Milwaukee, WI – Field hearing on student loans

Welcome to the Consumer Financial Protection
Bureau’s public field hearing in Milwaukee, Wisconsin, at the Wisconsin Center. At today’s
field hearing, you will hear from Director Richard Cordray, Deputy Director Steve Antonakes,
Under Secretary of the U.S. Department of Education, Ted Mitchell, and a panel of distinguished
experts who will discuss student loan servicing issues.
The Consumer Financial Protection Bureau, or the CFPB, is an independent federal agency
whose mission is to help consumer finance markets work by making rules more effective,
by consistently and fairly enforcing those rules, and by empowering consumers to take
more control over their economic lives. My name is Zixta Martinez. I’m the Associate
Director for External Affairs at the CFPB. Our audience today includes consumer advocates,
industry representatives, state and local officials, and, of course, consumers. We are
especially pleased to have in the audience David Mancl of the Wisconsin Department of
Financial Institutions. Let me spend just a few minutes telling you
about what you can expect at today’s field hearing. First, you’ll hear from Ted Mitchell,
Under Secretary of Education, after which you’ll hear from CFPB Director Cordray,
who will provide remarks about student loan servicing and the RFI, which we published
today. Following the Director’s remarks, Deputy Director Steve Antonakes will frame a panel
discussion about student loan servicing. After the discussion, there will be an opportunity
to hear comments from members of the public. Today’s field hearing is being livestreamed
at You can follow CFPB on Facebook and Twitter, and you can
also follow today’s conversation using hashtag #StudentDebtStress. So let’s get started. Ted Mitchell is the Under Secretary of Education
at the U.S. Department of Education. He has served in this post since his confirmation
on May 8, 2014. Under Secretary Mitchell oversees policies, programs, and activities related
to post-secondary education, adult, career and technical education, federal student aid,
five White House initiatives, as well as the Center for Faith-Based and Neighborhood Partnerships. Under Secretary Mitchell?
Thank you very much and welcome, everyone. Happy to see you all here and I look forward
to our conversation today. Director Cordray, thanks for inviting me to be a part of this. I really am quite happy to be here for two
reasons, and I’ll get to both in a moment. But I want to say, overall, this is a very
important moment for us to have this conversation. It’s important in the history of the nation,
it’s important in the history of the industry, and it’s certainly important in the history
of the government and in the lives of students. Over the last few years, the Obama administration
has really focused on making college more accessible, more affordable, yielding higher-quality
outcomes for a broader range of students than we ever have before, and we believe that the
administration has succeeded in helping more Americans get to and through college, and
to help them manage debt. On the front end, I think you know that the
Administration has led the way in expanding Pell Grants to students. It’s been particularly
important in the face of state disinvestment in higher education, including right here
in Wisconsin. We’ve worked with many of you in the room to simply FAFSA and have more
work to do there. We’ve expanded the American opportunity tax credits. We’ve created more
information tools for students and families in institutions, and, finally and most recently,
the President has announced, in the State of the Union, his intention to make 2 years
of community college free to all Americans, which we believe will be a major marker in
setting a conversation about increasing what we think of in America as universal, publicly
supported education from the 20th century notion of K-12 to the 21st century of pre-K
through community college. We’ve also tried, on the back end, to help
students and their families pay for college. We’ve expanded public service loan forgiveness
programs. We have built out income-driven repayment plans including, last week, completing
the puzzle around pay-as-you-earn, so that every American borrower now has access to
income-driven repayment plans. And then, in real time, we’ve been working with several
of you in the room to create a clear road map toward borrower relief, in cases where
borrowers have been defrauded or where colleges have misrepresented themselves. College continues to be the very best investment
that an individual can make, that a family can make, we believe that a nation can make
in its collective future. We need to do all we can to contain costs, and we need to do
all that we can to help students afford the debt that they developed in moving through
college. But the reality is that student debt it growing, and it’s creating real and perceived
barriers to students and families, barriers that stand between them and their dreams,
and us and our shared dreams for the nation. With the move to direct lending, in response
to the financial crisis, the Department, in 2009, contracted with a group of existing
loan servicers to provide guidance and advice to borrowers. Since then, we have worked with
those servicers to improve service and to improve the effectiveness of the servicing
program. This year—and this is one of the important points about having this conversation
now—this year we will be re-competing the contracts for loan servicing, and in anticipation
of that, Secretary Duncan has charged my office to explore the borrower experience, from front
to back. And it’s that work that has been ongoing, that makes it so exciting today to
acknowledge CFPB’s entry into this work, with is bold initiative. I’m here to learn and listen but I’m also
here to signal the deep partnership that the Department of Education has with CFPB on this
and so many other issues. With the tools we have in place, particularly
income-driven repayment plans, we should all be aiming at a zero default rate among student
loan borrowers. These are things we need to do together. The Department and the Administration
have plenty to do. We need to work with the Department of the Treasury to make IRS data
automatically available to income-based repayment borrowers, to help them not have to recertify
their loans and their income every year. We know we have to create better online tools
for students to understand the totality of their loan portfolio and opportunities to
lower their payments. And we need to execute on our commitment to create an integrated
complaint system and department for student loan borrowers. This is not just stuff we want to do. This
is stuff that the President has committed us to do in his Presidential Memorandum, encompassing
a Borrower Bill of Rights, and we’re working every day to bring about the changes we need
to make. But much of the heavy lifting—the advice,
the support, helping borrowers navigate their options—will continue to be done by servicers.
We need to be sure that the servicers’ incentives align with the goal of zero default, and we
need to be sure to set high and definitive performance standards, and then hold our servicers
to those standards. That’s the work we hope you’ll help us with today, and that’s
the work we look forward to doing together. Thank you very much. Thank you, Under Secretary Mitchell. I’m now
pleased to introduce Richard Cordray. Prior to his current role as the CFPB’s first director,
he led the CFPB’s Enforcement Office. Before that, he served on the front lines of consumer
protection as Ohio’s Attorney General. In this role, he recovered more than $2 billion
for Ohio’s retirees, investors, and business owners, and took major steps to help protect
its consumers from fraudulent foreclosures and financial predators. Before serving as
Attorney General, he also served as an Ohio State Representative, Ohio Treasurer, and
Franklin County Treasurer. Director Cordray? Thank you, Zixta, and welcome all of you.
Thank you all for joining us today in Milwaukee. I want to say a special word about Under Secretary
Mitchell, his team at the Department of Education, and the Secretary of Education, Arne Duncan,
who has come to be a personal friend and a great leader for this country. Very steadfast
and devoted to the work being done, and it’s challenging work. If you stop and think about
it, they’re trying to govern and direct a system of education, higher education in
this country, and K-12, but focusing only on higher education, that really amounts to
50 state public systems, a huge array of private colleges and universities, community colleges,
trade schools, vocational schools, professional education forums in a variety of venues, and
to do that with a system that, in the United States of America, has, unlike anything in
the history of the world, in terms of providing broad access to all segments of our society,
and trying to do that in an affordable way and a sustainable way is a worthy piece of
work for anyone to undertake. And we have appreciated our opportunities
to work with the Department of Education, partner with them on a variety of issues,
call attention to the issues affecting consumers in particular, which is our focus, and it
continues to be a very productive partnership, and that’s because of the attitude and disposition
of the people leading that effort at the Department of Education, and our own people, and I want
to especially acknowledge our really outstanding team, Office of Students at the Bureau, led
by our Student Loan Ombudsman, which is a statutory position, Rohit Chopra, who is a
truly outstanding public servant, and I’ve seen many in my day. So, to come back to my prepared remarks, Plato
once said—you know when I’m quoting Plato that I’m back to a prepared set of remarks—“The
direction in which education starts a man will determine his future life.” More Americans
are heeding that advice and going to college at record rates—including both women and
men, I might add, unlike in Plato’s day. At the same time, the high price of college
has created pressure and anxiety for students and families across the country, as we see
so often in our work today. The Consumer Financial Protection Bureau is
here in Wisconsin to focus on how tens of millions of Americans are affected by their
student debt load, which in the aggregate now tops $1.2 trillion. Wisconsin alone has
about 812,000 federal student loan borrowers—close to 1 million borrowers—who owe $18.2 billion.
This does not even include the expensive private student loans that many Wisconsin students
most likely had to take out to get through school. This is a significant burden now being
carried by many of our best and brightest. Student loans are now the largest source of
consumer debt outside of mortgages. Two-thirds of graduates are finishing their bachelor’s
degrees with debt that averages nearly $30,000. Among the most careful observers of economic
data, there is a growing consensus that a strain of this magnitude can have repercussions
that threaten the economic security of young Americans and economic growth for all Americans.
Significant debt can have a domino effect on the major choices people make in their
lives—whether to take a particular job or not, whether to move or not, whether to buy
a home or increasingly not, even whether to get married. Two years ago, we issued a public notice and
held a hearing to gather input on the student debt domino effect. We received more than
28,000 responses. This really struck a chord with people. The responses identified areas
of concern, including an overwhelming feeling by many borrowers that the process of paying
back their loans creates harms of its own and should be improved. They said the frustrations
and difficulties of understanding when, where, and how to pay back student debt are stressful
and counter-productive. Today we are going to be focusing very specifically on these
issues. Borrowers who finance a home, a car, or an
education often find that a company they never heard of acts as their loan servicer, with
the responsibility, on an ongoing basis, to collect and allocate the loan payments. That
is, in fact, their relationship over time. For young people finishing college, student
loan servicers will be their primary point of contact on their outstanding loans. These
companies are responsible for collecting payments and sending the payments to the loan holders.
Borrowers rely on them to process payments accurately, to provide billing information,
and to answer questions about their accounts, including ways to help prevent default. The
servicer is often different from the lender. People often are confused about this. This
means consumers often have no control or choice over the company they are dealing with to
manage their loans. As a growing share of student loan borrowers
reach out to their servicers for help, the problems they encounter bear an uncanny resemblance
to the situation we have seen very close up, where struggling homeowners reached out to
their mortgage servicers before, during, and after the financial crisis. Having seen the
improper and unnecessary foreclosures experienced by many homeowners, the Consumer Bureau is
concerned that inadequate servicing is also contributing to America’s growing student
loan default problem. At this point, about 8 million Americans are in default on more
than $100 billion in outstanding student loan balances. Today we are launching a public inquiry into
student loan servicing practices. The inquiry seeks information on the hurdles that make
repayment a stressful process and even at times a harmful one. For many young people,
repaying a student loan is one of their first significant experiences in the financial marketplace.
