 My name is Kevin Carey. I direct the education policy program here at the New America Foundation. And I just want to say thanks to all of you for braving the cold, not quite as cold as it was yesterday, but certainly unusual for Washington, D.C. to come here this morning. Plenty of warm beverages and refreshments out there to keep you going this morning. We wanted to start the new year with a discussion that I think is both very topical and very interesting, but also resonant of a lot of the larger issues that are confronting our institutions of higher education and federal policymakers. As we all know, over the last, even over the last decade, the federal government's involvement in an investment in higher education has grown tremendously, a $100 billion increase in just 10 years in combined federal grants and loans for a variety of reasons, all of which have the effect of making institutions that, as a matter of purpose or as a matter of mission, serve students who receive federal financial aid far more sensitive to the kinds of policies that we craft around those programs, to the point that even what might have seemed like small changes to the parameters of a program can have outsized effects on the ability of institutions to operate financially and the choices and options that students, and in this case, parents have to make. So while the topic of today's conversation is oriented around the Parent Plus Loan Program and the set of controversies and policy decisions that have swirled around that program over the last year and a half and continue to be very much contended and discussed here in Washington, DC, I think the larger context for this discussion is the ongoing and continually changing role of the federal government as a financier of our higher education system and the implications of that relationship for all higher education institutions, but particularly those, as I said, that serve students whose income circumstances make them eligible for financial aid. So I suspect that we are going to be continuing to have conversations like this in the future as policymakers grapple with issues of which institutions and which people and how much money and how do we balance our goals or access with our considerations of, particularly on the loan side of things, people's ability to repay loans, and on the institutional side of things, how institutions can manage themselves financially given the on some level inherent regulatory uncertainty that comes with having your banker be the US Department of Education. We have a fantastic panel here today, some people who are tremendously knowledgeable and experienced in the field with a diverse range of perspectives on this issue. So we're very grateful for them for coming in and joining us in this discussion. To start things off, we're gonna have a short presentation on the Parent Plus Loan Program that's gonna be led by our senior higher education policy analyst, Ben Miller. Ben's a former senior official at the US Department of Education, very, very knowledgeable about these issues and we'll kind of lay the groundwork for the discussion and after that our panelists will follow. So again, thank you so much for coming this morning and Ben is gonna start things off. Ben. Good morning everybody and thanks for coming. I'm just gonna spend a few minutes talking about sort of what the Parent Plus Loan Program is for those of you who may not be as familiar with it and sort of the changes that took place that led us to the type of discussion we're having here today. So for those who aren't familiar with them, Parent Plus Loans are loans that go to parents of undergraduate students and it's designed to help parents afford their children's higher education expenses. And this slide here is just a comparison of Parent Plus Loans with the Stafford Loan which is sort of the primary undergraduate loan taken out by students. And as you can see, a Parent Plus Loan is actually probably closer to a private loan than it is to a Stafford Loan. It carries a higher interest rate and origination fee than a Stafford Loan and it's also not eligible for the income-based payment plans that student borrowers can take advantage of to lower their payments relative to their income. In addition though, Parent Plus Loans actually can be much larger than Stafford Loans. There is no stated annual or maximum loan limit for Parent Plus Loans. Essentially a parent is eligible to borrow anything up to the cost of their student's attendance minus any aid they've received. And so that's why you see at the bottom here the average loan size for a Parent Plus Loan is actually a good bit bigger than a Stafford Loan. But the other thing that really sets the Parent Plus Loans apart is that it has a credit check. These are not entitlements the way that Stafford Loans are. But the credit is actually pretty different from a typical loan product. In that basically what happens is the Higher Education Act says that in order to receive a Parent Plus Loan you can't have an adverse credit history. So it's not really underwritten. If you don't have the adverse history you're in for as much as you want to borrow and your terms and conditions don't change based upon the quality of your credit. But even though Congress defines what adverse credit history means it's actually up to the Department of Education to figure out what that means through regulations. And the way the department's defined it through regulations is sort of a two-part test. Basically that within the past