 I'm great to see you all here. I hope everybody enjoyed lunch with Detroit Soul. Detroit Soul is an up-and-coming food provider in the city of Detroit neighborhood-based business and I'm really happy they were able to come here today to help sustain us all. I'm going to introduce Wade and then Wade after his remarks will introduce the panel. Wade Henderson, I need my glasses for this. Wade Henderson recently retired as the David A. Clark School of Law's first Joseph L. Raw Jr. Chair of Public Interest Law. He's a senior fellow at the Center for Responsible Lending and from 1996 to 2017 Wade Henderson was the leader of the Washington Conference on Civil and Human Rights which is a absolutely essential and fantastic organization in Washington D.C. that brings together the civil rights community around really critical issues in public policy and I found in my time in Washington I first met Wade back when he first started at the conference in 1996 when I was serving in the Clinton administration. I got a chance to work with him and with the conference on fair lending issues and on the Community Reinvestment Act and a chance to work together again in the Obama administration and I always relied on Wade for a wonderful mixture of deep substantive knowledge, a real strong political sense, a deep moral commitment to the issues at hand and that rare Washington trait common sense. So I'm deeply grateful to Wade Henderson for being here. Among his many honors and achievements he is a graduate of Howard University and Rutgers University School of Law. He's gotten honorary degrees from a number of institutions including CUNY School of Law and Gettysburg College. He's a member of the Bar of Washington D.C. and of the Supreme Court Bar and I'm delighted to welcome him here to the Ford School of Public Policy. Good afternoon everyone good afternoon come on wake up guys it was a great lunch wake up. First of all I'm honored to be with you and Michael thank you for that very generous introduction. I appreciate it. I want to thank the Center for Finance Law and Policy for the invitation to participate in this extraordinarily important conference. The Gerald Ford School is an incredibly distinguished venue and it's perfect for our discussion about consumer protection in an age of uncertainty. Now because this is the last panel I want to take the liberty of thanking the organizers for the extraordinary job they have done in pulling this together. Christy, you, Tracy, you know it's really been a first rate production and so thank you so much for your generosity and the lunches both today and yesterday were quite extraordinary. I normally thank the wait staff in places that I go because I know how hard it is to serve food. I used to do that myself so I do appreciate that but it was really well done. Now I'm excited to be a part of a conversation on the pitfalls of student loan debt. It's an important topic that has for far too long traveled under the policy radar in Washington and in far too many state capitals. My colleagues on the panel are distinguished and groundbreaking advocates. I'm going to have the opportunity to introduce them individually at the end of what I hope are my pretty brief remarks but I'm really especially pleased to be with all of them and as most of you know as Michael mentioned I'm the immediate past president of the leadership conference on civil and human rights but I'm here today in my capacity as a senior fellow with the Center for Responsible Lending and I want to thank my colleagues at the Center for their terrific research on the issue of student loan debt and for their help in preparing my remarks. Now I decided to entitle my presentation Good Debt, Bad Debt. The seamy underside of the student debt crisis which I hope is sufficiently provocative to keep you awake after all of that food this afternoon so we'll go from there. Before I begin I would like to take a minute to offer a couple of preliminary comments. First I really do want to acknowledge Michael Barr. Michael was very generous in his comments about me. I'm not a person that Michael hired in his tenure to one of the few here at the conference apparently but I did want to lift Michael up because when I met him he was a young policy wonk in DC fresh out of law school maybe three years or so and we conspired together to actually increase the level of civil rights enforcement funding across the board. Michael was at OMB and because of his work because of Frank Reigns whom he worked for but really because of Michael's commitment to the issue we were able to increase the level of civil rights enforcement funding at unprecedented levels and I give Michael a lot of credit for that because it really took commitment and you know knowledge and substance and how to work the system if you will to produce that result and it was a really good outcome so Michael thank you for that it was really important. I also really would be remiss if I didn't also take a minute look I'm here in Michigan guys right if I didn't acknowledge two of your native sons who in my view I can't come to Michigan without mentioning them they are the 43rd and 44th deans of the House of Representatives two of the longest serving members in Congress John Dingle who served from 1955 until 2015 chair of the energy and commerce committee and John Conyers chair of the house judiciary committee who was no slouch himself to congressional service he came in in 1965 and served until December of 2017. Now I mentioned yeah now they deserve thank you they deserve they deserve credit John Dingle really prided himself on being involved in the 1964 civil rights act that was his proudest achievement but John Dingle was also responsible for Medicare the clean water act and he helped lead the fight on the affordable care act you don't get better service than that and it should be remembered John Conyers took great pride in being involved in the 65 voting rights act in the fair housing act of 1968 1988 the Matthew Shepard James Bird hate crimes bill and many criminal justice laws that help promote reform we are unlikely to see two individuals with that same level of impact again and to know that they are here in spirit in Michigan is an important reminder I stand on the shoulders of people like John Dingle and John Conyers so thanks for indulging me um now my final preliminary remark I said I'm gonna keep it short I promise it's my final preliminary remark is really a prelude to my remarks this afternoon and that is a reference to the college admissions cheating scandal which has hit several elite universities and prominent individuals including Hollywood celebrities and which has roiled the higher education community now I'm quite sure I don't have to elaborate extensively on my views about the cheating scandal or as its chief organizer referred to it the so-called side door to opportunity for the sons and daughters of the wealthy a door that only money could buy to attend an elite college university I was I was struck especially by really almost immediately by the hypocrisy of those who focus on the alleged unfairness of affirmative action which arguably this university knows more about than many others because of the Gruder versus Bollinger lawsuit of early 2000 while they say at the same time they ignore the admissions from university preferences for legacy or the effect of fraud and white privilege but actually there are larger issues at play now I'm sure these cases and the resulting prosecutions having gotten the national attention they've received will run their course however questions about the true meaning of equal opportunity in American life through public education loom large and how we determine who gets into our better schools will remain unresolved long after the cheating scandals have been forgotten now this is not the venue for me to make my argument in favor of a federal right to quality public education in contrast to the 50 state education fiefdoms that dominate america today and routinely disfavor students of color and the poor but it is a place to remind us that de jure segregation which is a nationwide phenomenon with its history of inequality is baked into our education system k-12 and in the post-secondary world as well now as a result as Lisa rice pointed out on the previous panel structural inequality which is deepened by poverty and the expanding wealth gap is the backdrop against which the american student loan debt crisis must be viewed now there was a time not too long ago when student loan debt was considered good debt in consumer speak good debt is defined as an investment that will grow in value or generate long-term income and student loans have long been considered a relatively wise investment student loans of course typically had very low interest rates compared to other types of debt and the payoff seemed all but guaranteed it was also good debt because it's been drilled into our heads since early childhood that education was the gateway to opportunity in american life but somewhere along the way things got out of hand for all but the very highest income brackets student loans are now a necessity a while ago college students took out loans and or held jobs to pay for their education Pell grants which were readily available to low-income students regardless of color have diminished in value because they haven't been increased over a period of year so it pays for less and less and then parents and in some cases grandparents or other relatives began taking on loans each year of enrollment brought new loans often with higher interest rates and a new kind of consumer debt was born and while we use the term student debt what we're really referring to is family debt that affects multiple generations i guarantee you there are people in this audience who are subsidizing the education of their own children when they in fact are now moving meaning the individuals themselves into their retirement years so the growth of outstanding student loan debt over the last decade has been staggering today more than 44 million people carry over 1.5 trillion dollars in outstanding student loan debt an amount that exceeds all other types of non-mortgage loan debt two out of three graduates in the class of 2017 borrowed federal student loans to finance their education and this phenomenon is especially troubling for communities of color because the wealth gap makes the burden of student loan debt particularly heavy for african-american and latino families now i want to remind everyone this conference the consumer conference talked about the mortgage and recession crisis of 2008 african-americans lost about 40 percent of their collective wealth 40 the aclu has just issued a new report i i'm surprised i was an aclu lawyer by the way so i'm thrilled that they did it but the aclu has issued a report which said that by 2031 by 2031 african-americans will have in effect lost about a hundred thousand dollars in net wealth because of the recession of 2008 a hundred thousand dollars guys what we are looking at wealth in in 2013 as a result of the recession was 13 times less for african-americans than it was for white families so the truth is you're already starting from a phenomenally unequal position made worse because of structural inequality and made more difficult because individuals don't have the capacity to pay back the loans even though at the time