NEGOTIATED RULEMAKING FOR HIGHER EDUCATION 2014-2015

These income-driven repaymentplans, like the Pay As You Earn plan thatcaps a federal student loan borrower’spayments at 10 percent of income, can be aneffective tool to help individuals

Anaheim Marriott

700 West Convention WayAnaheim, California

+ + + + +

DEPARTMENT OF EDUCATION PERSONNEL:

LYNN MAHAFFIE, Acting Assistant Secretaryfor

TABLE OF CONTENTS

Opening Remarks

Lynn Mahaffie 3

Ted Mitchell 3

Public Commenters: Debbie Cochrane 12

Jee Hang Lee 18

Cody Hounanian 24

Patricia Hurley 32

Kay Lewis 37

Gustavo Herrera 43

Melanie Delgado 50

Kurston Cook 54

Makenzie Vasquez 61

Dawn Lueck 63/159 Diana Emuge 69

John Zimmerman 74

Graciela Aponte 82

Christopher Casey 88

Megan McLean 92

Kristen Leaf 98/162 Baldwin Ngai 105

Ann Larson 111

Laura Hanna 115

Elva Munoz 118

Karissa McKelvie 125

Frank Gutierrez 130

Angela Tran 135

Christopher Miller 141

LaTonya Subbs 144

Mike Dear 147

Nathan Horns 149

Tasha Courtright 151/166 Concluding Remarks Ms Mahaffie 168

Dr Mitchell 168

NEAL R GROSS

COURT REPORTERS AND TRANSCRIBERS

2

3

4

5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

6

7

8

(1:03 p.m.)

MS MAHAFFIE: Good afternoon.I’d like to welcome you to this publichearing

I’m Lynn Mahaffie I’m the Acting AssistantSecretary for Postsecondary Education at theU.S Department of Education I am herewith Dr Ted Mitchell, who is theUndersecretary of Education He has beenthe Undersecretary since he was confirmed bythe U.S Senate in May Prior to coming tothe Department, he had a very distinguishedcareer in education, much of it inCalifornia

He is the former CEO of the NewSchools Venture Fund He is the formerpresident of the California State Board ofEducation and the former president ofOccidental College And he is going to get

us kicked off this afternoon

Thank you

DR MITCHELL: Thanks, Lynn, andthanks again to all of you for being herethis afternoon

I’m pleased to welcome you to thesecond of two public hearings that we areconvening together, all of us, around anarea of incredible importance; that is,President Obama’s announced extension of thePay As You Earn repayment plan to those whoborrowed direct loans prior to 2008, andalso to solicit suggestions for additionalissues that should be considered by theDepartment for regulatory action by theNegotiating Committee.

As you all know, and what draws

us together, is the knowledge that a collegeeducation remains the single most importantinvestment that Americans can make in theirfuture Postsecondary education produceshigher earnings and lowers the risk ofunemployment

Unfortunately, for many low andmiddle income families, college is slippingout of reach Over the past three decades,the average tuition at a public four-yearcollege has more than tripled while atypical family’s income has increased onlymoderately, if at all

More students than ever arerelying on loans to pay for college Today,

71 percent of those earning a bachelor’sdegree graduate with debt, and that debtaverages $29,400 While most students areable to repay their loans, many feelburdened by debt, especially as they seek tostart a family, buy a home, launch abusiness, or begin to save for retirement

Over the past several years, theadministration has worked to ensure thatcollege remains affordable and student debtmanageable This administration has raisedthe maximum Pell Grant award by nearly

$1,000 It has created the AmericanOpportunity Tax Credit and extended access

to student loan repayment plans wheremonthly obligations are calibrated to aborrower’s income and debt

These income-driven repaymentplans, like the Pay As You Earn plan thatcaps a federal student loan borrower’spayments at 10 percent of income, can be aneffective tool to help individuals managetheir debt and pursue their careers while

avoiding the consequences of defaulting on afederal student loan.

