Two of the Department of Education’s (ED) top higher education officials — Under Secretary James Kvaal and Federal Student Aid (FSA) Chief Operating Officer Richard Cordray — on Wednesday testified during a House Higher Education and Workforce Development Subcommittee hearing, which touched on issues over President Joe Biden’s student loan cancellation plan, the pause on student loan payments, gainful employment regulations, and more.
This is the second hearing of a two-part series examining Biden’s student loan policies and the implications for students and taxpayers. Rep. Burgess Owens (R-Utah), chair of the subcommittee, began the hearing by arguing that ED has “vastly overstepped its authority” with the extension of the student loan payment moratorium, Biden’s student loan cancellation plan, and proposed income-driven repayment regulations.
“President Biden has signed three bills this year,” Owens said. “Just three. One to end the pandemic, one to reform DC’s criminal code, and one to declassify intelligence related to COVID-19’s origins. Meanwhile, the Department of Education has submitted billions of dollars of regulations completely reshaping postsecondary education. When in the world did unelected bureaucrats at the Department of Education and so-called 'nonpartisan' leaders at Federal Student Aid become legislators?"
Kvaal in his opening remarks said he is confident in the strength of ED’s legal justification for Biden’s student loan cancellation — which is currently in limbo as the U.S. Supreme Court deliberates on the issue — and hopes the department will be able to deliver the relief soon.
“Now as we wind down pandemic programs, the department is committed to helping borrowers return to repayment without suffering delinquency and default,” Kvaal said. “That starts with the secretary's plan to cancel up to $20,000 in student debt. Nearly 90% of eligible borrowers live in households earning less than $75,000 a year. As the Supreme Court considers this program, tens of millions of borrowers are eager for clarity.”
Meanwhile, Cordray touched on the resumption of student loan repayment, which will happen sometime after the Supreme Court’s ruling on the debt cancellation plan. He recommended that borrowers with “steady financial circumstances” enroll in FSA’s auto-debit program to avoid missing any payments, and that borrowers who will struggle to make their payments should sign up for an income-driven repayment plan.
“Ahead looms the unprecedented task of returning tens of millions of borrowers to repayment after a pause that was extended multiple times during the pandemic,” Cordray said. “Everyone with a stake in this upcoming event — schools, servicers, advocates, and public officials like yourselves — can help us drive these key messages in the months ahead.”
NASFAA’s Resumption of Loan Repayment Task Force earlier this month released a report on the institutional considerations for the resumption of student loan payments and created a toolkit with resources to help institutions and financial aid administrators communicate with borrowers.
Later on, Rep. Virginia Foxx (R-N.C.), chairwoman of the House Committee on Education and the Workforce, submitted a letter to the record from the Student Loan Servicing Alliance, which states that servicers have not received final written guidance on getting borrowers back to repayment, not yet being granted permission by FSA to communicate with borrowers about repayment, and other issues.
“With all due respect, this department has had almost two years to come up with a plan to return borrowers to repayment,” Foxx said. “And what I'm hearing here is the servicers have no guidelines, no funding, and no ability to reach out to borrowers because you won't let them. At this point it feels less like incompetence, and more like an intentional ploy to break the student loan program and use servicers, Congress, and anyone but yourselves as a scapegoat, so you can replace it with your radical free college agenda.”
Another key topic of discussion during the hearing was ED’s Fresh Start initiative, which would enable defaulted borrowers to reenter repayment in good standing. Rep. Glenn Grothman (R-Wisc.) criticized the initiative, saying it would give borrowers “additional loans, no question asked, without any indication of their ability to repay.”
“I don’t know about a bigger loan,” Cordray said. “I would say that those who had been in default who came out of default during the pandemic pause, we corrected their credit score to reflect their current situation. And we enabled them to apply for federal student aid and try to complete the credentials that very often defaulted borrowers found that they never completed in the first place. And that's a big part of their problem.”
Rep. Alma Adams (D-N.C.), on the other hand, praised the Fresh Start initiative and asked Kvaal the impact the initiative would have on low-income and first-generation borrowers.
“I speak to borrowers who have loans in default, and they talk about the tremendous consequences it has on their lives and their ability to save to buy a home,” Kvaal said. “We need to look at the challenges for people who have been left worse off for attempting to go to college or attempting to provide for their families, and offer relief to those struggling borrowers.”
Lawmakers also questioned Kvaal on ED’s recently proposed gainful employment regulations. Rep. Bobby Scott (D-Va.), ranking member of the House Committee on Education and the Workforce, said there were some concerns about the proposed gainful employment regulations because the metrics would measure the socioeconomic demographics of an institution’s student body “as much as it does the quality of the program.” He said that could lead to issues with minority students who are subject to discrimination and could have more challenges securing employment.
“The goal of the gainful employment rule is to create better choices for students,” Kvaal said. “And that's especially true for low-income students, first-generation students, [and] students of color, who are disproportionately likely to be left with debts they can't afford to repay. We believe it will improve the value of programs. And we're listening very carefully to affected communities as we consider comments on our proposal.”
The wide-ranging hearing also touched on FAFSA simplification, with Cordray saying FSA is not yet prepared to give a specific date the FAFSA will be available, but reiterated that it will be available sometime in December.
“We would hope that it would be earlier in December, rather than later in December, and we're working week in and week out to see what we can do to pull that schedule forward,” Cordray said. “So I can't give you a specific date. But we can focus in on it. It'll be sometime during December.”
Owens closed the hearing by saying the discussion was a “step in the right direction.”
“I'm excited about the fact that we do have a chance to have oversight in this regard,” Owens said. “And we're going to make sure of everything we can do to get the innovators to the table. We need to disrupt the system, not break it.”
Publication Date: 5/25/2023