Starting off their financial lives with such a big debt load can feel overwhelming, and
it can become all the more stressful when things do not go right. Defaulting on a student
loan can be devastating—nobody wants to start out in life that way—making it harder
for a young person to gain a firm financial footing. The resulting pressures can make
student loan borrowers feel like they are walking a tightrope where any false move can
cause them to fall. The Request for Information that the Consumer
Bureau is issuing today is meant to find ways to put the “service” back into the student
loan servicing market and help people avoid unnecessary defaults. We are encouraging student
borrowers to share their experiences by visiting To spread word of this
initiative online, use the hashtag #StudentDebtStress. At every stage of the process of paying back
their student loans, borrowers have told us they are wrapped in mounds of red tape, particularly
for private student loans. From the beginning, when they first graduate and start making
their initial payments, consumers can experience problems with payment posting, problems with
attempted prepayments, and problems with partial rather than full payments. For example, some
former students have told us they find it takes a few days for servicers to process
their payments, which can cause them to have to pay additional interest. We have also heard
from borrowers who complain about inconsistency, noting that they often get widely different
information, protections, and rights depending on what type of loan they have. When borrowers do seek any sort of help, the
range and severity of their problems can quickly snowball. They have told us about lost paperwork,
unanswered inquiries, and no clear path to get answers. They also find that when errors
are made, they may not be fixed very quickly. They may encounter limited access to basic
account information, including their payment history over the years. One borrower told
us, for example, that she made her payment on-time and in-full each month through an
automatic payment system established by the lender, but still faced problems with unexpected
fees. Once again, these kinds of problems are not new to loan servicing in general,
and in particular they have happened repeatedly in the mortgage servicing market over the
past decade. The stress can get even worse when loans change
hands from one servicer to another. Transfers are very common in this market, and the consumer
has no control over it. Between 2010 and 2013, more than 10 million student loan borrowers
had their loans move from one servicer to another for various reasons other than consumer
preference. One person told us that after seven years her account was switched to another
company. Suddenly, she stopped receiving paper statements and since then has had to call
the new servicer each month to confirm her payment amount and that it was made. These loan transfers can produce real headaches
and confusion for consumers. Some borrowers have complained that they are charged late
fees because they mailed their payments to their old servicers without being aware that
this was now an error. Other types of problems can arise as well. We heard from one person
who said he made full payments each month for 6 years. But when he informed the new
company handling his loan that he wished to enroll in an alternative payment plan that
had been available from his original servicer, he was told that was no longer an option. In today’s Request for Information, we are
seeking greater understanding of industry practices and the underlying market forces
that are causing various pain points for borrowers. The inquiry seeks to determine if the student
loan servicing industry is doing things that make repayment more complicated and more costly
for consumers. We are interested to know whether payments are applied in ways that maximize
fees or lengthen the amount of time for repayment. And we also want to know whether servicers
are forwarding enough information to the new company when the rights to a loan are sold. We also intend to get a deeper understanding
of whether there are, in fact, as some would claim, economic incentives for inadequate
service. Because student loan borrowers generally do not get to choose the company that handles
their loans—it’s just a very important feature of this market, which is why we’re
emphasizing it—ordinary market forces will not guarantee reasonable customer care. The
model used in most third-party student loan servicing contracts provides companies with
a flat monthly fee for each account. This fee is generally fixed and does not rise or
fall depending on the level of attention that a particular borrower requires in a given
month. This means that student loan servicers often make more money when they spend as little
time as possible on each account, and they typically get paid more when a borrower is
in repayment longer. So we are evaluating whether the typical methods of servicer compensation
can jeopardize the interests of borrowers. We especially want to know if there are adequate
economic incentives to take the time to enroll people in flexible repayment options or to
help them avoid default. We also are interested in seeing what we can
learn from protections offered in other consumer credit markets. Protections offered to consumers
with credit cards and mortgages might help improve the quality of student loan servicing
as well. In recent years, policymakers have adopted broad-based changes to strengthen
federal consumer financial laws so that they better protect consumers with mortgages and
credit cards. But there is currently no comprehensive statutory or regulatory framework that provides
uniform standards for the servicing of all student loans. This means servicers in other markets are
subject to more precise rules that include customer service standards, limits on certain
fees, written acknowledgement of disputes, and protections when loans are sold. In some
cases, servicers are required to explain the options that are available to distressed borrowers.
For example, a mortgage servicer, under new rules of the Bureau, must consider all foreclosure
alternatives available and cannot steer homeowners to those options that are most financially
favorable to the servicer. And so we are deeply interested to learn more
about whether recent reforms in the credit card and mortgage servicing markets might
help improve performance in the student loan servicing market. After all, loan servicing
generally includes many common functions, irrespective of the underlying consumer financial
product, such as account maintenance, billing and payment processing, customer service,
and managing accounts for customers experiencing financial distress. Some of these comparisons may be quite specific.
For example, credit card users have had certain protections under the CARD Act since 2009.
Consumers get timely posting of their payments and periodic billing statements at least 21
days before payment is due. If a consumer has multiple balances at multiple interest
rates, any extra payments generally must be allocated to balances with the highest interest
rate, so borrowers can get out of debt as quickly as possible. We are seeking information
on whether applying these same approaches might benefit student loan borrowers as well. In the same vein, the Bureau is seeking information
on whether the reforms we recently made to the mortgage servicing market through new
regulations might also benefit student loan borrowers. Reforms related to payment handling,
loan transfers, error resolution, interest rate adjustment notifications, loan counseling,
and treatment of distressed borrowers are all now in place to improve the functioning
of the mortgage servicing market. We are analyzing whether these protections should inform policymakers
and market participants when considering improvements in student loan servicing, as well. Furthermore, the lack of transparency of the
student loan market remains deeply problematic. Both the financial regulators and the public
lack access to basic, fundamental data on student loan origination and performance.
Without this information, we will be challenged to understand the complete set of risks posed
by student debt burdens. Today’s Request for Information asks whether more can be done
on this issue and what, in fact, should be done. At the Consumer Bureau, our mission is to
provide evenhanded oversight of industry while promoting fair and transparent markets. For
this reason, we finalized a rule that will allow us to supervise larger nonbank student
loan servicers, thereby closing a significant gap in oversight for compliance with federal
consumer financial laws. So the landscape is already changing. We are also grateful to our partners at the
Departments of Education and Treasury and among the state attorneys general for their
work to protect student loan borrowers. As our country pursues a vigorous debate about
higher education policy, it is imperative that we keep in mind the very real challenges
of those who have already accrued substantial student loan debt. We must do more on their
behalf. Student loans play a pivotal role in young people’s lives as they seek to
establish their creditworthiness and eventually finance their first major purchases. And with
more than 40 million Americans now carrying substantial student debt loads, it is simply
unacceptable to leave them without robust consumer protections and a well-functioning
servicer market. Abigail Adams once said, “Learning is not
attained by chance; it must be sought for with ardor and diligence.” In today’s
world, her statement applies not only to how we should seek to educate ourselves, but also
to how we should seek to provide financing that makes educational opportunity possible.
The rights of consumers to be treated fairly and according to the law must likewise be
pursued with ardor and diligence, and we intend to do that. Thank you.
Thank you, Director Cordray. At this time I’d like to invite our guest panelists to
please take the stage, and while they’re doing so I will briefly introduce CFPB and
guest panelists. Steve Antonakes serves as the Deputy Director,
as well as the Associate Director for Supervision, Enforcement, and Fair Lending at the CFPB.
He is responsible for the supervision of all banks and non-banks under the CFPB’s jurisdiction,
and the enforcement of federal consumer protection and fair lending laws. We also have with us
Rohit Chopra, Assistant Director for the Bureau’s Office of Students and the Bureau’s Student
Loan Ombudsman. Our guest panelists are Jen Wang, Policy Director,
Young Invincibles; Timothy Fitzgibbon, Senior Vice President, National Council of Higher
Education Resources; Loonin, Student Loan Borrower Assistant Project
Director, National Consumer Law Center; Justin Draeger, President and CEO, National Association
of Student Financial Aid Administrators; Dick George, President and CEO, Great Lakes Higher
Education Corporation; Chuck Knepfle, Director of Financial Aid, Clemson University; and,
of course, Under Secretary Ted Mitchell. Steve, you have the floor. Great. Thank you and good morning, everyone.
My name is Steve Antonakes and I serve as the Deputy Director at the Bureau. It’s
a pleasure to be with you today and to facilitate this portion of our field hearing on student
loan servicing. We will hear from a number of respected panelists today, including consumer
advocates, financial aid administrators, and representatives from the student loan industry. Each panelist will make brief opening remarks
and then we’ll begin the discussion. After that, we will conduct the public testimony
component of the hearing, where audience members who have signed up will have an opportunity
to make a comment. Before we begin the panel discussion, let me note that you can examine
the complete Request for Information that the Director just described, as well as instructions
for how to submit an official comment, by visiting our website at Now, our panelists will discuss the best practices,
concerns, and innovations in the student loan servicing market. Each panelist will have
2 minutes to make a brief statement. Let’s begin with Justin Draeger.
Good morning and thank you for the invitation to be here today. From the National Association
of Student Financial Aid Administrators, or NASFAA, we represent 3,000 colleges and universities
across the country. Our members serve 9 out of 10 undergraduates attending college in
the United States. And the financial aid administrators, in particular, have a vested interested in
participating in this conversation. Schools, besides altruistically, and the financial
aid administrators, altruistically wanting to help borrowers have very few resources
currently to prohibit or stop people from borrowing loans, or curb their borrowing.