they took them they thought they might families of color are more likely to to have a need to borrow for higher education and in larger amounts and following graduation those who earn lower relative incomes simply have less to work with which contributes to a higher likelihood of delinquency and default and in fact recent research shows that rather than helping communities of color build wealth a college education deepens the wealth gap for example young african-americans take on 85 percent more student debt than their white counterparts for their education and that difference in indebtedness increases by almost 7 percent per year after leaving school now it's critical to note that delinquency and default on student loans occur disproportionately for students of color and women a degree is not a shield from racial or gender disparities african-american bachelor's degree graduates default at five times the rate of white graduates and are more likely to default than whites who never finish a degree women graduates on average with $2,700 more in student loan debt than men and because of the gender pay gap they earn about 26 percent less so paying off their debt takes significantly longer if you set aside the question of whether these individuals are simply immoral that is to say they're taking the loans and they have no intention of paying them back and you know no matter what their circumstances are that's what they're doing if you set that argument aside because i think that's terribly untrue then the evidence of the disparities that we see are deeply disturbing and suggest that without some attention the problem is only going to worsen excuse me and while student loan debt is often seen as a millennial issue the crisis leaves no age group untouched AARP is increasingly concerned about student loan debt affecting the financial stability of older americans student loan debt held by borrowers over the age of 60 increased by more than 50 percent between 2012 and 2017 according to the GAO the government accountability office the increase in loan debt among seniors means that many more are spending their golden years struggling because of the federal government's ability to garnish social security income for repayment of federal student loan debt and it has been argued that the inability to discharge student loans in bankruptcy increases the problem now there are some exceptions to that rule but the truth is if you can't discharge that debt you are now entering your retirement years and you are relying on social security as your primary source of income you're in deep deep trouble guys deep trouble so according to the department of education for just one year of undergraduate instruction a full-time as a full-time student at a private non-profit school during 2017-2018 academic year the cost averaged about $28,000 an increase of approximately 3 percent higher than the previous academic year similarly the department found that the cost of full-time enrollment at public institutions offering a four-year degree also rose for these same two academic years in-state students enrolled full-time at public colleges and universities faced a two percent increase in costs amounting to $8,300 out of state students attending the same colleges and universities faced an average cost of $28,000 and yet few employed people had corresponding increases in income now i'm not going to discuss the the you know median income of you know the various communities i have that information if you're interested i'm happy to talk with you after the panel but the truth is you know as well as i do that women people of color don't measure up to the median income of white families and so when we talk about student loan debt even though they may be borrowing the same amount under the same terms the impact of that borrowing has a decidedly different effect on those communities so so while 250 oh student loan debts i'm sorry loan defaults to grade credit scores lowering them by as much as 50 to 90 points according to the urban institute which is a dc-based research organization and as credit scores drop the cost of any future credit goes up making it even harder for affected consumers to manage their personal finances while 250,000 federal direct student loan borrowers default every quarter guess which consumers are most likely to default we already discussed that so i won't go further beyond it so beyond a four-year baccalaureate degree and graduate schools today's educational options for include varied careers and technical training programs in such fields as health care computers cosmetology criminal justice fashion design and the entertainment business prominent among the institutions offering this educational medley of for-profit colleges that use marketing strategies to target financially vulnerable consumers then complete enrollment and financial aid applications as quickly as possible now these institutions even encourage debt beyond what is needed to pay tuition and fees this year the set of responsible lendings research found that for-profit colleges represent twin traps of poor outcomes and costly debts that together often lead to loan defaults across the nation for-profit college loan defaults occur at a rate three times that of students enrolled in either public or private institutions offering four-year or two-year studies and the sad result for these for-profit students is that they wind up in worse financial circumstances after enrollment all they wanted was educational training to improve their lives and further fewer than 30 percent of for-profit students graduate six years following their enrollment in two or four-year curricula now unfortunately debt was the primary takeaway from the for-profit college experience i won't go into the details involving regulatory rollbacks and changes but it is sufficient to note that the previous administration issued what were known as gainful employment rules which sought to really hold down and really hold up rather to a standard of care for-profit schools that at this point exploit students beyond anything reasonable just because we know of a school named trump university that has since gone out of business doesn't mean that all schools are back per se but having said that there are too many students who suffer in this area and it's really really worth noting and i really needn't mention other than to say we followed failures for for-profit schools like Corinthian colleges Everest ITT tech that left student borrowers without degrees and credit hours that could not be transferred and losses to taxpayers who funded federal assistance Betsy DeVos who has chosen to bring her own inimitable analysis to this problem unfortunately has done very little to advance the larger cost so this is the backdrop against which today's extraordinary panel is being asked to address it is my great pleasure to introduce today's panel individuals who i have come to know through this process and i must say have deep admiration for Sam and they will be presenting in the order that i introduced them Samuel Levine is consumer protection counsel to the FTC's commissioner Rohit Chopra and Rohit that was a great presentation this morning so thank you so much for coming to the conference and Sam is of course a worthy representative of the office then Sam will be followed by Joseph Sanders who is the supervising attorney for consumer fraud bureau of the Illinois attorney general's office and a student loan ombudsman for the state of Illinois great to have you here Joe and finally we'll hear from Dan Zibble Dan is the assistant director for supervision policy at the commuter i'm sorry at the consumer financial protection bureau ladies and gentlemen please join me in giving them did i say it wrong you're correct okay all right thank you thank you and any of it let me ask you to join me in welcoming all three of our now we're going to hear from them uh individually and then i'll pose a couple of questions and then ask the audience to follow up and participate Sam well i want to start by thanking professor Henderson it's really an honor to be on this panel with you and to have met you at this conference i want to start with the disclaimer i work for commissioner Chopra i hope i'm a good representative of commissioner Chopra as professor Henderson said but i do not speak for commissioner Chopra he's perfectly capable of speaking for himself as we saw this morning i also certainly don't speak for the federal trade commission as a whole i'm speaking only for myself so what i want to talk about today are some of the work that the ftc has done over the last year to take on some of the most abusive practices in the higher education space some of which were referenced by professor Henderson but then after that i sort of have a bad news portion of the talk how these abuses that the ftc has taken on are symptoms of a much bigger disease in higher education and when it comes to this much bigger disease in higher education i fear that our federal government is not on the side of students and our department of education is not on the side of students but first for the good news so the federal trade commission for those of you don't know is a bipartisan federal agency it's comprised of five commissioners and it has some independence like i said from the administration and what we do is we enforce among other things a prohibition on unfair and deceptive practices so if a company in the marketplace cheats students or customers we have the ability to go in and sue them and hopefully stop those practices and we've used that power in the higher ed space in two key areas over the last year and i'll talk about each in turn the first is in the lead generation space and the second is in student loan debt relief so let me start with lead generation so if you've never heard of lead generation all it is is someone who tries to connect a company looking for customers and potential customers lead generators in the middle trying to connect them in the higher education space this means connecting schools with potential students now you may be thinking of to yourself especially if you're a student here at the University of Michigan that's not how i recall going to school i had to fill out an application and pay someone ten thousand dollars to take my SAT for me um just kidding just kidding no no no no um but seriously that is not in in elite education that is not the traditional way that you apply to schools but for most americans who are going to schools that it does not resemble applying to the University of Michigan and there are many schools out there especially vocational and for-profit programs who use lead generators to connect them with potential recruits so the FTC went after a particularly bad lead generator last year called Sunkee um and according to our complaint what Sunkee did is they basically imitated military recruiters they set up websites like army and list comm and navy and list comm and they put ads on google that said enlist in the navy serve your country and for those students who did want to serve their country they came across these websites and thought these guys were the military and these guys that give us your personal information and we'll get in touch with you about your options so students looking to serve their country call up or excuse me put in their personal information they get a call