five years the parent applying for the loan can't have had any really significantly negative financial circumstances. So those are things like a default, a bankruptcy, a foreclosure, et cetera. You can see the list here. And the second is that when the credit check is run they don't have any debts that are 90 or more days delinquent. Now it's important to know that actually neither of these things have changed. The regulatory and the statutory requirements did not change in October 2011 sort of which is what sparked a lot of this discussion. Which I know seems odd because clearly we're here to talk about why the sort of number of loans approved has dramatically decreased. And the reason they did is because what happened was the department changed the way it actually evaluates what it means to be 90 or more days delinquent on a debt. And the way this works is when a credit check is run each debt on your credit report can have one and only one current payment status. These are examples from TransUnion. It's one of the major credit bureaus. And you can see that basically it says you're either paying as agreed or you're in some other form of delinquency status. And so basically before October 2011 when the credit check was run if you had a debt on your credit report that showed up as 90 or more days past due or one of these other time-based delinquencies you were denied the loan and couldn't receive one. But what about these bottom two categories? These aren't time-based but they're also not sort of an indication of things going well. Essentially a borrower can end up having their debt either charged off or put into collections by their creditor if it's already been delinquent for some period of time. Usually more than 90 days. So what the department did was it said that we're now gonna consider things that have been charged off or entered collections as also loan, I'm sorry, debts that are more than 90 days delinquent on the grounds that they've already been past the 90 days. And so basically the number of categories that result in a denial increased. So you can see how this sort of works if pre-October 2011 let's say you had two credit cards. One, you're paying as agreed, everything's going well. And the other is in collections. Before October 2011, you would have been approved. After October 2011, you would have been denied because that account was in collections and that's now grounds for a denial. Just one quick side note, if you are denied a plus loan there are actually a few things that can happen. First of all, if you're eligible, if you can find a qualified cosigner you can still get a loan. Now obviously depending on your family's circumstances and networks that may or may not be feasible. Second, there is a way to show that there are exceptional circumstances that should lead the department to reconsider your application. This usually is something like you can show that actually the credit report's out of date and you fix the debt or that the amount of debt you have is de minimis and really shouldn't be grounds for a denial. If neither of those things sort of work the one opportunity that students do get is they are allowed to borrow between $4,000 and $5,000 in additional staffer debt. They're basically treated like independent students. Now the obvious question then is why make the change? We don't know sort of what the default picture looks like and we're not entirely sure sort of what the results were gonna be and there's sort of been two stated rationales. The first is that when the old bank based federal student loan system known as the federal family education loan program ended there was a desire to make sure that the transition to 100% federal direct loans conformed with all the standard industry practices and so making sure that sort of what was being done in the direct loan program mimicked what was being done by the banks in the federal family education loan program. And the second part is voicing some concern that parents aren't taking out debts that they're not able to afford. Obviously there's concerns about student debt and making sure that people aren't being overburdened but regardless of whether or not you agree with these rationales and I'm sure we're gonna get into this later it is indisputable there have been some effects. We've seen an increase in the percentage of loans denied. It's gone from about 28% to somewhere around 38% or potentially a little bit higher. And the result of this is there has been a fairly substantial drop in the amount borrowed in this program. About a billion dollars less was dispersed from the third quarter of 2011 to the third quarter of 2013 and that's resulted in about 207,000 fewer parent recipients. We don't sort of know what the student side of this is because these are loans to parents. And then at the same time that while this has affected all of higher education broadly the biggest impacts and decreases have been seen either in absolute or relative terms at for-profit colleges and historically black colleges and universities. So that's just sort of a brief overview of kind of what happened and how we got here. And so now I'm gonna turn it over to our panel that's gonna talk more about these issues in particular sort of what the plus loan program and these changes mean for college affordability, intergenerational borrowing and higher education access. Thanks. Good morning, I'm Libby Nelson. I'm an education reporter with Politico and I'm here with this very experienced and interesting panel to