Schools are prohibited from getting in between a borrower and what are considered entitlement
dollars, federal student loans. Even though they can’t stop students from borrowing
or over-borrowing, they can provide mandatory counseling up front and then continued voluntary
counseling along the way. And for some students who find themselves in trouble down the road,
it’s often the schools who serve as advocates for them, trying to navigate a very complex
repayment environment, as has already been pointed out by Director Cordray. In addition, schools have a vested stake in
making sure that students stay current on their loans after they leave college, since
schools can lose Title IV eligibility for other students that are attending at their
institution, if their default rate, the number of students defaulting on their loans, goes
to high. So it’s for those reasons that we reached
out to institutions across the country and asked them to tell us, through a survey, what
could be done better, and we’ve published those survey results on our website in a report
this last winter, that talked about all the different processes that could be improved.
I want to hit on just a couple and wrap up. Of those who responded to the survey that
deal with students and their loans, half said that the repayment plans are just too complicated
for students to navigate. They also cited inconsistencies between servicers and how
they handle student loans, deferment and forbearance options, and how repayment plans were explained
to students. They varied based on servicer. From a school standpoint, one of the major
issues was it was difficult for a school to help a student navigate this process if they
didn’t understand the various differences between the servicers, and for that reason
we are calling on some sort of common manual or policies and procedures tool that would
outline how different servicers handle different loan interactions, so that they could clearly
see this servicer handles repayment plans this way, this servicer handles interest capitalization
this way, this servicer handles documentation for income-driven repayments this way. This
doesn’t exist right now and it’s a patchwork of effort on behalf of many schools to try
to put this together. Thank you. Great. Thank you, Justin. Next we’ll hear
from Timothy Fitzgibbon, Senior Vice President for the National Council of Higher Education
Resources. Thank you. Thank you for the opportunity to
participate today. This morning both Director Cordray and Secretary Mitchell talked about
unnecessary defaults and we believe that communication is the key to addressing some of those, so
that’s what my remarks will have to do with this morning. What we believe borrowers need
centers on providing personal communication, personal conversations, and not websites,
not collection letters, real person-to-person conversations. But we have to overcome unnecessary
technical barriers that are blocking these conversations between the borrower and the
service provider, barriers that are based on grossly outdated rules on the use of communications
technology to reach consumers on their cellular telephones. Timely and effective communications
about flexible and affordable repayment options. These are the keys to better service, fewer
defaults, and fewer borrowers languishing in default. The repayment programs, as Justin said, are
complicated, and even if simplified by Congress, students, borrowers, and families need conversations
to understand their options. The number one action the Bureau can take to help student
borrowers, the number one thing, is to push for modernizing the rules that implement the
Telephone Consumer Protection Act. Now this has nothing to do with telemarketers bothering
us at dinnertime. It has nothing to do with collection agencies making harassing phone
calls. It has everything to do with helping literally millions of borrowers get out of
default or avoid default all together by making it easier for servicers to speak with consumers
and offer individualized solutions—consumers who, by the way, almost exclusively use cell
phones. We no longer have the luxury of continuing
to debate this issue or kicking the can down the road. Tens of thousands of student loan
borrowers are timing out and needlessly defaulting on their loans every month. Tens of thousands
are timing out and defaulting every month, and countless more languish in default simply
because outdated rules governing auto-dialers and cell phones keep servicers from reaching
borrowers in time or from reaching them at all. NCHER and its members look forward to working
with Congress, the FCC, and the Bureau to develop reasonable rules combined with important
consumer protections that will allow the use of 21st century technology to communicate
with student loan borrowers. Thank you. Great. Thank you, Timothy. Next we’ll hear
from Dick George, President and CEO of Great Lakes Higher Education Corporation. Thanks very much for the opportunity to be
here today and to share thoughts with you on these critically important issues. Great
Lakes affiliated group is one of the largest servicers in the student loan space. We service
some $200 billion in student loans for nearly 9 million borrowers all across the country,
some 2,000 employees. We are a little bit unique in the sense that we are, at our parent
corporation level, a 501(c)(3) nonprofit charity. Our principal mission is post-secondary access
and success. And so everything that we do as a servicer is actually guided by that mission
of post-secondary access and success. And when we look at our role as a servicer,
and we look at the current media coverage of the student loan debt crisis, we have a
little bit different perspective as an operational entity than what we see as the principal focus
of that media coverage, and that is that there’s a great deal of concern with providing relief
for overburdened graduates, and in our view the focus really needs to be on a different
cohort of borrowers, and it’s the cohort not who have graduated and borrowed too much
but the cohort who have borrowed too little, because they failed at post-secondary education.
That cohort, which is predominantly comprised of low-income minority and first-generation
borrowers, it’s almost 80 to 85 percent of our delinquency and default portfolio. Unfortunately, when students drop out they
also tend to drop out of communication and become skips, both address and telephone,
which means that all of the tools and instruments that we have in deferment, forbearance, alternative
repayment methodologies, loan forgiveness—all of those things that we could normally bring
to bear to cure any delinquencies and default—and as Secretary Mitchell has said, we should
all be striving to zero default rate. It is perfectly conceivable that we would get there,
but we can’t do that if we can’t communicate with that vulnerable cohort of dropouts, and
we really need to work together to figure out how we can increase our level of communication
with those most vulnerable populations. That is probably the most difficult aspect we face
as a servicer, and I think it’s the most difficult aspect the program itself faces,
going forward, and one that we very much want to work with the CFPB and the Department of
Education in addressing. The program is increasingly complex. The numbers
of repayment alternatives, the numbers of loan forgiveness and deferment and forbearance
alternatives is extremely complex, but again, none of that can be brought to bear on behalf
of that most vulnerable cohort of dropouts unless we can actually find a way to communicate
with them early on. That might be the most important thing we can do in the servicing
environment. Thank you. Great. Thank you, Dick. Next we’ll hear
from Chuck Knepfle, the Director of Financial Aid at Clemson University. Thank you very much. I appreciate the willingness
on your part to hear from us, and I bring two perspectives today. One is I’m a practicing
financial aid director at a large public school, but also I currently serve as the Chair of
the National Direct Student Loan Coalition, a group of practicing financial aid administrators
at direct loan schools. And I want to tell you a little bit about
the evolution of direct loans over the last 20 years. Of course, we’re on, I think,
our 21st year of the existence of direct loans, and when it started it was a school’s choice
whether you went into the direct lending program or the bank-based FFEL program. Of course,
in 2010, we moved to 100 percent direct lending. The way that I’ve talked about it with my
colleagues around the country is, we ended up with about two-thirds of the old direct
lending program, and I’ll explain that a little bit. First of all, the first part of lending is
the origination and the borrower application process, and that has taken on the front end
of what direct lending looks like. So the schools work with one entity to originate
a loan, and then give that to the student. The second part is while the student is in
school, and that gives the school an opportunity, if the students asks, “I want to raise my
loan,” “I want to take less,” “I have questions about it, disbursed it to pay my
bill,” again, that’s all handled at the school level in conjunction with the Department
of Education. What has changed is the back end, the servicing
end, and there are some good things about the change and there are some bad things about
the change. The good is that we now have some redundancy in the servicing environment, which
is excellent. Under the old direct lending program we had one servicer, and although
the servicing was very good, there was one. If there was an issue with that one servicer,
of course, we would have issues. So the redundancy of servicing and keeping that servicing in
the private community, with contractor, works fine. The big change has been that the identity
of that servicers is now known to the student, and, in fact, it is marketed to the student.
If you look at the old direct lending prior to the switch to the new servicing model,
the default rates for student in direct lending, year after year, were consistently better
than those in the bank-based lending, and that makes a lot of sense. They were dealing
with one entity on the bank end and the Department of Ed was dealing with one servicer. Currently, the student sometimes might not
even know that the information coming from the servicer is about their federal loan.
They think, “I’m taking out a loan with the Department of Education.” The schools
tell them, “You’re taking out a loan with the Department of Education,” yet the communication
with the student comes from one of our 11, 12, 13—however many different direct loan
servicers we have right now. So I personally call for, in representing the Direct Loan
Coalition, that there’s just no need for the students to have to know who their servicer
is. We have the technology. We have everything in place where the communication can be from
the Department of Ed and that can be serviced by as many servicers as makes sense. But we
consistently hear from students, and Justin alluded to this in his comments earlier, that
they don’t know who their servicer is, or they’re receiving information from the servicers,
and much of it is very good. My daughter has a direct loan and the information she receives
is very good, but it’s not clear that that is a Department of Education, a federal loan,
and we think a lot of students are disregarding that communication because they don’t realize
that it’s back to their federal loan and that is contributing to the excessive default
rate that we have right now. Thank you. Thank you, Chuck. Next we’ll hear from Deanne
Loonin, Student Loan Borrower Assistant Project Director at the National Consumer Law Center.
Thank you, and thanks to Dr. Cordray and Under Secretary Mitchell, too, and CFPB for inviting
us here, or me here to speak today, and for your commitment to market-wide reform in the
student loan industry, and prioritizing borrower needs. I’m here today on behalf of my low-income
clients, and one thing I just want to sort of state from the outset, one thing about
the demographics is our clients, and all student loan borrowers, really, is that even though
a lot of them are young—and we hear a lot of talk about young people—the demographic
is much broader, all ages, basically all income levels, class, race. And even if they start
out young, they may not be young throughout the servicing and collection process because,
on the federal loan side, as many of you know quite extraordinarily, there is no statute
of limitations on collection. So, literally, these really can last a lifetime. On the private
loan side, it’s also important to note we’re seeing a lot more practices with shady debt
buyers and other ways in which even though there is a stated time limit, the loans may
be kept alive even when they shouldn’t be kept alive, and, in many cases, those are
predatory loans from the past. With respect to servicing, servicing really
is the lifeline for our clients and others like them. It’s the borrower’s primary
point of contact, and if done well it really is one of the main ways to help prevent borrowers
from defaulting. Unfortunately, what we see is that it’s often not done very well, and
I just want to focus particularly on what we’re looking for is comprehensive, unbiased
counseling for borrowers, so that, for example, on the federal side, people have rights that
they’re entitled to. There’s an array of relief programs. What we want to see is
that people get objective counseling about the full range of rights. What we often see
instead is counseling based on servicer convenience, or, in some cases, unfortunately, service
incompetency, or misaligned incentives. The same thing on the private loan side, even
though there aren’t as many mandatory options. Again, we’re looking for a system that is
working toward what is optimal for borrowers, not necessarily what’s optimal for the services,
and Director Cordray alluded to some of those same problems that had occurred in the mortgage
market, and still are occurring, to some extent. So we’re really pleased to see the steps
that CFPB has taken today. I want to make sure that we emphasize the urgency of what’s
going on now, that there’s a need for clear, transparent, and privately enforceable borrower
standards, just like there are, to some extent, in other consumer credit areas. Some of this
might take some new rule-making, and we urge the agencies to work together on that, but
that we don’t want to wait for that either, that there are existing tools, there’s existing
authority, both in terms of being able to set standards, whether it’s through the
department’s contracts, whether it’s through existing state and federal authority. But
that while we’re looking to the future that we’re also acting now, because people like
our clients are suffering now and really need the help now. And if servicing is done well,
this is a way to give people, for whom school might not have worked out the first time around,
it’s really their best chance at a fresh start, to go back to school, and to repayment,
and hopefully get into the labor force, as well.