from someone claiming to be a military recruiter and they say hey it's great that you're interested in the army but the army is downsizing have you thought about going to one of these schools that the army recommends and the company then if the company is successful in connecting the school to that student that school will pay Sunkee about 15 to 40 dollars a lead directly or indirectly now this is an outrageous practice this is steering people who want to serve their country into predatory for pro predatory schools not necessarily for profit predatory schools that clearly don't have their best interests at heart i'm proud that the FTC shut this scam down forced them to turn over their websites and by the way to the commissioner's point earlier sued the individuals who ran the scam not just the company and they're now under a permanent injunction but it's important to understand with the lead generation space and i'm going to get into more of this later that what about the schools that were buying these leads we know there were dozens of schools that decided that this was an okay way to recruit students what i'm going to talk about later is how that is the net's battle that we really need to be fighting who are these schools that think this is acceptable to prey on students in the way that they did through Sunkee but i'll get to that in just a minute the second area where i think the FTC has been active is in student loan debt relief you may not have heard of student loan debt relief but i'm sure you've heard from student loan debt relief operators if you've gotten a phone call in the last five years uh from an unknown number it might have said there is an obama forgiveness program that inspires tomorrow press one and you can see all your loans forgiven and if you had pressed one and spoke to someone that someone is a student loan debt relief operator except they're probably going to claim the department of education and they're probably going to claim that to get your loans forgiven or to get your loan payments reduced you need to pay them a thousand dollars upfront and then forty dollars a month for the next 20 years now the interesting thing and joe's going to talk about this more is that these debt relief companies did actually if you had paid them the thousand dollars uh often put students into income-based repayment programs that lower their loan payments but the reality is that these are free programs it is free to enroll these are government programs that taxpayers pay for and these these companies were able to do it for two reasons a because they lied to students and b because the servicers the actual student loan servicers who we as taxpayers pay to manage our portfolio of student loans aren't doing their job and joe's going to talk about joe's going to talk more about that but the ftc took on these debt relief companies we've shut a lot of them down i think that's a good thing but one point my commissioner has made and that i am making now is that this is this is a symptom of a much deeper problem now i want to get into what the what i see is two of the core structural weaknesses in higher education today that are hurting american students the first is schools that are treating students as nothing more than a source of revenue and the second is the total lack of accountability for the outcomes that schools are delivering for their students total lack of accountability against the schools so first i want to talk about the idea of students as revenue if you're an american citizen you have a birthright essentially to tens of thousands of dollars in federal student loans i think it's about fifty seven thousand five hundred dollars for undergraduate you can take that sixty grand anywhere you want basically if it's a you can't go to trump university with that but you can go to uh you can go to a lot of higher ed schools well we live in an entrepreneurial country and there are a lot of people who thought about the system of higher ed financing and thought gee i could make a lot of money like this i set up a school and every warm body that walks in the door can bring in tens of thousands of dollars and that's exactly what's happened in this country over the last 30 plus years there's a school that joe and i were involved in prosecuting it was conceived of at harvard business school as a way to make a quick buck that's that was the conception of the school and that's exactly how these schools operate they uh they run generally for-profit they they use they use lead generators like sunkey to connect them to customers and then they have admissions counselors and unlike an admission counselor at university of michigan if you're an admission counselor at a predatory for-profit school you're not an admissions counselor at all you're a salesperson they literally take hire these folks from use car dealerships we've seen the personnel records it's true those are their star counselors are used car salesmen selling people education and these sales people understand because they're not dumb at all they understand that every student is like a new lexus for the company they work for and i did not make that up that was in the present that was in the training for these counselors at the school that i referenced earlier every student you crude is a new lexus now when you have that kind of incentives in place those kinds of incentives in place when every student you can bring on is like actually selling a lexus of course there's going to be fraud and deceit of course you're going to hire companies like sunkey uh these lead generators to bring in as many warm bodies as you can you have an overwhelming economic incentive to commit fraud so we shouldn't be surprised when fraud is exactly what happens now as professor handerson referenced uh and here's where i get into the issue about the federal government the obama administration really made an effort to um to crack down a deception to students um they did a number of things but one thing i want to talk about and joe was very involved in it was a rule called borrower defense to repayment that basically said if a school lied to you in the course of the enrollment you shouldn't have to keep paying your loans you can get a discharge of your loans you and you can have some recourse against the school and that the department of education could take some administrative action against the school as well this was a very basic rule it would not have solved the problems i'm describing it would not have fundamentally changed the overwhelming incentives that i'm describing but it would have i think it would have moved the needle and made things a little better and a little less uh slanted against students well instead of moving the ball forward on this the current administration is rolling it back and unfortunately for those of us who care about students there's a rearguard fight going on by the states and by uh private plaintiffs like dan's group to try to stop the uh trump administration from watering down and rolling back these rules but my broader point is that i wish i could say we were moving forward on actually making sure schools don't lie to their students but i fear we're actually moving backward and given the incentives i described that's a real problem the second big failure big big failure in higher education is the lack of accountability for outcomes so i'm going to go back to the school that joe and i were involved in prosecuting this was a school that charged 80 thousand dollars for a bachelor's degree that by the way wasn't recognized by graduate schools and wasn't recognized by most employers well the consequence was somewhat predictable the vast vast vast majority of students who enrolled did not graduate those who graduated could look forward to a median income of 23 thousand dollars which is comparable i believe it's less than what a high school dropout would have been expected to earn it's that these guys are stuck with 80 000 in debt and for the private lending that professor henderson described 90 percent of students who took out a loan from the school defaulted this was a train wreck for students the this school destroyed the lives of thousands of students even as their private equity owners reap tens of millions of dollars in profit year after year and that lack of accountability that system in which you can destroy lives and deliver horrendous outcomes as long as you keep bringing in warm bodies for as long as you have that kind of incentive structure in place of course you're going to have student loan debt relief outfits spring up because people are desperate people come out of these schools they have no income they have a hundred thousand dollars in debt they're desperate and when you have desperation you have fraud so if we want to stop the desperation if we want to stop the student don't loan debt relief fraudsters at the core we need to get at the lack of accountability for the schools that are putting these students in the desperate straits in the first place once again i'm going to echo my refrain from before the obama administration tried to do something about this professor henderson referenced it a lot of us at the state and the department of education were involved they had a gainful employment rule it wasn't so radical it said if you're a school taking millions of dollars in federal funds and your students aren't able to repay those funds maybe you shouldn't keep getting millions of dollars in federal funds this was to protect students but it was also to protect taxpayers why are we subsidizing these private equity schools that are destroying students lives once again same old story the uh that rule is being rolled back it's been frozen and a lot of it's in the courts right now but once again gainful employment would not have solved the lack of accountability but it would have moved us in the right direction and instead we're moving in the wrong direction and there's a rearguard action by people like joe and dan to try to just stop the damage so i want to conclude with this uh commissioner chopra has talked a lot about uh here and elsewhere that to be an effective regulator you can't just deal with the symptoms of problems you need to address the core disease student loan debt relief lead generated these are symptoms of much deeper problems in higher education and if we're going to address them if we're actually going to protect students we need to get at the core disease the profit motive the lack of accountability treating students like at nothing more than atm's and that's why i'm so glad to be joined on this panel by joe and dan because they are on the front lines of getting not only at the at the worst abuses but also the core problems in higher education that are endangering american students so thanks very much hi everyone i'm joe sanders i'm with the illinois attorney general's office um like sam i need to let everybody know that the views i'm expressing here today are my own i don't speak for or bind the uh office of the illinois attorney general i want to thank the forward center on the university of michigan for having me here today i want to thank my panelists i'm really honored to to be on a panel with so much knowledge about student loans and and the problem here um and i want to thank commissioner chopra former student loan ombudsman chopra i am now the student loan ombudsman for the state of