found, yet again, that ED was
denying 99 percent of the new TEPSLF applicants. Of the 53,523 student
borrowers who applied, 661 were approved.
So, our goal here today is to collectively make it easier for the
public servants of this country to take advantage of a promise made to
them back in 2007.
And, as sometimes happens, people are going to search for blame. In
fact, there are plenty of folks who actually didn't produce or do what
we wanted them to do--what the American people expect them to do. But,
we want to solve this problem, and that is why we are delighted you all
are here before us today to help us engage in this discussion. We would
hope that everyone connected to this has an opportunity to hear what
you have to say as well.
The Executive Branch's implementation of this law, which was
supported by both Democratic and Republican administrations, have not
lived up to its standard. That is why I encourage my colleagues in
Congress, from both sides of the aisle, to come together today and
offer positive solutions.
Today, while we plan to ask tough question on precisely what went
wrong, we also wish to present an opportunity for the Department of
Education to initiate a publicly good faith effort to finally implement
the P-S-L-F program correctly.
The P-S-L-F is a popular, bipartisan program that is critical for
ensuring communities everywhere in the United States have access to
education, health care, and other fundamental services.
We know that President Trump's own Defense Department agrees with
this sentiment. It was under Secretary Mattis that the Pentagon stated:
``The Public Service Loan Forgiveness program has been an important
recruitment and retention tool for the military to compete with the
civilian sector predominantly in specialty fields, such as the Judge
Advocates General Corps, for whom graduate degrees are required.''
That's why we are here today. We are here to look for answers on
how we can better support the thousands of public servants who support
all of us every day.
Thank you.
I now turn to the Ranking Member for his opening remarks.
______
Mr. Smucker. Thank you, Madame Chair. Thank you for
yielding. Each year Americans take on more and more student
debt so it's no surprise that borrowers have demanded help.
College costs continue to surge, so Congress has stepped in.
But too often, overreaching government intervention may not
lead to positive reforms and you can just look at Public
Service Loan Forgiveness program which is indeed a broken
promise intended to help borrowers working in public service
professions struggling with their student loan debt.
Congress then doubled down on that same broken promise when
700 million was pumped into a new program called the Temporary
Expanded Public Loan Forgiveness OR TEPSLF.
The purpose of today's hearing should be to come up with
solutions to solve program confusion for borrowers because our
constituents are working towards loan forgiveness--are the
constituents who are working towards loan forgiveness are the
ones who we should be here to serve.
But whether you support or oppose the programs is
irrelevant for the purposes of today's conversation and I have
sincere hopes that today's hearings will really be an attempt
to resolve these issues and not be used to grandstand or to
point fingers.
My colleagues, based on some of the information we have
seen in advance, we will repeatedly point to one GAO statistic
that 99 percent of TEPSLF application were rejected since the
program began in 2018.
Well, that is certainly not the outcome that we had hoped
for and certainly makes for great headline but sadly, it
stretches the truth and only tells a fraction of the story. So
I will highlight some of the important facts and figures that
my colleagues will conveniently leave out.
71 percent of TEPSLF applicants were denied because they
did not submit a PSLF application. According to the law, TEPSLF
is only available to applicants who are ineligible for PSLF. Of
the 29 percent of applicants who cleared the first hurdle by
submitting a PSLF application, roughly only 4 percent were
ultimately eligible for TEPSLF. This number illustrates just
how tightly Congress defined that eligibility.
Also, the GAO report determined that the Department of
Education followed the law precisely. And nowhere in the GAO
report did they find the Department of Education was improperly
denying borrowers forgiveness or slow walking the
implementation process.
So we can't blame the Department of Education, we can't
blame PHEAA for high loan forgiveness rejection rates when it
was narrowly designed legislation and in fact combined then
with years of the Department of Ed under the Obama
Administration, years of inaction that brings us to today's
problem.
So again, PHEAA, Department of Education, there is not a
scapegoat that we should be working, trying to pin the issues
on. The Department of Education is following what is a very
complex law in fact, as written by Democrats. It is just not
the law that Democrats wish they had passed in 2007.
Spinning data to drive a political agenda doesn't serve the
American people. Might make for some great headlines and
Twitter material but it certainly does nothing to help
frustrated and struggling American borrowers. Talk is cheap but
failing policies such as in a case like this are costly. Thank
you. I yield back.
[The statement of Mr. Smucker follows:]
Prepared Statement of Hon. Lloyd Smucker, Ranking Member, Subcommittee
on Higher Education and Workforce Investment
``Each year Americans take on more and more student debt. It's no
surprise borrowers have demanded help. College costs continue to surge
so Congress has stepped in. But rarely does overreaching government
intervention lead to positive reforms.
Look at the Public Service Loan Forgiveness (PSLF) program - a
broken promise intended to help borrowers working in public service
professions struggling with their student loan debt. Congress doubled
down on that same broken promise when $700 million was pumped into a
new program called the Temporary Expanded Public Service Loan
Forgiveness (TEPSLF).
Whether you support or oppose these programs is irrelevant for the
purposes of today's conversation, and I have sincere hopes that today's
hearing will not be used to grandstand or point fingers. The purpose of
today's hearing should be to come up with solutions to solve program
confusion for borrowers, because our constituents working towards loan
forgiveness are who we are here to serve.
My colleagues will repeatedly point to one GAO statistic: 99
percent of TEPSLF applicants were rejected since the program began in
2018. Well, that makes for a great headline. Sadly, it stretches the
truth and only tells a fraction of the story, so I'll highlight some of
the important facts and figures my colleagues have conveniently left
out.
Seventy one percent of TEPSLF applicants were denied because they
didn't submit a PSLF application. According to the law, TEPSLF is only
available to applicants who are ineligible for PSLF. Of the 29 percent
of applicants who cleared the first hurdle by submitting a PSLF
application, roughly only 4 percent were ultimately eligible for
TEPSLF. This number illustrates just how tightly Congress defined
TEPSLF eligibility.
Also, the GAO report determined that the Department of Education
followed the law precisely. And nowhere in the GAO report did they find
the Department of Education was improperly denying borrowers
forgiveness or slow walking the implementation process.
There is no scapegoat to pin the issues on. We can't blame the
Department of Education for high loan forgiveness rejection rates when
it was narrowly-designed legislation, combined with years of Obama
administration inaction, that brings us to today's problem. The
Department of Education is following the complex law, as written by
Democrats, it's just not the law the Democrats wish they had passed in
2007.
Spinning data to drive a political agenda doesn't serve the
American people. It might make for some great headlines and Twitter
material, but it certainly does nothing to help frustrated and
struggling American borrowers. Talk is cheap, but failing policies are
costly.
Thank you, I yield back.''
______
Chairwoman Davis. Thank you, Mr. Smucker, and without
objection, all other Members who wish to insert written
statements into the record may do so by submitting them to the
Committee Clerk electronically in Microsoft Word format by 5
p.m. on October 3.
I am now delighted to introduce our witnesses for the first
panel. First is Kelly Finlaw. Ms. Finlaw started her 14th year
of teaching middle school art in New York City. She teaches at
the B. Ford Rogers School IS 528 which is a public middle
school located in Washington Heights.
She has taught middle school in Washington Heights since
she started teaching and has lived in the same neighborhood as
her school for the past 11 years.
As a public school teacher in NYC, she is an active member
in the United Federation of Teachers and the delegate for her
schools chapter.
Next we have Yael Shavit. Yael Shavit is an assistant
attorney general in the Consumer Protection Division of the
Massachusetts Attorney General's office. Her work addresses a
wide range of consumer protection issues with a focus on
student loans and higher education matters.
Before joining the Massachusetts Attorney General's office,
Yael held a Ford Foundation public interest fellowship at the
National Consumer Law Center and served as a San Francisco
Affirmative Litigation Project Fellow and lecturer in Yale, at
Yale Law School. Lecturer in law, I am sorry, at Yale Law
School.
Finally, Matthew Chingos, directors the Center on
Education, Data, and Policy at the Urban Institute. He leads a
team of scholars who undertake policy relevant research on
issues from pre-kindergarten through post-secondary education
and creates tools such as the Urbans Education Data Portal.
Chingos is coauthor of Game of Loans, the Rhetoric and
Reality of Student Debt and Crossing the Finish Line.
Completing college at America's public universities.
He has testified before Congress and his work has been
featured in media outlets such as the New York Times, the
Washington Post and NPR.
Before joining Urban, Chingos was a senior fellow at the
Brookings Institution. He received a BA in government and
economics and a Ph.D. in government from Harvard University.
Pursuant to rule 7D, the witnesses will please stand and raise
their right hands. Thank you.
[Witnesses sworn.]
Chairwoman Davis. Let the record show that the witnesses
all answered in the affirmative.
We appreciate all of the witnesses for being here today and
we look forward to your testimony. I want to remind the
witnesses that we have read your written statements and they
will appear in full in the hearing record.
Pursuant to Committee Rule 7(d) and committee practice,
each of you is asked to limit your oral presentation to a five
minute summary of your written statement.
Before you begin your testimony, you probably see the
button in front of you. If you remember to press it to the
microphone so it will turn on and the Members can hear you. As
you being to speak, the light in front of you will turn green
and after four minutes, the light, excuse me, the light will
turn yellow to signal that you have one minute remaining. When
the light turns red, your five minutes have expired and we ask
that you please wrap up.
We will let the entire panel make their presentations
before we move to Member questions. When answering a question,
please remember to once again turn your microphone on.
I will first recognize then Ms. Finlaw.
TESTIMONY OF KELLY FINLAW, TEACHER, NEW YORK CITY
Ms. Finlaw. Good morning, Chairwoman Davis, and Members of
the committee. My name is Kelly Finlaw. I'm a middle school art
teacher at IS 528 in New York City. I am a proud member of the
United Federation of Teachers and the American Federation of
Teachers.
On behalf of the 1.7 million members of the AFT, I thank
you for inviting me here today to share my experience with the
Public Service Loan Forgiveness program.
Apart from being with my family, with people that I love,
my classroom is my favorite place on earth. Being a teacher is
one of the most difficult professions in the world but I clawed
tooth and nail to make it and I am doing what I was meant to
do.
There are moments every day that overwhelmed me, that stop
me in my tracks. They are moments of gratitude that this is how
I get to spend my life.
Going to college was my only option after high school. My
mother made sure of that. But even though she worked several
jobs to make ends meet, there wasn't anything leftover to pay
for my education. So student loans kept me in my classes every
semester.
I didn't go into education so that the government would pay
my loans for me. The PSLF program didn't even exist when I
started teaching during the 2006, 2007 school year. I took on
the debt that I have because it was a means to an end. I
expected to carry this debt with me for the rest of my life, a
small price to pay for a life that already feels like I have
won the lottery every day when I walk into my school.
In 2007, after I had already started teaching, a bipartisan
law was sent into motion that it believed would alter the
course of my financial future.
A promise was made to me, to my colleagues, and to all
public workers that should we continue to serve our communities
for at least 10 years and make 120 quality payments on our
student loans, our debt would be forgiven.
Teaching isn't a career that garners much respect from
anyone outside of the profession but this promise was
validation that the work that we do every day is valuable. The
promise that Congress made to me and to all public sector
workers gave me hope for my future.
When I learned about the law, I called my loan servicer and
said I'm a teacher, what do I need to do to quality for the
PSLF program? I made these calls repeatedly to different loan
servicers over the span of several years. The answer was always
that same. Just keep making payments and after 120 you will
quality.
After 10 years of making student loan payments, October
2017 was my month, my light at the end of the tunnel. I
received an email from my servicer, Nelnet, letting me know
that I was eligible to apply for PSLF. I filled out my
paperwork immediately.
Once I applied, my account was transferred to Fed Loan, the
exclusive servicer for PSLF. I received a letter from Fed Loan
a few weeks later, a letter I had dreamed of for 10 years. I
remember standing in my living room when the light at the end
of the tunnel went dark.
The Department of Education denied my application for
public service loan forgiveness. The reason which no loan
servicer had ever raised was that one of the loans was not a
direct loan.
I called Fed Loan immediately. I was told to reconsolidate
so that all of my loans would qualify. Once I reconsolidated, I
was transferred to Nelnet and I called and asked all of my
loans qualify, what do I need to do now?
I was told that my qualifying payments had ben reset to
zero and I would have to keep paying for 10 more years. I have
now made 5 payments toward my second round of 120 payments.
According to Nelnet, I am 115 payments away from forgiveness
while simultaneously being 5 payments past.
I dream of owning an apartment in my neighborhood but how I
can I afford a mortgage when I recently had to decrease what I
contribute to my pension in order to cover my monthly bills. I
do not share my story with you today to seek sympathy. I
wouldn't trade my life with any other person on this planet. I
share my story because there was a promise that was made to me
and to millions of other public servants and that promise is
being broken every day.
As of March 2019, the Education Department had forgiven the
debt of 518 public servants, less than 1 percent of its
applicants.
I vacillated between anger and despondence when I was
denied forgiveness. I tried to find answers on my own but it
wasn't until my union reached out that I felt like I had a
voice again.
I never thought I would say this but I'm a plaintiff in a
lawsuit against Betsy DeVos and the Department of Education.
The Weingarten v. DeVos lawsuit is seeking a court order that
will hold the Education Department accountable for the errors
and misrepresentations of its loan servicers and allow
borrowers who have been denied due process.
Congress has already made an effort to rectify the issues
in this program allocating $700 million for the Temporary
Education PSLF program. Yet no one proactively talked to me
about applying for TEPSLF. I had to research on my own.
I do not understand why Secretary DeVos would not do
everything in her power to help teachers like me who did
everything right, receive the loan forgiveness we were
promised. I urge her to take action which is within her
authority to fix this broken system.
As I stated before, I do not come from a wealthy family. I
took out students loans because it was the only way that I
could earn a degree and to date, I am the only member of my
family to have that honor.
If the PSLF program wasn't meant for me, a teacher who
loves her job, pays her bills, and comes for a family where
loans were her only option, who was it meant for?
I'm extremely grateful to have this opportunity to speak
before you today but the truth is I would prefer to be in my
classroom right now. Today will likely by the only day I am not
in my classroom for the rest of the year.
I am here today because I have no other option. No other
hope for my own future. I am here today so that you can see the
face of a person who has been impacted by the gross
mismanagement of PSLF. Thank you for your time.
[The statement of Ms. Finlaw follows:]
Chairwoman Davis. Thank you, Ms. Finlaw. Ms. Shavit, please
proceed.
TESTIMONY OF YAEL SHAVIT, J.D., ASSISTANT ATTORNEY GENERAL,
OFFICE OF THE MASSACHUSETTS ATTORNEY GENERAL
Ms. Shavit. Chair Davis, Ranking Member Smucker and Members
of the subcommittee, thank you for inviting me to testify
today.
My name is Yael Shavit and I am an Assistant Attorney
General in the Massachusetts Attorney General's Office. On
behalf of Attorney General Maura Healey, I appreciate the
opportunity to share our serious concerns about the
implementation of the PSLF program.
Advocating on behalf of students is a central priority of
our office. Our office has brought some of the first
enforcement actions against student loan servicers and works
directly with borrowers to help resolve issues that arise with
their loans. Through this work, we regularly see firsthand both
the importance of the PSLF program and the profound financial
injuries suffered by public servants due to the mismanagement
of the program.
As you know, Congress created the PSLF program to allow
public servants to manage their student loan debt by providing
them with loan forgiveness after 10 years of service. Without
this program, people interested in dedicating themselves to
public service careers often would be unable to do so because
of the steep costs of higher education.
The PSLF program is critical not only to the borrowers who
rely on it but to the broader societal interest of ensuring
that skilled workers can serve in public sector jobs.
Nonetheless, we have seen time and again how diligent,
hardworking public servants who had every reason to believe
that they were meeting the programs requirements are being
denied the benefit of PSLF after years of work.
Our offices investigations have revealed widespread
mismanagement of the PSLF program by both student loan
servicers and the Department of Education.
In 2017, we brought an enforcement action against PHEAA
also known as Fed Loan Servicing which is the exclusive--has
the exclusive contract to manage the PSLF program. Our lawsuit
alleges that PHEAA, by engaging in widespread loan servicing
failures has caused financial harm to thousands of
Massachusetts residents seeking to rely on PSLF.
Despite being aware of these problems, the Department has
failed to adequately oversee its servicers and it has failed in
its own administration of PSLF.
Borrowers have been misinformed about the requirements of
PSLF and have been told incorrectly that their loans or
employment qualified for the program when they didn't.
Borrowers have had their payments miscounted and their
applications delayed. They have been excluded from qualifying
repayment plans through no fault of their own.
In short, the system is deeply broken. The problems with
the administration of PSLF came into sharp relief in 2017 after
the first participants in the program became eligible for loan
forgiveness.
Only 96 people out of over 28,000 initial applicants had
their loans forgiven. This extraordinary denial rate should
have served as a wakeup call to the Department that it needed
to overhaul its oversight and management of PSLF.
Unfortunately, the Department has failed to demonstrate a
commitment to the program or to public servants.
We have seen this lack of commitment first hand. Rather
than working with our office when we identified PHEAA servicing
failures, the Department instead empowered PHEAA in its failed
efforts to evade our enforcement authority by invoking
inapplicable Federal preemption principles and privacy
statutes.
It is now clear that the Department is also impeding
Congress's efforts to help public servants. Despite Congress's
appropriation of $700 million to temporarily extend PSLF, the
Department has once again denied approximately 99 percent of
applications for relief.
The Department's continued failure to administer the PSLF
program appropriately is disheartening and unacceptable. We
appreciate the subcommittees focus on this issue. The PSLF
program is important and we believe that it is essential that
the programs administration be fixed not only for those public
servants who have already relied on the program, but also for
future borrowers who are willing to committee themselves to the
public good and the countless Americans who benefit from their
service.
On behalf of the Massachusetts attorney general's office
and the borrowers we represent, we urge Congress to continue to
use its oversight authority and demand accountability from the
Department and its servicers. Students across the country are
counting on it. Thank you.
[The statement of Ms. Shavit follows:]
Chairwoman Davis. Thank you, Ms. Shavit. Dr. Chingos.
TESTIMONY OF MATTHEW M. CHINGOS, PH.D., VICE PRESIDENT FOR
EDUCATION DATA AND POLICY URBAN INSTITUTE
Mr. Chingos. Chair Davis, Ranking Member Smucker and
Members of the committee, thank you for the opportunity to
testify today about the Public Service Loan Forgiveness
program.
I direct the Center on Education, Data and Policy at the
Urban Institute here in Washington, D.C. I'm proud of the work
we do at Urban but I should emphasize that the views expressed
in this testimony are my own and should not be attributed to
any organization with which I am affiliated, its trustees or
its funders.
