Senate Hearing on Servicing Shows Stark Divide on Need for Student Debt Relief
By Hugh T. Ferguson, NASFAA Senior Staff Reporter
The Senate Banking Committee recently delved into the topic of student loan debt in a hearing focused on examining the practices of servicers and their handling of debt forgiveness programs. Yet the conversation underscored just how far apart Democrats and Republicans are on policy solutions aimed at alleviating ballooning student debt levels.
Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking, Housing and Urban Affairs committee, largely focused on issues stemming from income-driven repayment plans and the Public Service Loan Forgiveness (PSLF) program.
“Too many of the debt-forgiveness programs that students are told they’ll be able to count on are mismanaged — or not really managed at all — by student loan servicers,” Brown said, citing recent reports on administrative failures related to those two programs.
Brown took issue with how the previous administration conducted oversight of the servicing industry and how the lack of supervision continues to create adverse outcomes for students.
“We created this program to protect people from being trapped in debt forever. Clearly it isn’t working,” Brown said.
Sen. Pat Toomey (R-Pa.) used his remarks to highlight how student loan debt forgiveness would serve as a benefit for wealthy individuals at the expense of taxpayers for an expense that is voluntarily incurred.
“Congress created the student loan program with the same expectations as any other loan program: the loans would be paid back,” Toomey said.
While members remained at odds over the available policy solutions, witnesses also urged Congress to take a role in addressing other issues created by the federal student loan landscape.
“The student loan system itself, created by Congress in a long evolution of well-intended but poorly thought out programs and patches, is a byzantine mess that is inscrutable to borrowers, servicers, and quite possibly ED itself,” said Neal McCluskey, the director of the Cato Institute’s Center for Educational Freedom. “It features a dizzying array of loans and repayment plans, often festooned in arcane lending terms, the sheer volume of which alone is a great deal to wrap one’s head around.”
Publication Date: 5/10/2022
Robert W | 5/10/2022 2:30:43 PM
Hey Hugh,
A colleague mentioned he would like to see data over entire life of loan program showing how many borrowers paid their loans in full in comparison to those who did not. To me, the current number of borrowers in repayment and current status, before the Covid suspension compared to those who were not would be interesting. Include the amount of dollars involved.
The plan for re-election sold by political pundits and advisors to incumbents is to create emergencies, peddle fear and divisiveness with help from the MSM and then provide a solution to sell to those of us dumb enough to purchase it.
Treating all loan servicers as scape goats is another popular way to come up with perpetrators and lay blame. I will go out on a limb here and say the Feds would do no better servicing these loans. I have some good friends who were and are affiliated with servicers whom I find to be student oriented, honest, law abiding, and hard working tax paying citizens.
No one ever mentions the possibility students may have made a mistake or bad decision.
We need the math, performed by a competent and independent entity, like a CPA firm, and if the program is not breaking even, maybe we need to get out of the student loan business. Maybe the state guaranty agencies and FFELP programs might be viable options. Let’s see the math.
This is my opinion only and I respect those of others.
Sincerely,
Bob Walker
Tupelo, MS
Mark M | 5/10/2022 11:3:07 AM
Creating complex cancellation/forgiveness programs intended to function over extended periods of time (10-25 year repayment terms) can only lead to chaos from election to election - administration to administration. Create manageable lengths of forgiveness program terms ( 3-5 years) that provide the borrower a reasonable chance of success.
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