illinois and so i am standing on the shoulders of ombuds giants okay so i'm going to build on what sam talked about sam talked about schools and where the loans you know the product that the loans are paying for and the problems there um and i'm also going to touch on the defaults that professor henderson talked about because as the federal student loans there are protections in place that should make defaults zero income driven repayment is a repayment system that's based on your income and if you don't make very much money your payment is literally zero dollars and that's considered in good repayment status you're in these zero dollar payments for 20 to 25 years and then the loans forgiven with the existence of these programs um some of which sam actually helped to create on the negotiated rulemaking committee um for the department um why should there be student loan defaults why should anybody default when you have these protections in place there are a host of reasons here but but i'm going to talk primarily about a large one which has to do with the companies that interface between the student and the us department of education who's the primary lender of federal student loans now and those are the student loan servicers the servicers have misaligned incentives where what's good for the servicer is not necessarily good for the student or good for the department of education um i'm going to start with some basics um because this stuff can get in the weeds and kind of nitty gritty fast so just some baseline stuff um there are multiple kinds of federal repayment plans when you first enter repayment on your federal student loans you're going to be on a 10-year repayment plan which takes the principal looks at the interest rate amortizes it over 10 years those are the payments that you're initially asked to to start making if you're having trouble making that payment amount you can extend the term um you can extend that to 30 years this will obviously lower the payment but increase the amount of interest you pay over time and then there are also income driven repayment plans and there are a host of these but the basic idea is that you pay 10 to 15 percent of your income and you do that over a period of time usually 20 to 25 years and any amount that you owe at the end of that time is forgiven now that structure is unique you don't see a lot of financial products that are structured in that way and one helpful way to think about it is it's more of a tax on income than it is alone you pay a certain percentage of your income for a set amount of time and that is your obligation and there's a host of scholarship out there that that goes into detail on that but i think it's a helpful concept just thinking about what it is we're talking about here um and i think honestly the department of education could do a better job of emphasizing those insurance like aspects of idr as opposed to simply the costs right because interest continues to accrue but you're not necessarily going to owe it at the end of the 20 years um okay the qualifications for idr are varied you need to figure out some some basic information in order to figure out which plan you should be in and how to get into it do you have a fell loan do you have a direct loan do you have a parent plus loan are you married if you're married do you file jointly do you file individually um do you have a hardship um when was your loan originated so going through these factors takes some time right you need to figure out all these facts in order to get into the plan um an alternative to to an income-driven payment plan if you're having trouble making your payments is a forbearance and this is something that doesn't have all those upfront questions right it's simply something that you're allotted a certain amount of and you can say i'd like a forbearance and it's like a payment holiday interest continues to accrue but you don't have to make your payments for usually a period of months um but you get several of these so it can quickly add up into years if you continue to use them now another basic what is a student loan servicer um now the department of education defines student loan servicers on their website um some key points the department says uh the loan servicer loan servicer will work with you on repayment plans and if your circumstances change at any time during your repayment period your loan servicer will be able to help so the department is saying if you can't make your payments call your loan servicer um now servicers uh often pair at these exact same statements right they hold themselves out as experts on repayment for federal student loans so they'll say um and this is a quote from a servicer website if you're experiencing problems making your loan payments please contact us our representatives can help you by identifying options and solutions so that you can make the right the right decision for your situation right so they're offering nuanced expert help on what type of repay payment plan you should be in um now getting getting more to the to the conclusion here what are the servicers incentives servicers main cost or a large cost for the servicers are call centers these are you know large operations where you have a lot of people on the phone answering incoming calls from student loan borrowers who ostensibly some of which you know need help on repayment options um servicers can reduce their costs significantly by reducing the call time that they have on each call and they incentivize their representatives accordingly if you have short average call times you're eligible for bonuses um what this means in practice is that the call representatives are incentivized not to go through the long series of questions that you need to answer in order to figure out where you should be on income driven repayment but instead offer forbearances quickly and often because you can do it in under five minutes um this harms borrowers you need to make 20 years of qualifying payments on an income driven plan if you're going to get that loan forgiveness and so each month that you are in a forbearance interest is continuing to accrue and you're losing time towards that forgiveness um that right there start you start to see why students default because instead of getting into these plans that are affordable and that will ultimately pay off the loan over a period of time they're putting them into a series of forbearances that ultimately increase the loan balance and don't get the borrower any closer to ultimate repayment 270 days if you if you don't pay for 270 days you are technically in default on a federal student loan and once borrowers who don't understand the system run out of forbearances that's that's really the countdown until the default um now even when somebody gets into an income driven plan if you go in you know what you're looking for you tell the service or what you want right you force the issue and you get into the income driven plan there are a series of hurdles that um problems that come up in the interactions with the servicer so for example each year you need to recertify your income in order for the Department of Education to calculate your payment um so you're not making much money one year you might be on a zero dollar payment you get a new job you're making more you have to recalculate so that you're contributing what you can from your income um if you fail to recertify your income at the allotted time you are kicked out of the program now this has some negative consequences for borrowers uh right away number one your payment goes up dramatically um number two um there's interest capitalization so the interest that was accruing while i was paying less while i was paying a zero dollar payment or or less than the fully amortizing payment has continued to accrue in the background and when i drop out of the income driven plan that interest capitalizes on to the top of the loan and i'm now that amount is used to calculate interest going forward so you're increasing the amount of interest that's that's created from the loan um there are interest subsidies where the government will pay those interest payments for a period of time you lose those if you had those for your loan um and one of the problems that we see from the servicers is that the communications on when these recertification dates come out are not clear so instead of a subject line that says hey you need to recertify your income next month it'll say you have a new document on your Navient website click through to see your inbox right and then you have to go find your password and and i think we've all dealt with this and it's really um a block to students successfully recertifying um not all servicer communications are done in that manner when you owe your bill they'll say hey your payments do pay us right and it'll give much more specific information so um again problems on the servicing side um we see it with private loans um with private loans you often have to have a cosigner most private student loans are um underwritten on the cosigner not on the student because the student doesn't have uh sufficient credit history they may make more income after they get the degree and so cosigners often ask for in selling those loans and in selling the cosigners that the um it's often highlighted that the cosigner can be released through a series of consecutive on-time payments unfortunately what constitutes on time for cosigner release is often different than what constitutes on time in terms of whether you're delinquent so you could make a payment that's on time and does not put you into delinquency but is not considered on time for cosigner release so for example you get a say a 10 day grace period your payments do at the first of the month but if you pay by the 10th you're fine that doesn't count as on time for a cosigner release so uh a lot of parents and and older individuals as as highlighted by professor Henderson um get stuck in these loans that you know they were told they would be able to get out of um but are not because of the semantics used by the servicers um another problem we see is present amount do so you you might call up your servicer and say I'm behind uh what do I need to do to to get current on the loan servicer's response uh in some instances that we've seen is your present amount do is and then they'll give you a figure present amount do as defined by the servicer is not the same as the amount to bring you current um present amount do is the amount to bring you current plus your next payment and this is not at all clear to borrowers when they're calling up um so these misaligned servicer incentives are one of the problems that that create defaults I want to talk a little bit briefly um as I wrap up here about what the states have done um to address these problems so first thing offices like mine the attorney general's state attorney general uh have brought lawsuits um Illinois, Washington, Pennsylvania, Mississippi and California have all sued Navient um for some of the practices that I that I just discussed um there are also a series of state student loan servicing laws uh and these are laws that are designed to get at the exact same conduct so for example Illinois passed a law that just went into effect on December 31st of last year um one of the things that's required is if you're um a borrower who's at who's defined as at risk somebody