ATLANTA—Standing before thousands of financial aid professionals gathered to begin a weeklong conference hosted by Federal Student Aid (FSA) on Tuesday, Education Secretary Betsy DeVos announced that American higher education is in crisis, and that it’s largely due to the federal student loan program.
“Our higher ed system is the envy of the world, but if we, as a country, do not make important policy changes in the way we distribute, administer, and manage federal student loans, the program on which so many students rely will be in serious jeopardy,” DeVos said during the opening session of the annual FSA Training Conference.
She went on to say that since its inception, FSA has “outgrown its structure and its governance,” suggesting the federal government may be ill-equipped at present to manage the $1.5 trillion in outstanding federal student loans, particularly as many borrowers struggle to pay down their debt.
It took 42 years - 1965 until 2007 - for the student loan balance to grow to $500 billion.— US Dept of Education (@usedgov) November 27, 2018
It took only 6 years for the loan balance to double - to $1 trillion - in 2013.
Today FSA holds nearly $1.5 trillion in outstanding loans. pic.twitter.com/4VRuyEqeCX
DeVos attributed part of the growth to the move to direct lending in 2010, when the Obama administration ended the Federal Family Education Loan Program (FFELP). She also claimed increases in federal student aid have contributed to increases in tuition, fees, room and board—a contested theory known as the Bennett Hypothesis.
DeVos is throwing the move to direct lending under the bus. Listen, the government "monopoly" here is not the problem. FFEL was a HUGE problem. The maze doesn't work because of the ad hoc nature of the system. NOT the move to all DL lending. #FSATC2018— Rachel Fishman (@higheredrachel) November 27, 2018
Centralizing student lending in the federal government has only made things more complicated for students and families, DeVos said.
“We know students are having poor experiences. With more than 30 variations of 10 different repayment plans, each with their own set of burdensome requirements, it’s no wonder this government maze doesn’t work,” DeVos said. “Students are taking out tens of thousands of dollars in debt but many are misinformed or uninformed as to the implications of taking on that debt and their responsibilities to pay it back.”
Betsy DeVos is speaking to us about student loan volume. $1.5 trillion loaned to date. Saying that we need to control this risk. I don’t disagree but funding more federal grants could make a big difference. #FSATC2018— Daniel Barkowitz (@barkowitz) November 27, 2018
As a way to improve communication and reduce complexity, DeVos said FSA will focus on financial literacy through its NextGen Financial Services Environment, in addition to modernizing the financial aid application process through initiatives like the myStudentAid mobile app.
Moving forward, DeVos said both the Department of Education (ED) and other policymakers should focus on four principles: supporting individual students through multiple pathways, promoting innovation, providing more accessible and comprehensive information, and the idea that “nothing is free.”
“Someone, somewhere ultimately pays the bills,” she said.
DeVos has been a proponent of supporting alternative pathways to higher education, such as apprenticeships and vocational programs. Earlier this year, ED also announced its intent to convene several new negotiated rulemaking committees focused on issues like accreditation, state authorization, access to high quality and innovative programs, and eligibility of faith-based entities and activities.
“Each of us has a contribution to make and a role to play in resolving our present crisis in higher education. I’m confident we can – and we will – rise to this challenge. Because Americans have never shied away from challenges,” DeVos said on Tuesday. “We live in some of the most exciting and opportunity-filled times ever. Let’s ensure our rising generations can seize each and every opportunity, and that the only thing that limits them is their imagination.”
NASFAA President Justin Draeger applauded DeVos for “highlighting a national issue that is affecting millions of students and families across the country."
“We agree with her assessment that it will take a joint effort between schools, students, lawmakers, federal agencies and others to reduce the negative impacts of over-borrowing,” he said in a statement. “The financial aid community stands ready to work with policymakers to find and implement solutions that will help help keep college affordable without burying families in debt that cannot be repaid.”
Publication Date: 11/28/2018