moderate today. And I really wanna jump pretty much from that straight and vivid discussion but I know you all have handouts. I will tell you very briefly who everybody is anyway or let you introduce yourselves and talk for just a minute about what it is that you do. Cheryl, do you wanna get started? So I'm a senior vice president for public policy and government relations at UNCF. Thank you very much to New America Foundation for hosting the forum and good to see so many folks here who are interested in this topic. Very briefly on UNCF, our mission is to help minority students go to and through college. We've been working at this for nearly 70 years. Most people know us by our motto, a mind is a terrible thing to waste. Last year we launched a new PSA campaign updating that. To a mind is a terrible thing to waste but a wonderful thing to invest in. We've raised over 3.6 billion for student scholarships. We awarded 10,000 scholarships under 400 programs each year to minority students at more than 900 colleges and universities across the country. We also support and raise money for historically black colleges and universities and we advocate on behalf of them in particular 37 private historically black colleges and universities. And it's been said the HBCU community has been very concerned about the changes in the Parent Plus Loan program. And we can talk further about the impact on our sector and our thoughts about the Parent Plus Loan changes. Wonderful, thank you, Steve. Well, I'm Steve Gunderson, president and CEO of the Association of Private Hector Colleges and Universities, which is a fancy name for the career colleges. And I'm here because David Bergeron didn't wanna be up here at the table. He understands this stuff and I don't. But obviously, and you look at Ben's presentation, you get a pretty quick understanding because the historically black colleges and the private sector career colleges are the ones that are most impacted. And that's obvious because that's the constituencies we serve, they tend to be low income. They tend to be first generation, post-secondary education. They obviously have the economic challenges that are impacted not only by Plus, but I think by a whole series of other loans as well. Thank you, Kevin. Good morning, my name is Kevin Fudge. I'm here from American Student Assistance, which is an educational debt management organization based in Boston, Massachusetts. I guess one could say the capital of higher education in this country, maybe. And cold. And cold, right. So it's interesting, the perspectives we have here. ASA is an organization that's dedicated to helping students and families be successful in their student loan repayment. Along those lines is education about what it means to be a wise borrower, so not over-borrowing. And then understanding your options when you do take out loans, what those repayment options are, and noticing that there's a great difference between Parent Plus loans and undergraduate Stafford loans. And we can talk about that more about that later. But basically, we're pleased to be here and our focus is on what's in the best interests of the borrower and how do we advance those interests going forward. And Rachel, I'm gonna ask you not only to introduce yourself, but to give a little bit of an idea of the conclusions you reached in the report you're releasing today to sort of get us started into the discussion as well. Great, thanks. So my name is Rachel Fishman. I'm a policy analyst with the Education Policy Program here at the New America Foundation. I do a lot of research surrounding policies of financial aid and access and success of students, especially disadvantaged students. And so starting about a year ago, I did a lot of research into the Parent Plus Loan Program. I heard rumblings from financial aid counselors that students were getting rejected at a higher rate. And I'd always been curious about that program. And so I started researching it more and I uncovered that a lot of low-income, moderate-income students had started borrowing these loans and is it good public policy to have disadvantaged, economically disadvantaged families taking on debt that they're putting the parents so much into debt after the student has already gone into debt for college education. And so without a doubt, as I was reading all these anecdotes and hearing from HBCUs and from students, the implementation of the credit change was totally bungled. It left students scrambling in the middle of their academic careers with trying to find the funds to remain in school and that never should have happened. But the underlying motivation of the department was strong. We shouldn't be lending money to parents who can't afford to pay that money back. These loans are inflexible. Remember, they're not dischargeable in bankruptcy. They're also on top of loans and grants and aid that is already available to students. So basically doing this research, I've come up with the recommendation, three recommendations. I call it choose your own adventure for policy makers. One would be to add an ability to repay to the credit check criteria. So not just looking at adverse credit, but sort of a forward looking credit check that takes into account a family's resources, a parent's resources to repay the loan. And that's something that I know that HBCUs have been behind adding an ability to pay metric. Another thing that they could do that policy makers could do would be to cap the loan. Not to make it unlimited up to cost of attendance, but