who's delinquent somebody who maybe didn't complete their degree the servicers are required to have a specialist there that really knows the ins and outs of these income-driven plans um services are not allowed to present forbearance as the only repayment option um so there's a series of regulations that are designed to correct some of these incentive problems um and then our law also um created an ombudsman similar to what was seen at the CFPB um another thing that states can do uh and and there's a good example of this in Rhode Island is to correct some of the the problems with the federal system and their servicers at the state level as a model for for how it could be done at the federal level it's a lot of gridlock right now with higher education act reauthorization but uh I think the federal government would do well to look at programs like the Rhode Island student loan authorities um state lending program two touchstones there first Rhode Island services their loans in house this increases their cash flow and it aligns the incentives of the borrower and the lender and that Rhode Island wants to keep the students current they don't want them in forbearances and then just falling out into default they want them to keep paying um and then number two Rhode Island has a single IDR program so if you start having problems with repayment there's one program you talk to the servicer who works for the state agency there and they say okay we'll put you into the income plan there's much less friction on that transaction so um I think there are some great state programs out there and um watch for more from the states on higher education good afternoon um my name is Dan Zibble I am the chief counsel of the national student legal defense network uh we are an organization a non-profit organization in DC we're about a year old and we are dedicated to issues of consumer protection really across the student aid lifecycle focusing on predatory issues in in the for-profit colleges and some of the student loan servicing issues as well uh it is really great to be here today I want to thank professor bar and the Ford school uh I'm an alum of the law school and just walking around uh here over the past 24 hours has been uh nostalgic and kind of fantastic uh buildings like these weren't here when I when I went to school so uh it's a it's a pretty fantastic setup um I think as professor Henderson said said best the crisis here is huge right we hear the 1.5 trillion dollar number all the time that's about one trillion in growth over the last decade alone uh more people are borrowing more people are borrowing more the average student let the average student is borrowing more money delinquency rates are high bankruptcy is impossible or virtually impossible to obtain uh and there's lots and lots of causes for that and I think uh maybe fewer solutions right now but what I want to offer some comments on and thoughts on is for the role of of the U.S. Department of Education and all of this because that's the piece that we haven't I think focused that much on and and I offer these thoughts really as someone who used to work there I spent three years in the general counsel's office focusing on issues of of higher ed Commissioner Chopra was there for a for some of that time um and that was under secretary a little bit under secretary Duncan under secretary king and uh the end of my time under the current administration um during the the the first chunk of that um I had served on the Obama administration's interagency task force on for-profit education we helped do a lot of things that the as I think some of the other panelists were referring to during the the last few years of the administration uh starting to operationalize the gainful employment regulations that that had been sort of a multi-year effort in the courts back down to the agency back up in the courts and finally uh it was really was really getting going we set up an enforcement unit designed to ferret out the kind of predatory practices by for-profit and other predatory institutions of higher education uh and there was a there was a lot going on there was a lot going on on student loan debt relief uh a lot going on on enforcement actions against some of the big actors Corinthian ITT and many of the kinds of actors who were engaged in similar or almost identical behavior as the Corinthians and ITTs that very few people in this room will have ever heard of what these schools are beauty schools trade other types of trade schools uh for-profit law schools through there's a whole host of of players that never get the kind of press that Corinthian and ITT do but they're out there and i think those often get get overlooked really because of the size and the scope and and our attention span to pay on these issues uh in contrast the Department of Education in the last two years has taken a very different approach there's been a lot in the world of regulatory rollbacks it's been mentioned a little bit the gainful employment rule which really was designed to be a value proposition our students taking out a level of debt can measure with their earnings there's a debt to earnings ratio uh that rule was in effect it is still the law of the land uh it is not being enforced by the current Department of Education and the department has to propose in a in a in an nprm that came out about a year ago notice and propose rulemaking to essentially select all and delete the rule um the department has unlawfully refused to implement rules designed to provide automatic debt relief to people who went to colleges largely for-profit colleges but all colleges that closed when they were there uh that was the subject of litigation and the department is slowly finally starting to implement that relief and we're seeing the fruits of litigation uh just in the last few months the department has unlawfully delayed the borrower defense rule uh including a class action waiver a ban on class action waivers and a ban on mandatory arbitration that the department put in uh in 2016 the department as i said under secretary divas delayed the implementation of that rule that has been found to be illegal uh the department delayed what's called the state authorization rule which was designed to protect students who are enrolling in online institutions of higher education uh i believe that that is also unlawful uh and we have summary judgment arguments in about three weeks in california where a judge will make that decision uh the department has reversed course on one of the most controversial accreditors of for-profit colleges an organization called ACICS and that was something that secretary king at the tail end of the obama administration said you are not doing your job well enough you are no longer fit to be served as a department recognized accreditor which for practical purposes means you can't get you as a school that is accredited by that accreditor uh if that accreditor is not recognized by the department you are no longer your students are no longer eligible to get title for aid you know Pell grants direct loans so ACICS was out ACICS was back in and quite remarkably even after letting it back in it or even when letting it back in uh it becomes clear that the department actually believes that ACICS does not meet the federal standards for competency and conflict of interest but lo and behold ACICS is now a recognized accreditor by the U.S. Department of Education the department has effectively dismantled the enforcement unit designed to ferret out the kinds of behavior that we've been hearing about and then on the student loan servicing side we've seen the department argue forcefully that state consumer protection laws, UDAP laws can't be used against student loan servicers so that's trying to stop the kind of lawsuits that that Illinois and Joe have been bringing against Navient and other states and it's also been trying to stop lawsuits that private class actions and private plaintiffs have used against the student loan servicers the department has made that argument in the federal register student loan servicers are sort of latching onto that you can query the level of relationship there but that is the argument that's being made in the courts it has been having limited success I think every state AG has been able to fend off the preemption argument but there are a couple cases that have come out the wrong way and those are now in the in the courts of appeal including one that I argued last October I think and we're still waiting for a ruling from the Seventh Circuit on that similarly the logic also applies to the kind of student loan servicing bills that Joe was talking about where the department is saying to states hands-off registration licensing hands-off our student loan servicers those are federal contractors states you have no role in protecting students in this space and on top of that on the student loan servicing's front there's a recent report from the department of education's office the inspector general which says that ed is not actually doing a good enough job itself policing the student loan servicers so you have the IG of ed saying you're not doing a good enough job all the while the department of education is saying nobody else is allowed to oversee these servicers so who's to do that who's who's left as we think about that issue and Joe mentioned briefly that the higher education act is currently being debated for reauthorization I think there's really a fundamental question that has to be asked which is what is the role of the U.S. Department of Education in the student loan space right if we look back at the origins of student loans it really I think the modern system really dates back to post-world war two the GI bill largely a grant system the goal was opportunity and providing access the goal was about the students about education workforce training obviously a lot has changed since then you didn't have the Department of Education back then that came about in the late 70s and there are still people at ed who worked at the Department of Health Education and Welfare and have actually an amazing amount of knowledge about that about that time and in the I think it was in the late 90s when the Department's Office of Federal Student Aid was created as a performance-based organization a PBO under the so the Al Gore reinventing government concept and designed to give greater flexibility to the agency to act a little bit more business-like and then later you know 2008 financial crisis the government switches to entirely a direct loan system rather than the system of guaranteed commercially made loans under the what's called the fell program the family federal family education loan program so that's a lot of change right and the question really is is what is where is the department in all of this and is this the kind of program that the department as constituted right now really has the ability to oversee and oversee in a way that is effective and I think one of the things that struck me over the past 24 hours sitting here in the room with you know so many sort of financial experts and the way I think a lot of people talk about banks and supervisory authorities and all of the consumer protection that goes with sort of these complicated commercial lending products auto loans payday loans you spend time with the Department of Education they're talking a different