My testimony will provide an overview of PSLF and the
Temporary Expanded PSLF program with a focus on program design,
tradeoffs and options for reform.
I am not an expert on student loan servicing but I believe
that the complex design of loan forgiveness programs place an
important role in the challenges faced both by borrowers trying
to navigate these programs and by the Federal Government
administering them.
PSLF sounds like a simple program. Work in public service
for 10 years and have your loans forgiven. But the program is
complicated and has only become more complex over time. First,
Congress limited the program to borrowers who took out loans
under the direct loan program and it may not be obvious to
borrowers which kind of loan they have.
Second, borrowers need to prove they worked in public
service which the Federal Government defines based on the legal
status of the employer, not the job being done.
For example, nurses at nonprofit hospitals are eligible but
nurses doing the exact same work at for profit hospitals are
not eligible.
Third, borrowers need to spend at least some time in an
income driven repayment plan. Payments made under the wrong
plans do not count towards PSLF.
Such a complex program has led to borrower confusion. A
2018 GAO report on PSLF found that of the borrowers who applied
for forgiveness, only half had any qualifying employment in
loans and less than one percent had made 120 qualifying
payments. Congress attempted to address borrower concerns about
PSLF by creating TEPSLF, a first come, first serve pot of money
for borrowers who met all of the requirements of PSLF except
they were in the wrong repayment plans.
As with PSLF, few TEPSLF applicants have been approved for
forgiveness. But the denial rates alone don't tell us whether
these programs have reached their intended beneficiaries. To
judge success, we need to know how many borrowers are actually
eligible under the terms of the programs, how many are applying
and how many are being approved.
It is impossible to precisely estimate how many borrowers
are eligible for these programs because the Federal Government
does not collect comprehensive data on borrowers sector of
employment.
This has left the press and Congress to focus on the fact
that 99 percent of applications were rejected and not on why
they were rejected.
The recent GAO report does not tell us much about the share
of eligible borrowers who were able to access the program but
provides insight into why so many borrowers were rejected.
71 percent of TEPSLF applications were denied because the
borrower had not yet submitted an application for PSLF. Of the
applications that did meet the requirements the first applying
for PSLF, 96 percent did not meet the other eligibility
requirements including making 10 years of qualifying payments
on eligible loans and meeting payment size criteria set by
Congress.
The hard truth is that a program as complex as TEPSLF is
likely to continue to be confusing as evidence by borrower
confusion about the PSLF program which has been in place for
much longer.
In addition to creating confusion, PSLF distributes the
largest benefits not to the neediest borrowers or those who
contribute most to the public good but to borrowers with the
largest debts who know how to navigate the system by obtaining
the right kind of loan, picking the right repayment plan,
working for the right employer and even filing their taxes the
right way.
Programs like PSLF could be more effectively administered
if the onus was on the government rather than borrowers to
measure eligibility.
For example, Congress could consider modifying the program
to simplify eligibility rules and provide forgiveness using
administrative data such as from the IRS rather than using a
cumbersome application process.
A more ambitious option is to shift the resources currently
dedicated to PSLF to alternative policies aimed at the same
goal. Research shows that targeted scholarship programs are
more effective than loan forgiveness.
In my view, efforts to reward socially valuable employment
such as social work and teaching will be better accomplished
through grants or through carefully tailored wage subsidies. In
conclusion, many of the challenges of implementing PSLF and
TEPSLF stem from the complex design of these programs.
Discussions about how to improve the administration of loan
forgiveness programs should be accompanied by careful
consideration of how these programs might be reformed to reduce
confusion and make them work better for both borrowers and tax
payers.
Thank you for the opportunity to testify today. I look
forward to answering any questions.
[The statement of Mr. Chingos follows:]
Chairwoman Davis. Thank you very much. Thank you to all of
you staying within time limits and we look forward to the
questioning.
Under Committee Rule 8(a), we will now question witnesses
under the five minute rule. As chair I have decided to go at
the end so I will yield to the next senior Member on the
Majority side and then we will shift over to the Ranking Member
and go back and forth.
Again, I want to now yield to Mr. Courtney of Connecticut
for the first questions.
Mr. Courtney. Thank you, Madame Chairwoman, and to Mr.
Smucker for holding this hearing today, to all the witnesses
particularly, Ms. Finlaw, for really telling the human side of
this.
Again, I think most Members I would assume, certainly my
office has gotten these calls and, I mean, the crushing
disappointment that people experience when they built their
whole life plan and professional career for 10 years, you know,
to get that rug pulled out from under them is just devastating.
Before I begin my questioning, I want to join the chair to
express my frustration with the CEO of PHEAA, known to
consumers as Fed Loan Servicing for refusing to testify today.
Fed Loan is the loan, sole loan servicer implementing PSLF. If
a borrower hopes to obtain PSLF they have to speak to Fed Loan.
So I think as Ms. Finlaw maybe knows from some of her
colleagues, there are other loan servicers that deal with Title
IV loans, Stafford loans, Perkins loans, all of them, but if
you want to apply for discharge under PSLF, the loan has to be
given to this one sole gatekeeper, Fed Loans.
And, you know, that is why their refusal today to be
accountable on a public forum when the program they administer
fails more than 99 percent of the borrowers that again, have to
go through that bottleneck is really outrageous.
According to USA Spending, Fed Loan has collected over $1.3
billion in tax payer dollars because of the servicing contracts
that they have with the Department of Education and yet they
refused to appear today to publicly discuss how they actually
spent the tax payers money.
Fed Loan is currently competing today also for the
Department's next gen loan servicing platform. This is a multi-
billion dollar contact that the Department claims will address
many of the problems leading to PSLF's failure and yet Fed
Loans chief executive officer refuses to engage with Congress
about the problems implementing the last billion dollar
contract that it received.
And I want to just note for the record, again the refusal
to testify here today occurred on September 13 and that was
before the witness list was released and I just again want to
leave that on the record.
So today, since they're not here, Ms. Shavit, who is suing
Fed Loan servicing in the state of Massachusetts, and since
they are unwilling to share their side of the story, I would be
interested in hearing what you have to say about their
practices.
Can you explain how Fed Loans practices have prevented
borrowers from qualifying for PSLF and are there other ways
that Fed Loan practices costs borrowers money?
Ms. Shavit. Sorry, certainly. Fed Loan servicing failures
affect a number of facets of PSLF. So as we allege in our
complaint, Fed Loan failed to timely process borrowers'
applications to participate in qualifying repayment plans. As a
result of the backlogs and the delays that this caused, PHEAA
decided to place some borrowers in forbearance status which is
itself not a qualifying repayment status.
The effect of these servicing failures was to deprive
borrowers of the opportunity to make payments that would
qualify for PSLF. In effect, what this does is prolong a
borrower's repayment obligations inappropriately and increase
the likelihood that they will never qualify for PSLF.
Additionally, PHEAA failed to correctly count and track
borrowers qualifying payments causing borrowers to be credited
with fewer qualifying payments than they actually made. Again,
this throws borrowers off track.
I think it is also important to note that the problems that
effect PSLF borrowers aren't just servicing failures that are
specific to PHEAAS's management of PSLF. Servicing failures
across PHEAA's platform, across their work, have ripple effects
at throw PSLF borrowers off track.
So additional servicing failures that have been recorded
including the misapplication of payments can also have the same
effect of throwing borrowers off track.
Additionally, we are aware of borrowers as Ms. Finlaw has
described who have been misinformed by PHEAA about the
qualification of their employment or their loans for PSLF and
relying on this information borrowers have spent years,
sometimes up to a decade thinking that they were on track to
get PSLF forgiveness only to discover the error when so much
time had passed that they were unable to make the critical
changes in their lives to actually become eligible for PSLF.
I would also like to note a different failure which I think
is important to recognize and that the failure that happens
when PHEAA recognized its servicing errors and didn't
immediately take measures to both identify the entire
population harmed by its servicing errors and to then make sure
that those borrowers were made whole.
It should be PHEAA's priority to make sure that those
borrowers are made whole and frankly, it should be the
Department's priority to make sure that PHEAA does so.
Mr. Courtney. Thank you. I again just also want to add
quickly for the record, the Administration has submitted two
budgets since taking office in 2017 for fiscal year '19 and '20
and both at times that have zeroed out the PSLF program which
again I think kind of screams out about what their, you know,
support and priority for this program is and I yield back the
balance of my time.
Chairwoman Davis. Thank you. I will now, I would now turn
to the Ranking Member, but he has decided to go further down
the line and I now call on Ms. Stefanik of New York.
Ms. Stefanik. Thank you, Chairwoman Davis and Ranking
Member Smucker. I believe that all of my colleagues understand
the frustration and confusion this program has caused for
borrowers.
And while Congress created the Public Service Loan
Forgiveness Act in 2007 with a noble intent, I believe that we
must fundamentally reform and improve this program so that we
are understanding its shortcomings and it actually reaches what
the intent is that is easier of the student and incentivizes
public service.
So, my first theme I wanted to cover today is what
qualifies as public service and what should? Dr. Chingos, you
talked in your testimony about how the government defines
public service based on the legal status of the employer, not
the actual job being done. Can you elaboration this and explain
how it may cause confusion for employees?
Mr. Chingos. That's exactly right. It's about the legal
status of the employer so if your employer is a government
employer, or a 501C3 and there's another category we don't have
to talk about, you're eligible. And if you're not--so for some
borrowers that's pretty obvious. Right. If you're a teacher,
you're going to probably be a teacher for the government or for
a private school which is probably going to be a nonprofit
private school. You're clearly eligible at least on that
component.
But if you're a nurse, some nurses are at for profit
hospitals, some are at nonprofit hospitals. So there is a
number of kinds of occupations that's very much the same kind
of work.
So if you're a journalist at NPR, you're eligible. If
you're an investigative journalist doing the great work that
the Washington Post does, you're not eligible. So that is maybe
sometimes could be lost on borrowers and could lead to some of
the confusion we have seen.
Ms. Stefanik. So, you know, GAO has noted that about 25
percent of the work force in this country is encompassed in
this broad definition of public service. It seems that defining
public service more precisely would be necessary to focus the
programs intent and eliminate confusion for borrowers.
What are some of the factors that we should consider when
trying to address this nebulous definition that exists today?
Mr. Chingos. I think it is really about tradeoffs. So as
you mentioned, a quarter of the economy currently falls into
the current definition so that is going to be a pretty wide net
you're casting.
So, if Congress wanted to be more targeted, you could think
about trying to encourage, you know, certain kinds of more
targeted public service.
So, let's say we decide there is a shortage of nurses and
doctors in rural areas. We could create a program for that
population.
And indeed, there is a, several examples of programs like
this. So, there is a, you know, a program for nurses in high
need areas. There is a teacher program that's just for teachers
that's separate from the PSLF program.
And actually, if you sign up for that you can lose your
payments towards PSLF. That's a whole other tangled web of
competing, conflicting programs confusing borrowers.
But the point is we have examples of more targeted programs
and there's just a real tradeoff between trying to capture as
many people as possible and trying to do this in a way that's
more targeted to clear goals.
Ms. Stefanik. I think creating more flexibility in what the
needs of the particular communities are, so I represent a very
rural district. We need healthcare experts. We need healthcare
provides. We need nurses. We need farmers in our district.
Those needs are very different than other parts, perhaps more
urban regions accords the country.
The second theme I wanted to focus on today are specific
ideas about how we can reform the program. You know, one of my
concerns is that the lump sum payment of forgiveness on any
unpaid debt if we shifted that to more of an annual payment
towards a borrowers balance, are we then able to reduce the
incentive to over borrow and provide a more even distribution
to the benefits of the program
Mr. Chingos. I think there would be some advantages of
moving to, you know, more staged forgiveness. It would simplify
things certainly so that it's not you wait 10 years and then
found out that you either were confused or you had gotten bad
information so it could be helpful in that way.
It would, there is certainly a tradeoff there in that it
would alter the distribution so it wouldn't just be for people
who made reasonably low incomes over a longer period of time,
you know, a doctor who was in residency for four years could
get it even though they're making a lot of money later. So
there's a tradeoff there but it could certainly be part of an
effort to simply the program.
Ms. Stefanik. What do you think about the proposal to cap
the amount any one borrower may receive?
Mr. Chingos. I mean, that could help focus the benefits on
a sort of broader set of people and really on people who
borrowed for college. The way that you get the most benefits
now is by borrowing a lot of money.
So, if you come out with a typical debt of $30,000 and
start with a salary of say $45,000, you're not going to get any
loan forgiveness.
So really in order to be eligible for say the six figure
amounts of forgiveness or just the average PSLF forgiveness we
have already seen of about $59,000, you have to borrow for
graduate school.
So, the current program is very tilted towards people with
lots of debt, people with graduate degrees and in some cases,
people who have made, you know, not very high incomes, but
reasonably high incomes. So putting a cap on it would focus it
more on folks who just borrow it for undergrad.
Ms. Stefanik. Thank you very much and I yield back the
seven seconds.
Chairwoman Davis. Thank you. I now turn to Mr. Takano of
California.
Mr. Takano. Thank you, Chairwoman Davis, for this very
important hearing on the Department of Education's
mismanagement of the public service loan forgiveness program.
This program was created as a way for Congress to say thank you
to the many dedicated public servants in this country that
sacrificed high paying jobs and who instead work in their
communities.
Unfortunately, Congressional Republicans and the
Administration do not like this program. It is evident from
every attempt that the President has made to eliminate the
program in every budget he has put forth since being in office.
As well as the Ranking Members proposal to eliminate the
program in the PROSPER Act.
Unfortunately, it is this Administration that is tasked
with implementing this program. Any from where I sit, it is
evident that they are purposely sabotaging this program. It is
shameful.
Ms. Shavit, my first question is for you. It appears that
PHEAA has engaged in deceptive practices. What type of
oversight do you believe the Department of Education should
have over PHEAA and other loan servicers?
Ms. Shavit. I believe it's critical that the Department of
Education play a rigorous oversight role. It's important to
remember the Department of Education selected these servicers
to manage these student loans on its behalf. And in the context
of PSLF, the Department has entrusted the entire PSLF program
to one servicer.
So, the Department needs to play an active oversight role
and part of that active oversight role in the context of the
failures of PSLF, should have involved the Department stepping
in when it saw that PHEAA was mismanaging the program.
And the Department should have required the follow things
from PHEAA. It should have required PHEAA to get at the root
causes of the servicing failures that were harming borrowers.
It should have required PHEAA to identify the entire universe
of borrowers who had been harmed and then it should have
required PHEAA to take steps both to make those borrowers whole
and to make sure that the problems were fixed so they wouldn't
affect future generations of borrowers.
Mr. Takano. Wow, it is an inconceivable it's just one
contractor, one company that is the loan servicer for these
loans. And what recourse does the Department of Education, what
should it do if loan servicers are just not compliant with the
terms of their contract?
Ms. Shavit. The Department has significant powers to create
consequences for the mismanagement. Actually, earlier this
year, the Department's own Office of Inspector General came out
with a report that included the conclusion that the Department
was failing to create incentives for servicers to comply with
servicing requirements by failing to create consequences and
accountability when servicers weren't compliant.
We see this playing out in the context of PSLF. There
should be consequences to PHEAA for its continued failure to
manage this program correctly.
The Department is authorized and to the best of my
knowledge has not undertaken to exercise its authority to
penalize PHEAA both financially and quite frankly the
Department should consider in the context of future bids of
these contracts whether PHEAA is up for the task of continuing
to manage this program.
Mr. Takano. Thank you very much for your testimony. I want
to move on to Ms. Finlaw.
Ms. Finlaw, the Department of Education has a
responsibility to people like you to ensure that we keep our
initial promise and provide loan forgiveness, the loan
forgiveness that Congress intended.
So, Ms. Finlaw, as you have noted, you have had several
loan servicers over your 10 year period of your loan. Did any
of those loan servicers ever send you information about PSLF?
Ms. Finlaw. I was notified in the fall of 2017 that I was
eligible to apply for this program.
Mr. Takano. And can you give us a sense of was that, how
long had you had the loans taken out at that point?
Ms. Finlaw. I started taking loans out in 2001.
Mr. Takano. 2001.
Ms. Finlaw. But I started teaching in the 2006, 2007 school
year so I was eligible at the 10 year mark because it went into
law in 2007. So, at the 2017 at that year, I was sent an email.
Was I notified throughout those 10 years? No. I had to fill
out an application every year to be on an income-based
repayment plan which meant that I had to submit my taxes and
proof of employment every year and those conversations centered
around this makes me eligible for PSLF. I'm on track and the
answer was always yes.
Mr. Takano. Okay. So, this is a question you may not know
the answer to but you had different loan servicers. Did you
ever encounter these other loan servicers that were unaware of
the loan forgiveness program?
Ms. Finlaw. No one ever said that they were not aware, it
was always a conversation.
Mr. Takano. Okay. Did they ever proactively reach out to
you to let you know that what your status was?
Ms. Finlaw. No.
Mr. Takano. No. Or did you have a call to inquire--did you
have to call to inquire that you were still on track?
Ms. Finlaw. I called every year when I had submitted my tax
forms and my employment because it's, you have to be on an
income-based repayment plan so those conversations happened
yearly with a variety of different loan servicers depending on
where my loan was at that time.
Mr. Takano. And you were never informed about your
eligibility.
Ms. Finlaw. No.
Mr. Takano. Okay, thank you.
Chairwoman Davis. Thank you. Mr. Grothman.
Mr. Grothman. Before I start, I would like to briefly yield
to Congressman Smucker.
Mr. Smucker. Thank you. I just wanted to take the
opportunity just share a little bit about PHEAA which is a
Pennsylvania state agency, the state that I come from who has
as its core a public service mission to create affordable
access to higher education.
PHEAA's responsible to a bipartisan board of directors and
responsible to the Commonwealth of Pennsylvania. In fact, as
chair of the Education Committee in the state Senate, I served
on PHEAA's board, saw firsthand the work that they did in
promoting access to higher education.
Just one statistic. Since the financial crisis PHEAA has
used $1 billion of its resources in benefitting students to
supplement need based programs which provide direct cash
assistance to students.
Really there is very few if any organizations in the
student loan servicing space that have really, that have given
so much benefit to so many.
I know personally that PHEAA would like to be a
constructive partner in helping to improve this system and
helping to improve the law but as a servicer of the Department
of Education, they must follow the rules and requirements of
what is a Congressional program. Rules put in place by Congress
and administered by the ED Department.