While this administration hasmade significant strides in extendingrepayment options available to borrowers andbuilding awareness of income-drivenrepayment plans, more needs to be done.Currently, not all student borrowers offederal direct loans are eligible to captheir monthly loan payments at 10 percent ofincome

Therefore, the President hasdirected the Department of Education toimplement four substantive initiatives thatwill extend support to struggling federalstudent loan borrowers The first of theseinitiatives will extend the President’s Pay

As You Earn plan to allow additionalborrowers who borrowed federal loans to captheir federal student loan payments at 10percent of income, regardless of when theyborrowed

No existing repayment optionswill be affected, and the new repayment planwill also end, to include new features to

target the plan to struggling borrowers.Today we look forward to hearing yourperspectives representing, it looks to me,like a wide range of higher educationcommunities, student and consumer advocates,and a cross-section of stakeholders toassure that our regulatory efforts supportthe proposals intent to ease the burden thatsome borrowers are experiencing in managingtheir student loan debt.

To fulfill the second initiative,the Department will develop, evaluate, andimplement new targeted strategies to reachborrowers who may be struggling to repaytheir federal student loans, to ensure thatthey have the information they need toselect the best repayment option and avoidfuture default

In addition to focusing onborrowers who have fallen behind on theirloan payments, this effort will focus onborrowers who have left college withoutcompleting their education, borrowers whohave missed their first loan payment andborrowers, especially those with low

balances, who have defaulted on their loans

in order to help them rehabilitate theirloans with income-based monthly payments

Our third effort includespartnerships with tax preparation companies H&R Block and Intuit, the makers of TurboTax to better educate borrowers aboutincome-based repayment plans during the 2015tax filing season Building off of priorwork, the Departments of Education andTreasury are collaborating to developeffective ways to inform borrowers abouttheir repayment options as they file their

2014 federal taxes and on an ongoing throughpersonalized financial management tools

Finally, the Departments ofEducation and Treasury will work together toensure that students and their families havethe information they need to make informedborrowing decisions The administration hasdirected us to work with researchers to testthe effectiveness of loan counselingresources, including the Department’s ownfinancial awareness counseling tools

call with higher education experts andstudent debt researchers to identify ways toevaluate and strengthen loan counseling forfederal student loan borrowers, and I lookforward to continuing this outreach.

As I mentioned at the outset,this is the second of two hearings we willconduct on the new Pay As You Earn plan tosolicit suggestions, and to solicitsuggestions for additional issues we shouldtake up in negotiated rulemaking

Based on the public commentsgathered in the first hearing and today, theDepartment will list draft a list oftopics to be considered by one or morerulemaking committees We anticipate thatany committee established after the publichearings will begin negotiations in February

of 2015, and a Federal Notice Registerseeking nominations for negotiators will beissued in advance of that date

Again, thank you for dedicatingyour time and your expertise to this veryimportant process I look forward to aproductive dialogue, and I appreciate your

willingness to share your perspectives with

us this afternoon

Thanks

(Applause)

MS MAHAFFIE: A couplelogistical issues before we get started.Many of you have preregistered to speak Ifyou would like to speak and you have notregistered, please go see Amy at the backtable, and we’ve got a few more spaces left

If you would please limit yourremarks to five minutes, we are going tokeep track of the time, and I will let youknow when you need to wrap up your remarks

If everybody has had a chance to speak and

we have additional time left, we will letyou come back up if you want additionaltime

Today we have a video crew here.They are not part of the Department ofEducation They are going to film peoplewho are actively wanting to be filmed andnot others So if you would like to befilmed, please let them know at thebeginning of your remarks Otherwise, they

will not film you.

We are going to take a break at2:30

And I also want to let you knowthat this session is being transcribed and

to do that

I want to start actually byacknowledging the hugely important rule thatwas out last week requiring career educationprograms to prepare students for gainful

employment As welcome as a meaningfulgainful employment rule is, the rule itselfactually underscores the need for theDepartment to do more in many ways, and that

is because the rule’s accountability metricsexcludes students who don’t complete theirprograms At best, this is a huge loophole

At worst, it creates an incident for poorlyperforming programs to make sure studentsdon’t complete

We know that non-completion isincredibly common in some of these programs,and we see it in the Department’s gainfulemployment data Consider the University ofPhoenix pharmacy tech associate’s degreeprogram There were 920 borrowers whoentered repayment in 2009, and 449 of themdefaulted So that’s a default rate of 49percent