Great. Thank you, Deanne. We’ll round out our opening comments with Jen Wang, the Policy
Director of Young Invincibles. Jen? Thank you so much, and thank you so much for
everyone who’s here in the room, and to CFPB and the Department of Education for doing
this important work on behalf of student loan borrowers. I’m the Policy Director at Young
Invincibles, a national nonprofit dedicated to elevating the millennial experience on
key economic issues affecting their lives. I’m here today to share with you the results
of a very recent survey on student loan servicing that we conducted over the past 2 months.
Student loan servicers, as many of you know, are companies that manage student loans when
they’re in repayment. For folks with federal loans, the Department of Education lends out
the loan but a separate company services the loan. So many borrowers, like Deanne mentioned,
will interact with their servicer for years, even decades, and this is why we want to ensure
that borrowers, particularly those who did not complete their education or those who
start out having trouble starting their career, have the most consumer-friendly experience
as possible. We received 1,230 survey responses about borrower
experiences with their student loan servicer. Our respondents are part of a self-selecting
sample, those with student loans who are having their loans serviced, and many of these borrowers
have a high level of concern, if not distress. Thirty-nine percent of them told us that they
have contracted their student loan servicer and were not able to reach a positive outcome.
One borrower shared her story. “I contacted by servicer about putting my account on forbearance
due to unemployment. Little did I know I was never put on forbearance and eventually my
account defaulted.” Fifty-four percent told us that they felt
that their servicer made it more difficult to repay their student loans. A borrower wrote,
“My servicer did not accurately display federal repayment plans that I was eligible
for.” Thirty-eight percent felt that they do not receive timely and accurate responses
from their servicers. Eighty-two percent said that they’ve had their servicer change,
and of those who experienced a servicer change, 32 percent experienced problems repaying their
loans as a result of that change. One borrower said, “When my loan servicer changed, my
loan balance appeared as zero for months. I attempted several times to get an answer,
to no avail. I then got a nasty letter in the mail demanding back payments, which had
never previously been billed to me.” Fifteen percent sent instructions to their
servicer with a payment, like asking a servicer to apply the payment to the highest-interest
loan, and those instructions were not followed. Another borrower said, “On multiple occasions
I’ve sent letters plainly detailing how I would like extra payments applied. These
letters were ignored and my servicer applied the payments as they saw fit.” So we feel that we have multiple reasons to
be concerned for borrowers and their experiences while they’re in repayment. I hope that
these stories and experiences shape today’s conversation. Great. Thank you, Jen, and let me thank all
of our panelists for their thoughtful opening remarks. Under Secretary Ted Mitchell, Rohit
Chopra, and I will now pose questions for our individual panel members, and Jen, since
you went last we’ll start with you. I was just wondering if you could expand, perhaps,
a little bit, on some of the stories you were referring to from your survey, as well as
other sources, and talk a little bit more about the experiences of interactions between
student loan borrowers and their servicers. Absolutely. The participants in our survey
filled out the survey online. They come from all over the country. They have an array of
different levels of educational attainment. Some did not complete college. There were
46.3 percent that had private student loans. Ninety percent have federal student loans.
Seven percent were not sure what kind of loan they had, and this is something that people
say to us all the time. “I don’t know whether my loan is a federal loan or a private
loan.” I think that part of the complexity about this federal-private split is that people
don’t realize that their servicer—which has a company name that’s different from
the Department of Education—is actually servicing their federal loan. I’d also like to highlight, a lot of our
borrowers specified the level of loan amount that they had, which speaks to how long some
of these people will actually be in repayment. Twenty-three percent have between $45,000
and $75,000 in student loan debt, and 16 percent have between $75,000 and $100,000 of student
loan debt. These borrowers could be in repayment for two decades. Seven percent of respondents said that they
sent instructions to their student loan servicer and those instructions were followed, so the
example that I gave earlier of the borrower who wanted their payment applied to the loan
with the highest interest rate, 7 percent of the borrowers said that that happened.
Fifteen percent said that, like I said, those instructions were not followed. So I want
to echo a lot of the sentiments that some of the folks around the table have said here,
in how we have to improve the borrower experience or the customer interaction experience that
a lot of the 40 million people who have student loans are experiencing out there. Thirty-percent of the people who took our
survey said that they had a servicer change and that they experienced problems. Now, this
could have been in response to applying for a public service loan forgiveness, but we
feel that 32 percent of the people having problems is too high of a number. We really
need to get that number down. I hope that that helps and I hope that that answers your
question. It does. Thank you, Jen. Under Secretary Mitchell? Sure. Thanks. Tim, what Jen described sounds
a lot like widespread, sort of stress, anxiety, difficulty in making effective communications
back and forth. In that context, how has the industry responded? What kind of changes in
practices and procedures are you seeing? I first would put into context the scope of
the problem. We hear the $30,000 in average debt for an individual with a bachelor’s
degree, but those individuals pay those loans back at about a 97 percent rate, where the
borrowers with loans over $100,000, the vast majority of those borrowers are graduate students
and they pay their loans back at a higher rate. So there’s a large group of borrowers
of the $1.2 trillion that are having a good experience. They’re paying as agreed, and
probably it’s because they were more prepared going into it. They graduated, as Dick said,
and they’re more prepared going into the process. I think the problem with a lot of the borrowers
who are first-year dropouts, that have a $5,000 loan balance or less, and those are the predominantly
borrowers that are defaulting, we’re not getting information to them soon enough. You
want to be able to speak to a student before he becomes a borrower, ideally, and oftentimes
servicers or collectors are dealing with borrowers way after the fact. They’re in over their
head. I have two kids in college and I talk to their friends, and a lot of them sign what
they need to sign to get into school, and they sign what they need to sign to stay in
school, and then 4 or 5 years later they see this big number and it’s very, very hard
to help them with that big number when, if you provide information up front. So I think it gets back to communications
on the front end, financial literacy services, how to choose a school, how to graduate on
time, how to borrow responsibly, and so on, and then, again, the communication piece.
If you can’t reach these individuals, as Dick said, a lot of times if they’re in
stress they’re not reaching out like they did in the survey for Young Invincibles. They’re
hard to find, and if you can’t find them, it’s difficult to counsel them, and if you
can’t contact them in the manner they want to be contacted in—I know if I don’t send
my kids a text, they don’t communicate with me. I think that’s fairly true for college
students of all ages, and it makes it more and more difficult to provide the counseling
that they need. So I don’t think it’s a lack of servicing,
servicers will, certainly, or interest in helping borrowers. Nobody has an incentive
in a failed situation for a borrower, but without early communication and consistent
communication it’s just very difficult to make a difference. Deanne, you mentioned the need for transparent
standards. I’m wondering, what do you think can be learned from standards and protections
in other consumer financial markets? Thanks. A lot of the standard protections
like credit cards and mortgages were enacted in response to crisis, and even though we
don’t draw all the same parallels, hopefully that we know that we can get out ahead a little
bit, but we certainly have a pending crisis here too. What we’re talking about, what’s
been enacted on mortgages, in particular, there are still problems out there. We know
that. But there has been a lot done in terms of, first of all, clear standards about things
like basic customer service, about right to information about your loan or the loan product,
and also even sort of the old RESPA Qualified Written Request, which is now sort of a notice
of error, where if there is a problem there’s a clear process about how you go through to
find out, first of all to let your servicer know that you know there’s a problem, to
make sure that there’s a time frame of when they have to respond. Those sorts of things are all the kinds of
things that are within the mortgage area, and, I think very importantly, which is sort
of what I was getting to about the comprehensive counseling, is required explanation prior
to foreclosure, prior to accelerating the debt, of what the loss mitigation options
are, so that actually you can stop the clock for people before they go into these draconian
default consequences and make sure that they are counseled properly. We need more options
on the private loan side, but at least some of the lenders do have them, but on the federal
loan side we know that there are a lot of those options. And then the last feature I would say, which
critical, and hopefully as we go through all of this, is that there’s private enforcement
associated with all of those rights, as well, so that even though we know that a lot of
public regulators are stepping up more than they have in the past, this has been an area
where there has not been a lot of aggressive enforcement. So we’re looking both for state
and federal public enforcement coupled with strong private enforcement. Justin, both you and Chuck and talked about
the important role the institution play as sort of a middleman in this, and it’s partly
about information and communication. But I’m wondering how you would see best practices
in engaging servicers with you in making sure that some of this information is developed
and promoted. Thanks for that question. The thing that I
think is most frustrating is there may be borrowers who withdraw from school, as has
been pointed out. They just go missing. It’s hard to find them. They’re not making payments.