In addition, with PHEAA as you all are aware by now is
engaged in active litigation with one of the witnesses who is
here today, and the Majority Staff was aware of that fact when
they chose to invite the panel of witnesses that they selected.
Yet, and I think shamefully, decided to make a spectacle as
opposed to conducting good oversight. With that I yield back.
Mr. Grothman. Thank you. I was not in Congress at the time
this program was originally instituted. I apparently and I will
take the Chairman at her say so, I think apparently the design
of the program was to discourage people from going into the
private sector.
As someone who represents a lot of manufacturers strong in
the agriculture community, I hope when we get done introducing
legislation, the committee and I suppose the goal is to
introduce legislation, we should not treat people who go into
the very difficult sectors like manufacturing and agriculture
as second-class citizens.
I think a lot of times it is very difficult to go into
those fields as the economy goes up and down, frequently people
in manufacturing lose their job. Rarely do people in public
sector lose their job. And I hope when we reintroduce
legislation here, we do not continue down the path of
discouraging people to going into the jobs that are so vital to
keep our economy moving.
Whenever I tour my factories or agriculture facilities, I
feel so grateful to the people who go into those areas and I
hope the new bill we introduce doesn't treat them like second
class citizens. Okay.
Now, Dr. Chingos, to your knowledge, how much action do the
Department of Education take regarding PSLF in the first few
years of the amended--of the Obama Administration?
Mr. Chingos. So, the exact implementation of this law is a
little bit outside of my area of expertise, but my
understanding is that it was a few years from when it was
passed in 2007 until I think it was 2012 is my understanding
when action was first taken.
Mr. Grothman. Okay. So, for several years and I don't mean
to pick on them, it's very difficult to run this Federal
Government. It is far too big. But for many years after the law
was passed, the Obama Administration really didn't get up and
running and kind of left a little bit of a mess for Secretary
DeVos to deal with it. Do you think that is accurate?
Mr. Chingos. Once again, I'm not a scholar of the kind of
history of this program but obviously it's been in place for a
long time and the data we have from, you know, a GAO report
back in 2015, the current GAO report indicate that some of the,
you know, questions, challenges, are certainly not something
new.
Mr. Grothman. Sure. One more time lesson. If you want
something done, don't ask the Federal Government to do it but
okay.
Now we are hearing that 99 percent of the borrowers have
been denied. Do you feel denied is the right word for these
borrowers or were they just not eligible?
Mr. Chingos. So, the data we have from GAO indicate that at
least the 71 percent who first--hadn't first applied for
PSLF's. We don't know whether they would have been eligible.
They would have had to apply again and some of them indeed may
have.
But for the other 29 percent who met that first
requirement, the data we have indicate that 96 percent of them
were not eligible.
Mr. Grothman. Were not eligible. So, it was a poorly
designed program by Congress. We shouldn't put the blame on the
Department of Education today because Congress did a bad job or
overpromised in 2007 when the law was passed. Do you think that
is accurate?
Mr. Chingos. I think it's pretty clear from the design of
the law that a lot of the challenges, maybe not all the
challenges, but certainly a lot of the challenges come from the
complex design of the program.
Mr. Grothman. Okay. Thank you.
Chairwoman Davis. Thank you. Thank you, Mr. Grothman, your
time is up. Ms. Jayapal.
Ms. Jayapal. Thank you, Madame Chair, and I would like to
yield--
Chairwoman Davis. From Washington state.
Ms. Jayapal. Thank you. I would like to yield to you
briefly for your comments.
Chairwoman Davis. Thank you, Ms. Jayapal. I just wanted to
clarify because it is my understanding and I believe that the
staff is well aware that as Mr. Smucker stated, we actually had
quite a number of signals that PHEAA had chosen not to show up
today and that was well before Ms. Shavit was invited to be
here so had no relationship to that.
I think as we can tell from the testimony it would be very
helpful to have them there and I think that, you know, they
were in error to not be here because it again they are the sole
company that is engaged in this effort and it is important to
hear from them. They may have that, have suggestions that would
be very helpful to us to here.
Ms. Jayapal. Thank you, Madame Chair.
Chairwoman Davis. Ms. Jayapal.
Ms. Jayapal. Thank you and thank you all very much for
being here. And I wanted to just start out by laying out the
situation as I see it.
12 year ago, years ago Congress passed a law that would
encourage people to take relatively lesser paying jobs in
public service. That is not diminishing any other profession,
it is saying that public service is an important public good
and we want to encourage people to go into public service, but
there was a contract in exchange for that, full forgiveness of
their student loans after 10 years of repayment.
Thousands of Americans then enrolled in this program. And
they worked full time for 10 years in public service, they
dutifully made their payments on their student loans only to
find out at the end of the 10 years that they had a 1 percent
chance of achieving the promise of freedom from student debt.
And I think, Ms. Finlaw, your story perfectly demonstrates the
problem with this.
It was a promise, it was a contract, people followed the
rules and then at the end of the game, they were told that they
didn't qualify.
I want to thank you for taking time away from your students
to be with us today, Ms. Finlaw. I know how much you love that
job and you said that in your testimony.
Ms. Shavit, you are an Assistant Attorney General in the
Consumer Protection Division of the Massachusetts Attorney
General's Office which brought some of the first enforcement
actions against student loan servicers. And your office also
works directly with borrowers to help resolve issues that they
encounter with their loans.
You have heard about the timeline of the invitation to
PHEAA's CEO and I just would like to get your opinion about why
that their CEO has rejected Congress's invitation to testify
today. Were you surprised by that and if so why?
Ms. Shavit. I wish I could say that I was surprised by that
but frankly its consistent with the approach that I believe
PHEAA took during our investigation. While I might not be
surprised, I am disappointed. I think it's critical that we get
to the bottom of what has gone wrong with the implementation of
PSLF.
I think that PHEAA has unique insights into this and I
would have hoped that they would prioritize the interests of
borrowers and the interests of this program to come and share
those insights today and it's discouraging that they chose not
to.
Ms. Jayapal. It sounds like you are saying that perhaps
they are scared and rightfully so of being exposed for
wrongdoing.
You are sitting next to one of the many individuals
rejected for the PSLF after making on time payments for 10
years. I wanted to lift up the story of one of my constituents
who earned a master's in education to teach at a local
community college.
She told me he was instructed by her servicer to
consolidate her loans into direct loans and she would be all
set. Several years later she received a letter telling her that
none of her payments counted because she was in the wrong
repayment plan. And after calling her servicer again and again
she was told that they didn't know who she talked to before,
but she must have been given the wrong information.
This is a very common story. Can you tell me specifically
what are, you know, the top one or two practices by Fed Loan
that are hurting borrowers, Ms. Shavit?
Ms. Shavit. I think it's hard to rank them because quite
frankly there are so many servicing failures that are
compounding to make really, really serious problems and
obstacles for borrowers to be able to avail themselves of this
program.
Certainly, the misinformation that you've identified just
now is a crucial mistake. It's a very big problem for borrowers
and it stops them from ever getting the benefit of the program.
But in addition to that, a series of other more general
servicing failures including the failure to process peoples'
applications timely compound to create a scenario where
borrowers lose multiple opportunities to make qualifying
payments, dragging out their repayment obligations and
decreasing the likelihood that they'll ever be able to benefit
from the program.
And of course, PHEAA's failure to accurately count
borrowers qualifying payments, makes people, deprives people of
actual credit that they should be entitled to.
Ms. Jayapal. Thank you, Ms. Shavit. What is clear to me is
that Fed Loan has raked in $1.3 billion over the past 10 years
and has little to show for it. Overcharging borrowers, failing
to process repayment applications, unacceptably long wait
times. These findings point to an overburdened company that
can't meet the terms of the contract to serve the American
people and our public servants are suffering as a rest. Thank
you, Madame Chair.
Chairwoman Davis. Thank you. Thank you very much. Mr.
Meuser of Philadelphia, Pennsylvania.
Mr. Meuser Thank you, Madame Chairman. Thank you all. I am
trying to get a better understanding of how this all
originated, how it happened. How did borrowers become--Dr.
Chingos, let me ask you this please. How would borrowers
originally become aware of this program?
Mr. Chingos. So, they could become aware and from reading
about it and I think in some cases, they could learn about it
for their servicer but as I said, the servicing piece of this
is, my expertise is more on the program design than on the
servicing.
Mr. Meuser Let me ask you this then. How would a nurse in
the private sector believe that they were eligible versus a
nurse in the, in working for a nonprofit? Why would they think
that they were falsely eligible?
Mr. Chingos. Well, they might think they were eligible if
they feel nursing is serving the public good which I think it's
reasonable. A lot of folks probably think that, I certainly do.
And perhaps they have some friends at another hospital who
found out that they're eligible for this program.
Mr. Meuser Would any of them, did any of them receive a
letter stating congratulations you are eligible for this
program? Any of those who were considered non eligible receive
documentation that they were actually eligible? Was that
mistake ever made?
Mr. Chingos. So, the Federal Government doesn't collect
data on sector of employment so to sort of prove your
eligibility for this program it's the borrower that has to go
to the Federal Government.
So, you in theory could get a letter from the government or
from your servicer saying hey, you should know about this
program and look into whether you're eligible but the
government would have no way in a comprehensive way of going to
their borrowers and saying hey, you might be eligible.
Mr. Meuser Right. So, there is no one claiming eligibility
of all these thousands, perhaps a million that actually
received the documents stating that they were eligible as far
as you know?
Mr. Chingos. Well, borrowers can certify their employment
and their loans with their servicer before the 10 years have
passed. So rather, I mean, so one of the problems with this
complex program is it's a retroactive program so if you wait
till the end of 10 years to do all the paperwork, you're
probably going to, you know, potentially have some issues.
You go to some employer from eight years ago and get them
to fill out a form. So, their now is system in place where you
can certify your employment and loans each year and have the
government tell you yes, you're on track.
Mr. Meuser Are you reviewing eligibility--is--to the best
of your knowledge is PHEAA reviewing eligibility requirements
now of those who are requesting the reimbursement?
Mr. Chingos. My understanding is that's a process that's
ongoing now but once again, not an expert on the details of it.
Mr. Meuser Okay. Madame, chair, I yield the remainder of my
time to Dr. Foxx.
Mrs. Foxx. Thank you, Mr. Meuser. There are several things
that I would like to put in the record right now about what is
happening in this hearing.
Number one, and we are going to say this over and over. The
Secretary must follow the letter to the law. That is her
constitutional duty. Accusations that she can do anything else
are false.
I want to enter into the record, Madame Chairman, a chart
that has been prepared by the staff which outlines the
Education Department's implementation of PSLF. And it shows
from its beginning in 2007 when PSLF was established and then
it shows--and it shows that under the Bush Administration a
couple of rules were issued.
The first one was defining public service organizations and
full time.
From January 2009 to January 2012, not one word out of the
Obama Education Department on PSLF. No guidance whatsoever to
anyone.
Then in 2012, an employment certification form. Then 2013--
nothing in 2014 whatsoever. 2015. Then 2016, an email campaign
targeting 3.3 million borrowers.
So, it is I think mismanagement in the Department of
Education long before this Administration came along than has
created this problem.
I would also like to enter into the record something from
the Department of Education's website which I have read, and it
is seven steps for PSLF success.
I believe that anybody with a college degree should be able
to read this and understand it and follow it. It is about as
clear as it can be as to what the requirements of the law are.
And then I would also like to submit for the record the
statutory language for PSLF so that all of our colleagues can
read it. It is pretty clear, complicated but clear.
I would like to enter into the record Public Service Loan
Forgiveness program statute 685.219 and the TEPSLF statutory
language. It is really important that we understand the basis
of these programs.
Thank you, Madame Chairman, I yield back
Chairwoman Davis. Thank you. Let us see. We are now
turning--oh, without objection, we will certainly take those
for the record. Sorry. If we turn back to Mr. Levin.
Mr. Levin. Thank you, Madame Chairwoman, and thanks for
holding this hearing.
Ms. Finlaw, thank you so much for coming. I appreciate
the--you really, you being here, you taking the time off. I saw
your national president of the AFT here was, I really
appreciate the support of the organization to help us figure
this out.
Let us just talk about this on a human level. So, when did
you go to school? When did you, what is your education about
teaching?
Ms. Finlaw. I entered into a degree for art education in
the fall of 2001. It's a 5 year program. I graduated in the
spring of 2006. I started teaching that school year.
Mr. Levin. And so, you have student loans from those years.
Ms. Finlaw. I paid for 100 percent of my own education.
Mr. Levin. Awesome.
Ms. Finlaw. With loans.
Mr. Levin. And so, when did you become aware of this public
service loan forgiveness program?
Ms. Finlaw. In the 2007 school year. It was a pretty common
conversation amongst teachers. This is happening, this is
happening, this could affect us, we stay in education. Some
people don't go into education for the long haul. I knew right
away that I would.
Mr. Levin. So how long have you been working on trying to
make sure you were eligible and stayed eligible?
Ms. Finlaw. Since I started paying back my loans which is
when I got my job teaching in New York City.
Mr. Levin. Like 12 years ago.
Ms. Finlaw. 14 school years ago.
Mr. Levin. 14. Wow. Okay. And so, can you explain to me now
why you are not eligible?
Ms. Finlaw. I'm not eligible because one of my loans is not
a direct loan. And like 100 percent of the people that applied
for this loan, we all have college degrees and know how to
read.
However, when Nelnet tells you that you're on track and
that's who is your servicer, and they tell you have nothing
else to do but to fill out a form every year, and that in 5
years, in four years, in three years, your loans will be
forgiven, then you believe them.
Mr. Levin. May I ask you how much outstanding loan debt you
still have?
Ms. Finlaw. I started with $120,000. I now have almost 90
and a 7 percent interest rate. If I pay this off myself, I will
still pay $130,000 more.
Mr. Levin. Let me just express on behalf of the people of
the 9th District of Michigan at least and hopefully most of
your fellow Americans how sorry I am that we have had this
program and that year in and year out you have done your best,
thought, and been told by the loan servicer that you were on
track and had done everything you were supposed to do and we
completely failed you. I am really sorry.
Ms. Finlaw. Thank you.
Mr. Levin. I am really sorry. How--based on your best
understanding, what do you have to do now to be eligible? Are
your, do you think your payments now are eligible?
Ms. Finlaw. Well, I have been told that I was accepted by
Fed Loan as an applicant. They took my loans from Nelnet and
then they told me that you're, that you've been denied and to
reconsolidate and then Nelnet was my new servicers once again.
And I called and said okay, so now I'm on the right payment
plan and the one loan that did not qualify is now a qualifying
loan, what do I do? And they said well, you just pay for 10
more years.
And it's income based so we are going to quote you at $600
a month that you have to pay every month on these loans for the
next 10 years and if you get a raise, you are going to pay
more. So that's what I'm in right now. That's currently what
I'm in.
Do I believe that--I have to resign myself that I'm going
to die with this debt. I have to just accept that I had to do
this to get to where I am. I had no other option and that's my
reality. So that's what I accept.
However, if a program was meant to protect me, I had to
protect myself from this program and I was unaware that was
going to be one of the qualifications of making it--
Mr. Levin. So, they say that you are now on the 10 years
track again?
Ms. Finlaw. Right.
Mr. Levin. They claim that?
Ms. Finlaw. Yes.
Mr. Levin. And you would have how long to go still out of
this year years? Nine and a half or what, where are you at now?
Ms. Finlaw. After I was denied I went into forbearance to
figure things out because I believed I qualified, and I wanted
to make sure like I wanted to not waste payments.
Mr. Levin. Right.
Ms. Finlaw. So, after a year I resigned myself that I have
to, that I am going to have to go back into this and I am 5
payments in so I have 115 more payments.
Mr. Levin. Which is 115 months.
Ms. Finlaw. Yes, yes.
Mr. Levin. Yeah. All right.
Ms. Finlaw. You can't pay two payments in one month, you're
not allowed.
Mr. Levin. Let me just commit to you that we are going to
do our best to get to the bottom of this and honor our
commitment to you.
Ms. Finlaw. Thank you.
Mr. Levin. Our kids need you and we need you to keep
teaching. Thank you. And I yield back, Madame Chairwoman.
Chairwoman Davis. Thank you. Thank you. I now turn to the
Ranking Member, Mr. Smucker.
Mr. Smucker. Thank you. Two points I would like to make
before I get to questions in regards to some of the comments
made about PHEAA.
The billion dollar figure has been raised several times,
collars coming to PHEAA. Just like to remind Members here that
those dollars were grants for students. Those dollars were
expanded to ensure that students have access, have the ability
to pay for their higher education.
And secondly, I want to just point out that it is unusual,
it is outside of common practice for this committee to call as
witnesses the parties in an ongoing lawsuit.
In fact, we don't know of any time in recent history,
certainly in no time since have been here, has that occurred so
just wanted to put that in the record as well.
There is a lot to unpack here from accusations that have
been leveled in the media to the very real and very personal
experiences of borrowers like yourself, Ms. Finley, and I
appreciate you--Finlaw--and appreciate you being here today.
There is a very personal experience of trying to earn that loan
forgiveness that loan discharge.
I was, I did notice that it has been voiced here several
times the commonly held perception that the PSLF program was a
promise to all public sector works as if working in public
service was the only requirement.
And of course, we know that despite false advertising form
wishful thinkers over the last decade, that is just simply not
the case.
For example, in--when the law was passed in 2007 and
Democrats at that time made a legislative decision to tailor
the program to direct loan borrowers only, but that is really
only the tip of the iceberg when it comes to all of the
eligibility requirements that have been placed on the program.
Mr. Chingos, you seem to have a good understanding of those
requirements, of the requirements hat borrowers must meet to be
eligible for both PSLF or the TEPSLF loan forgiveness. Would
you talked a little bit about the root cause of those issues?
Mr. Chingos. Right. So, the first requirements having the
right kind of loan. So back in 2007, only about 1 in 5
borrowers were getting a direct loan. And their college, not
they decided. So, the terms were the same, they wouldn't know
the difference.
Two, you have to be in public service for 10 years as
defined by the Federal Government and be able to document that
full time for those 120 months.
And three, you have to be in the right kind of plan. And
the plans themselves have become more complicated over time.
So, I have talked a lot about the complexity of PSLF, but
it really rests on a very complex, messy base of our Federal
student loan program which is a really important program.
It opens the gates to college to millions of students every
year, but it can be really challenging to navigate because we
now, I have lost track, whether we have 5, 6, 7 income driven
repayment plans each with different requirements that work
slightly differently. And ultimately affect how you--
Mr. Smucker. So, would you agree that the root cause, the
reason for some of these issues is that it is imbedded in the
requirements of the program that was passed by Congress?