maybe cap it depending on a student's expected family contribution. So for example, if the expected family contribution of a student is zero as determined by the FAFSA, then they shouldn't be able to get a loan because the federal government is telling them you do not have any money that you can put towards your education. And so the last thing I would recommend would be that you could choose would be to eliminate the program entirely and increase student loan limits to kind of account for the money that would be lost for those smaller parent plus loans. Some of my smaller recommendations, so if you were to retain the program, I say that we need better data. And this is true for everything related to education, not just loans, but plus loans are really problematic and we just don't have any data on them. So we don't know, for example, how many people are defaulting, at what institutions. And so it's hard to sort of diagnose a problem with the program. We know that there are low income students borrowing and that that's probably a bad idea, but we don't know if they're defaulting at any higher of a rate and we really need to know that. And also not to package plus loans and financial aid packages, allowing students to just max out on plus loans up to the full cost of attendance without thinking about budget and how they should appropriately limit these loans given that they're a very inflexible form of debt. So before we get into all of those recommendations, which should give us plenty to discuss, is this microphone working? Okay, cool, great. I wanna ask a little bit how your constituencies are the colleges you represent and Kevin, the students you work with, how you see them using plus loans, what sort of needs they fill and when you think it's appropriate for a student to take out or perhaps not to take out a plus loan. So Cheryl, I don't know if you wanna start with the HBCUs and sort of what you see is the role these loans play? Sure, so a couple of points that I'd like to make about HBCUs. Our institutions, and here I'll talk more broadly, not just private, but also public, historically black colleges and universities. You know, as many of you know, the mission of our institutions is and has been for over 150 years to enroll low-income disadvantaged students, primarily African-American students and help them get to the finish line in terms of earning a college degree. HBCUs have been particularly impacted by plus loans, I think, because we have a high prevalence of low-income students at our institutions. Our average percent enrollment of Pell-eligible students is about 74% across all HBCUs. That is substantially higher than the average for all public colleges and universities, which is about 43%. So we are very, our institutions are very, very focused on this population and helping them succeed. We think plus loans are a critical piece of the financing package to help these students succeed. Many of them do need that extra support to help meet the cost of attendance at some of our colleges and universities. We think that the Parent Plus Loan Program is not a perfect program and certainly can be improved, but we think it is a substantial component, you know, to financial aid for our students. I mean, I think one positive thing about New America Foundation pulling this report together and holding this forum is we want to focus on what we think is the real conversation and that is how do we, as a country, help low-income students succeed in finance or college education? In today's economy, when we know that it's essential to get a degree, and if not plus loans, then we need to look at how do we boost Pell Grants? Pell Grants is the foundational program for college assistants, for low-income students. Pell Grants pay only 30% now of the average cost of attendance at a public institution, even less at a private institution. So for our population, loans are a necessary fact of life and we need to figure out how we can provide the assistance that they need so that they are able to manage that loan debt well and look at plus loans in the broader context of how we finance student financial aid for this population of students. Steve, how do students at for-profit colleges and universities use plus loans and what role do they play at your institutions? I think everybody has been a little surprised as they started looking at the data, including us as the percentages that we see on the plus program with Rachel's study and others, because we've always had this image that our schools are all adults coming back to school for career education and career skills. The reality is about 31% of our students are under the age of 24, so they would be about the ones who would be dependent. When you look at that, excuse me, it's 37%, not 31%. And when you look at that, you'll also see in our demographics that 51% of our students come from families where the highest level of education attainment for their parents was high school or less. So you are dealing with a very different economic demographic and the reality is because we're proprietary schools, there is no operational subsidy, so tuition and fees cover the cost of the design and delivery of that education. And when you look at, as Cheryl said, that the Pell is really not keeping up with low income students' needs in terms of cost of education today. They have to look at other options and clearly private loans is, should I say, been the discouraged term, if we can put it affectionately. So you look at how do you put all