language they're talking about their customers which are usually the schools or their customers are the servicers I mean Rohit's nodding along but yeah I mean I think you know there are tons of well-meaning people at the Department of Education but it's it's really it's a different conversation that's happening there and it's not a focus on you know how to best protect the students it's protection of taxpayers and whether that's working or not we can talk about but there's a lot of it is about protecting the schools and enabling the schools and what if there's a bad school well we can't shut the school down because what about the students who go there right now the conversation is never about well what about the students who are going to go there in two years three years four years five years it's about what about the students who are there today right now and how do we protect them and there's not a conversation about whether that's in the the the best interest writ large now there are exceptions to this I think there were certainly exceptions in the in the last few years of the of the Obama administration when you saw Corinthian and ITT and even even recently we've seen exceptions to that and even this administration I think has a tipping point with some of the Argosy University comes to mind just in the past few weeks where the Department of Education said enough is enough there's indications that you we can't find you know 13 16 million dollars of federal money that's enough finally for us to put you out of business or at least take the Title IV aid away from you but I do think that there's a fundamental question to say what is what is the role of the department and as in the statute right now the department has a role in contracting with services overseeing servicers overseeing accreditors overseeing schools deciding which schools can participate in Title IV which schools can't participate in Title IV which accreditors can accredit what do the loan payment repayment plans look like and all of that means the Department of Education is at the the central focus point of a 1.5 trillion dollar student debt portfolio and as I hear the conversations that go on in DC about HEA reauthorization there's lots of proposals I think at the at the margins and they're good proposals and good conversations that absolutely have to be having about things like you know incentive based compensation for recruiters at schools the federal 90-10 rule you know the use of private rights of action in the HEA these are all things that get discussed but what I would like to see from the outside is you know what is a broader conversation about what are we doing here what is the role of the department what is the role of the CFPB in all of this as the department has tried to edge out the CFPB from its role in policing student loan servicing companies what are the roles of states states have proven to have a great ability in this space and probably should have more of an ability in this space but they're under resource as well and how do we bring that all together into a system that works that works for students and then within the Department of Education what can be done more on the supervisory side on the monitoring side you have program compliance you have the same people are looking at you know the the finances of institutions and are also looking at whether or not they're meeting their campus security requirements these are very different things and very different skills and you know it shouldn't necessarily be the same people checking the box to make sure that your campus has all the blue lights that we all see around to also be making sure that you're not lying to students during the recruiting those are two different skill sets that are required from the department there's a lot that could be done on all of these issues and I really you know I fail a little bit in only asking some questions here and not providing a lot of answers but I think it's a conversation that that really needs that needs to happen more as I think Professor Henderson has said that the the travesty hears with the students and I think we have all heard from so many students who have been so deeply impacted by these issues in their lives and they're just clobbered with with debt and you know this is you know they are they are truly sold sold hope I think and and in the end they're not they're not only not not given the promise of hope they are they're left paying for it but without anything to show for it all right thank you Dan and thank you to our other two panelists Sam and Joe great presentations thank you all Dan I want to pick up actually on the point you entered on which is really the Department of Education and it seems as if the department is captive of the student loan services and by the way just so that the audience is aware of this and over the past what five years or so the CFPB has received about 50 thousand complaints about student services loan services and the horror stories but they bring to the department is really worth documenting I mean just to hear the difficulty that the individual student has experienced in trying to get proper information and trying to really understand what his or her obligations are is really a chilling story I think the moderator of our last panel John Pado said he did not want to be a source of bloom and do I think we don't want to end this conversation on a depressing note but since the department is really at the centerpiece of much of this activity including its effort to preempt both states and other federal agencies from getting involved it really is at the crux of how we make these reforms the question is how do we do that so I have some ideas but I want to open it up to the panelists for any suggestions you will have to offer and then I want to put something on the table to consider first I think I just want to make certain they're on the same page would you all agree that the department is really at the key to sort of trying to resolve this issue if we look for one major institutional player to facilitate change Sam would you agree with that Joe you think that's true or do you know they're there they make all the loans right there they they improve the schools they improve the creditors they have all the money they ran all the regs they enforce all the regs they say nobody else can do it I think that's a power but not the world well I think that's true I think that's very true there's a separate philosophical question I'll just throw it out anyone wants to try to answer it that's fine but I want to go to the really important issue key that the first sort of philosophical question is why is the federal government making a profit in student loans and why given the magnitude of the debt the indebtedness that we're talking about 1.5 trillion dollars 44 million people in default why is the federal government seeking to make a profit on something that should be an investment in the national future and that's an issue that sort of looms large over the entire discussion we'll get back to that if you all want to try to address that in the course of your response but trying to bring about reform of the Department of Education is going to be extremely different no one of the organizations that I'm familiar with in DC as non-governmental organizations outside groups has adequate stroke to really bring about that reform alone I'm looking at Congress and my experience has been that in achieving anything affirmatively you have to have bipartisan support guys you can take you know the votes of one party in this instance the Democrats have control of the House of Representatives and that will make a difference as we sort of pursue reforms going forward but if you're really trying to accomplish something meaningful in an affirmative way support that's going to be a key issue so I'm going to encourage everyone to sort of think about the challenge of really doing that thank you very much so how do we do that how do we do that and I'm just throwing out any ideas because it's very true the states are the laboratories of change in this area the states are really far ahead of the federal government and looking for meaningful change but obviously if the states are preempted from dealing with some of the issues that we've talked about they too will have difficulty any ideas in these lines I think there actually may be a glimmer of hope in something you said during your talk it didn't sound hopeful but I think from a political economy perspective it might be you pointed out that even ARP the AARP is now being concerned about this issue and I think that speaks to a deeper problem in the space which is that our political system does not serve young people well it doesn't you can say it's because we don't vote you can say it I say we I don't know if I should still be saying we but you can say it because young people don't vote you can say it's because young people don't contribute to political candidates but the reality is our political system does not we would never what's happening to students now what we've all been talking about we would never let this happen to seniors we'd never let it happen and now that it is happening to seniors there may be hope that it could actually be a wake-up call a bipartisan wake-up call that this is no more acceptable for young people as it is for older americans and I think the seniors point is is relevant as the ombudsman I take in the complaints on this stuff and the amount of parents that call in with parent plus loans as cosigners with their own debt is is remarkable you get a lot of older people who are engaged and have this problem yes so I think one to piggyback on the seniors thing the other thing we haven't really talked a lot about is uh is veterans and the military and you talk I guess you did mention a little bit uh in the recruiting in the in the in the um the lead generation but there is a huge incentive built in uh particularly for for-profit colleges to target veteran population and it's under what's called the 9010 rule which is provides that for-profit colleges can't get more than 90 percent of their revenue from the U.S. Department of Education let me say that again for-profit colleges can't get more than 90 percent of their revenue from the Department of Education but still that requires a loophole and one of the loopholes is that department of defense and department of veteran and the VA department that money doesn't count towards the 90 percent so GI bill funds count towards the 10 percent which makes GI bill funds incredibly valuable and department of defense education assistance programs uh it's very valuable revenue for for-profit colleges so I think one the extent to which veterans populations are heard is also something that can drive it up but I think more fundamentally we need people I think like people in this room who are experts in other types of lending products to really be focused on this issue and this is not necessarily an issue that the higher education community can solve on its own but people who have familiarity with you know how did we look at mortgages and how did we think about mortgages how do we think about auto loans how do we think about all these other products and what lessons can we draw from them and what lessons can we draw from the other regulators to think about how best the department of education