Mr. Chingos. I think the complex design of the program is
an important reason why this has been so challenging and not
just for borrowers to get what they were promised but also for
the Federal Government to administer it.
Mr. Smucker. So, we have been hearing the turning down of
students as denials. Wouldn't it be more accurate to able those
borrowers as currently ineligible?
Mr. Chingos. Right. The data we have certainly indicates
that a large number of applications that have been rejected are
because the applicant is not yet eligible and I would expect in
the coming years folks who are, have not yet made the 120
payments are going to cross that make and will be eligible.
Mr. Smucker. Students as we mentioned are often unaware of
the underlying basics of the aid they are receiving.
You note in your testimony that a study you did found 28
percent of Federal loan borrowers in their first year of
college didn't even know that they had a Federal loan and 14
percent did not know that they had any kind of student loan.
One third of students could not provide an accurate estimate of
how much they had borrowed. How much they had borrowed in the
first place.
Given that many borrowers do not have a good grasp of some
of the basics of the Federal loan system, I am really not
surprised that the PSLF and TEPSLF approval rates are low. Are
there ways that we could bolster our current loan counseling to
help students and provide more of a positive solution?
Mr. Chingos. I think it's definitely better to provide more
better information to people, but I think that's ultimately
going to be a challenge because of the complex nature of the
problem.
So first, yes, we should try and do that but at the same
time for borrowers going forward, I think we need to think can
we make these programs better so they work better without
having to, you know, pay tons of money to some other company to
have to then explain it back to the American people.
Mr. Smucker. Thank you.
Chairwoman Davis. Thank you, Mr. Smucker. Before I turn to
Ms. Adams in North Carolina, I just want to take the
prerogative of the chair and just clarify that the 1.3 billion
that we are talking about to PHEAA is just the payment that
they receive for servicing the loans. So, I wanted to add that
to the record. Ms. Adams.
Ms. Adams. Thank you, Madame Chair, and thank you very much
to all the witnesses for your testimony and for being here
today. Thank you for the Ranking Member as well. I want to
first direct my line of questioning to Ms. Shavit, is that the
correct pronunciation?
I first of all I want to commend you and your office in
your investigation into is that PHEAA. I know that Attorney
General Josh Stein of my home state of North Carolina similarly
attempted to request information from the Education Department
of look into PHEAA's and PSLF practices but was rebuffed.
So, can you describe the process that your office went
through in investigating PHEAA's conduct and how the lawsuit
was pursued?
Ms. Shavit. I'll answer that to the best of my ability to--
Ms. Adams. Yes, ma'am.
Ms. Shavit.--within the bounds of the litigation. But I
think as a general matter, when we investigate any actor, we
speak to borrowers who have been or sorry, not to borrowers,
but to consumers who have concerns, who raise those concerns to
our office.
And then we look at available information about what's
going on and we have the authority to file civil investigative
demands which are like subpoenas to get information from the
entities that we're investigating.
We have received information about PHEAA's practices
through the course of that type of an investigation as we were
figuring out what was going on before we filed this lawsuit.
Ms. Adams. Okay. All right, thank you very much. Ms.
Finlaw, thank you very much for telling us your story. I share
the sentiments and that my colleague expressed in terms of just
feeling really bad about what happened and the fact that we do
need to get to the bottom of it and thank you for being a
teacher.
I taught 40 years at a college, Bennett College in
Greensboro, North Carolina. My daughter is an assistant
principal and has taught for 18 years. It is a noble
profession. I can't think of anything that I would have rather
done for all of those years and like you, my degrees are in
art, education, and multiculturalism, all three of them.
So, I appreciate the fact of what you do with students and
I know what that is because I have done that.
As someone who has been a teacher, I do know how rewarding
that work can be, but I also know how long the hours can be and
how for someone who doesn't come from wealth, programs such as
PSLF can be a godsend.
So, I image how angry you were when Fed Loan told you that
you basically threw 10 years of--worth of payments down the
drain. That is not only sad, but it is very unfortunate that
happened to you and to anyone else.
So, what advice would you have for others considering
applying for public student loan forgiveness?
Ms. Finlaw. A friend of mine recently asked me that
question and what I would do differently now is the same advice
that I would give to someone applying. I would keep every
document you've ever been given because I no longer have access
to documents that were given to me.
I would record every phone call when every person told me
that I was on track and I was just year's away, months away. I
would get names and ID numbers of who I'm speaking with and I
would cover my own back in a program that was meant to cover my
back.
I have called Fed Loan within the past three months,
requested information and been told certain information and
called back later and received different answers. So, we talk
about how this program can be approved and the guidance of the
borrowers. Let's start with some accountability with our
servicers.
Ms. Adams. Okay.
Ms. Finlaw. What information are they giving people and how
can I talk to two different agents within a five minute period
and get different answers. And I would have all of that
documented.
Ms. Adams. Okay.
Ms. Finlaw. Every person that's going to apply document
everything.
Ms. Adams. Okay. So, what do you hope that will come out of
your lawsuit and your testimony today? We have got about 15
seconds.
Ms. Finlaw. Okay. The lawsuit is asking for forgiveness of
the eight plaintiffs on the lawsuit. But I don't want another
teacher--I recently told my colleagues about this, what's
happening and I said I hope that when you get to 10 years that
you don't have to sit where I'm sitting, that you don't have to
look over your back or to answer for all of those things. My
hope is that this program is fixed for you.
Ms. Adams. Thank you very much. I am out of time.
Ms. Finlaw. Thank you. Thank you.
Ms. Adams. Thank you very much of your testimony. Madame
Chair, I yield back.
Chairwoman Davis. Thank you very much. Mr. Watkins of
Kansas.
Mr. Watkins. Thank you, Madame Chair. Thanks for being
here, everybody.
Based on your insight, Dr. Chingos, about the extensive
program criteria, could you please elaborate on what the early
data tell us about borrowers who do qualify for forgiveness and
what would a borrower today have to have done to be eligible
for TEPSLF?
Dr. Chingos. So, the first eligible payments could be made
in October of 2007 so about 12 years ago. So, in order for
someone to be eligible today, they would have had to pretty
much either have a direct loan back in '07, '08, '09, or have
known to consolidate into one of them right away. They then
would have pretty much had to remain in a public service job
for the 10 following years, make those 120 qualifying payments.
As we have talked about, these have to be in the right kind of
plan, an income driven plan, and they have to be on time
payments. Not late payments, not early payments, on time
payments. So, they would have had to check all of those boxes
to be eligible now in 2019.
Mr. Watkins. Okay. According to the GAO, 71 percent of
TEPSLF applications were denied because a PSLF application had
not been submitted first.
However, looking beyond that, the remaining ineligible data
is muddled. What is your analysis of the lesser discussed
reasons why borrowers did not receive forgiveness and what do
the outcomes of borrowers in the other 29 percent of
application rejections tell us about the scope and future of
the TEPSLF program?
Dr. Chingos. So, if we look at the 29 percent of borrowers
who did, who met that fist screen of having been applied and
been rejected for PSLF, what we see is 35 percent had not been
in repayment for 10 years. So, if you haven't been in repayment
for 10 years, you couldn't possibly be eligible so they don't
even look any further.
A 19 percent failed to meet the payment size criteria set
by Congress when they created TEPSLF, those new requirements.
13 percent were below 120 payments, qualifying payments. 11
percent didn't have any eligible Federal loans. 8 percent
didn't provide the requested income information that Congress
said they had to collect when they made TEPSLF, and a few other
reasons and then four percent were approved.
Mr. Watkins. Thank you, Dr. Chingos. Madame Chair, I yield
the remainder of my time to Mr. Smucker.
Mr. Smucker. Thank you. A point of clarification. We talked
about the $1 billion from PHEAA. It is true PHEAA got paid in
fees from the Department of Education $1 billion, we are not
denying that. But it is also true that PHEAA over the last
decade has given back $1 billion to students in Pennsylvania.
And a second point the borrower on the panel has had
interactions with multiple servicers which sounds like some of
those interactions happened before Fed Loan became the
exclusive PSLF servicer.
So, seems that there have been obvious previous problems
and the previous administrations did not properly make sure
that all servicers properly implemented the program.
I think we will hear in the upcoming panel from the
Department of Ed about steps that they are taking to rectify
some of those issues.
Chairwoman Davis. I will now move to Mr. Scott, chair of
the overall Education and Labor Committee. From Virginia.
Mr. Scott. Thank you. Thank you, Madame Chair. The, this--
if a student applies and is denied, it is probably the
student's fault. But if 99 percent are denied it is the
programs fault.
These aren't puzzles or contests, this is a program that
you are supposed to benefit from. And having all these hurdles
and barriers is just totally unreasonable.
Ms. Finlaw let me get--verify. You were told that you were
on track by your servicer. Dr. Chingos, did you say 96 percent
were ineligible?
Mr. Chingos. Under TEPSLF if you met the first requirement
then 96 percent were still not eligible for TEPSLF.
Mr. Scott. So, we have program where people think they are
eligible when 96 percent of them are in fact not eligible.
Mr. Chingos. That's right.
Mr. Scott. Ms. Shavit, what is the basis of your lawsuit
and what remedy are you--which remedy are you seeking?
Ms. Shavit. Sorry. Our lawsuit is alleging that PHEAA has
mismanaged its servicing of the PSLF program in addition to
other servicing failures that we also allege.
But relevant to this discussion, we are alleging that by
denying borrowers the opportunity to make payments that qualify
under PSLF, PHEAA is derailing borrower's ability to benefit
from the program.
What we are seeking is that PHEAA will correct this
problem, that it will ensure that borrowers who have been
harmed are made whole.
We are also asking that PHEAA take measures to ensure that
the same problems that are harming borrowers now and that have
already been a problem for public servants won't repeat
themselves.
We are asking PHEAA to ensure that it is changing its
policies in a forward looking fashion as well.
Mr. Scott. In the meanwhile, obviously we need a change in
the program. Are those needed changes regulatory or statutory
and what would you suggest that we do?
Ms. Shavit. I think as an initial matter, we have an
important program that's been law for quite a while and while
its complex, it's not impossibly so.
The problems with this program have came to a head in 2017
when it was clear that there was real servicing failure around
the time that borrowers were first eligible to receive loan
forgiveness.
And the Department of Education didn't rise of the occasion
to increase its oversight of PHEAA and its other servicers to
ensure that borrowers weren't harmed. The program as it exists
needs to be fixed.
While there might be some statutory changes that could
happen, first and foremost, the Department needs to do what it
is tasked by Congress with doing which is ensuring that
borrowers get the benefit of the PSLF program.
And one thing that I might add is given both the Department
and PHEAA's failures to fix these problems thus far, Congress
might consider devoting some funding to a third party auditor
who could go through and review PHEAA's practices to actually
identify what's going on that's harming borrowers and to audit
individual borrower accounts to make sure that every person is
identified who has been harmed and can get the relief that
they're entitled to.
Mr. Scott. Are you familiar with the GAO report?
Ms. Shavit. Yes, I am.
Mr. Scott. They made recommendation--the GAO made
recommendations?
Ms. Shavit. Yes.
Mr. Scott. Are there additional recommendations that need
to be addressed?
Ms. Shavit. I think it's more oversight by ED and I think
it's more responsibility of servicers. I think as the
Department's Office of Inspector General noted, the Department
of Education needs to actually create consequences for servicer
misconduct. It needs to be willing to penalize its servicers
when they're failing borrowers. That's I think not mentioned in
the GAO report, but I certainly agree with the recommendations
in that report as well.
Mr. Scott. Thank you, Madame Chair, I yield back.
Chairwoman Davis. Thank you. I now turn to the ranking
chair, Ms. Foxx of North Carolina.
Mrs. Foxx. Thank you, Chairman Davis. I want to thank our
witnesses for being here today. Dr. Chingos, much of the
hearing today has focused on what GAO has reported regarding
PSLF and TEPSLF implementation and the experiences of borrowers
navigating the repayment progress.
Lost in this conversation are some critical facts. The
CBO's most recent baseline projects that under fair value, the
direct loan program will cost tax payers over $300 billion over
the next decade.
The CBO recently estimated that eliminating PSLF for new
borrowers would save a projected $23 billion over 10 years.
Student loan borrowers as a group are paying down about 1
percent of their Federal student loan debt every year.
As of the second quarter of fiscal year 2018, 45 percent of
borrowers were in active repayment. 56 percent of borrowers owe
less than $20,000 of student loans and the top 6 percent of all
people who borrowed at the most hold 23 percent of all the
outstanding student loan debt.
Taken together, these data tell me that tax payers are
about to be on the hook for billions of dollars borrowed by
graduate students. Do you agree with this assessment?
Dr. Chingos. Thank you for the question. So graduate
lending is a big piece of the story here. So, in the most
recent data we see graduate students are 14 percent of all
students, but they borrowed 47 percent of the loans. So nearly
half. So that's really where the big dollar loans are among
graduate students.
Mrs. Foxx. If this is the case, what structural changes
should Congress make to the lending and repayment programs to
limit irresponsible borrowing and protect the interest pf both
students and taxpayer alike?
Mr. Chingos. Well, I think Congress can take a look at the
loan limits in the program. So, one thing that happened around
the time PSLF was put in place in '07, within a couple years I
think in 0'6, a Congress expanded the grad plus or created the
grad plus program.
So where as undergraduates can't really borrow, it's pretty
hard to borrow more than 45 and by law you can't borrow more
than 57,500. But graduate students can borrow an unlimited
amount up to the cost of attendance.
And for a number of years that sort of worked okay. The
graduate loan program was maybe even making some money for the
government. People were borrowing but they were borrowing money
that they could repay.
But when you interact that with a loan forgiveness program
that is potentially if implemented as generous as PSLF, you
could create a situation where we are forgiving lots of debt
and we are not forgiving debt of, you know, people with 30,000
for a BA, we are forgiving debt with for people with 150,
200,000 to be a doctor or lawyer.
Mrs. Foxx. Right. Well, let us return to CBO's recent
estimate that eliminating PSLF for new borrowers would save a
projected 23 billion over 10 years.
In your mind, is this another indication that the initial
denial rate is temporary and as more time passes, these
eligibility issues will get ironed out and borrowers will
navigate these rules more successfully?
Mr. Chingos. Right. So we know from the GAO and the
Department of Ed that not many applications for PSLF and TEPSLF
have been approved so far but I think it is pretty clear from
the CBO saying this is a program that's going to cost 23
billion over the next 10 years that they expect a lot more
people to be approved in the coming 10 years.
Mrs. Foxx. Thank you. I know some comments have been made
about the PROSPER Act which we passed through this committee
last session.
Let me say that the main motivating factor in our
eliminating PSLF going forward was exactly what we are hearing
about today. And that is how complicated the law is and how
unwieldy it has been for students.
We didn't want to hurt students who wanted to get an
undergraduate degree and go into public service, that was not
the intention.
The intention was exactly to solve the problem that's here
today. And we believe under income repayment plans, students
would have--we know, we did the numbers. Would have been better
off with a very simple loan program that was much easier to
understand than it is clear as being described here today.
I would also like to point out that a witness has said that
the Department did not do what it should have done before 2017
and we certainly agree with that.
I would also like to enter, Madame Chairman, two other
pieces into the record. These are graphics from the Department
of Education. How to get your student loans forgiven and then
process for obtaining TEPSLF loan forgiveness which puts in
graphics what Dr. Chingos has been saying.
Chairwoman Davis. Thank you. And that is so ordered for the
record. Thank you. Unanimous consent. Ms. Bonamici from Oregon.
Ms. Bonamici. Thank you very much. Thank you all for your
testimony. I have a consumer protection background, so I have
been deeply concerned about the implementation of the Public
Service Loan Forgiveness program and the Temporary Public
Service Loan Forgiveness program and have been incredibly
considered about this being an empty promise to borrowers like
Ms. Finlaw.
Last Friday I had a roundtable discussion to hear from
Oregonians who have been affected by this. A lot of people
showed up. What I heard, stress, uncertainty, and a feeling
like these borrowers have upheld their share of the bargain and
they told me about putting off getting married, putting off
home ownership, putting off starting families, all because of
the burden of student debt and they spoke about their passion
for public service.
One of the borrowers, Sawyer, served in the military. She
found out after paying her loans for eight years they told her
she was in the wrong repayment plan. She had to start all over
again on her 120 payments.
There is a Ph.D. psychologist who works at the Federal
prison. She loves her jobs, it is really hard. She is
incredibly stressed because of the amount of debt she has from
getting a Ph.D. Her payments are not even affecting the
principle, so it is getting, the debt is getting larger and
larger and the stories she is hearing she is really concerned
about that.
Other participates, some are told that they needed to
consolidate their loans to participate and there are others
said they didn't qualify because they consolidated their loans.
Many lost years' worth of payments like you did, Ms. Finlaw.
One of the borrowers, Susan, said she and her husband tried
for a year to get confirmation that their payments were
qualified.
One borrower, a teacher, had her loans forgiven under the
Temporary Public Service Loan Forgiveness program. I think she
is one of 24 in the entire state. One of the, you know, one
percent nationally.
And she told her story. She said she had to fight tooth and
nail. She said, she doesn't have any kids, she used all of her
spare time. She worked with my office, she worked with the
Consumer Financial Protection Bureau which I might note would
not be particularly helpful at this period of time because
President Trump recently appointed a PHEAA executive as the top
student loan official at the Consumer Financial Protection
Bureau.
S he worked with the ombudsman at the Department of
Education. She painfully detailed as you recommended, Ms.
Finlaw, every interaction she had about her loans. It took a
tremendous amount of time and patience. This is certainly not
what Congress intended when the Congress passed the original
program or the temporary program.
I am really grateful for all of them, all the people who
shared their stories in Oregon and Ms. Finlaw as a big
supporter of arts education. Thank you for your important work.
I am going to ask you a question but first I want to ask Ms.
Shavit, is there any information you can share about how PHEAA
got this very lucrative contract to administer the Public
Service Loan Forgiveness program?
Ms. Shavit. The information that I know is basic
information. I'm sure that there is more detailed information
available but there was a process by which servicers competed
to get the exclusive contract to manage this program.
And I'll note, that any complexity in this program was
known at the time and PHEAA represented in order to get this
contract that it would be able to do its job and administer it.
So, you know, I think that's a critical piece of this,
right. The representations made are that PHEAA is up to the
task. That was the position I'm sure that they took in order to
get that contract.
Ms. Bonamici. Thank you. And, Ms. Finlaw, you know, you
have heard this morning that PHEAA is not represented here
today even though they were invited and decided not to come.
What would you have said to PHEAA and to--what would you like
to tell the Department of Education about your experience? What
would you say to them directly?