That’s one set of challenges, and maybe we can, as you pointed out earlier, Dr. Mitchell,
maybe there are things that we can look at in auto-enrolling folks in income-driven repayment
if the Federal Government or some agency at the federal level has their wage information
already. But I think the frustrating thing is if there
are process-related issues standing in the way of a willing borrower, trying to make
a payment or trying to get into a forbearance or deferment and can’t because it’s so
complicated, and in those instances they may very well come back to the school to act as
an intermediary on their behalf. The number one challenge that schools cite is this inability
to easily look up and see what the different processes are between servicers. Chuck talked about the Federal Family Education
Loan program. In that program, which was bank-based lending insured by the Federal Government,
they had a manual that outlined all the standard practices between all the lenders and guarantors
in the FFEL program. Where there were differences, there was an appendix that said, “This guarantor
will handle this process this way. This guarantor will handle this process that way.” Nothing
like this exists and we understand there will be differences in servicing, because this
is a competitive market—we’re trying to leverage the best out of every servicer—but
a school’s inability to understand what those differences are in a very easy way leads
to a lot of unnecessary work and roadblocks in the process. The second thing I would say that we hear
a lot of is concern about marketing and the firewall between servicers who have other
lines of business, and their federal servicing contracts. So, for example, last week we saw
an example of a school who sent us a piece of marketing that a servicer was doing on
a private consolidation loan, that would consolidate federal and private loans together. That same
entity is also a federal loan servicer. We don’t understand, or it’s not very transparent
to us what those firewalls are between their role as a federal servicer and then another
line of business where they’re doing private student loans or other collections or servicing. Dick, the Bureau’s analysis of student loan
default suggests a balance that is much lower for defaulters, on average, than the typical
borrower, which is what you mentioned about non-completers. What other data do you have
that suggests a warning sign for borrowers, and how do you use that in your business? Well, there are sort of two levels of warning
signs that one could think about. We could use predictive analysis based on some fairly
limited demographic characteristics—ZIP code of residence, college attended, things
like that. With four or five piece of data we could probably get to a 95 percent confidence
level on the probability of ultimate delinquency and default. Now there are some statutory
limitations on what sorts of demographic data we’re allowed to use, but I think you could
build a very robust predictive analysis and then provide some targeted counseling to those
borrowers well before they enter school. So something, I think, could be developed in
that space. Once they’re in school and once they’ve
borrowed, the warning signs are pretty obvious. Clearly, the most important warning signal
is early withdrawal from school. As I said, that’s the cohort that is comprised of the
most vulnerable students, and that is the single most important warning signal. One
of the things that we could do—and it’s possibility that we could work with institutions
to do—is get earlier notification of withdrawal. Currently, it can take quite some time, one,
before the school recognizes the student has withdrawn, and, two, before the servicer then
receives the notification. So if we could accelerate that process we could potentially
be able to reach that student before they’ve moved or relocated and become a skip. The other thing that we see in a warning signal
is did they actually receive exit counseling or not. We’ve done some data sampling on
that and it’s pretty clear that it has an impact. Some 23 percent of borrowers who receive
exit counseling will ultimately become delinquent or default, whereas 37 percent of those who
don’t receive exit counseling will ultimately become delinquent and default, so that’s
another warning signal. And the other ones that are equally important
are, are we able to be in contact? Does that borrower log into our site? Have we actually
had a right party contact with that borrower? Has that borrower ever been able to sign up
for auto-pay? Has that borrower changed repayment plans while in grace? All of those things
signal a propensity to delinquency and default going forward, and we could develop more targeted
programs to work with those borrowers, where we see those warning signals, but the ultimate
problem, as Tim alluded to, is TCPA and other constraints on our ability to contact borrowers,
and the fact that when borrowers drop out they’ve had a failure experience and oftentimes
they’re psychologically predisposed not to want to talk to us. So even if we have
a number, even if we have a good address, in many, many instances, it’s going to take
a different type of counseling to communicate effectively with those borrowers, even when
we know the warning signals. Chuck, Deanne really has talked a couple of
times about sort of the heart of the matter being how servicers provide counseling and
guidance to borrowers. You hear from the other end. You hear from alumni and graduates of
other places, of other institutions. What perspective are you getting from them on the
quality of that advice? Justin mentioned earlier a survey that the
Direct Loan Coalition and NASFA worked on together, and we asked that specific question.
I think Justin even cited the statistic that half of the financial aid administrators who
responded mentioned that, in their opinion, when they’ve talked to students, repayment
plans were not clearly explained to them. And it actually went up to about 60 percent
specific to income-driven plans. And that’s a very telling statistic, of course, but it’s
just a yes or no box. I think the comments are where we really start to dig into the
problem. And as I looked through the various responses,
a couple of themes came out. A few responses noted that when borrowers asked about income-based
repayment, they were told they needed to enter one of the standard repayment plans first,
and once they got into the standard they could talk about moving into income-based repayment.
That’s obviously a concern if that’s happening. Others mentioned that—and we’ve heard
this very consistently for years—that when a student is having problems making their
payments, the immediate reaction is deferment forbearance, and, of course, this has been
somewhat rectified with the new pricing structure, but that’s a faster process and, thus, as
was mentioned in the opening remarks, tends to be a cheaper process for a servicer to
go through than actually going through the steps to put a student in income-based repayment.
Now, we’re very happy that the steps to income-based repayment are getting easier
to get in and stay in, and we’re happy that the incentives have changed. So there’s
definite progress on this just since 6 months ago when we did the survey, but it’s still
important to note. We also heard, with some relative frequency,
that information coming from different servicers was inconsistent with each other, and that
was mentioned earlier. Justin mentioned that. But also even depending on which customer
service rep you got on the phone, you might get different information, even at the same
servicer. And then the last comment, which makes some
sense but I want to note, is that the schools noted that when the school got on the phone
with the student, the advice and the experience went a whole lot better than when it was just
the student. And that, of course, makes sense but the fact that that’s coming up and schools
are noticing that I think is of concern. Now I say all that but now I want to come
to the defense of the servicers, really, based on a structure we have in place. You mentioned
that just last week they wrapped up rule-making on another repayment plan. That seems to be
going in the wrong direction in a whole lot of schools’ opinions. There are currently
six—that, in truth, is a seventh—and, to be honest, if I was on the phone at one
of the loan servicers and tried to explain six or seven different repayment plans to
a student, I can’t imagine that conversation going well. There’s just simply too many
options. So I do want to take this time to call upon maybe calmer minds to say let’s
settle on a couple of plans and move forward, and I think this will solve some problems,
as well. And I want to mention one other idea. Dick
mentioned exit counseling and the Direct Loan Coalition has come out with a proposal. Currently
exit counseling occurs at the school level. When a student graduates—and this doesn’t
get at the ones who withdraw—but when a student graduates, we know they’re graduating,
we send them information about, here’s something you need to go through. It talks about your
repayment obligations, different repayment plans, that sort of thing. But note, it’s
for students who graduate. We can’t proactively send it out to those who withdraw, and very
accurately that was noted that that’s one of the bigger problems. Potentially that might be moved on to the
servicing end. So we send out exit information to our students in March or April, for those
that graduated last week, and they filled that out, yet they won’t go into repayment
and select a repayment plan for 6 months after graduation, which is close to Christmas. So
maybe the exit counseling process could be moved, and there’s your consistency now.
Now you have a consistent process right before a student goes into repayment where all the
different payment options are outlined, and then perhaps the servicers could help with
that process, and maybe that might provide some of that up-front information that the
students need. Thank you, Chuck. We have reached our lightning
round. I will have one question that I will ask each of the panelists to respond to, and,
Chuck, you certainly touched upon this yourself in your remarks there. I want to just ask
you all, if you could, give one or two best practices or areas of improvement that you
would like to see in the student loan servicing market. Jen, we can start with you and just
work our way around the table. Absolutely. One area of improvement that we
would really like to see, after hearing from borrowers, is to release information about
how servicers are doing. We have advocated for some time for a complaint system, which
we’re thrilled that some people are taking interest in, but a lot of borrowers out there
feel like the struggles that they’re going through in dealing with their servicer, or
paying down their debt, they feel often very alone in that, and I think that there are
many borrowers who look for answers online and can’t find them, sometimes contact their
servicer and don’t get a good resolution. We try to direct them to CFPB whenever we
can, to file complaints, but I think that there has to be better consumer information
out there about performance. Another thing that I think would be a big
help is to definitely hold all the servicers to an absolute standard, and this is something
that I think many have advocated for in the consumer space. I think that competition between
the servicers is a good thing but if you’re holding servicers to a standard that is only
set in place by the absolute best performer but isn’t across the board, I think that
there’s just better incentives out there for these companies. Two things quickly, and this was allowing
people to switch is really important, and certainly probably the best way to figure
out what customer service or shopping. And then having a specialized, either within the
same servicer or potentially experimenting with other ways, so that there are specialty
units. I think it’s the best way to get at giving people accurate advice about the
range of options. It’s not, in my view, about contact, and that might be an issue
in some ways, although that’s a separate issue. I’m on the line all the time, or
quite often with my own clients, I hear inaccurate information being given to them all the time.
We now have a crisis, really, in the for-profit school industry which we all know about, and
these servicers should be ready for that, but if they’re not ready yet, at least get
some specialized unit within your servicer so that really vulnerable people can get accurate
information. I’ll give two real quick. A couple of years
ago I moved to take the job at Clemson. I was in Ohio. As I moved to South Carolina
I had a question about my taxes, and I contacted the address and the phone number that I had
when I was in Ohio and they told me, “Well, you live in South Carolina now. You have a
different servicer.” So I had to contact the IRS servicer for the Southern region,
and it hit me that there are multiple servicers servicing tax forms, and I didn’t know that.
And maybe that’s a model where we can still have the private industry involved with servicing
but keep that information. Don’t make it so public to the student, and I mentioned
earlier how important that is. The second—and Deanne alluded to this a
little, and I’ll follow up—in the mortgage industry, when loans are sold between entities,
there is a law, and I believe it’s in the Truth in Lending Act but I’m not sure where
the law is, but it states that the bank draft information, when a loan is sold, must transfer
with the loan, and the borrower cannot see an interruption in the bank drafts of their
mortgage payment. I’m a computer guy. It sounds like copy-and-paste that right into
the loan servicing and we would address a whole lot of the concerns with the 10 million
borrowers who switched servicers. Just to repeat one of Deanne’s, on specialty
counseling, clearly a best practice, and we’re already well along where we’ve established
SCRA counselors and IDR counselors so that as calls are escalated they can go to much
higher level and more experienced counselors who focus specifically on one or more of those
benefit programs, and clearly that does have a positive impact on borrower understanding
and outcome. But two things I would offer as best practices.
