Senators met Thursday to evaluate ways to improve and simplify student loans for higher education.
The Senate Committee on Health, Education Labor & Pensions met to specifically address the Reauthorizing the Higher Education Act. The act was first signed into law in 1965 by Lyndon B. Johnson and required providing federal assistance for students pursuing post-secondary and higher education.
However, for years lawmakers and politicians from both sides of the aisle have sharply criticized the need to simplify the application process and provide transparency for the system in place.
Committee Chairman Senator Lamar Alexander, R-Tenn., said he introduced legislation during the last Congress to streamline federal aid.
“It would combine two federal grant programs into one grant program and reduce five federal loan programs into three. One loan for undergraduate students, one loan for graduate students, and one parent loan,” Alexander said. “It would also simplify payment options by streamlining complicated repayment programs into two simple plans. An income-based plan and a 10-year payment plan.”
The chairman stated he noticed a consensus forming among his Republicans and Democrat colleagues on this issue.
“The consensus I see emerging is this student focus. Simpler, more effective regulations to make it easier for students to pay for college and pay back their loans. Reducing red tape so administrators can spend more time and money on students. And making sure a degree is worth the time and money that students spend to earn it.”Alexander added that the current FAFSA has about 108 questions, with many of the question overlapping for information already submitted to the government for paying taxes. He suggested by using the information the government already has could shorten the form to 25 questions.
The committee’s Ranking Member Senator Patty Murray, D-Wash., urged the committee that simplification to this financial aid process does not mean reducing funds.
We have to acknowledge that simplification cannot mean elimination of aid especially since college cost continues to rise. We should be reducing the barriers facing students at every stage of financial aid process; before they apply, while they are enrolled and after graduation,” Murray said.Murry stated that not only are these forms confusing to students, but no standard format or terms exist.
“I believe both our federal aid system and schools and universities need to play a bigger role helping enrolled students understand the complex maze of eligibility requirements for their financial aid,” Murray told the committee. “We have to help the millions of student loan borrowers struggling to manage their student debt with few resources that have their best interest in mind. Borrowers are experiencing delays and errors and mismanagement of their loans and often getting conflicting and inaccurate information.”
Witness and Chief Policy Officer for UAspire Laura Keane, advises her students to understand the commitment they are making financial before deciding on which university to attend.
UAspire is a Philadelphia-based organization that helps provide students with the necessary resource to find a financial path to higher education.
“College costs aren’t transparent. We advise our students to celebrate, then decide. Celebrate when you get accepted -- but decide only after you review the financial aid award letter, which explains your aid,” Keane said. “Award letters are confusing, if not misleading. They fail to provide the consumer -- in this case, students and families -- with key financial information.”Keane said they found that federal unsubsidized loan presented in 143 different ways in award letters they reviewed. Of those 143, 26 letters did not even use the word loan in the description.
Kean recommended to the committee establishing guidelines as in the past they have helped to provide transparency in other government-based programs.
Witness and Massachusetts Legal Assistance Corporation Racial Justice Fellow for the National Consumer Law Center Joanna Darcus said her organization works to train and support attorney who represents student loan borrowers nationwide.
“The federal aid program should be tailor to the needs of all students and borrowers working seamlessly for their benefit,” Darcus said. “(Income-driven repayment) IDR is at the heart of making student loan repayment sustainably affordable from borrowers like our clients.”Darcus said that many of her clients are not even aware that an income-driven repayment is an option and they default on their loan.
According to the Federal Student Aid website, “An income-driven repayment plan sets your monthly student loan payment at an amount that is intended to be affordable based on your income and family size.”
Witness and Professor Of Public Policy in Education and Economics at the University of Michigan Dr. Susan Dynarski suggested looking at how other countries set up their income-driven repayment plans.
“Other countries allow borrowers to spread their payments over more years,” Dynarski said. “In the income-based plans In the U.S. payments do not adjust automatically. Instead, they are based on the previous year’s income. If a borrower needs to adjust her payments she has to fill out an application.”She added there were two ways to deal with a complicated federal aid system.
“You can try and push put more information that explains to people this very complicated system or you can simplify the system so it doesn’t need as much explaining,” Dynarski said.