Ms. Finlaw. I think that it's interesting that if my
principal called me into his office today and I just said nah,
I am not going to show up, it would mean my job. And yet there
is an empty seat next to me.
And I'm someone that this organization deeply affected, and
I don't get to look anybody in the eye. And that--he has to
sleep at night. And all of the people that are going to hide
behind legislation have to sleep at night.
I sleep really well at night. My moral compass is strong.
And I will be in school tomorrow morning at 8 a.m. greeting my
kids at the door and no one is going to take that from me. And
I would go back and do it all again for the right to stand
there every day.
And I just wonder what he would have to say to me, what he
would have to answer to me to say hey, you didn't jump through
every hoop. We know we told you, we told you did but games up
like you didn't follow every rule like you got to the end and
oops. Like you, can you really look at me and say that? He is
not. He is not here to do it.
Ms. Bonamici. Thank you so much for your work, for your
passion, and for representing I know many others who are in the
same or similar situations across the country.
Chairwoman Davis. Thank you.
Ms. Bonamici. Thank you, Madame Chair, I yield back.
Chairwoman Davis. Mr. Cline of Virginia.
Mr. Cline. Thank you, Madame Chair. Thank the witnesses for
being here. As law makers, we are tasked with ensuring that all
legislation we pass out of this body is able to hold the test
of time within the framework of the constitution. And to that
point, laws should not be written in such a manner that
compliance is proven to be extraordinarily difficult
particularly what the incentive is financial.
I wasn't a Member of Congress when the Public Service Loan
Forgiveness program was passed back in 2007. Unfortunately,
PSLF and Temporary Expanded PSLF have seen dramatically low
rates of full eligibility even when the participants have such
a large financial incentive to be in compliance.
Since coming to Washington and joining the Education and
Labor Committee, I have committed to ensuring that laws are and
remain navigable.
PSLF and TEPSLF were intended to benefit nurses,
firefighters, police officers, teachers, and other workers who
have devoted their lives to serving the public. In many cases,
these brave men and women are putting their lives on the line
for others in their communities.
That drive and motivation to serve is part of what makes
this country so exceptional and we should recognize, commend,
cherish, and empower all of our citizens who work to make the
world a better place.
Instead of drafting PSLF for specific occupations, the
Majority designed and passed a program that delineated
eligibility based on the tax status of the employer so not all
nurses and not all teachers were eligible for forgiveness and
depending on where they worked or how they had structured and
were making their payments, their eligibility is even further
magnetized.
These are important distinctions that quite literally have
very real costs associated with them. We need to have a serious
conversation about solutions instead of attacking the
Administration for executing the law that Congress wrote.
A law of--a law creating a web of confusing requirements
will inevitably reward those borrowers most skilled at
navigating such a complex process instead of the borrowers who
may be more in need of relief.
Dr. Chingos, in your estimation, do PSLF and TEPSLF as
currently structured lay out an easy to follow path and help
the borrowers who most need repayment relief?
Mr. Chingos. I think a lot of the requirements makes it
clear that it's challenging. Look at the implementation of the
program and look at the fact that 99 percent of the people who
think they're eligible are not, in fact, eligible; or look at
stories like Ms. Finlaw's which, you know, frankly, it's angry
to hear the stories like that. And so really my interesting in
all this is helping think about how do we design a program, so
it doesn't happen again?
Mr. Cline. And how has the complexity of compliance changed
over the years?
Mr. Chingos. I think it's become more complex. When the
program was passed, around the same time they passed one of
the--not the first, but I think the second or third income-
based repayment program. We now have a new income-based
repayment program. We have a pay as you earn program. We have a
revised pay as you earn program. So, the repayment system
itself has become more complex and because you have to be in
that system to be eligible for PSLF.
And then TEPSLF, of course, also well-intentioned, created
a whole other set of requirements around certifying that your
payment size was the right size over the last 12 months. And as
we saw, a number of people were rejected because they didn't
send that information, or they didn't meet that requirement set
by Congress.
Mr. Cline. So, the PSLF program was enacted back in 2007,
and the first time a borrower could verify they were somewhat
on the right track for PSLF was after the Department released
the employer certification form in 2012. How did this long
delay in getting the implementation of PSLF start to contribute
to the problems and confusion borrowers are grappling with
today?
Mr. Chingos. I think that fact, I mean, it highlights a
broader issue, which is that retroactive programs are really
hard to implement. So, it's one thing to say, okay, starting
next year we're going to change the loan program in this way.
We're going to give a forgiveness to someone who does something
next year. But to say you have to look back 10 years, that's
why I think it has been important that the Department over the
last two administrations has worked to put those certification
processes in place, but it's, you know, yet another example of
how complicated and difficult it is to implement this program.
Mr. Cline. Thank you. Madam Chair, with that I am going to
yield the remainder of my time, if she would like it, to the
Ranking Member, Congresswoman Foxx.
Mrs. Foxx. Thank you very much. Dr. Chingos, would you
state that again that you just said? Most of the time those of
us in education know that you set up evaluations to begin with,
you don't go backward and try to evaluate. Because I think that
is a very important point that you made.
Mr. Chingos. Well, I think this is an area where I'd love
to have more data. I mean, I really want to know, you know, are
there 10 Kelly Finlaws in the world? Are there a hundred? Are
there a thousand? Are there a million? And GAO gave us a lot of
data, but it didn't tell us anything about that. It told us
about who applied and who was eligible. And what we really need
to know is who is out there, who is eligible for this program,
and are we reaching them?
Mrs. Foxx. Thank you very much. That is very helpful.
Chairwoman Davis. Thank you. I want to turn now to Ms. Lee
of Nevada.
Ms. Lee. Sorry about that. I wasn't expecting that. I
thought you were going first. Thank you, Madam Chair. Thank you
for all being here today.
This issue is really important to me for two reasons. One,
as a person who put myself through school with student loans
and understanding the burden that it is placing on young people
in our country, we have a student debt crisis in this country.
But secondly, in my home state of Nevada we happen to have a
public employee service crisis in terms of deficits in nursing,
mental health professionals, and, most importantly, teachers
like yourself, Ms. Finlaw. We just started the school year with
700 vacant positions.
This program, statutorily we can talk about the law, et
cetera, but was created to incentivize people to go into public
service careers. And in this committee, unfortunately, we heard
many stories. And I think about one in particular in my
hometown, Caroline Courtman, who worked for the Clark County
School District. She took out loans in 1998 and thought she had
paid them off entirely. Turned out that she had $130 left.
Then, as many teachers who seek career advancement, she went on
to get a certification in speech pathology, which required her
to take out $25,000 in loans.
And after that, she made--she signed up for the teacher
loan forgiveness program, another distinct program, but also
one that is run by a loan servicer, such as PHEAA. She went on
to make her six minimum payments. And after that, she applied,
but was denied because of that $130 from 1998, which she had
already actually paid off. And I am sure, like you, she went
through several iterations of trying to navigate the system.
And finally, Nelnet told her that her servicer said
essentially, she should start and apply for the PSLF and start
the clock ticking again for 10 more years. And given what we
know now, I can't blame her for giving up at that point.
Loan forgiveness programs, let us be clear, were intended
to encourage people to enter public service.
Ms. Finlaw, first of all, thank you for your commitment.
Your children must be incredibly fortunate to have you as a
teacher. Your story is just one that is all too familiar.
But most importantly, it is really about mismanagement and
confusion and, in the end, hardworking people like you not
being able to adequately benefit from a program that was
created to help you.
I just want to understand a little bit more. Can you walk
me through what was your process of applying? But more
specifically, how many times did you call? What was the length
of those calls? And where do you stand? You already told us
where you stand now.
Ms. Finlaw. To be eligible for this program you have to be
on an income-based repayment plan, which means that every year
you have to reapply. So, every year they're reaching out to you
and saying you need to submit your taxes and proof of
employment. That conversation happens every year, and in that
conversation, I say and this is putting me on for PSLF. And me
submitting this, is there anything else that I have to do?
No, just keep paying. You pay every month. It's auto-
deducted out of your bank account. Like, you're on the right
track. As long as you fill out that income-based repayment
plan, like you're on the right path.
In 2017, I received an email from Nelnet that said you are
eligible to apply for Public Service Loan Forgiveness. You've
done everything right.
Then I was taken over to FedLoan. Nelnet was no longer my
servicer. So, Nelnet even said don't pay anymore because your
loans will be forgiven. FedLoan sent me a letter that said,
essentially, too bad, so sad.
Ms. Lee. Clearly, very confusing. Here is my question. You
believe this was a government program and was operating in good
faith. At any time did you feel that you were lied to or
misled?
Ms. Finlaw. When someone earlier was speaking about other
loan forgiveness programs, I was forgiven by Stafford loan. I
was forgiven different loans. I had no reason to believe this
wasn't going to work. I really believed that the couple
thousand dollars that have been applied to my loans would be
forgiven because they had been so far.
And, yes, I was lied to several times, directly lied to. In
fact, I was told to do things that in the end put me in a worse
place.
Ms. Lee. I thank you for the answer. I am out of my time.
Thank you.
Chairwoman Davis. Thank you. Mr. Sablan?
Mr. Sablan. Thank you very much, Madam Chair, for holding
today's hearing. Good morning--good afternoon, I think,
everyone.
My two youngest are public school teachers. My daughter
works in a county sheriff's office. But, Ms. Finlaw, is there
something that you would like to say that you have not been
given an opportunity to? Do you want to say something for the
record? And then I will share it with Ms. Shavit.
Ms. Finlaw. Thanks for giving me that opportunity.
Mr. Sablan. You are welcome.
Ms. Finlaw. It feels a lot, as someone sitting in this
seat, that it's really easy to write me off under what Congress
put into law in 2007. It's just really easy to say they made it
really complicated, end of story, period. I did what I was
asked to do. I called. I made my payments on time. I pay every
month and I was misled not just by FedLoan, but by other
servicers, and lied to. And in what other sector of government
are you able to lie to the people that you're servicing and
then hold them responsible for the lies that you told them?
And so, from someone sitting in this seat, it deeply
effects my life and it's just infuriating to hear someone say,
well, this is what the law said. If that's what the law said,
I'm going to go back up what Mr. Scott said and say then how
did 99 percent of people misread the law?
Mr. Sablan. Right.
Ms. Finlaw. Thank you.
Mr. Sablan. I would probably throw a shoe against a wall,
maybe on several occasions.
Ms. Shavit, is there something you would like to add for
the record?
Ms. Shavit. I would like to reiterate the importance of
this program. And I'd also like to say that, as Ms. Finlaw
suggested, the complexity of a program shouldn't be an excuse
for the Department not to do what it is responsible to do and
ensure that the program is administered correctly.
I disagree with the notion that this is a uniquely complex
program. I think what we see here is a failure of good faith on
the part of the Department to actually make sure that this
program is implemented the way it should be and it's a failure
of responsibility on the part of servicers to make sure that
they're doing everything that they need to do to make sure that
borrowers are getting the benefits of the programs that
Congress intended.
Mr. Sablan. Thank you. Madam Chair, thank you. I yield my
time back.
Chairwoman Davis. Thank you very much. Mr. Keller.
Mr. Keller. Thank you, Madam Chair. Just a couple things.
Congresswoman Foxx actually laid out a timeline and
submitted items for the record, which I thought she very
adequately pointed out the failures in what happened here in
Congress and, quite frankly, in previous administrations in the
Department of Education. A program that started in 2007 that
was signed into law, regulations came out in 2008. And the
Department of Education didn't have an employer certification
form until 2012. Certainly, we can't say that it is one loan
servicer over the other when you have the confusion. I mean, we
are talking about people that 98 percent of them don't
understand how the program works. If you have all the loan
services that don't understand how the program works, there is
definitely a problem with the program.
And rather than try and place blame on one of those
individuals or another, I think this body ought to be looking
on how we fix it and now how we place blame. Because certainly,
we can probably look at what happened with this law in 2007 and
we can look at the Department of Education under previous
administrations. Congress realized there were problems with it
when, in 2018, we had the Temporary Expanded Public Service
Loan Forgiveness program. So, Congress obviously knew that
something was done incorrectly, and we did this.
And I will say that the current administration is the one
that signed that and the administration or the loan servicers
cannot make up their own rules. They should not and they
cannot. They follow the rules they are given. This is serious
stuff. It effects lives, it effects people.
And these are certainly from their government, but here
again, we can point to numerous things in both of these
programs that have been failures because of the ambiguity
created here in this body.
So, with that I want to go to Dr. Chingos. There is a
question. You mentioned some data earlier and understanding
that. How might the Department use available data to predict
participation in the PSLF and the TEPSLF, you know, people that
might be, you know, eligible for these loans, so that we can
target making sure they have the adequate information?
Mr. Chingos. So, the primary way the Department can do that
now is for the people who have come forward to identify
themselves, started to fill out those employer certification
forms, started to count those qualifying payments, they can
keep track of those people. We could get maybe a deeper look
into the servicer data on those people. I think there's more--
you know, reading the GAO report, I thought there was more that
could be learned from the data that currently exists about
people who are applying.
I'm really interested in better understanding that 99
percent that's, you know, not being approved, understanding why
because it's a huge number of people. And it's easy for me to
sit and say, well, maybe people are confused and don't
understand it, but I think there's a lot more we can use the
data to learn, you know, why is that the case and what do we do
about it.
Mr. Keller. Is there any other data that we are not
collecting that you think we should?
Mr. Chingos. So, I think if there were a linkage between,
say, IRS data and Department of Ed data, that would be an
opportunity for the Federal Government to know things about
borrowers it doesn't currently know. So, if someone is working
in the public or nonprofit sector, they'd get a W-2 from their
employer with an EIN, and so that's in--over in the Department
of Treasury and the IRS. If the Department of Ed knew that
information, well, then they could do more proactive outreach
to people to say, hey, you're in this sector, make sure you're
doing the right things to be eligible for this program that
you're entitled to. But right now, they're not able to do that.
Mr. Keller. Okay, I appreciate that. And a perfect example
of how two Federal Government agencies aren't communicating and
yet we want to--we put out rules to loan servicers that,
obviously, multiple over the 10 years or, you know, prior to
people could apply, and now we want to go after the loan
servicer of PHEAA simply because they are the ones servicing
the loans now.
So, again, I just think that there is--we need not focus on
who we contracted with, but why we made it so ambiguous that
people don't understand it.
Thank you. I yield back.
Chairwoman Davis. Thank you very much. It is now time to
recognize myself for five minutes. I am going to do that
quickly and then we will turn to the next panel.
While we still have you with and, again, you have all been
very helpful, I wonder part of the full picture here really
does mean that we need to hear from the Department of
Education. And I wonder--and we also have the GAO with us, as
well. I wonder if you could share with us, maybe just starting
with Ms. Shavit, what you would like to know from them. What
would be helpful in our further discussions to better
understand the role that they have been playing and whether or
not, in fact, there is something that they could have been
doing along the line to communicate better with the Congress?
Ms. Shavit. One thing that I would certainly like to know
is what efforts are being taken right now in the Department of
Education to make sure that borrowers like Ms. Finlaw are
getting the benefits of the programs that they were reasonably
relying on. I want to know what instructions the Department is
giving to PHEAA with respect to making sure that these
borrowers are made whole, but I want to know what the
Department is itself doing or planning to do in that regard and
how it thinks that the program can be fixed going forward. I
want to know what plans the Department has to make sure that
future borrowers who are willing to commit themselves to the
public good will have access to this program.
These are the primary pieces of information that I think we
need to know. What plan is in place and what information needs
to be gathered to make sure that people who are supposed to
benefit from this program can?
Chairwoman Davis. Thank you. Doctor, we have been saying
``shin-goes,'' ``ching-goes.''
Mr. Chingos. ``Ching-goes.''
Chairwoman Davis. Chingos.
Mr. Chingos. Chingos.
Chairwoman Davis. Okay, thank you. Please, in just a minute
or two, what is your sense? What would you like to know?
Mr. Chingos. Sure. I would love to hear from, you know,
GAO, Department of Ed, you know, what data would they need and
how could they get it to more accurately measure how well PSLF
and TEPSLF are being implemented. You know, we talk about this
99 percent rejection rate. It tells us something about the
program, but it doesn't tell us what we really want to know,
which is who's out there? Who should be getting this program
and are they getting it? And if they're not getting it, why?
So, I would really want to know what data could help us
better assess that, so that we can make improvements going
forward.
Chairwoman Davis. Thank you. And, Ms. Finlaw, what would
you like to tell the Department of Ed? What would you like them
to know that you haven't had a chance to say?
Ms. Finlaw. I would like to know what I'm supposed to do
when I'm lied to. I would like to know what recourses I have
and, in 10 years, what will I do then? I'd like to know who's
out--who's looking to protect the borrower from these
organizations that mislead and misrepresent? And who's going to
protect me in the next 10 years? How do I know I'm not being
lied to again if I'm doing everything I'm told to do?
Chairwoman Davis. Thank you. I want to thank all of you and
certainly my colleagues who are here. This is often when we
have a second panel it makes it difficult because Members have
had to go into other committee hearings. And so, I hope the few
of us who are here right now will have an opportunity to really
understand and learn more.
I have heard many different things. I mean, I have heard we
should shelve the program; that, in fact, if people only read
the Department of Ed's directions that, you know, they
shouldn't have any problem.
I have heard that, in fact, it is complicated. And there
are probably reasons why in the process of even the initial
legislations and on is that we know, you know, it started in
the Bush administration and went through three administrations
basically and, you know, we still have a role on the part of
the Department of Ed to be able to, you know, kind of yell
help, you know, we have got some problems here, we need to take
a look at this. So that is what we want to know.
I personally believe that as a country this is something
important for us to continue to do, to pledge and then to act
on that pledge that we are there to help along the way those
people who go into public service and choose to make that their
career, their lifelong careers; important for people to do and
not everybody is able to do that.
We do have--I know that the issue of graduate students
maybe have more wherewithal, yes, some do, but probably the
majority do not. And so, we need to be able to address that
issue and how we deal with it, how we make this work. And you
have been very helpful in helping us understand that. Thank
you.
I now want to remind my colleagues, I have a number of
things I have to read here, so just bear with me for a second.
I remind my colleagues that pursuant to committee practice,
materials for submission for the hearing record must be
submitted to the Committee Clerk within 14 days following the
last day of the hearing, preferably in Microsoft Word. The
materials submitted must address the subject matter of the
hearing.
Only a Member of the committee or an invited witness may
submit materials for inclusion in the hearing record. Documents
are limited to 50 pages each. Documents longer than 50 pages
will be incorporated into the record via an internet link that
you must provide to the Committee Clerk within the required
timeframe. Please recognize that years from now that link may
no longer work.