The program had fewer than 30graduates, though, in 2008 and ‘09 combined,

so that means a debt-to-earnings ratio willnot be calculated, and the program will passthe rule So it passes the rule, and theschool has no incentive to improve the

program, even though the default rate is 49percent, and defaulters outnumber graduates

by 15 to one or more

So while finalizing the gainfulemployment rule is an incredibly importantstep, the Department can and must use itsauthority to do more, including creating asystem to track and monitor complaintsagainst schools, loan servicers, and debtcollectors, stopping colleges frommisrepresenting the job placement rates, andensuring states and accreditors fulfilltheir responsibilities under HEA

Our detailed comments also havespecific suggestions for how to strengthrules to prevent CDR manipulation, so thatcolleges aren’t evading accountability atstudent and taxpayer expense

So to illustrate why the gainfulemployment rule makes stronger CDR rules allthe more urgent, I actually want to readfrom a for-profit college industry analyst’sreport It’s called "CDRs Only Matter if EdEstablishes New Test in GE." This is fromOctober 2013

The question is, "In our opinion,CDRs have been an easily manipulatedstatistic that was generally irrelevant forinvestors until last month when Edthreatened to establish a new program levelthree-year CDR test in its new gainfulemployment rule As this year’s CDR data

extraordinarily adept at managing theserates, but a program level test would be farmore granular than the OPEID unit currentlyevaluated, and, thus, much more difficult tocontrol

"However, if Ed drops this ideafrom the next version of GE, then CDRs willreturn to their rule as an easily managedcost of doing business."

Without relief provisions forstudents also, the new gainful employmentrule also makes it all the more important toprovide relief to defrauded students anddeter schools from engaging in fraud.Default certification discharge provisions

in HEA are broad and tended to providerelief for harmed students and discourage

illegal practices of schools But theDepartment has interpreted them verynarrowly, so those should be expanded.

The Department should alsoconsider easing requirements regardingburden of proof, so that unreasonablehurdles don’t keep students with legitimateclaims of fraud and identity theft fromgetting discharges And in places where aschool’s violations are pervasive, theDepartment should be required to grant groupdischarges

Finally, I’d like to highlight anissue that is of particular importance here

in California In the last three years,seven California community collegescollectively enrolling more than 100,000students have pulled out of the loanprogram, each with a borrowing rate easily

in the single digits

We hear about other schools onthe verge of making the same decision atleast once a month Many of these collegescite fears of CDR sanctions as the reasonfor pulling out, but the law actually gives

them a special protection because of theirvery low borrowing rates It’s called theparticipation rate index appeal.

But the problem is that collegescan’t take comfort in it, because it’s onlygranted when the axe is about to fall, rightwhen they are on the verge sanction Soallowing colleges to appeal or petition theapplicability of high CDRs towards asanction before it is mere months away wouldnot be burdensome to the Department andwould help keep community college studentsfrom dropping out or borrowing private loansunnecessarily

So thank you for your time, and,again, I would direct you to our detailedcomments for much more detail

Thank you

MS MAHAFFIE: Jee Hang Lee?

MR LEE: All right Goodafternoon, ladies and gentlemen My name isJee Hang Lee I am the Vice President forPublic Policy and External Relations withthe Association of Community CollegeTrustees based in D.C

It is my pleasure to be here totalk to you about suggestions on importanttopics that should be included in the U.S.Department of Education’s upcomingnegotiated rulemaking on direct loan andexpanding Pay As You Earn repaymentprograms.

The Pay As You Earn expansion isnecessary to ensure students that need helprepaying their loans are not caught up in anunnecessary web of eligibility requirements.And in addition to this topic, we believethere are other federal student need issuesthat need proper attention through therulemaking process

First, we ask that the committeerevisit existing regulations around cohortdefault rate challenges and appeals for lowborrowing institutions

As mentioned by Debbie, we wouldlike some issues related to participationrate index to be dealt with by thecommittee Colleges are being forced tounnecessarily walk the plank on criticallyimportant PRI appeals that are deemed and/or

denied intensive statutory protection.Waiting to file a PRI until your thirdconsecutive CDR leading to sanction is fartoo late in the process

