US Senate Committee on Health, Education, Labor, & Pensions

Statement of Senator Tom Harkin (D-IA) At the HELP Committee Hearing: “Strengthening the Federal Student Loan Program for Borrowers”

Thursday, March 27, 2014

“Today’s hearing is the eighth in our series examining critical issues in postsecondary education as the Committee looks to reauthorize the Higher Education Act. The topic we will discuss today is of central importance, and will remain a primary focus of federal policy going forward: strengthening our federal loan programs to ensure they’re working well for students and families.

“Since the passage of the National Defense Education Act in 1958, the federal government has played a role in helping students fund their college education through loans.  We certainly have much to celebrate over the last half century when it comes to greatly expanding access to higher education. Yet various new challenges today demand our immediate attention.

“In recent years, several major changes have been made to the federal student loan programs to address structural issues of loan origination, servicing, and repayment options.

“In 2007, Income Based Repayment was created specifically to help struggling borrowers repay their loans and avoid the severe financial consequences of default.  In 2010, Congress then made the historic switch from the Federal Family Education Loan lending program to the Direct Loan program, a process that unfolded smoothly, according to nearly all accounts. 

“It’s important to take a moment to restate the importance of that action, and the real impact it has had on students and families.  Despite the strenuous opposition and lobbying of special interests, we achieved the goal of 100% Direct Lending.  This eliminated more than $60 billion in wasteful subsidies to banks, and directed the bulk of that money to students and their families.  We should never go back to a federal aid system that put the interest of big banks ahead of the interest of students. 

“Despite all the progress made, however, there is still much work to be done. As the current student loan landscape clearly illustrates, the stakes have never been higher for college students.

“With aggregate student loan debt in this country now over $1 trillion dollars, and the average student saddled with over $29,000 dollars in debt, there is a growing consensus that we must boldly address the impediments to college affordability and the key drivers of college costs.  While previous hearings have explored these very issues, the purpose of today’s hearing is to examine one central question: how well is the student loan system, from counseling to repayment, working for students and families? 

“I am disappointed to report that all four TIVAs – the largest contracted servicers of federal student loans under Title IV – chose not to attend the hearing today, which directly concerns their contracts with the Department of Education. These loan servicers, like Sallie Mae, rely heavily on federal dollars for their business and yet could not prioritize this hearing on their calendars. I hope we can all agree that students and taxpayers deserve to be prioritized. 

“However, I am very excited today for the opportunity to discuss the state of our federal loan programs with a distinguished panel of experts. We’ll take a hard look at what’s working, what’s not, and what needs to be done to ensure that the dream of an affordable higher education stays in reach for the millions of families who rely on student aid.  I’m confident our witnesses will present a broad overview of the federal loan program and offer concrete recommendations to make it work better for students.

“At the outset of this discussion, I want to make clear that there’s certainly room for streamlining and simplification, particularly when it comes to income-driven repayment plans. However, we must preserve quality choices for students who find themselves in very different circumstances. Students should be able to freely choose among a number of repayment options and decide which plan best meets their needs.  I have serious concerns about current proposals that advocate eliminating a repayment option that is working for nearly two-thirds of borrowers.  Simply put, a one-size-fits-all approach is the wrong solution.

“As we move forward, let’s remember that our federal loan programs are an investment in human capital and an important pathway for equal opportunity. Students deserve to be treated fairly and to understand all the options available to them at each stage of the loan process. By advancing a more cohesive federal aid system, students will be better prepared to seize that opportunity.

“I look forward to working with our distinguished ranking member, Senator Alexander, and my colleagues on both sides of aisle to ensure that our federal loan program remains easily accessible, effectively managed, and mutually beneficial both for students and taxpayers.” 


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