One would be much more robust financial literacy training. I would almost make Title IV eligibility
conditional on having for-credit financial literacy courses at the institution. If we
have expert counselors in our call centers, and the level of financial literacy among
the borrowing population remains where it is today, the ability for that communication
to have a positive and meaningful outcome is pretty limited. And I think institutions
and the Department of Education could work towards that goal of mandatory, credit-bearing
financial literacy. The other thing that I would suggest as a
best practice is limiting the duration of forbearance. Too often we see forbearance
used as if it were a repayment methodology as opposed to a step to get to an effective
repayment methodology, and I think we can do some work to limit the duration of forbearance
as to what would be needed in the individual borrower’s circumstance, so if they say,
“I can’t make my payment this month. I’m getting a new job. I’ll be able to be back
on track in 60 days or 90 days,” the forbearance should be limited to that 60-day or 90-day
period. Otherwise, the potential of losing track with that borrower is significantly
heightened, and that ultimately is what leads to breakdown of communication, delinquency,
and default. Dick put it very well about financial literacy,
the need for that, so I would just add a bit of caution to what the counseling is, because
we’ve kind of gone from an idea of the advice you give to a young person or anyone going
to school is you borrow only what you need and pay it back as quickly as you can, and
we’ve kind of morphed to this, don’t worry so much about how much you borrow and if you
pay it back long enough some of it will be forgiven. Senator Harkin made a good comment
at a hearing last fall, to be careful about the advice. If we talk to borrowers, don’t
discard the standard repayment, which might get them to pay the loan off in 10 years.
It might be $40 a month more but they’ll pay it off in 10 years. That little bit can
make a difference, and if they pay it in 16 years, they don’t get the forgiveness if
they’re in a 20-year forgiveness program, and they’ve paid interest for 6 years more
than they needed to. We try to simplify these programs and IBR
is good for a lot of people but IBR isn’t for everybody and we need to be careful that
that’s not just a one-size-fits-all. The best practice that I would highlight—and
I apologize for sounding like a broken record here, but I’ll just say it again, which
is transparency is a good thing. Common policy and procedures manual. Drive servicers to
the best practices because they’re transparent to everybody on what they’re doing, with
every practice that they’re engaging in with borrowers, and, too, it helps schools
know how to help students when they act in that intermediary role. Thank you, everyone. At this moment I’ll
ask our panelists to rejoin the audience, please. Everyone join me in thanking them
for their participation at our field hearing today. At this time I’ll turn it back over to Zixta
Martinez, our Associate Director for External Affairs. Thank you, Steve. An important part of how
the Bureau helps consumer finance markets work across the U.S. is to hear directly from
consumers, from industry, from our state and local partners, and from community advocates.
One of the ways that the Bureau gathers feedback is through public events such as these. We
have held public hearings, public town halls, and other events in places such as Indianapolis;
Minneapolis; Birmingham, Alabama; Sioux Falls, South Dakota; Durham, North Carolina; Detroit;
St. Louis; Atlanta; Des Moines, Iowa; Miami; Los Angeles; Itta Bena, Mississippi; Oklahoma
City; New Orleans; Phoenix; Nashville; Reno, Nevada; El Paso, Texas; Newark, New Jersey;
Richmond, Virginia; and, of course, now we can add Milwaukee, Wisconsin. At these events, we not only hear from experts
in the field, we also invite the public to participate, and before I open the floor for
public comments, I want to remind folks that there are several other ways to communicate
your observations, concerns, or complaints to the CFPB. You can file a complaint with
the CFPB through our website at Our website will walk you through the process
for filing a consumer complaint about a financial product or service. The CFPB takes complaints
about mortgages, car loans or leases, payday loans, student loans, or other consumer loans.
We take complaints about credit cards, prepaid cards, credit reporting, debt collection,
money transfers, bank accounts and services, and other financial services. If you don’t have a specific consumer complaint
but would like to share your story with us, we have a feature on our website called Tell
Us Your Story, where you can tell us your story, good or bad, about your experience
with consumer financial products or services. Your story will help inform the work that
we do to protect consumers and create a fairer marketplace. We also have another feature called Ask CFPB,
where you can find answers to over 1,000 frequently asked questions about consumer financial issues,
as well as additional resources. I encourage you to visit to learn
more about the resources and tools the Bureau has developed to help consumers make the best
decisions for themselves and for their family. Now it’s time to hear from public participants
here today. A number of you have signed up to share public comments and observations
about today’s discussion. The public comment portion of the field hearing is also an important
opportunity for the CFPB to hear about what’s happening in consumer finance markets in your
community. Each person who signed up to provide testimony will have 2 minutes to do so, and
what we hear from is invaluable. We want to hear from as many of you as possible, so I
encourage you to please observe the time limit so that everyone who signed up has the opportunity
to share their observations with us today. Our first member is David Mancl, who is with
the Wisconsin Department of Financial Institutions. David? Good morning and thank you for the opportunity
to come to Wisconsin for this important topic. I was encouraged to hear about the possibility
of requiring some financial literacy for such loans or grants in the future, so I’d be
encouraged to keep that comment going and that discussion going. Thank you, Mr. Mancl. Thank you for joining
us this morning. Karen Bauer? Hi. I’m an attorney at the Legal Aid Society
of Milwaukee and I very frequently deal with borrowers in distress. But the first thing
I wanted to talk about today was my own experience this week. I owe $127,000 in student loans,
and, like I said, I’m a legal aid attorney, so, as you can imagine, I have a partial financial
hardship which means that I’m doing income-based repayment. When I did my taxes I realized
that I’d had a substantial change in my income in the downward direction, unfortunately,
and I called my servicer. I know what the rules are but I wanted to check in and see
what they said. I said, “My income went down. I need to
talk about my income-based repayments.” Their response was, “You’re not up for
recertification until September. You have to wait until then.” And I said, “No,
I don’t think I do,” and their response was, “If you send that in now we will deny
it.” And I asked for a supervisor. We resolved it, but if my student loan servicer is giving
me false information, that’s true for almost everyone. And I think, among my clients, I’ve
had issues like people who call and say that they’re disabled, and they’re never told
about the possibility of a disability discharge on their student loan. That’s a big one.
I’ve had people who have had lawsuits filed by private student lenders with inadequate
documentation attached to those lawsuit, very similar to the robo-signing crisis with mortgage
foreclosure. Predatory actors soliciting borrowers via radio, TV, letters, the Internet, to pay
for student loan consolidations through direct loans, or to set them up with income-based
repayment. I really think that some regulation is called for in that arena, because no one
should have to pay to sign up for income-based repayment. Also, I have borrowers who attend school for
a day, a week, or a month, and then withdraw and owe thousands of dollars, and the problem
there is that the school is not telling people that the time that they’re withdrawing from
classes, “You will still owe money.” So I think that’s a big concern too. But the item that I wanted to speak to you
about very quickly was the possibility of setting up a hotline similar to the Homeowners
HOPE Hotline, which is independent of the servicers, so that people can call someone
who is not their servicer if they think something is up, that they’re told they can’t recertify
their IBM for 5 more months, so that they can get some unbiased information regarding
their loans and the repayment possibilities. Thank you. Thank you, Ms. Bauer. Selma Allie? Bill Druliner? Thank you. I appreciate the CFPB’s focus
on this really important issue. It’s clear that the mounting level of student loan debt
and confusion regarding options is an issue. I am Bill Druliner. I’m the Community Engagement
Manager for GreenPath Financial Wellness. We’re a nonprofit, national financial education
and counseling organization, and we have 60 counseling locations in over 16 states, and
served 200,000 households last year. We did an internal review of clients that were calling
us saying that they had issues with student loan debt, and we found last year that they
had a very similar profile to consumers that called us with credit card debt issues or
mortgage delinquency issues, as well. So what we’ve really found is that there
really is a separate issue between good advice being given from servicers and the need for
holistic financial counseling for consumers. Even the best servicer with the best process
and the best intentions at heard will not be able to help a consumer that also has a
mortgage delinquency issue or is carrying credit card debt at 28 percent interest. And
so it’s very important that there is the opportunity for holistic, nonprofit, accredited
financial counseling to be available for consumers. Currently, the state of pay is that it’s
really difficult to tell legitimate players in the financial counseling industry from
those that are scammers. There’s a lot of advertising happening in this space, and a
challenge that we have is that currently there really is no funding mechanism for nonprofit
agencies to be able to offer counseling in this way. So even those nonprofit agencies
seeking to help consumers really only can resort to a client pay model to be able to
do it. Then it causes confusion between the legit and the illegitimate players. There has been a proven model showing the
effectiveness of holistic financial counseling, both in the pre-purchase counseling space,
in decreasing subsequent mortgage delinquencies, as well as in the foreclosure mitigation space,
in helping to drive better outcomes for consumers that are struggling. And so we really would
encourage you to look at nonprofit agencies that have experience in both financial counseling
and credit counseling, as well as the housing counseling space, because there actually is
capacity in that industry right now to be able to help with this issue, due to the decline
in foreclosure issues across the country. Thank you, Mr. Druliner. John Fisher? Thank you. I didn’t really know I was going
to be called on. I’m with Money Management International, and we’re the largest nonprofit
national counseling organization. We’re a member of the HOPENOW Hotline organization,
and I think that’s an excellent model to consider here. There’s so much that we can
do here, in terms of providing not only complete holistic counseling, but there’s a lot of
things that we can do that might be beyond your imagination right now. There’s things
that we can do, like we can record every phone call that we have. We can use tools to mine
that information, protecting the information of the person, to understand why are they
calling, what are the things that they’re asking us. We can provide excellent reporting
in all those things. So what’s interesting, as Bill talked about,
with regard to the credit card challenges and the housing challenges that we’re seeing
right now is the engagement piece, and it was mentioned by a lot of the panelists, that
the challenge is sometimes to get the people on the phone and talk to them. And that’s
the outreach part but the other part is the inreach part. What we’ve seen historically
is people don’t call. They don’t always know what’s going to happen when they call
and they fear acceleration of their problem by a party on the other end. They sometimes
generally will trust a nonprofit organization more—not always. I think they trust the people on the HOPENOW
line more because it’s supported by a lot of people. In many cases, in these markets,
the only thing that comes out in the press are the problems and the people to avoid,
and what happens is everyone avoids everyone. And then, sometime late at night, they see
the late night ads, and it’s very current in the student loan market right now, “We’ll
fix your problems in 15 minutes.” Well, nobody’s going to fix these problems in
15 minutes. It takes a very engaged, knowledgeable, trained person to help them with that. So
I think that’s a really important thing to consider. We’re not the whole solution, but the counseling
organizations that Bill and I represent, two of the largest, could do a lot. You could
do a very interesting try-out there. So thanks. Thank you, Mr. Fisher. Jessica Roulette? John
Wasik? Hello. I’m John Wasik. I’ve been writing
about this for our Forbes and I’m also researching it for the Nation Institute. Some of these
predatory practices are way out of control. There are firms across the country that are
exploiting a lot of people and they’re completely unregulated. My question for Under Secretary
Mitchell is, is the Department of Education going to begin to regulate these firms? Do
you know the scope of the problem, and how would you approach it? This is not Q&A with the press at the moment.