Without any assurances in yearsone or two, many community colleges havefaced political and media scrutiny overtheir unrepresentative CDRs Colleges thathave stopped offering federal loans point toconcerns about CDR sanctions We would notethat one institution that had 29 defaulters

in FY10 that has around 8,000 studentsrecently just left the program

There is no statutory reason thatthe Department must withhold PRI appeals or challenges or appeals until aninstitution is facing immediate sanction,and doing so is currently preventinginstitutions from using a valuable tool.Colleges should be able to submit a PRIchallenge or an appeal in any year in whichtheir published CDR, official CDR, exceeds,the sanction thresholds

Second, revisit a more sensitivetopic it’s the treatment of borrowers who

have recently died and their next of kin anddischarging outstanding federal student loandebt Loans are currently being discharged

if a family member or representative of theborrower, including an institution, provides

a certified copy of the death certificate tothe institution or to the loan servicer

However, these rules areincomplete Verifying death is puttingunnecessary burden on grieving families andfails the adequate use of federal datasources, misses many eligible loans, and isunfairly considering institutions throughdefault calculations

In fact, the Federal Governmentand other entities already have thedocumentation necessary to provide relief tofamilies The Department should continuallyverify that all borrowers of outstandingdirect loans do not appear on the SocialSecurity Administration’s death master file

Furthermore, the Departmentshould remove all borrowers who have diedprior to default from CDR calculationsregardless of when proof of death was

provided Data matching can be achieved byregularly comparing the Social SecurityNumbers of loan borrowers with SocialSecurity records.

The Department currently alreadydoes this process when you fill out yourmaster promissory note, because they match

it with a master the master death file

So that would be one of the recommendationsthat we would have for you

Third, we ask the committee torevisit the loan rehabilitation regulationsadopted last year to provide for a smootherand more consumer friendly rehabilitation ofdefaulted loans Requiring nine consecutivepayments on time has excuse me Sorry.Well, was intended to provide an on ramp toenter/reenter active and responsible loanrepayment

However, given that manycommunity college borrowers have very lowloan balances, defaulters who take the step

to get back on track with rehabilitationoften desire to finally take care ofsignificant action on their debt and pay in

full through payments of lump sums.

It is nonsensical that lump sumpayments that absolve all debt can result in

a loan that remains in default and itcontinues to count as a default for theinstitution

The Department should allowstudents to pay off their entire outstandingloan debt through rehabilitation as a means

to remove default from the borrower’srecords

Fourth, we ask the committee toconsider the rules around adjustments ofCDRs involving borrowers service similar

to the action by the Department earlier thisyear Borrowers in good standing on oneloan, or in default on another, are clearlyexperiencing an anomaly of the loan program

or an unusual hardship of split servicing.CDR adjustments are, were made for all threeconsecutive years for CDRs for institutionsfacing sanctions

Given that the split servicingissues remain common for borrowers who enterrepayment in 2012 and 2013, the Department

should continue to adjust annually to alleligible institutions We believe theDepartment has needed, the topic should

be added to the rulemaking agenda

Fifth, we ask the committee toconsider fair treatment to borrowers whohave been split serviced by providingadditional assistance and relief to thesestudents for default through institutionCDRs due to split servicing The record ofdefault should also be eliminated forborrowers’ records, and the defaulted loansshould be placed in administrativeforbearance

Okay Perfect We will haveadditional comments that we will submit toyou later today

MS MAHAFFIE: Cody Hounanian?I’m sorry

MR HOUNANIAN: No, you did agreat job

MS MAHAFFIE: Oh, okay

MR HOUNANIAN: Yeah That’s thebest job I think I’ve ever seen of my lastname Yeah, it’s a tough one

Hello, Undersecretary Mitchell,and everyone here today Thank you for theopportunity to speak I’m here to present apetition If you don’t mind, if I can givethis to you.

DR MITCHELL: Thank you

MR HOUNANIAN: No problem And

to save some trees, that’s just a segment of

it We’ll send a digital copy by the end ofthis hearing

My name is Cody Hounanian I amrepresenting Student Debt Crisis We are anonprofit organization that seeks tofundamentally change the way that we pay forhigher education in this country

We are a partner and member ofthe Higher Ed, Not Debt Campaign, where wework in solidarity with many otherorganizations to make these changes areality

I’m here today not only to speakfor myself as a recent graduate with over

$30,000 in debt, but I’m here to speak for39,900 signers of this petition and over 40million student loan borrowers across the

country that stand behind the importance ofaccessible, affordable, quality education.