if indeed it is the department of education but how best to to oversee and monitor these student loan servicers well I think you made a number of of great points guys and I would say uh apropos of your observation about AARP and uh and veterans veterans groups there are two other elements in Washington that I think are coming together as part of a new potential coalition that will help address these issues obviously the groups represented here are part of that discussion and organizations in the higher ed and civil rights community but you also have the home builders who are expressing great concern that individuals who may be eligible to purchase homes are delaying their purchases by about on average seven years because of student loan debt you have the National Association of Realtors who are really concerned about their ability to continue to keep the home market building all of that is true so I see the possibility of a new emerging coalition coming together in part because of the reauthorization of the higher education act which will likely be the legislative vehicle at the federal level that will at least one of the central elements in addressing these issues secondly I'm you know again mentioned the importance of bipartisanship I would say that clearly the senate is going to be our big challenge in moving legislation forward but I'm encouraged by the fact that Lamar Alexander chair of the education committee in the senate health and education committee is committed to reauthorizing the higher ed act soon Lamar Alexander has a history in this area and I think we should certainly lift him up because on issues of civil rights in the education context he has been a leader he and Patty Murray the senator from Washington are the chair and ranking member of the committee and I have some sense of optimism that they will at least examine these issues closely if we can bring adequate attention to the matter but we're going to have to get the attention of congress on this issue and we're going to have to do it beyond what we have done so far in providing general information I thought this panel was so wonderful because a lot of this information has been known as a general matter but pulling it together in a single forum where we have a conversation like this is a rare opportunity and I think we should take advantage of it one of the hopes that I have coming out of this is that there will be a focused and detailed report on the role of the department of education that will be in essence shared by a number of different constituencies ownership of it that they will sign on to it that they will help promote it and that they will bring this report and the focus on the role that the department is pursuing and not pursuing to the attention of a broader public I think right now Secretary DeVos gets away with many of her actions because they are part of a several groups of things that she's doing some of which we have disagreement with and yet none of it really has has pierced the consciousness of policymakers in washington and until we do that we're going to have a problem so I'm looking to really bring people together to really lay out in essence a detailed analysis of the failures of the department and addressing these issues that can enjoy the support certainly of the NGO community in washington and many other influencers secondly I would think just as the state attorneys general several of them have banded together in collective action in the past that having state's attorneys general join an effort to highlight the wrongful role of the department of education could be helpful I assume Lisa Madigan is still she has stepped down yeah we have a new attorney general in Illinois Attorney General Kwame Rao and you know he has been continued the push on these issues and you know we have we have a lot of ideas that that I think could serve as a template on the federal level yeah states obviously fund higher education and I think there are some unique ways that we could think about using income driven repayment on the state level there's a lot of talk about free tuition plans and these are good these get back to your your idea of should the federal government make a profit but I think income driven repayment implemented correctly on the state level could show us a path where those who get the degree and go on to great success pay into the program but that the program supports those who fall on hard times absolutely and doesn't over burden them with debt that can't be discharged in bankruptcy and they're going to carry with you for the rest of your life so I think that states have an opportunity to create a template that could show the federal government the way forward I think that would actually be very helpful and and just one note recently I've seen some analysis that suggests that not all student loans are non-dischargeable in bankruptcy that there are they loans have to conform to a certain standard in order to be non-dischargeable and that some of the loans that students get particularly those that go beyond the cost of tuition and books that actually provide more money than necessarily the student would need to pursue his or her education can be discharged under appropriate circumstance so I think there needs to be some clarification of what we do in that space going forward as well let's let's open it up for a few questions if anyone has any any questions guys please go ahead so a few days ago there was an announcement or not an announcement but there were new stories about a decision or like at least a policy change by the administration that to reduce the total limit on student lending that is available there were new stories about this that mentioned that unlimited borrowing just winds up encouraging schools to charge more I'm wondering if you if any of you have seen the it didn't mean it didn't cite any of the research but I'm wondering if you've heard of that argument and what's your take on it so you're referring to a cap on the amount of student loans one student might get colleagues my response would be gainful employment is there for a reason and that if schools overburden students with debt then they should have some skin in the game next question I was going to ask about the public service forgiveness program as something that's really important to me because the main plan my career plan was built around it existing and continuing to exist hopefully and I know it's one little corner of this giant conversation but it does seem if we want to encourage people to continue following public service so many I just graduated from law school and I work at the law school and even as a lawyer it was the most confusing process I've like far more confusing than doing my taxes or anything else in my life is trying to figure out do does my lender know that I'm in this program I'm still not sure about that um and it just seems like that's just one person and I know plenty of people depending on it for the law school loans depending on the med school loans depending on it for you know infinite things and it just seems it's one little slice but I'm just wondering what that's a great question I mean I think it's that's so there's a there's a one of the members of our our team who's a lawyer hearing her stories about what she has been dealing with in PSLF and you know the periodic employment certification forms that you have to fill out it's sort of it's eye opening as to how challenging this is even for people who like you who are you know very highly educated and and the like and you know you can only imagine how hard it is for people who who don't have that background it's it's one of the issues that's come up in the massachusetts attorney general's action against fiat also is fed loan servicing and it's really at the core of one of the lawsuits that we have pending in the 11th circuit right now about what happens and what are your what are your what's the recourse when a servicer basically lies to you about whether or not you're eligible for PSLF you know you call in you say am I on track they say yes two years later they say yeah about that yes we actually meant no and you've been making and you've been making payments but I think it's a it's an incredibly timely topic right now just because sort of the first chunks of PSLF you have to under public service loan forgiveness you have to make 120 consecutive qualifying payments and we could debate what's qualifying and what's not qualifying but 120 consecutive payments is 10 years and the program started a little over 10 years ago so you're starting to see the first sort of tranche of people who are eligible for student loan forgiveness come due and the reality is is I think the numbers are something like only one percent of people who are I think they're eligible right now have actually actually been granted relief I think that number will probably trickle up over time but it's it's certainly quite low at the moment well even if it's tripled up it'll still be three percent I mean it would have to go up it's still pretty low guys I think we would all agree that there needs to be a dramatic reform of the public service loan forgiveness program there are too many people who we think should qualify for loan forgiveness because they're engaged in what we think is public service in the most appropriate sense and yet they are excluded I don't think anyone would take issue at least I hope not with first responders police and fire you know people and teachers and that kind of thing but they're researchers engaged in cancer research they're people who are engaged in medical support I mean all of that should be part of a larger set of reforms what is missing is a sense of obligation to make those changes the department knows that the problem exists and totally ignores it totally ignores it so this is really such an important time to pursue meaningful reforms and they've got to be calibrated to the people who have a power to do it so if I were setting up a structure like this which I'm involved in I would like to think that we'd look to people in Tennessee to talk to Lamar Alexander get some really first-rate examples of what we consider good public service work that's not being recognized we would focus on Paddy Murray in Washington state and others trying to connect the stories of individuals to the actual members of Congress who sit on the appropriate committees and I'm looking for states where Republicans they are represented by Republicans particularly in the Senate not because you are focused exclusively on Republicans but we need I think it's fair to say Republican votes to make a difference guys to make a difference so you know we've got to be very strategic about this we have to really think through the better ways to make the affirmative case for change and then present that case backed up by a level of grassroots and grass top support that's missing from the debate any other questions yes ma'am I think there's a young lady right behind you to yeah we have time for a couple more so we'll take one from her then one from over here if there is thank you my question is about consumer choice regarding loan servicers so for example you mentioned that there are pending lawsuits against Navient who services all of my loans and so it's not clear to me whether consumers have any option to switch to a different servicer or we're just sort of stuck