What we have heard here today, of course, is very valuable.
Members of the committee may have some additional questions for
you, and we ask the witnesses to please respond to those
questions in writing. The hearing record will be held open for
14 days in order to receive those responses.
I remind my colleagues pursuant to committee practice
witness questions for the hearing record must be submitted to
the Majority Committee Staff or Committee Clerk within 7 days.
The questions submitted must address the subject matter of the
hearing.
And we will now take a very, very brief minute or two to
seat our second panel. Thank you again.
[Recess]
Chairwoman Davis. All right. Thank you both for being here,
for staying with us throughout the panel. I think it is helpful
for you to hear them and for them to know that you are in the
audience, as well, and appreciate that.
I wanted to now introduce our introduce witnesses. Jeff
Apple--Appel, Jeff Appel is the director of policy liaison and
implementation at Federal Student Aid. Prior to joining Federal
Student Aid in 2016, Mr. Appel worked in the Department's
Offices of the Undersecretary as well as the Office of
Planning, Evaluation, and Policy Development.
Prior to working at the Department, he worked on Capitol
Hill as a senior policy advisor with the House Committee on
Education and Labor. And prior to working for the committee,
Mr. Appel worked at the Government Accountability Office, the
GAO, for over 20 years. And for several years, led much of
GAO's higher education and student financial aid-related work.
Next, Melissa Emrey ``ah-ross''--``air-us''? ``Air-us.''
Arras, okay. Thank you, Ms. Arras, is a director in GAO's
Education Workforce and Income Security Issues team. She
oversees GAO's higher education reports and has led studies
examining the Public Service Loan Forgiveness program.
Before joining in GAO in 2001, she worked at a private
sector consulting company and conducted program evaluations for
state and local governments.
Pursuant to Committee Rule 7(d) I will now ask the
witnesses to please stand and raise their right hands.
[Witnesses sworn.]
Chairwoman Davis. Let the record show that the witnesses
all answered in the affirmative.
We appreciate, again, your being here and look forward to
your testimony. I wanted to remind you that we have read your
written testimony, your statements, and they will appear in
full in the hearing record.
Pursuant to Committee Rule 7(d) and committee practice,
each of you is asked to limit your oral presentation to a five-
minute summary of your written statement. I also wanted to
remind you that pursuant to Title 18 of the U.S. Code, Section
1001, it is illegal to knowingly and willfully falsify any
statement, representation, writing, document, or material fact
presented to Congress or otherwise conceal or cover up a
material fact.
Before you begin your testimony, please remember to press
the button on the microphone in front of you so that it will
turn on and the Members can hear you. As you begin to speak,
the light in front of you will turn green and after 4 minutes
the light will turn yellow to signal that you have 1 minute
remaining. And when the light turns red, your five minutes have
expired, and we ask that you please wrap up.
We will let the entire panel, both of you, make your
presentations before we move to Member questions. Please
remember to turn the microphone on, once again, when you
respond.
I will first recognize Director Appel. Please begin.
TESTIMONY OF JEFF APPEL, DIRECTOR OF POLICY LIAISON AND
IMPLEMENTATION, OFFICES OF FEDERAL STUDENT AID, DEPARTMENT OF
EDUCATION
Mr. Appel. Thank you, Chairwoman Davis, Ranking Member
Smucker, and Members of the committee for the opportunity to
join you today. I look forward to discussing with you the
Public Service Loan Forgiveness program, which we call PSLF,
its temporary expansion, and our efforts to help borrowers
understand and navigate their complexity.
In 2007, Congress created PSLF to forgive any remaining
balance on direct loans for borrowers who make 120 qualifying
monthly payments. Under the law and regulations, a qualifying
monthly payment is generally one that is made on time, under a
qualifying repayment plan, and while working full time for a
qualifying employer.
While these requirements seem simple, the law and
regulations surrounding PSLF pose obstacles to borrowers. A few
such complexities are, first, not all loan programs qualify. In
fact, only direct loans do. And when PSLF was enacted, the
Direct Loan Program was a much smaller program. In 2007, about
75 percent of borrowers participated in the nonqualifying FFEL
program, a choice made by borrower's school. To qualify for
PSLF, therefore, a borrower with one or more FFEL loan would
have had to consolidate them into a Direct Loan. The FFEL
program ceased making loans in 2010.
Second, not all loan repayment plans qualify. Qualifying
repayment plans for PSLF generally include the income-driven
repayment plans, IDR plans, and the 10-year standard plan,
which would pay off loans before PSLF would apply. Many
borrowers don't choose qualifying plans because they're
comfortable making their payment when not based on income or
would find a payment based on income unaffordable to them.
In light of these complexities and other disqualifying
factors, the number of borrowers who have to date been eligible
to receive forgiveness is low. As of June 30th, about 91,000
borrowers have applied for PSLF, but only 845 have had loans
discharged. Fifty-two million dollars has been forgiven.
In 2018, to increase the number of borrowers who could
receive loan forgiveness Congress created a limited temporary
expansion of PSLF, or TEPSLF. The expansion forgives the
remaining balance on Direct Loans for borrowers who would
qualify for PSLF but for the fact that some or all of their
payments were made under the graduated or extended repayment
plan.
In creating the expansion, however, Congress set other
conditions. Under the law these borrowers must demonstrate that
their most recent payment and the one 12 months prior to
applying was at least as much as they would have paid under an
IDR plan. And like the original program, the temporary program
limited benefits to borrowers who made 120 qualifying payments
on Direct Loans, which excluded many borrowers who had FFEL
program loans or that payments they made prior to
consolidation.
Congress also required the Department to implement an
application process for TEPSLF within 60 days of enactment.
Thus, we stood up the simplest application process we could
within that short timeframe. As of June 30th, we've received
over 17,000 requests for expanded forgiveness. Of these, 681
borrowers had their loans discharged for a total of $28.2
million.
While initial approvals have been low, we do expect that
more borrowers will qualify for PSLF and its expansion in the
future. Why do we expect this? Consider the following.
Overall, among applicants without standing eligible loans,
about 80 percent have not been in repayment for 10 years.
Naturally, as time passes, more borrowers will have a real
opportunity to meet the criteria of PSLF and the expansion.
Regardless, we recognize that we must build on our improvements
in administering the program. These improvements include
implementing GAO's recommendations, which includes improving
our communications and outreach, as well as streamlining
processes. The GAO's recommendations were helpful to us and we
will continue to meet them moving forward.
Beyond the GAO recommendations, we recently developed a
PSLF help tool to help borrowers understand PSLF eligibility
requirements. The tool allows borrowers to generate employment
verification forms to make it easier to provide annual
certification and provides information about other actions a
borrower should or must take if he or she wishes to receive
forgiveness. Since launched in December 2018, borrowers have
used the tool more than 216,000 times to generate over 82,000
forms.
The help tool is a first step for the type of service that
we believe all borrowers deserve. To that end, we anticipate
improving it as part of Federal Student Aid's Next Gen
Initiative. The central focus of Next Gen is to improve the
customer experience throughout every stage of the student aid
life cycle.
In short, we are committed to doing our job to help
borrowers navigate the complex forgiveness programs the
Congress established. We, as always, stand ready to provide
technical assistance to you and any legislative change that
would expand forgiveness to more borrowers who faithfully serve
our country.
In the meantime, we will continue to implement the law as
written and continue to improve our administration of it. I
appreciate the opportunity to provide you with an overview of
our work, the changes we have made and plan to make, and
welcome any questions you have today.
[The statement of Mr. Appel follows:]
Chairwoman Davis. Thank you. Thank you. Ms. Arras.
TESTIMONY OF MELISSA EMREY-ARRAS, DIRECTOR OF EDUCATION,
WORKFORCE, AND INCOME SECURITY, GOVERNMENT ACCOUNTABILITY
OFFICE
Ms. Emrey-Arras. Chairwoman Davis, Republican Leader
Smucker, and Members of the committee, I am pleased to be here
today to discuss GAO's reports on the PSLF program and the
temporary expanded loan forgiveness process. I will focus my
remarks on three issues.
One, the extent to which borrowers' applications for loan
forgiveness through the PSLF program and the temporary expanded
process have been approved or denied.
Two, the extent to which education provides the PSLF
servicer with sufficient information to administer the program.
And three, opportunities for improving service to
borrowers.
Beginning with a look at the data on loan forgiveness, our
2018 analysis found that Education had denied about 99 percent
of borrowers that applied for PSLF during the first 8 months
that Education was accepting applications. According to
Education's PSLF data, through March of 2019 PSLF program
denial rates have continued to be about 99 percent. Similarly,
when we looked at the temporary expanded loan forgiveness
process, we found that Education had denied 99 percent of those
requests as of May of 2019.
Turning to Education's interactions with the PSLF loan
servicer, we found shortcomings in the information Education
provided to the loan servicer, which increased the risk of
administrative errors. For example, in our 2018 report, we
found that Education does not have a comprehensive document or
manual to provide the PSLF servicer with guidance and
instructions. This made it difficult to effectively administer
the PSLF program and provide consistent service to borrowers
according to PSLF servicer officials. We reported that
Education's guidance and instructions to the PSLF servicer are
dispersed in a piecemeal manner across multiple documents,
including Education's original contract, multiple updates to
the contract, and hundreds of emails to the servicer. As a
result, PSLF servicer officials said that their staff were
sometimes unaware of relevant PSLF program guidance and
instructions in emails provided by Education.
Consequently, we recommended that Education develop a
timeline for issuing a comprehensive guidance and instructions
documents for PSLF servicing. We also made recommendations to
Education provide additional information for determining which
employers qualify for PSLF and to standardize the payment
information the PSLF servicer receives from other loan services
for determining qualifying payments for PSLF. Education agreed
with these recommendations but has yet to fully implement them.
Now turning to opportunities to improve service to
borrowers, we have found that Education can provide better
service to borrowers by expanding outreach, streamlining
processes, and sharing critical information with borrowers. For
example, we found that Education does not include information
for borrowers about the temporary expanded process and key
online sources.
Consequently, we made recommendations that Education
include information on this process in its online PSLF help
tool and require all loan servicer websites to provide
information on the temporary expanded process.
We also made recommendations that Education integrate the
request for the temporary expanded process into the PSLF
application, provide borrowers with sufficiently detailed
information to be able to identify any errors in the servicer's
counts of qualifying payments for the program, and provide
borrowers more information on options for contesting denials of
temporary expanded loan forgiveness. Education agreed with
these five recommendations and has yet to fully implement them.
In conclusion, large numbers of borrowers have pursued
careers in public service, sometimes at lower pay than in the
private sector with the hope of one day achieving loan
forgiveness through the PSLF program. They have often had to
navigate the PSLF program requirements with a lack of
sufficient information from Education, only to be denied 10
years later when they applied for loan forgiveness because
their prior years of employment or loan payments did not
qualify.
In addition, some borrowers who were denied may not be
aware that they may be eligible for loan forgiveness through
the temporary expanded process, potentially missing out on this
opportunity. Education needs to take action to better serve
these borrowers and help smooth their long road towards loan
forgiveness.
We continue to believe that implementing GAO's eight
recommendations would strengthen program administration,
improve service to borrowers, and help fulfill the original
goal of encouraging individuals to enter and continue tin
public service. Thank you.
[The statement of Ms. Emrey-Arras follows:]
Chairwoman Davis. To both of you, thank you very much,
again, for being here.
I am going to turn to Ms. Jayapal for the first questions.
Ms. Jayapal. Thank you, Madam Chair. I do think it is
unfortunate that the CEO of the Pennsylvania Higher Education
Assistance Agency, which exclusively manages the Public Service
Loan Forgiveness through FedLoan is not here. I would have
really liked to ask him questions, especially given that
FedLoan's performance under its contract with the Department of
Education has, frankly, been abysmal.
Dr. Appel, you say in your testimony that as of June 30,
2019, about 91,000 borrowers have applied for PSLF and 845
borrowers have had their loans discharged for a total of 52
million. You realize that is a less than 1 percent approval
rate, correct?
Mr. Appel. Yes, Congresswoman.
Ms. Jayapal. And you acknowledge that Congress provided an
extra $700 million to help students who were enrolled in the
wrong repayment plan and yet the Department of Education
disbursed 28 million to forgive 681 borrower loans?
Mr. Appel. Yes, Congresswoman.
Ms. Jayapal. And you acknowledge that the Pennsylvania
Higher Education Assistance Agency or FedLoan has made $1.3
billion over the course of 10 years to service student loans,
correct?
Mr. Appel. Off the top of my head, I don't know the sum of
the compensation they received.
Ms. Jayapal. But it sounds about right?
Mr. Appel. I wouldn't want to guess.
Ms. Jayapal. Okay. I will tell you it is right. But you are
aware that Mark Brown, the head of the Education Department's
Office of Federal Student Aid, called FedLoan's performance
``wholly unacceptable'' in an April 2019 letter to the company?
Mr. Appel. I haven't seen the letter. I will take your word
for it.
Ms. Jayapal. Actually, Madam Chair, I would like to enter
into the record that letter from Mr. Brown. I would like to ask
unanimous consent.
Chairwoman Davis. Oh, yes, I am sorry.
Ms. Jayapal. Thank you. And based on these facts, Mr.
Appel, how would you grade FedLoan's performance under its
contract?
Mr. Appel. Well, among the--if we were to go over some of
the facts that you laid out, you mentioned the reflected and
I--but I also mentioned it in my oral statement and in the
written statement we've submitted, the approval rate is low.
But I think in the earlier panel there were questions about
terminology sometimes being unfortunate.
Ms. Jayapal. I understand. And I am so sorry, I just have a
little bit of time.
Mr. Appel. Yeah.
Ms. Jayapal. But if you had to grade FedLoan's performance
how would you grade it on an A to F grading system?
Mr. Appel. So, Congresswoman, the current contract process
that is used to allocate loans among--new loans among servicers
is based on a performance metric. In other words, as borrowers
take out new loans and those are allocated among servicers,
those are based on their performance against a set of metrics
that include keeping repayment--keeping loans in repayment, as
well as--
Ms. Jayapal. I'm going to just--
Mr. Appel.--as well as customer borrower satisfaction.
Ms. Jayapal. Okay. I wanted to see if you were willing to
endorse what Mr. Brown said in his letter. He called FedLoan's
performance wholly unacceptable. I wanted to see if you were
willing to say that.
Has the Department of Education ever issued a corrective
action plan to FedLoan or to its parent company, the
Pennsylvania Higher Education Assistance Agency?
Mr. Appel. I believe FSA has issued corrective actions with
respect to a number of servicers.
Ms. Jayapal. And I will just say in the letter that I
submitted there are three outstanding corrective action plans:
one, around deficiencies for improper servicing; two, around
customer service as identified in Higgins v. Education; and
three, the implementation of the Teach Grant reconsideration
process. The fact that these warnings were even issued I think
shows serious malfeasance at FedLoan.
Has the Department of Education compensated the borrowers
who were affected, or did you require FedLoan to do so?
Mr. Appel. I don't know about the particular circumstances
that you're referencing. I do know when there are cases of
servicer error, there can be corrective action that requires
keeping borrowers whole.
Ms. Jayapal. Okay. Has the Department ever considered
taking all or a portion of business away from FedLoan to
improve the borrower experience?
Mr. Appel. As you may be aware, Congresswoman, FSA is now
engaged in a significant effort to remake and transform the
student loan servicing function as part of its Next Gen
Initiative.
Ms. Jayapal. And do you believe that FedLoan should be
under consideration for an ongoing contract given that it has
been called wholly unacceptable in terms of its performance so
far?
Mr. Appel. So, the acquisitions process that's common
across the Federal Government includes provisions that require
solicitations to be open for competition that will be--past
performance will be judged based on requirements of that
solicitation.
Ms. Jayapal. Thank you, Mr. Appel. It is unfortunate, and I
think very disturbing to me, that $1.3 billion in taxpayer
money is potentially going to be continued for an agency that
has wasted that money as far as we can see from everything that
has been put forward. And I hope that you would reconsider that
at the Department of Education.
Thank you, Madam Chair.
Chairwoman Davis. Thank you.
Ms. Jayapal. I yield back.
Chairwoman Davis. Thank you. Mr. Smucker? The Ranking
Member will now ask questions.
Mr. Smucker. Thank you, Madam Chair. Mr. Appel, I would
like to just get a few questions and your answers on the
record.
So yes or no, does the Higher Education Act, which is, of
course, the act which authorizes PSLF, have specific criteria
for borrower eligibility?
Mr. Appel. Yes, Congressman.
Mr. Smucker. Does that specific participation criteria
include employment with specific types of organizations doing
specific types of work, yes or no?
Mr. Appel. Yes, Congressman.
Mr. Smucker. And does the specific participation criteria
include specific requirements about what counts as a payment
for PSLF?
Mr. Appel. Yes, Congressman.
Mr. Smucker. And does that criteria include a requirement
for a borrower to be in a certain type of repayment plan and
how many payments need to be made to qualify for participation?
Mr. Appel. Yes, Congressman.
Mr. Smucker. Did the Department of Education add any
requirements for participation in addition to what was already
in the law?
Mr. Appel. There were some additions as a result of
regulations developed by the Department that further--
Mr. Smucker. Could you go into detail about what some of
those requirements may be, when they were established? And have
any of those eligibility requirements been changed in the last
decade?
Mr. Appel. So, the Department of Education originally
engaged in negotiated rulemaking to develop regulations for
PSLF in 2007. I believe the final regulations were issued in
2008. In defining eligibility requirements, an on-time payment
is defined as a payment within 15 days of the due date.
There are also requirements that address certain types of
qualifying activities within work performed by certain types of
organizations. So, for example, certain religious activities
might not qualify under the program as--for employment
purposes.
Mr. Smucker. So, again, your testimony is that those
regulations were implemented in 2008?
Mr. Appel. Yes, sir.
Mr. Smucker. Have any of those requirements changed since
then, in the last decade?
Mr. Appel. There are a few additions that I believe were
added in 2015 that pertained to making some exceptions about
how to count payments for Department of Defense loan repayment
programs that were kind of given a special treatment in terms
of how those payments would be counted.
Mr. Smucker. Thank you. Let's go then to the requirements
for the expansion, the Temporary Expanded PSLF. Were those
requirements as specific as PSLF?
Mr. Appel. Yes, Congressman.
Mr. Smucker. Did the Department add any requirements to the
Temporary Expanded PSLF criteria when implementing that program
that are not related to the statutory requirements?
Mr. Appel. No, Congressman.