I’m sure Under Secretary Mitchell will be glad to speak with you following the field
hearing, although I certainly can’t speak for him. But thank you for your participation
here. Saul Newton? Thank you. First I want to welcome you to
Milwaukee and thank you for holding this hearing and showing an interest in this important
issue. My name is Saul Newton. I’m a college student. I’m also a veteran, and I’m a
student loan borrower, and I’d just like to tell you my story. I started my college career, actually, 8 years
ago now. I was the first in my family to go to college and it was very important to me
that I get my education. So when I graduated from high school I started attending a small
state university here, certainly not an extravagant school or one that, by comparison, would be
very expensive. I was trying to be responsible. But my family couldn’t even afford tuition
at a state university, and so in order to afford my tuition I had to rely on financial
aid, and particularly student loans. While I was in school I worked several jobs to make
ends meet, but I was drowning. In the 2 years that I was enrolled at this particular institution
I saw my tuition go up $1,600 a semester. So after 2 years of attending school I couldn’t
afford it any more and I had to drop out. I ended up joining the military so that I
could have access to the GI Bill in order to serve my country and come back and continue
with my education. About 3 months after I dropped out of school I was deployed to Kandahar
in Afghanistan, and while I was deployed to Kandahar I was going on daily patrols. It
was a very active area and it was a time in Afghanistan where it was not good for us.
But while I was going out on daily patrols I was also forced to continue making my student
loan payments, because if I didn’t, it would be disastrous for my personal credit and my
financial future. And so, for 12 months, while I was deployed, I was making my student loan
payments. And now I’m back in school and I’m really
thankful that I have the GI Bill at my disposal and I’m able to continue working on my education,
but student shouldn’t have to go to war to afford a college education, and while they’re
serving in the war— —and while they’re deployed, their focus
should not be on making their student loan payments. The other thing that I would just like to
add, separate from that, is one of the panelists briefly brought up something that I’ve seen
up close, not personally but through friends of mine, and that’s predatory institutions,
particularly preying on veterans. For-profit schools who are preying on veterans are a
big driver of this crisis, and there desperately needs to be something done about that. Thank
you. Thank you for your comments and thank you
for your service to our country. Tom Penalung? Becky Thies? Thank you so much for holding this hearing
today on such an important topic. As we’ve heard, over 40 million Americans have student
debt, and as many deal with this debt they rely on loan servicers for information about
their loans, to obtain a deferment or forbearance, or to enroll in an alternative repayment program.
Unfortunately, as we have seen in the mortgage market, as well, far too many borrowers have
unsatisfactory experiences with their servicers, ranging from unfair treatment to being subject
to illegal practices by servicers as they pay back their loans. The CFPB itself has found that student loan
servicers were harming borrowers by doing things like allocating payments so as to maximize
late fees, deceiving borrowers by misrepresenting minimum payments, charging illegal late fees,
not being up front with consumers about protections they have under bankruptcy laws, making illegal
debt collection calls, and failing to provide accurate tax information. The CFPB should
use the authority that you do have to make sure that borrowers are treated fairly and
that they get the information that they need to take advantage of any repayment plans available
to them. This means that abusive profit-increasing practices that are banned in other consumer
debt industries but are still used by companies that collect payments on private student loans
must be curbed. Incompetent servicing practices truly harm
borrowers. Too many people are getting squeezed by practices like servicers misapplying payments.
To help borrowers to the fullest extent possible, the CFPB should act now with the authority
that it does have to help borrowers, but also needs to be creative moving forward, to figure
out which interventions will best help in this industry. Thank you. Thank you, Ms. Thies. Emily Brunjes? First of all, thank you for the opportunity
to share comments today. My name is Emily Brunjes. I’m here with colleagues from the
Wisconsin HOPE Lab, where I work as data manager and analyst. We are a translational research
lab, primarily concerned with college affordability, and very concerned with the issues being discussed
here today. They’re central to what we do because we’re interested not only in students
getting into school but also completing their degrees. I hope you’ll forgive me. I really appreciate
the tone and the direction of this conversation, but being in an organization that’s really
focused on affordability, I’d like to shift the focus back there again, because we know
that the cause of student debt is that college is really not affordable for so many students.
Here in Milwaukee, as an example, University of Milwaukee has seen a huge swell in enrollments
at the same time state appropriations have remained relatively flat. And so the result,
of course, is that the cost to students has gone up dramatically. This puts students in
a pinch. For a lot of these students, from low- to moderate-income families, they may
face a bill of upward of $15,000 a year in order to attend college, ever after you account
for all of the grants that they’ve received. And, not surprisingly, they turn to loans
to cover that difference, because, as others have mentioned, work is really not going to
meet that balance. And so now we see over 75 percent of graduates from UW-Milwaukee
graduating with loans averaging around $33,000 in debt in total. And entering a weak economy,
entering a job market in a city that’s profoundly segregated, they find themselves in a very
difficult situation, and their odds of repayment are too low. So my contribution to this conversation is
to say that while it is good to improve terms of repayment and to address issues with servicing,
really we need to go deeper than that and go to the core of the issue, which is about
college affordability. And so we are very excited about the partnerships that are happening
between the Department of Education and the CFPB, and would like to see that continue,
in the search for how to make college affordable. Thank you for your contributions and for your
tone. We appreciate it greatly. Dan Rial? Hello. I’ve been a student a college a number
of years ago. I have graduated with a 3.84 on my GPA, highest honors, and I found, after
I had graduated, that my degree is essentially garbage, on top of that, being unable to get
a job in the career for which I have studied. I have also met with my servicer, who has
not been entirely forthright with me on a number of issues, starting with the income-based
repayment. I was put on such a program but after 3 years I’ve noticed that I now owe
$10,000 more than when I graduated, despite the fact that I was even trying to make more
than the minimum payments. What that says to me is that there is no point in trying,
if my best will only get me deeper into debt. The fact of the matter is, I’m not even
the worst case I know of, who I’ve gone to school with. I have a friend who’s been
told that they now have to pay $1,900 a month, when they only make $1,200. This is unconscionable. Furthermore, there’s also the fact that
these servicers aren’t being truthful to us. You know, they tell us, “Oh, yes, we
will get you paperwork to put you onto this program or that program, forbearance, deferment,
income-based repayment.” They’ll send the paperwork sometimes—sometimes. And even
when you send it back to them, they have been like, “We never got it.” I have been forced
into default by my servicer because they have been unwilling to work with me and I can no
longer trust them, and yet I’ve heard some discussion about how an exit counseling should
be taken on by the servicer. Why, if I cannot trust them? Thank you. Thank you. I hear the frustration and I can
only begin to guess at how difficult it must have been to gather the courage to share that
with us. We’re deeply appreciative that you did. It is inspiring to us to make sure
that we keep our nose to the grindstone and continue to do our part, modest though it
may be, to make things better in consumer finance markets, because it’s really about
consumers. So we’re deeply grateful that you are here. Katie Buitrago? Thank you. Thank you again for shedding a
light on this important issue. I’m here from Woodstock Institute. We are a research
and policy nonprofit in Chicago. And I’m here to talk a little bit about some research
we just released on for-profit colleges, which has been alluded to by some of the other people
who have testified today, and I think a lot of these schools produce poor outcomes that
lead to issues with repayment and ultimately servicing problems. As you know, for-profit colleges are educating
a growing proportion of undergraduates, especially low-income students and students of color
and are often more expensive than comparable programs at public colleges and produce worse
educational outcomes. Just one-quarter of African American students at for-profit colleges
graduate within 6 years, and many of them are under investigation. Our research found
that many students at for-profit colleges are more likely to borrow, and borrow more
than students at other types of schools, even controlling for important factors that influence
debt, like socioeconomic background, college costs, financial aid and resources, and more. Our report found that students at 2-year,
for-profit colleges were nearly 50 percent more likely to borrow than students at public
colleges. When you look at it by race, Latino students were more than three times as likely
to borrow at 2-year, for-profit colleges, and African American students were more than
twice as likely to borrow. Latino and white students at 4-year, for-profit colleges were
significantly more likely to borrow than similar students at other schools, and students who
borrowed at for-profit colleges took out $1,300 more, on average, at 2-year schools than at
other types of schools. Based on these findings, we’re concerned
that there’s something happening in the business models of for-profit colleges that
encourages students to borrow to finance their educations, rather than seeking out other
options. This merits further investigation. Colleges that foster unaffordable debt and
generate poor educational outcomes should not be allowed to take advantage of students. We applaud the CFPB’s announcement today
that it’s launching an inquiry into servicing practices that harm so many for-profit college
students. We urge the CFPB to create servicing standards that encourage affordable repayment
options, improve communications between servicers and borrowers, use an appeal process for dissatisfied
borrowers, require timely and accurate application of loan payments, and early notification of
resources for borrowers in default, honor payment plans while servicing rights are transferred,
and provide adequate and well-trained staff. These changes would help ensure that borrowers
who cannot afford their loans, especially students who attended for-profit colleges,
are treated fairly and have the opportunity to pay what they can until they get back on
their feet. Thank you. Thank you, Ms. Buitrago. Martha Martin? Hello. I’m here as a parent plus loan-giver,
whatever term we’d use there. My experience was with Direct Loans and Great Lakes loans.
My son and I had taken out loans over the course of his 4-year undergraduate experience
at a state school. Things seemed to be going fine. I was paying more than just the interest
each month, between $230 and $450 per month, and then one month, in February of 2013, instead
of $230, $2,300 was automatically deducted from my account. I called the following Monday
to Direct Loans and they said, “Sure. No problem. We’ll send you a check in the mail.”