I personally benefited from manyrepayment options And as I continue mygoal to attend law school, they have given

me peace of mind knowing that I will be able

to afford that $100,000 or more in debt that

is ahead of me

Too often Americans have feltthat they were being abandoned by theinstitutions that are designed to protecttheir interests The Department ofEducation has the ability, through thesepolicies, to shape how Americans appreciatehigher education and how they perceive theirgovernment’s efforts to assist them

Currently, our leaders are doing

a poor job of comforting strugglingAmericans who are looking at these policies

to help better themselves and theirprospects to follow the American dream It

is your obligation to protect the integrity

of higher education in this country bymaking it something obtainable to everyone

Recently, we believe that our

politicians and agencies have failed touphold the universal need for all people tobecome educated, no matter their financialcircumstances First, our Congress deniedstudent loan refinancing, which could havehelped 25 million Americans lower theirpayments.

Now the Department has chosen not

to defend students and is closing for-profitinstitutions such as Corinthian Colleges,and they have given them very few optionsfor handling this unprecedented situation

Instead of highlighting fairnessand equality, those in authority have usedtechnicalities and arbitrary differences inloan terms to draw an imaginary line in thesand so that they can avoid helping someborrowers What is truly important isassisting any American who wants to betterthemselves through education

What the almost 40,000 signers ofthis petition are asking is simple We need

to preserve the limited options given tofederal student loan borrowers today andexpand them so that even private loan

borrowers can use them Also, we need to do

a better job of spreading awareness of theseprograms, so that anyone who can be assisted

is enrolled

I personally could not afford mystudent loans without income-basedrepayment, and neither could my twinbrother, who is also a recent graduate So

in my household alone, we have two peoplewho these options are very important to

Also, in my work with StudentDebt Crisis, I have met hundreds ofborrowers who are completely unaware ofthese options So as part of the petition,

we have simple asks First, we need to keepthe 10 percent discretionary income cap forthe Pay As You Earn Program This program

is a crucial option for young Americans likemyself who have been unable to find a high-paying job despite doing what they were toldwould set them on a path to a successfulcareer

Second, we need to preserve thePublic Service Loan Forgiveness Program andavoid setting a cap on forgiveness before

the program spends its first dollar Weneed to use this program to incentivizeAmericans to not only becoming educated but

to also enter fields in public service wheretheir expertise is so desperately needed

Third, we need to tear downarbitrary restrictions that deny privateloan borrowers the same options that otherpeople such as myself, are given Thereshould not be a difference between how weassist some borrowers over others when weall agree that what is important here isthat Americans, whoever they are, arebettering themselves and society througheducation

I would like to share some of thecomments that our petition signers left, as

I think it is important to share their wordsand to add a human aspect to this topicinstead of focusing on loan terms and policydetails

This is Alice from Kansas City

"Please help us students who have paid andneed relief like other students may get Ihave been paying for almost 20 years I

have worked with special education students,and I have never received a benefit, onlyhigher interest rates."

This is Patricia from California,

"I currently use both the Pay As You EarnProgram and public service loan forgiveness,and I find that they make it possible for me

to make my payments I think that allstudent loan borrowers should have theseoptions and find the relief that I have."

Tamara from South Dakota, "Theseoptions would be ever so helpful I amcurrently in college furthering myeducation, and I am getting close tograduating It scares me to think of what

my estimated repayment will be in a month."

And, last, Judith from Illinois,

"Students that are trying to get a goodeducation should not have to suffer because

of their student loan payments, especiallywhen jobs are so hard to find Why go tocollege if the cost outweighs the benefits

of getting the education in the first place?Help out the help out students to be able

to pay back their loans without burying them

in debt before they can even enter theircareer."

MS MAHAFFIE: If you could wrap

up your remarks, please

MR HOUNANIAN: I’d simply askthe Department keep in mind how these ruleswill affect the lives of borrowers, peoplelike these, people like myself, and others

in the room We hear from people crippled

by student debt every day, and we’d just askthat you guys find the same satisfactionthat we find by being able to help borrowersthrough our outreach, and that you’ll use it

to motivate to expand to many others

Thank you

(Applause)

MS MAHAFFIE: Patricia Hurley?