Mr. Smucker. Thank you. Mrs. Emery-Arras, also a few
specific questions.
Yes or no, in the report issued by the GAO, the GAO find
that the Department was not following the law on TEPSLF?
Ms. Emrey-Arras. We did not do a legal compliance review.
Mr. Smucker. So, there was no finding that they were not in
compliance with the law?
Ms. Emrey-Arras. Correct.
Mr. Smucker. Did the Department disagree with any of your
recommendations in the report because they did not want to help
borrowers?
Ms. Emrey-Arras. The Department agreed with all of the
recommendations.
Mr. Smucker. And did the GAO find that the Department was
actually denying, completely denying any eligible borrowers?
Ms. Emrey-Arras. No.
Mr. Smucker. Did the GAO do any analysis of whether the law
as written is the reason that almost all applicants for the
program have been found ineligible?
Ms. Emrey-Arras. No, our focus was on the implementation of
the law and how it was operationalized by the Department.
Mr. Smucker. Thank you. And I yield back the balance of my
time.
Chairwoman Davis. Thank you very much. Mr. Scott?
Mr. Scott. Thank you, Madam Chair. As I said earlier, I
mean, we didn't create a puzzle or a contest. I mean, the odds
of somebody getting through this process, they would be better
off buying lottery tickets.
Mr. Appel, when should a person know that they are on the
right track to get a discharge under this program?
Mr. Appel. So, Congressman, to help borrowers know whether
they're on the right track the Department developed an
employment certification form back in 2012 that we encourage
borrowers to complete at least annually or more frequently if
they change employers. That starts a process that allows them
to track their progress towards forgiveness.
Mr. Scott. Okay. And is that form sent to the servicer or
to the Department?
Mr. Appel. So, the form is sent to the servicer. It's made
available on our website and borrowers can obtain the form from
any loan servicer.
Mr. Scott. And as soon as the student as the borrower fills
out the form, when do they know whether they are on the right
track or not?
Mr. Appel. So, when they--after they complete the form, if
it's accurate, completely filled out, the contractor will
review and respond to the borrower typically within 30 to 45
days, depending on whether the form is complete. It can take
longer if there's any back-and-forth required to obtain more
information.
Mr. Scott. And so, the borrower should know when they sign
up with an employer whether they are on track to a 10-year
discharge?
Mr. Appel. So, one of the things that we--in addition to
the employment certification form that we've recently developed
and implemented is a Public Service Loan Forgiveness help tool.
And it's an automated tool that will guide a borrower towards
the steps of completing the employment certification form, but
it's almost an online tutorial that will help guide borrowers
to recognize, we think, sooner and make sure that they're aware
that they have the right loan, are in the right repayment plan,
that their employer is likely to qualify or may qualify. And
those are some of the--we plan on actually making additional
improvements to that tool in response to some of GAO's
recommendations.
Mr. Scott. If that process starts taking place, what
portion of the people who think they are in the plan will
actually be in the plan?
Mr. Appel. So, as we've kind of seen in some of the results
to date with respect to applications that have been submitted,
among those that have been found not eligible, several are
because borrowers are not in the right repayment plan. Some of
the new information that we've been making public is to help
provide some transparency and clarity about those factors that
are keeping borrowers from--
Mr. Scott. Now, as I understand it, if you are in the wrong
plan, you can consolidate into the right plan, right?
Mr. Appel. So, if you have the wrong type of loan you can
consolidate into the Direct Loan Program. For example--
Mr. Scott. And then you would qualify for the 10-year
discharge?
Mr. Appel. You would have an eligible loan. Beyond that--
beyond--there are other requirements beyond having the right
kind of loan. That includes being in the right repayment plan.
Mr. Scott. Well, I guess the question is people ought to
know whether they are going to get a discharge after 10 years.
We all have constituents who have said they thought they were
in the right plan. They are at the end of 10 years, they
thought they had done what they--what was necessary. And all of
a sudden, they are told, no, you have got another 10 years to
make payments. That wasn't what we expected when we set up the
program.
Now, to fix this so that people who are in plans and have
done what they are supposed to do, do we need statutory
changes, or can this be done through regulation to fix the
problem?
Mr. Appel. So, depending on what problems or barriers there
may be--
Mr. Scott. Well, the problem is that 99 percent of the
people that are applying for a discharge are told they are not
qualified. And, you know, if it was 99 percent qualified, 1
percent didn't get it right, you could say it was their fault.
But 99 percent discharged, there is something wrong with the--
well, let me ask you this. Do you think there is something
wrong with the program?
Mr. Appel. Congressman, earlier in my oral statement and in
my written statement we have information to the point of the
low approval rates to date. So, among eligible--among
applicants who have eligible loans, the right loans, about 80
percent have not been in repayment for 10 years. So, meaning
that 10-year repayment requirement is a significant criteria in
order to earn forgiveness. So, for--
Mr. Scott. Well, my time is expiring. Is there anything
that--to get this thing fixed is there anything that needs to
be done by statute or can you do it by regulation to fix the
problem?
Chairwoman Davis. Mr. Chair, I am going to go ahead and go
to the next Member, but I also want you to respond to that in
just a few minutes, okay?
Mr. Appel. So, I--as I mentioned earlier, some of the
obstacles borrowers are facing are because of the statutory
requirements, and the Department is happy to provide Congress
technical assistance if you'd like to contemplate legislative
changes. There are steps that we're taking to improve our
administration of the program, some of which are in the
response to the GAO's recommendations. We're taking quite a few
steps to try to increase borrower awareness about the
requirements of the program and the steps that they need to
take in order to earn forgiveness.
Chairwoman Davis. Thank you, Director Appel. Dr. Foxx?
Mrs. Foxx. Thank you, Madam Chairman. Mr. Emrey-Arras, the
GAO completed a report in August of 2015 that said the
Department of Education could do more to help ensure borrowers
are aware of repayment and forgiveness options. In general,
that report found that participation in the available programs
was low and the conclusion of that report said the borrowers
needed information PSLF to take advantage of the program.
The report also found the Department had not assessed the
efforts it had made to raise awareness of the program. Is that
generally accurate about that 2015 report?
Ms. Emrey-Arras. Yes.
Mrs. Foxx. Ms. Emery-Arras, who was the Secretary of
Education at the time this 2015 report was issued?
Ms. Emrey-Arras. The prior administration.
Mrs. Foxx. Who was the Secretary of Education in the time
period looked at in developing the report, how long had that
individual been in that position?
Ms. Emrey-Arras. It was under the prior administration.
Mrs. Foxx. But who was it and how long had that person been
in the position?
Ms. Emrey-Arras. I don't remember how long at that point in
time.
Mrs. Foxx. Okay. Well, I would appreciate it if you could
get that for us for the record. Okay?
Mr. Appel, you were at the Department when this report was
issued, correct?
Mr. Appel. Correct.
Mrs. Foxx. In that 2015 report the GAO noted that the
Department had taken some steps intended to increase borrower
awareness of PSLF, but it had not notified all borrowers who
have repayment about the program. The report noted that
borrowers had to proactively seek out the information on PSLF
that the Department had put on social media and its website.
The report goes on to note that the Department was considering
an email campaign to borrowers on income-driven plans.
Mr. Appel, do you recall what actions the Department took
in response to this report?
Mr. Appel. So after--consequent to the report, the
Department continued some of the direct outreach it was making
to borrowers as part of a campaign to increase awareness of
income-driven repayment and the link participating in that plan
to Public Service Loan Forgiveness.
Mrs. Foxx. If the Department had done more to inform
borrowers earlier about all of their obligations under the law
would the ineligible rates, we are currently seeing have been
this high?
Mr. Appel. So, I think one of these--Congresswoman, one of
the significant and important details that we're offering today
is--in terms of insight into the low approval rates, is the
fact that a large majority of applicants haven't been in
repayment for 10 years. So, there's either a confusion on the
part of the borrower about what's required or borrowers are
going ahead and applying, perhaps thinking they're taking the
right steps in order to track progress.
Mrs. Foxx. Right. And nobody in the last panel or this
panel has said one word about student financial aid officers
and what is their responsibility to the students and interns.
And again, one of the things we did in the PROSPER Act was to
talk about the financial literacy aspects and the importance of
counseling to students.
It seems to me that there is a big gap here in the people
who are not here. We talked about PHEAA not being here. We
should have had somebody from NASFA here to talk about what is
the role of financial aid officers in explaining this to
students?
I will still contend students, from the material on the
Department's website, could understand what the requirements
are. And I do think it is important for us to stop using the
word ``denied'' and start saying ``ineligible.'' Because, as
you say, 80 percent have not even paid 10 years' worth, which
means they are not denied. They simply have not become eligible
for the program. And I think it is very important we do that.
If the Department had done earlier a more robust outreach,
I believe we would not have seen so many people incorrectly
believing they were eligible and on track. But I also believe
there would be very few people eligible for a discharge in 2019
considering all the limitations included in the law.
There would have been no need to create TEPSLF if Democrats
in Congress in 2007 had done a better job writing the program
and the Democrats in the executive branch cared about borrowers
enough to move forward with implementing the program so
everyone was aware of the legislative requirements from the
beginning.
Most of these problems stem from the beginning of the
program and the lack of work done during the Obama
administration. And that simply is--the blame is being put on
this administration, which is incorrect.
Thank you. I yield back.
Chairwoman Davis. Thank you. Turn to Mr. Sablan.
Mr. Sablan. Yeah, thank you, Madam Chair. We are all
getting hungry. I will get right to the questions.
Mr. Appel?
Mr. Appel. Yes, Congressman.
Mr. Sablan. Mr. Appel, why does the Department prevent
prepayments from counting towards Public Service Loan
Forgiveness through pay-ahead status? And why wouldn't the
government want to encourage borrowers to pay their loans
early?
Mr. Appel. So, Congressman, I mentioned earlier one of the
few additions to the statutory requirements that the Department
had added through its regulations was to define what
constitutes an on-time payment, and that was a payment within
15 days of a due date. The idea behind that in part rests with
the goal of the program and the requirement that a borrower's
employment--that the 10-year service requirement is tied to
their loan repayment.
So, in order--so there's kind of two subparts of that
requirement. A borrower needs to work for 10 years for a
qualifying employer, but also make 10 years' worth of
repayment. We've kind of combined that--those two elements are
kind of combined in that one statutory requirement.
Mr. Sablan. Fair enough, thank you. And, Mr. Appel, on page
9 and 10 of GAO's report they talk about the benefits of
integrating the Public Service Loan Forgiveness program, PSLF,
and the Temporary Expanded PSLF, which allows borrowers to
qualify for loan forgiveness through additional types of
repayment plans. And it says that the Department basically
knows that this should happen.
However, GAO says that there are, and I quote, ``currently
no specific plans to do so.'' How is that possible?
Mr. Appel. So, I think, Congressman, to make sure I
understood your question, the GAO did recommend that we combine
the application process of both the Public Service Loan
Forgiveness program and the temporary expansion of that program
that Congress created.
When Congress first passed the temporary expansion in 2018,
they gave the Department just 60 days to implement a simple
process. We did the best we could within that short timeframe.
It's a challenge for a Federal agency to implement anything in
60 days and comply with other statutory requirements, frankly,
including the Paperwork Reduction Act.
The simple process we've set up really--is really basically
a borrower sending us an email. And given the statutory
requirements in the appropriations language that conveyed that
program, we felt, obviously, legally, we had to make sure that
a borrower wasn't, first, eligible for Public Service Loan
Forgiveness, but for using the discretionary appropriated funds
included in the appropriations bill.
Also, by making sure that we're kind of using one pot of
money before we use the discretionary pot of money, we would
make those funds go further anyway. So, we thought that was
part of the goal of Congress, as well.
Mr. Sablan. So, Mr. Appel, are you saying that GAO's
statement that there are currently no specific plans to do so,
to merge, for example, the two programs, is incorrect?
Mr. Appel. So, I'd say their report and recommendation are
fairly recent. I believe your final report just came out a week
or two ago and includes that recommendation.
We agreed with the recommendation. We don't have a
timeframe yet. One of the our--one of the challenging things
about trying to combine the two processes, frankly, is with the
appropriated discretionary funds that pay for the loan
forgiveness part of the bill is dealing with the first-come,
first-served requirement.
Mr. Sablan. All right.
Mr. Appel. So, there's a queuing process that is part and
parcel of the temporary expansion.
Mr. Sablan. I have one more question, Mr. Appel. Thank you.
Mr. Appel, we know that the Department itself has found
that the loan servicer responsible for administering PSLF,
PHEAA, that loan servicer, has miscounted payments towards PSLF
contrary to their contract. Has the Department ever penalized
PHEAA for not following its contract? And if not, why not?
Mr. Appel. So, I'm aware that the Department has developed
corrective action plans to work with PHEAA on payment counting
issues. I'm not sure of the specific requirements of that. I'm
happy to get back to you on that, if you'd like.
Mr. Sablan. So, there is a potential possibility that they
will be penalized?
Mr. Appel. So, the Department in past has taken actions
against servicers--
Mr. Sablan. Money?
Mr. Appel.--that proposed penalty. It includes recouping
funds that they were paid to perform a service that we find
they actually didn't perform.
Mr. Sablan. My time is up, Madam Chair.
Chairwoman Davis. Thank you. I am going to turn to Mr.
Guthrie.
Mr. Guthrie. Thank you, Madam Chair. Thank you for
convening this hearing. I appreciate.
I apologize. There is a couple of the--I know another
committee and they had a couple subcommittees meeting and I
have been there, so I apologize for being late to be here. But
glad to be here to ask some questions. I look forward to your
responses.
So, Ms. Emrey-Arras, this July, the GAO report--GAO
completed another report relating to Federal loan repayments.
In the report, on income-driven repayments the GAO found
potential fraud in the program and suggested the Department of
Education was vulnerable because of the weak verification
measures of income-driven repayments. Is that correct?
Ms. Emrey-Arras. That is correct.
Mr. Guthrie. So, do you all stand by your findings and
notes of potential fraud in this report, which you said you do?
Do you believe Congress should be concerned about these
deficiencies and that we should be looking for solutions to
what you discovered?
Ms. Emrey-Arras. We did make recommendations in that report
that your referenced to help address potential fraud and error
in the income-drive repayment plans.
Mr. Guthrie. Thank you. So, Mr. Appel, was it the
Department's reaction to that report on income verification and
income-driven repayment plans--I mean, what was the
Department's reaction? And did the Department make any changes
or are they in the process of making any changes to eliminate
or mitigation the risk of fraud in these repayment plans?
Mr. Appel. Thank you, Congressman, for the opportunity to
respond.
We agreed with GAO's recommendations in that report and are
in the process of taking steps to respond to those. We're still
trying to figure out how best to do that.
One of the things that GAO found, and that kind of
highlights one of the challenges we have in implementing
income-drive repayment programs, which has some impact with
respect to the Public Service Loan Forgiveness program, is that
the Department doesn't have access to income of borrowers
unless borrowers provide it to us. That is sometimes an
implementation challenge in terms of not only enrolling
borrowers into an income-driven repayment plan but maintaining
their enrollment because there's a requirement that they
certify their income annually.
We've taken steps to try to facilitate borrowers' provision
of that income by using the same tool that we've used to help
FASFA applicants provide IRS data to the Department for the
purposes of applying for Federal student aid. So that's the IRS
DRT tool that you may be familiar with.
Mr. Guthrie. Right.
Mr. Appel. So, borrowers can also use that for providing
their income data for purposes of participating in an income-
drive repayment plan. There are times, of course, that we know
that borrowers may lose a job and their financial circumstances
change and they may not be earning any income. And they're
still entitled to participate under the law in an income-based
repayment program. And they may have payments that are
legitimately zero dollars.
We're taking steps based on the--GAO's findings that--there
seem to be a potential for fraud or an indicator of fraud given
the extent to which they found that for some borrowers who had
certified on their applications, that they had very large
family sizes or low or no income, that GAO found that they had
earnings reported in the Department of Health and Human
Services' New Hires database; another source of income
information to which the Department of Education does not have
access.
Mr. Guthrie. Okay. One other question, Mr. Appel. In order
to prevent fraud in any program it is important to carefully
follow the law as written as the Department has done in the
Public Service Loan Forgiveness.
Further, I am just wondering, are you aware of any concern
of potential fraud in the Temporary Expanded Public Service
Loan Forgiveness or Public Service Loan Forgiveness as the GAO
noted in the income-drive repayment report?
Mr. Appel. So, Congressman, I'm not aware of any potential
for fraud. But as I mentioned earlier, because of the issues
that GAO had identified with respect to those borrowers that
participated in income-drive repayment, being enrolled in it
for--in order for a borrower to really benefit from the Public
Service Loan Forgiveness programs, they need to be in an
income-driven repayment plan. That lowers their monthly payment
more than a 10-year standard plan would provide.
So, to the extent that the information provided isn't
accurate, then that's kind of a spillover from the potential
concerns that GAO had about whether there's a chance of fraud.
Mr. Guthrie. Okay, thank you. My time has expired, and I
yield back. I appreciate your answers. Thank you.
Chairwoman Davis. Turn now to Mr. Grothman. Ready?
Mr. Grothman. Okay. Mr. Appel?
Mr. Appel. Yes, sir.
Mr. Grothman. Okay. There is a lot of confusion about the
PSLF eligibility requirements. We should have a graph coming up
here. Is there a graph coming up? Oh, here it is behind me.
Okay.
I want to make sure I understand everything here and even
looking at this graph is going to lend credence to the idea
that Congress did a bad job of putting this program together
and it is too complicated. But are you familiar with this
graph?
Mr. Appel. Generally.
Mr. Grothman. Yeah. The graph to me looks ridiculously
complicated. Do you think it is ridiculously complicated?
Mr. Appel. So, Congressman, in my written statement we've
kind of laid out what the statutory requirements are.
Mr. Grothman. And I am not blaming you for it. I am blaming
Congress for it. I think the people who put together this
program in 2007 didn't do a very good job. Do you think that is
an accurate statement?
Mr. Appel. Congressman, as we've mentioned, there's a
relatively low approval rate and we've identified several of
the statutory criteria as being responsible for why borrowers
aren't obtaining forgiveness on their loans yet.
Mr. Grothman. Right, and I want to qualify myself. I mean,
I asked the previous panel. I am not for programs that
discriminate against people who decide to go into manufacturing
or agriculture or the private sector. I am not one of those
private sector haters who thinks, you know, they should be left
out of everything.
But in 2007, a large percentage of students had been
borrowing Federal loans through the FFEL program, not Direct
Loan, correct?
Mr. Appel. Correct. About three-quarters of students at
that time were participating in the FFEL program because their
schools participated in that program.