A few weeks later I still hadn’t gotten the check, and I noticed that Direct Loans
had been sold to Great Lakes, at which time I called Great Lakes and they said, “Oh,
well, that’s on them. There’s nothing we can do about that. We’re not sending
a check to you.” I called Direct Loans back. “No, that’s
now Great Lakes. We don’t own it anymore.” I worked my way up the chain. I was told,
“Well, of course, you must have okayed that. Otherwise there’s no way it could’ve happened,”
and I said, “It was just a decimal problem, obviously. But it just so happens I need to
get a new roof this month and a new washing machine, and a new front porch, and my son
is getting is married, so I really can’t afford this extra amount, and I’m a retiree.” Over the past 2 years I’ve been hung up
on numerous times. I finally did get a three-way conversation between Direct Loans and Great
Lakes and it sounded like Great Lakes would do something, but then they called and said
no. I went to the ombudsman at Great Lakes. I was just kind of laughed out of the situation.
I found out I could call the Department of Education, and spoke with their ombudsman.
I went through two different people. They lost my file. They said, “Well, why did
you send in a check for $2,300?” I said, “No, it was automatic deduction.” And
they said, “Oh, well, Great Lakes and Direct Loans say they have no record of you ever
calling them.” Might I add that I went past the 2-month period in which I could have asked
my bank to collect on that for me, so I was just out of luck. Additionally, I just quickly say that I was
given paperwork with pages missing. I showed an accountant for the airport, who is a friend
of mine, “Do you understand what this is?” No, he did not. I couldn’t see how, after
taking out $28,000 of loans and paying for 6 years, I then owed $24,000. That didn’t
make sense to me either, but nobody ever could address that. Not to be rude, but nobody seemed
to have the mathematical know-how to answer any of those questions, with whom I ever spoke
with. So, anyway, I’m here. I know I’m not alone
in this. Luckily, my son graduated and is in grad school and all that good stuff. He
got scholarships. But I just think this is really ridiculous, and I hate to think of
students whose parents are not native English speakers. I don’t know how they would possibly
navigate any of this. Thank you very much. Thank you, Ms. Martin, and thank you for taking
time to share your thoughts today. Did you ever get the $2,300 addressed? No. I was finally told by the Federal Student
Loan Department Ombudsman that if I wanted to apply, I could, but then I’d have to
pay the 7.7 percent interest, so basically it would be a loan on a loan, and in the interim
what I ended up doing is getting a home equity loan and just paying off the $24,000, because,
you know, it just got— One more chance on this. Will you file a complaint
with the CFPB, and somebody will come around and talk to you about how you can do that.
I’d love to, yes. Thank you. We’ll just see if that helps. Okay. Thank you. Desiree Cocroft? Hi. I’m Desiree Cocroft and I actually am
a program manager for a nonprofit in Milwaukee called Make a Difference Wisconsin. We do
financial literacy for high school students, and just given the conversation that I have
with a lot of kids that are going to college, and the things that they don’t understand,
up to the financial aid award, like “What is this?” and “What does it mean when
I circle this?” shows me that financial literacy is definitely a key indicator. And
even with my own story. When I finished college at private institutions I came out with $83,000
in debt, and having graduated with that amount of debt I think that I could have used what
I’m giving to students at that time, because I wasn’t paying it off. I did forbearance
because I just didn’t think you could really pay off $83,000. Like, does that really happen? And so I spent a lot of time not paying more
than the minimum, and not thinking about how it could actually be paid off, and it wasn’t
until I started to do more financial literacy education for myself that I realized, you
know, it is possible to pay it off. And so I think someone on the panel even mentioned
thinking about taking out what you need and paying it off faster. That wasn’t the frame
of mind that I had. It was like, what can I do so that I can have my tuition paid off
and then I’ll figure it out at some point. And I think that is the case with a lot of
students, and especially like myself, not having a family that could tell me, “Hey,
this is what you do so that you can be debt-free afterward.” It was like, hey, you need a
tuition paid. I was the first in my family to go to college, as well, so in their mind
they’re like, “Hey, if you’re getting offered that, then take it so you can go to
school,” but no one being able to support me afterward, and having a family that had
consumed debt and debt issues, in my mind it was a part of life to have those kind of
issues, and you figured it out at some point. So the fact that I ended up doing my own financial
literacy for myself, I started getting very serious about paying off my student loans,
and now I only owe $23,000 after $83,000, and I’ve been paying it off for 7 years.
I’ll be done at the end of this year, and it wasn’t because I make six figures or
anything like that, but it was paying more than the minimum, and actually having a service
provider that worked really well with me, and that’s not the case with a lot of people,
so I’ve heard. But having, I guess, the optimal partnership. I wanted to pay it off
sooner and I had a service provider that made it easy for me to do it, and I’ve been able
to do that, and it was only after being financially literate, and I think that that is very important,
having worked with seniors in high school that don’t understand what it really means
to take out a loan, and don’t really understand what it means to pay it off later. I think
that is really a psychological thing, when it comes to how do you pay it off, how do
you budget to make that happen. So I would like to see a lot more financial literacy
on the front end, because it sounds like there’s a lot of back-end conversation today. Thank you, Ms. Cocroft. Scott Ross? Thank you, Director Cordray, and your team,
for bringing the Consumer Financial Protection Bureau to Milwaukee. My name is Scott Ross.
I’m the head of One Wisconsin Now and One Wisconsin Institute. We’re nonprofits out
of Madison. Certainly your work and the stories of borrowers here today are exposing a crisis
of affordability in our higher education system. The 43 million student loan borrowers nationally,
including 1 million here in the state of Wisconsin, have done the right thing. They’re working
hard to get their education or job training, and they’ve taken the personal responsibility
for paying for it. They’ve earned the right, the same right, to a shot at the middle class
the previous generations got. They have the right to expect that as they make good on
their loan payments they’re going to be treated respectfully and fairly, and I think
my story is one example, and I do consider myself one of the lucky ones. At the advice of my loan providers, I consolidated
my student loans back in 1999, at an interest rate of 7.875 percent. I paid those loans
off until 2013, after nearly 20 years, but because I could not refinance, I wasted $21,000,
if I could’ve gotten my interest rate down to, say, 5 percent. No, I would’ve spent
$21,000 more in the economy. And I think research that we’ve done at One Wisconsin Institute
shows how student loan debt has impacted our state economy. A state support for higher
education has declined here in Wisconsin—for instance, $70 million in cuts to the technical
college system, the oldest in the United States of America; $650 million in proposed or actual
cuts to the University of Wisconsin system; millions of dollars more in tuition paid;
and 41,000 who are eligible for financial aid were denied financial aid last year. It’s
obvious that the burden of higher education is being shifted to students and their parents
as opposed to the investment was used to make as a society in higher education. Today, according to figures, we know that
over 800,000 in the state of Wisconsin owe nearly $19 billion in federal student loan
debt. Student loans are taking an average of nearly 20 years for the average borrower
to retire, and monthly payments translate into lost lifetime wealth and reduced economic
activity. Not only borrowers but our entire state economy feels the weight of the student
loan debt burden. My hope is that some day in this country we will have debt-free higher
education, but I also hope today we can take some real steps to help student loan borrowers,
making sure they’re treated fairly by loan providers, making sure they have the same
consumer protections of every other consumer transaction in the United States, and that
they can simply refinance their student loans like you can a mortgage. Again, I want to thank you for coming. I really
appreciate you putting attention on this and coming to Wisconsin on a nice day like this,
so thank you. Thank you, Mr. Ross. Lawrence Hoffman? Thank you. I was a teacher and I went for
my Ph.D. at age 44, and after 6 years I got the Ph.D. and ended up with $38,000 in student
loans. It seemed like it was something that I could handle. But Sallie Mae represented
itself as being a government agency, so I trusted them, and I took out a 9-percent loan
on the consolidated loans. Long story short, I eventually left teaching and ended up, at
one point, paying $750 a month with hardly any income. Fortunately, a government ombudsman
helped me with information, and eventually—not through Sallie Mae—Great Lakes helped me
to realize that now there is income-based payment, and so my income-based payment now
is $150 a month, which is affordable, definitely. However, I have now paid $51,000, having started
with $38,000, and if I paid it off today I would have to pay $137,000 more. I will never
be able to pay this loan off—never—and I don’t want Sallie Mae to get the rest
of it when I die, because I’m sure they have insurance that covers that. So I hope
maybe direct student loans will help, or, in some way, I can keep Sallie Mae from getting
some $150,000 or $200,000 when I’m gone. Thank you, Mr. Hoffman. Robbie Hiltonsmith?
Hey there, folks. Thanks for the opportunity to testify today. I’m Robbie Hiltonsmith.
I’m a policy analyst at Demos, which is a national public policy organization, and
I, as previous commenters have, want to refocus the discussion a little bit on the causes
of student debt here. It’s all good to look at different ways to help repayment. That
is certainly an important focus. But we have to recognize that the reasons why people are
borrowing so much is, as previous people have said, college has become increasingly unaffordable,
especially in the past decade, and the impact of that student debt on people’s financial
future. We have done a couple of pieces of research on this. In the most recent one we
came out with we looked at the cost of college and found that 80 percent of all tuition increases
at public schools are because of decreasing state support, and, as people have mentioned,
in Wisconsin and otherwise that seems to be pretty well borne out. And in another paper
we looked at the impact of student debt on lifetime wealth and we found that for dual-educated
households, coming from a public school, they have about $50,000 of debt, which is two student
debt burdens, leads to about $200,000 in lost wealth. About two-thirds of that is in retirement
savings, one-third of that is in home equity. So we’re seeing both the impact of people
borrowing and we’re seeing what effect that’s going to have on the economy, and if we really
want to address this crisis we have to figure out ways to get at the root cause. That does
include solutions like refinancing or other partnerships to encourage debt-free college,
because if people have to keep borrowing, these kinds of things are going to keep happening.
Thank you. Thank you, Mr. Hiltonsmith, and I want to
thank everyone who joined us for today’s field hearing, and for all the thoughtful
and powerful comments that we heard today. They’re important to us. I want to thank
the audience and to everyone watching via livestream at This
concludes the CFPB’s field hearing in Milwaukee, Wisconsin, and I want everyone to have a great
afternoon, and thank you again for joining us.

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