MS HURLEY: I’m Pat Hurley I’mthe Associate Director Associate Dean andDirector of Financial Aid at GlendaleCommunity College, and I appreciate theopportunity to provide comments

It is clear from the previousspeaker that many students are unable torepay loans on the standard 10-year

repayment plan and offer longer ones And Ibelieve that the President’s Pay As You EarnProgram is a good option However, it isalso my experience that as federal studentaid programs have grown and matured, theyhave also become more complex And as aparticipant in four negotiated rulemakingpanels, I contributed to that, so I am wellaware of the complexity.

Currently, students must decidebetween six loan repayment options, two 10-year plans, and four that are 25 years orlonger It is particularly difficult toexplain to students the differences betweenthe three plans based on income I hopethat the Department will use the upcomingnegotiated rulemaking session to engage indiscussions on what the appropriate numberand type of repayment option should be

The following comments are more

on the front end process, and they involveloan counseling And generally it isaccepted that providing students with clearand timely information is essential toinformed and appropriate borrowing

However, some colleges have receivedinformation from the Department that theycannot require loan counseling beyond thatmandated in the law.

It is clear that this is one areathat one size does not fit all Graduatestudents may not need additional loancounseling that would be appropriate forcommunity colleges or other at-riskstudents And some recent legislativeproposals have recommended annual loancounseling

My institution is an example thatthat can work Our current three-yearcohort default rate is 6.6 percent, which iswell below the national average of 10percent and way below the community collegeaverage of 20 percent We firmly believethat this is because we require students toattend a loan workshop each year that theytake out a loan

The feedback that we get fromstudents, particularly those who haveborrowed at other schools, is that theyappreciate the information And while many

colleges may not have the resources toconduct in-person workshops for students,and each rely on online programs, schoolswho do want this option should be permitted

to do so and encouraged to do so, notrestricted in the regulations

Along with this and another frontend part of the loan process, before we get

to the repayment plans, is the ability toreduce or deny loans While currentregulations allow colleges to deny or reduce

a student’s loan with documentation, as long

as it is on a case-by-case basis and notdiscriminatory, many colleges are stillfearful of using this authority

Community colleges have beenasking for this authority to reduce or denyloans for some time, because at low costinstitutions funds are more likely to beused for indirect expenses rather thaninstitutional costs

In response, one of theDepartment’s current experimental siteprojects allows colleges to restrictunsubsidized loans As a participant in

this experimental site, my college does notaward unsubsidized loans to first yearstudents We have received no complaints,and we have reduced both the number ofunsubsidized borrowers and the number andthe amount of borrowing in the unsubsidizedloan program by about 50 percent.

Our conclusion is that in thepast students borrowed the maximum because

it was available to them, not necessarilybecause it is what they needed to attendschool for that year

We look forward to theDepartment’s experimental site report onthis project If this is indeed the case,and our assumptions are correct, we alsolook forward to expanding the aid officer’sregulatory authority to reduce or deny loansthat may help more students avoid overborrowing

And then I would also like tocomment on the previous speaker’s remarksabout the low participation rate index.This is a particular problem for communitycolleges who have few borrowers, so that the

percentage of students that are borrowing isvery low My favorite example of this isCanada College in California that had twostudents in repayment, one in default, whichgave them a 50 percent default rate Eventhough they had thousands of studentsenrolled, their default rate was based onthose two individuals.

As we move towards the shoppingsheet, pardon?

MS MAHAFFIE: If you could wrap

up your remarks, please

MS HURLEY: Yes And this isgoing to become more important as we movetowards the shopping sheet and other, andthe college ratings, which will point outstudents’ default schools’ default rates.And the question for the schools that havevery few borrowers is whether that is reallyindicative of the institution

Thank you very much

(Applause)

MS MAHAFFIE: Kay Lewis?