with whatever we get yeah I mean no you do you don't have a choice that being said you know if for example if you want to pursue public service loan forgiveness you can fill out what's called an employer certification form that will automatically transfer your loan from Navient to Fed loan has also been sued Dan pointed out the Massachusetts attorney general has sued them for miscounting public service loan forgiven forgiveness payments and other types of income driven repayments so I don't know that I would qualify that as a choice but you know the misaligned incentives cross over the industry and so you know I think that choices is something that that that could make a change but it's not currently available did you still professor Henderson it's been fascinating to hear you thinking out loud about how to put together a coalition regard to this this is not a subject I know anything about so I'm I'm asking a question in addition do you have any data on the percentage of student loans that are held privately either directly or through securitization and how that relates to the 1.5 trillion figure because one of the things that we talked about in the financial crisis along with misaligned incentives in the mortgage industry was an inability of the regulators to perceive how the damage that was being done in the mortgage sector could possibly be translated into the larger financial system which unfortunately we all learned and so I'm wondering whether there's any aspect of the financial system that ought to have an interest in participating in the kind of thing you're talking about that's a great question a great question I do not have that data I'm going to pose the question to my colleagues to see if they do but regardless of how they respond we should have the data and we should be able to if we don't have it currently that has to be one of the research topics that we pursue in trying to put together the affirmative case for change there are institutions that I think are going to be very concerned about you know this we're ringing the alarm if you will about the problems of student loans so I think some of the major banks even though they may not be involved directly in student lending have real concerns about this I think we should be able to petition the Federal Reserve to take a look at this and with greater specificity so it's a great question let me open it up anyone have that kind of data indicating the degree of loans that are private loans versus those that are government issue do we have that sense I do not have the data so interrupt me but what I think is interesting about your point more broadly it's it kind of reminds me of a point Commissioner Chopra made earlier about auto loans and what he said is that there's not going to be some sort of cataclysmic event like there was in 2008 where the auto loan the auto loan bubble collapses and banks collapse and you know we need aggressive intervention by the federal government we're not going to have that in student loans either it does not present the kind of risk acute risk to the economy that you saw with mortgage lending what it presents instead is sort of I think what you were alluding to earlier with a slow realization across the economy that people who are going to school and are recently out of school are not able to buy homes are not able to get cars are stuck in jobs maybe that are not sufficient to repay their loans so it's sort of slow motion pain for our economy instead of the kind of cataclysmic event that I think would trigger the reforms we saw in the mortgage market Mike Calhoun one one quick point to add to that there's a problem with the lack of data the department holds a lot of the data on student lending they don't share it they don't make it available they're now actively using the privacy act to try to block both state banking regulators and state attorney general's offices from accessing that data and so I think just getting the information would be a starting point for for an answer Calhoun so I want to follow up on the the last comments and bring it back to where you started Wade on the whole presentation and that is we are already well into that cataclysmic event for black communities black students with debt the numbers some you shared there that you first of all one out of five black graduates the success stories are currently in default and again the default numbers as was alluded to here you've got to tease them out among the different sectors but here default means a really really severe level of financial distress so first of all just the numerator and denominator if you're in deferral which means interest is running you're not making payments you're not included in the default calculation and then to hit default you're not deemed in default until you are 270 days late nine months in the student loan world so you're talking about people you facing cataclysmic things garnishment wages all kinds of other pressures and then you look at the other data the majority it's near the majority of black students are making no progress on paying off the debt so even if you're technically making payments you are owing more than what you started with when you came out of school and it is still growing not always there are no statute limitations on collecting the debt there's no statute limitations on the interest accruing and then a study I've cited from a fairly state research organization the brookings institute their projection is that of black students with debt which is close to 80 percent of black students 70 percent 70 percent will default and on top of all of that connected with this is we see this as a lending institution that it is the number one reason our black applicants for home loans uh don't receive the mortgages and even some of these programs if you're in a individual repayment plan you for 25 years if you don't fall into one of the other circumstances for many you are excluded from participation in the mainstream financial system like being able to buy a house you know your kids will finish school hopefully before you're able to even apply for a loan to buy a house and so you've got the combination of the student loan debt paired with and feeding together with black home ownership which is stuck in the ditch at the rate it was when the fair housing act was passed and at a greater gap between black and white home ownership even than there was when the housing fair housing act was passed 50 years ago so one of the things we struggle with at CRL this is our main focus in this work is how do we lift this up because these problems are related to but at a different level and and in ways different in kind than others so too often we see like a fourth of black students go to for-profit colleges which have about a 90 percent adverse outcome for that group so you start out with that whole segment a lot of there are a high number of black student borrowers who have relatively small amounts of student debt five to ten thousand dollars but they have no increase in earning capacity they were living paycheck to paycheck before they undertook this program and took on that debt and so the fact that it's a small amount of a debt makes in a lot of ways no less of a financial albatross for them so i think we need to both lift up this issue and focus on black homeowners the black student borrowers and look at the things that help them the most you know refinancing at today's interest rate is not going to be a primary it's great thing to do maybe but it costs a ton of money and it's not going to principally help these black student borrowers for example so how do how do we you know we've got one group that we need to triage this in some sense we've got one group that really is being hammered by this and i worry as we search for the global solution those folks are left lying dying in the waiting room well that's a very sobering yes final comment for the afternoon guys i mean obviously we have just scratched the surface of what is a really important national debate this is a crisis hidden in plain sight but it's affecting more and more americans across racial lines but certainly with a disproportionate effect on african americans other communities of color but again i think this is having such a broad impact the solution is potentially within reach but this is an organizing challenge as well as a substantive argument challenge we're going to have to think through how we organize ourselves and those who share our view more effectively to impact policymakers in washington while the opportunity presents itself this reauthorization of the higher ed act is a good thing the initiatives that are taking place in the states are good things these are the laboratories of change getting ideas from the attorneys general who have worked collectively together on a number of issues and may be able to shine a light here and thinking through how we bring political pressure to bear from grass tops and grass tops organizations that have an interest in these issues but don't necessarily see of themselves as being active players we're going to have to bring them in from the sidelines and recruit them to be engaged in these efforts so with that i'm going to bring this panel to a conclusion please join me in thanking three extraordinary panelists so i promise our agenda has me talking for a half an hour but i promise that is not true i just want to give some brief closing remarks what a what a terrific panel we just had it it and the last two days um have left me in a spirit that i um was not intending when i organized the conference which is unbelievably angry and i'm hopeful that our time together and the work that we can do together going forward will channel that anger which i'm sure many of you share into a constructive path a path that helps us get out of the mess that we continue to be in um and helping and serving households in the financial sector not just with their student loans but as we've discussed in in so many aspects of their lives and i want to thank um first and foremost um christie bear and tracy van duessen for getting us all through these two days in in such good shape as i mentioned at the outset christie and tracy had a lot of helpers i'm not going to name them all again but wonderful students and staff from across the ford school have been involved in this effort getting you all here and making the conference work and i'm very grateful uh to them as well and and lastly i just want to give my thanks to all of you the speakers and panelists and audience who have been on this journey with us for a couple of days it's been amazing for me to have the the privilege of learning from you these last couple of days and to be able to step away a little bit from my day job and refocus on the set of issues that i care deeply about so um thank you to all of you for being here and for your contributions um i just have a small bit of logistics to let you know about um if you wouldn't mind with your taking your name badges and dropping them off with tracy on the way out we recycle them um if you have other conference materials you want to recycle um please also use the recycling bins for those for paper um if you need any logistics help at all on your exit this afternoon please see um christie or tracy on the way out and she will as you've learned take very very good care of you and safe travels and journey home