Mr. Grothman. Yeah. And you think what happened is or part
of the problem is here that the expectations were raised for
people who were taking out their loans from the FFEL program
and that is maybe a primary reason why we don't have those huge
forgiveness that some people thought?
Mr. Appel. I think we, Congressman, find in terms of
reviewing the applications that are submitted, that one of the
factors that are disqualifying applicants from receiving
forgiveness is the fact that they have FFEL loans, which don't
qualify for forgiveness.
Mr. Grothman. Okay. Probably millions of people have either
FFEL or combined FFEL and Direct Loans, right? You think
millions of people are in that boat?
Mr. Appel. So, the FFEL program ceased making loans in
2010. It's a declining share of the overall outstanding balance
of Federal student loans--
Mr. Grothman. But still a high percentage. You have--
Mr. Appel.--but not insignificant.
Mr. Grothman. Over half?
Mr. Appel. It's less than half of the current outstanding
balance. At the time--
Mr. Grothman. Of the balance. But the number of people who
have some loans in that--from those programs?
Mr. Appel. Congressman, that's also a declining share.
Mr. Grothman. A declining share, but people who have
least--
Mr. Appel. It has millions of borrowers, Congressman.
Mr. Grothman. Millions of borrowers, right. Did the
Department say anything to those students during or after the
transition about what that meant for repayment as we flip from
FFEL to Direct Loans?
Mr. Appel. So, part of our outreach and communications
effort that we do is intended to be--to reach as broad an
audience as possible. That's in part why we use--kind of rely
on social media in order to reach as many people as possible.
Mr. Grothman. Do you think there were a lot of people who
didn't combine or blend their FFELs into Direct Loans? Is that
part of the problem, too?
Mr. Appel. Congressman, that is part of the problem in the
sense of that's what we see as we're reviewing the applications
borrowers are submitting to date.
Mr. Grothman. Okay. If a borrower over or underpays in any
given month, will that still count as a qualified payment
assuming the borrower is in the correct repayment plan?
Mr. Appel. It depends. It can. That has been an issue for
some borrowers, and we are looking at taking steps to help
those who may have inadvertently overpaid one month. That
causes the--their payment bill the next month to decline to an
amount that was lower than their regular scheduled monthly
payment.
Mr. Grothman. Okay.
Mr. Appel. So there have been some issues.
Mr. Grothman. Then I want to point out another area we
might wind up people disappointed. Okay? Now, to get the PSLF
you have to be working for a nonprofit or government agency,
right?
Mr. Appel. No, Congressman--yes, Congressman.
Mr. Grothman. Okay. So that seems odd. So, if I am a
journalist for NPR or a journalist for The Washington Post,
theoretically you are doing the same thing, but it is not
occupation, it is employer, right? So, you can have the exact
same job, but because one guy was or gal was--you know, got
involved working for a private sector corporation, they are out
in the snow. Could that cause part of the confusion, too, if
people didn't realize--
Chairwoman Davis. Mr. Grothman, your time is well up. Mr.
Appel, could you respond quickly to the first part of that
question?
Mr. Appel. Yes. For an employing organization to be
eligible it needs to be nonprofit or government. For profit
organizations would not be.
Mr. Grothman. Could be confusing. Thank you.
Chairwoman Davis. Thank you. Thank you. Ms. Adams.
Ms. Adams. Thank you, Madam Chair, and thank you to the
witnesses for being here.
Mr. Appel, thanks for appearing before the subcommittee
today. It is more than I can say for PHEAA. We know that the
Department itself has found that PHEAA has miscounted payments
toward the PSLF contrary to their contract. So, has the
Department ever penalized PHEAA for not following its contract?
And if not, why not?
Mr. Appel. Congresswoman, thank you for your question. I
responded to a similar question earlier. I'm aware that a
corrective action plan had been developed for--with respect to
PHEAA on payment counting issues. I'm not familiar with the
specifics of that. It's not a function that I directly oversee
at Federal Student Aid, but I do know there was a corrective
action plan taken.
I know with respect to some servicers and others there are
penalties and consequences provided in cases where it's
necessary. That has included reimbursing the Federal Government
for fees they've been paid to perform services that we late
find they failed to perform.
Ms. Adams. Okay. So, you are saying that they reimburse as
a way of correcting?
Mr. Appel. That is a method of one of the consequences of
failing to perform as contracted.
Ms. Adams. Do you know if there are others?
Mr. Appel. There are other examples, I believe, of that
being the case with--for other servicers on other issues.
Ms. Adams. Okay. Thank you. Ms. Emrey-Arras, the Department
seems to lay off a lot of--to lay a lot of the blame on
application denials on the borrower either because they were
not in repayment for the required 120 months or their
applications were incomplete. In GAO's estimation how much of
that can be laid at the feet of the Department and PHEAA?
Ms. Emrey-Arras. I think any confusion at the level of the
borrower relates to the need for outreach by the Department. If
people are applying for a program that they're not eligible
for, it's because they're confused. And so, it's really
important that the Department help them understand what the
requirements are so that they can apply if they are eligible
and not spend their time applying and have their hopes dashed
if they are not.
Ms. Adams. So now that the Department has begun
implementing some of your recommendations, have we seen denials
decrease accordingly?
Ms. Emrey-Arras. It's still early, but the numbers have
been very consistent in terms of the extremely high denial
rates.
Ms. Adams. Okay. So, it is more so than it was?
Ms. Emrey-Arras. The denial rates have stayed constant at
99 percent.
Ms. Adams. Thank you very much. And, Madam Chair, I yield
back.
Chairwoman Davis. Thank you. Mr. Comer?
Mr. Comer. Thank you, Madam Chair. Mr. Appel, the
legislative language that created TEPSLF says, and I quote,
``provided further that the Secretary shall provide loan
cancellation under this section to eligible borrowers on a
first-come, first-served basis based on the date of application
and subject to both the limitation on total loan volume at
application for such loan cancellations specified in the second
proviso of the availability of appropriations under this
section.''
My question, does the first-come, first-served aspect of
the law incent borrowers to act quickly rather than take the
time necessary to understand their obligations under the law to
be able to receive assistance under this program?
Mr. Appel. Thank you for the question, Congressman. It
seems we see an awful lot of applications that have been
submitted among borrowers who have not yet been in repayment
long enough to qualify. Because the first-come, first-served
feature of the law was a key criteria in the statute, it is one
of the things that we advised borrowers about in the
information that we've posted and made available to them with
respect to how to take advantage of the opportunity.
Mr. Comer. So, it is safe to say that the incentive to act
quickly caused people to apply for the program without knowing
whether they were actually eligible or had met all the
requirements to be eligible, is that correct?
Mr. Appel. That potentially could be a factor in motivating
applicants to apply sooner rather than later.
Mr. Comer. Ms. Emrey-Arras, I know I probably mispronounced
that. I apologize.
Ms. Emrey-Arras. It's okay. Close enough.
Mr. Comer. Would you agree that the GAO has issued a number
of reports over the years that include a finding that the
Department of Education could have better informed their
grantees or stakeholders about the programs or requirements in
a program?
Ms. Emrey-Arras. We have found that the Department did not
regularly inform people about PSLF when they were entering
repayment. We also found--and we actually still have an open
recommendation not this day that the Department still does not
regularly notify everyone in repayment about income-driven
repayment. That has been open for years.
Mr. Comer. I see, yes. In our quick review we found more
than 20 reports dating between 2007 and 2015 that included a
finding along those lines. Given your expertise in this field,
would you agree it is clear that the Department of Education
has historically done a pretty bad job of providing clear
information to its stakeholders?
Ms. Emrey-Arras. We've had concerns over the years.
Mr. Comer. All right. Would you say it is clear Congress
should have known that the Department let us say struggles with
providing information to people?
Ms. Emrey-Arras. I would say our reports have talked about
that over time.
Mr. Comer. So to both of you all, would you both agree that
if Congress wanted to ensure TEPSLF was implemented in an easy-
to-understand and straightforward manner, Congress could, and I
would say should, have taken that body of GAO evidence and
written a law that at least attempted to mitigate these known
issues with the Department of Education under the Obama
administration?
Ms. Emrey-Arras. For GAO, that would be a policy call that
we would leave to the Congress.
Mr. Comer. Mr. Appel?
Mr. Appel. Congressman, I work at Federal Student Aid,
which is--we don't--we also don't do policy. That's the
prerogative of other parts of the Department.
I would say that a requirement to implement a program
within 60 days is not a lot of time, so that's why we first
established it the way that we did. And we did try to simplify
the process for borrowers as much as we could within the
timeframe given.
And with respect to the requirements for a borrower to let
us know that they're interested in TEPSLF, the requirement and
application process is basically sending us an email with their
name and date of birth. That was the requirement to start the
process. If they hadn't applied for PSLF yet, we required that
they do so since we needed to make sure that, before we spent
the discretionary appropriated funds, that the borrower was
ineligible for PSLF.
Mr. Comer. Thank you, Madam Chairman. I yield.
Chairwoman Davis. Thank you very much. I think everybody
who wants to ask a question has asked a question. And so, I
will ask my five minutes of questions. Again, thank you for
being here.
Mr. Appel, you obviously sat here during the testimony
earlier and I am wondering as you listened to Ms. Finlaw, what
did she do wrong?
Mr. Appel. Congresswoman, unfortunately, given that matter
is in litigation, I can't really speak to the specifics of
that. I think you will see in our written testimony, in my oral
statement, some of the factors that borrowers have had to
navigate in order to become eligible for forgiveness under both
Public Service Loan Forgiveness and its temporary expansion.
And some of that has to do with the limited availability of
benefits to the Direct Loan program and in order to access the
benefits via that route--
Chairwoman Davis. Yeah.
Mr. Appel.--some of the additional steps that borrowers
have to take to do that.
Chairwoman Davis. As you listened to that, to her story,
though, which I think probably is not unique, were there any
thoughts that you had that perhaps more could have been done
over the years to address those concerns?
Mr. Appel. So, I think the Department has, over the last
several years, taken an increasing number of steps that we at
Federal Student Aid have to increase our outreach in terms of
trying to help borrowers understand what the requirements are
and what they need to do to access the benefits. We're trying
to use the, to a large degree, social media so we can try to
reach as broad an audience as we can using the, you know, most
current communication tools and methods.
One of the new tools that we're excited about and I think
will be very helpful to assist borrowers navigate some of the
complexities involved is the new Public Service Loan
Forgiveness help tool. And that's something that we're making
available on our website and are trying to promote and make
other aware, so that they can make sure borrowers have that in
order to use. It really is a very useful tool.
Chairwoman Davis. Yeah. Thank you. And are you saying that
this tool is available today?
Mr. Appel. Yes.
Chairwoman Davis. And are the instructions for using it
clear as a bell?
Mr. Appel. Congresswoman, I believe they are.
Chairwoman Davis. Have you tested it on students?
Mr. Appel. It has been user tested. And we're seeing it--
Chairwoman Davis. In how many students?
Mr. Appel. The test--in terms of user testing, I don't know
what the size of the focus groups were on the user testing. We
do know that it's already been used in the first half of this
year almost a quarter of a million times and generated, as I
mentioned before, the importance of the employment
certification form, over 82,000 forms.
Chairwoman Davis. I understand that you're often pointing
to the Next Gen program. How far along is that?
Mr. Appel. So, the Department has taken a critical first
step towards that with the award of--
Chairwoman Davis. Is that a baby step or a first step?
Mr. Appel. I think it's a significant first step. It's the
digital customer care solution, which is going to consolidate
multiple websites on the Department now that are student-
facing. It'll be our way of being able to promote FSA as a
single brand and have a single point of entry for borrowers,
students, and families to receive more information about
student aid.
Chairwoman Davis. Okay.
Mr. Appel. And we'll be able to streamline and make more
consistent our communication and outreach.
Chairwoman Davis. And that will be dependent, also, on
people complying with a bid package as you go forward. Okay.
Ms. Emrey-Arras, could you give us a sense, if you will, I
mean, you have you been working with this for a long time, I
get the feeling that in looking at all this, even though the
Department has said they are taking steps, they are working on
it, many, many of the recommendations have been very slow.
Ms. Emrey-Arras. Right.
Chairwoman Davis. Would you attribute that to being
lukewarm to this program or do you think that they are
committed?
Ms. Emrey-Arras. I can't comment on that issue, but I would
say that several years ago we pointed out problems in terms of
the financial incentives for servicers to talk about PSLF, and
actually pointed out that there was a financial disincentive
for servicers to counsel borrowers about PSLF or about loan
consolidation because they would lose those accounts. Those
accounts would go to another servicer.
We pointed that out. We made a recommendation to the
Department years ago to address that issue. That remains an
unimplemented recommendation.
We also made recommendations last year to do things like
have a single manual for the servicer to make sure that the
servicer knew what the guidance was for the program. That has
yet to be implemented.
There's a lot of stuff that could be done at the ground
level right now to fix this program, and we think those things
should be done.
Chairwoman Davis. And do you have--give us a sense. You
think they are going to be done. When do you think they are
going to be done?
Ms. Emrey-Arras. I would defer to the Department on that.
We've been told that by and large 2020 is the date for a lot of
the activity. I don't know if Mr. Appel would like to add
anything further on that.
Chairwoman Davis. Would you confirm that?
Mr. Appel. Some of the recommendations that Ms. Emrey-Arras
mentioned that the FSA, the Department has agreed to do include
developing a servicing manual, which we are planning to do by
spring of next year, of 2020.
Chairwoman Davis. All right. We will follow up. Thank you,
Mr. Appel and Ms. Emrey-Arras, as well.
I want to remind my colleagues that pursuant to committee
practice, materials for submission for the hearing record must
be submitted to the Committee Clerk within 14 days following
the last day of the hearing, preferably in Microsoft Word
format. The materials submitted must address the subject matter
of the hearing and only a Member of the committee or an invited
witness may submit materials for inclusion in the hearing
record.
Documents are limited to 50 pages each. Documents longer
than 50 pages will be incorporated into the record via an
internet link that you must provide to the Committee Clerk
within the required timeframe and recognizing that link may no
longer work after a number of years.
I want to again thank the witnesses for their
participation. And, you know, what we have heard is very
valuable. I have to say that, you know, there is some
disappointment, obviously.
I don't know, Mr. Appel, whether you feel that it would
have been good to have PHEAA here for this hearing, that, in
fact--despite the fact that they adhere to regulations,
obviously the law that Congress sent. Nevertheless, we would
have gained some insights, I think, and perhaps the Department
of Ed would have been in that position, as well.
I think that we all would like to see more transparency in
this regard. That hasn't existed. And only with the push of
GAO, I think we have been able to--be able to really
acknowledge the fact that there are real problems in this. They
have been there for a long time and we are concerned that they
haven't been addressed.
Yes, and I will recognize the Ranking Member for his
closings statement, but, again, it has been perplexing. And I
hope certainly the next time that we meet--we all want to solve
this problem and I think you all do, too. But there has been
problems in trying to get to that point.
Mr. Smucker.
Mr. Smucker. Thank you, Madam Chair. And before I make
those closing remarks, with your permission I would like to
submit for the record a letter from NASFA which details the
student and administrators' long concerns with the
implementation of PSLF over multiple administration and
includes recommendations to Congress for how to legislatively
fix the program to help borrowers. I would like to submit that
for the record, if I may.
Chairwoman Davis. Oh, yes, I am sorry. So, ordered.
Mr. Smucker. Staff has the actual report. Thank you.
Thank you and I would like to just close by thanking each
of you for being here, thanking the witnesses from both panels.
I think we did hear a lot today. We learned a lot. I drew just
a few conclusions from the conversation that we have had today.
One is this was a law that created expectations which were
far beyond what was laid out in the law. The law was more
complicated than borrowers were led to believe, and it led to
some unfortunate circumstances where borrowers did expect a
benefit that they were not able to access.
So, I think the first takeaway for me is that we as Members
of Congress have an obligation to write laws that are clear,
laws that are written simply and clearly. And I think there was
a failure in this case for that to occur.
And then that legislation must be faithfully carried out.
It is a duty by the administration, all administrations, to
carry out the intent--or the legislation that was passed by the
administration. And I think in this case there was a failure
there, as well. I think the--and it is unfortunate, the
executive branch from the beginning fell short of providing
borrowers the information that they needed to verify whether
they were eligible, first of all. And then to start down that
pathway to eligibility.
The Department failed, as well, I think from the beginning,
from 2007, to inform the entities that were carrying out the
PSLF to inform them of what precisely they should be telling
borrowers, what information that they should make available.
The Department failed to notify borrowers that although
they met some conditions for PSLF, that they perhaps were
working for a nonprofit, there were also--there were also many
other conditions that needed to be met, as well. They may have
had the wrong type of loan. They may have been in the wrong
repayment plan. They may have been working for a nonqualifying
employer. Or they maybe, as was mentioned, hadn't been
repayment long enough for that 10-year period to qualify for
forgiveness.
But, again, all of that is only part of the problem. As we
said earlier today, the Secretary must follow the letter of the
law. That is her constitutional duty. And any accusations that
she is doing otherwise or can even do anything else are just
absolutely false.
It is the responsibility for Congress, of all of us here
today, not loan servicers, not the Department, to fix a program
that has clearly been overpromised and under-delivered.
Republicans on this committee stand ready to discuss bipartisan
solutions to provide relief to deserving borrowers struggling
with student loan debt. I urge my colleagues on the other side
of the aisle to drop this quest for scapegoats, realize that
Congress created the PSLF mess, and come to the table with us
to do what is right for borrowers across the country.
Thank you, Madam Chair.
Chairwoman Davis. Thank you. I want to ask unanimous
consent to submit for the record a letter from the bipartisan
PSLF Caucus expressing their support for the program; and also,
a statement from Representative John Sarbanes on the PSLF
program, as well. And since it is in my responsibility to also
say without objection, we are submitting that for the record.
And I have basically, you know, given you my sense of this.
I think that despite the fact that--and I think we all are
saying we want to work on this problem, there is a need to
acknowledge where some of the failure has occurred and then to
move forward. And I think that is what we are here to do today.
It is disappointing to hear from so many young people that
are out there that all they want to do is really serve their
communities. They want to be teachers. They want to be able to
provide for their communities' health and emergency services,
whatever that may be. And clearly, despite all perhaps best
intents, we have not lived up to the promises of what this
legislation had hoped to do.
So, we have work to do. I think you all have work to do. I
know the Department also has work to do. I hope you would
acknowledge that. And we will try and get on with that and be
back and take another look at this next year.
Thank you very much.
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[Whereupon, at 1:42 p.m., the subcommittee was adjourned.]
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