MS LEWIS: Hello I speak toyou today on behalf of the National Direct

Student Loan Coalition, a grass-rootsorganization comprised of schools dedicated

to the continuous improvement andstrengthening of the Direct Loan Program

I’d like to thank you for theopportunity to provide comments today Toensure that the federal direct student loanprogram continues to be a strong and viablesource of loan funding for students, I wish

to address the regulatory issues in thefollowing areas

Number one; expand participation

in the Pay As You Earn repayment plan Wesupport President Obama’s proposal to expandthe number of borrowers eligible toparticipate in Pay As You Earn The currentmenu of repayment options, though well-intentioned to address borrower choice, adds

a layer of complexity to the program thatmany borrowers find confusing

The same is true of the incomedriven plans To the extent possible, weurge the Secretary to consider regulationsthat would establish one income drivenrepayment plan open to the largest number of

as of 10/1/2007 To increase the pool ofborrowers who could be eligible for Pay AsYou Earn, we encourage the Secretary tooffer loan consolidation to borrowers whomay not be able to take advantage of thisplan as a result of borrowing in the FFELProgram or obtaining a federal direct loanprior to the established date Expandingloan consolidation options could have theadded benefit of reducing the outstandingFEL portfolio and reducing costs.

Number three; simplify thefederally held loan servicing environment.The current direct loan servicingenvironment is fraught with confusion andfrustration for student borrowers There is

an inherent flaw with the current multiplecontractor environment Borrowers do notunderstand who holds their loan

Until another means of repayingstudent loans is available, such as IRSpayroll deduction, the following changes areneeded to restore clarity and simplificationfor students.

Borrowers must have a singlepoint of contact for all loan repaymentactivities Borrowers should be given oneweb portal and phone number for loanservicing Service levels, loan terms, andborrower benefits must be equal and uniform.Calculations of interest, fees, interestcapitalization, and application of payments

to principal and interest should all bestandard and consistent among thecontractors

We support healthy competitionamong a limited number of contractors Toomany contractors increase the complexity ofthe system and taxpayer cost Healthycompetition can be managed in a way that isinvisible to the borrower

Number four; require that allfederal loan servicers use white labelbranding Initially, the direct loan

program had one contractor identified as theU.S Department to Education to borrowers.

We believe that environment can bereplicated in the current multiple servicerenvironment We also believe that willreduce borrower confusion and defaults

To simplify the repayment processfor borrowers, we urge the Secretary torequire that the identity of contractors beinvisible to the borrower, that contractorsshould be mandated to use only theDepartment of Education’s logo and name onany communication to the borrowers.Contractor branding and other marketing ofthe contractor to the borrower should beprohibited

Number five; eliminate interestcapitalization to reduce debt Interestcapitalization increases the principalamount of the loan and the total cost ofborrowing, since future interest accrues oncapitalized interest Capitalization is notrequired by in federal law, and is aholdover from the previous federal FamilyEducation Loan Program

It is not necessary to chargeborrowers additional interest, and we urgethe Secretary to consider elimination ofthis practice in the federal student loanprograms.

Number six; support efforts tolimit borrowing Current statute allows aidprofessionals to limit the amount of tolimit the amount a student may borrow on acase-by-case basis However, the Departmenthas strongly cautioned against restrictingborrowing

Some schools no longerparticipate in the federal loan programsbecause they fear their students will overborrow This forces students at theseschools into more expensive private loanprograms We are advocating for aid officerdiscretion to develop counseling programsthat inform borrowers and the authority tolimit borrowing when it is not in the bestinterest of the student

In closing, I would like to thankyou again for the opportunity to presentthis testimony on behalf of the National

Direct Student Loan Coalition Thecoalition looks forward to participating andnegotiating in the rulemaking process in2015.

Thank you

DR MITCHELL: Thank you

(Applause)

MS MAHAFFIE: Gustavo Herrera?

MR HERRERA: Good afternoon Myname is Gustavo Herrera I am the WesternRegional Director at Young Invincibles AtYoung Invincibles, we are working to expandeconomic opportunity for young adults byelevating the voices of 18 to 34 year olds

on issues like health care, highereducation, and jobs

Thank you for allowing me totestify on the administration’s effort toexpand Pay As You Earn

Income-driven repayment planslike Pay As You Earn are critical forstudent loan borrowers, but not everyone hasaccess to Pay As You Earn We want to seethe administration solve this

Default and delinquency rates