this together? I've been in our schools for, I've been at AFSCU for two years on February 1st. I've been at 75 different schools. And I mean, when you visit those schools, you begin to appreciate, should I say, the economic opportunity that these schools present for them. Literally, I was in a school just before Christmas where they collected NIC ties to give to the young men to go out and do job interviews. Let's understand the economic environment in which we're dealing here. So there is not free money sitting around at home that is going to do this. And what really bothers me about this, and it's not what we should or should not do with PLUS, but I don't think we can or we should deal with PLUS in isolation. We've got a much bigger question here. And that is, how are we going to address the issue of access and affordability for low income students at an era when 65 to 85% of all jobs require some level of post-secondary education? And if we don't collectively deal with that conversation as we get into reauthorization, we fail the very constituencies we're trying to help. Kevin, what about students themselves when they're looking at their financing options? What makes them turn to a PLUS loan and what might make it a wise or a poor decision on their part? Thanks for your question. Before I get to that, I just wanted to mention address your point about access. And part of the issue with access is the definition of access should be expanded to include once the debt is repaid. If you're just defining access as the person has a $30,000 PLUS loan, they're allowed to enroll. I would argue that that's not necessarily access. Access is when the debt is satisfied, the loan is repaid, and then the person is actually able to act on the investment and then move forward successfully through their career. One of the things that we like to emphasize is our choices. And I mentioned that Boston, sort of the cradle of liberty, the cradle of higher education. We have the privilege of having a wide range of brand name schools, highly competitive institutions that many people want to attend. But along those lines, those are also some of the most expensive schools in the country. And actually in New England, we have the highest concentration of schools, private institutions that are $40,000, $50,000 and above, as well as in the top five of the most public, I'm sorry, the most expensive public university in the country. So I think what we try to do is explain what people, that you have options when it comes to borrowing and then repaying, or when it comes to deciding where you're gonna go to school. If the institution's interests are to enroll as many students as possible so that they meet their goals, their interest isn't necessarily, is this affordable for the student or not? And if you look at us as, or I tend to look at myself as sort of like a lone doctor or a lone whisperer, and I do a lot of work after the fact when people have already borrowed, I would like to do much more preventative medicine and preventative care in saying, let's take a look at your finances, let's take a look at this picture, is this feasible or not? And if you wanna take the doctor analogy further and say first do no harm, I agree with all the rosy projections in the scenarios and trying to create more policies that will help in the long term, but if we focus on what's happening right now, right now the students that I deal with are taking out more than they can reasonably expect to repay and the schools aren't gonna tell them not to do that because their interests are, we need as many students in seats as possible to meet our enrollment objectives. Some schools are, and I don't wanna paint a broad brush and say that they're not necessarily have the students' interests at heart, but higher education is a business, it's not a charity. So the students that I work with, in fact I saw a young woman on Monday who came in because she wasn't able to afford the next semester. She was carrying a previous balance of $8,000 from the prior semester and she couldn't enroll and because she couldn't enroll and address and take classes for the spring semester, her financial aid was subsequently dropped. So now she doesn't have any grants or loans for the upcoming semester and she can't pay the previous semester. So she's kind of in a rock and hard place. She's like, well, can you help me find some scholarships? January 6th, looking for a scholarship for January 22nd, it's probably that can happen. And the parents, now that I'm a parent, I have a seven and four year old at home, we play lightsabers all the time, I completely understand the idea of you want your student to realize their academic, social, human potential and so you wanna do anything to help them go to the college or the college of their choice. At the same time, you have to be realistic about what are the long-term consequences of this decision? And now, as I'm trying to think about, as me and my wife sit down and think about if UMass right now, UMass Amherst, the flagship campus is roughly $25,000 a year. So when my first grader graduates from high school, I'm guessing it'll be roughly what, 40? So we're already talking about trying to invest now and we actually, I came up with this great solution. I'm like, oh, we'll home college. People home school. I'm like, we'll home college. It's brilliant. Anyway, I'm gonna trademark that by the way. The point is that when plus is packaged as part of financial aid, I don't think students really understand and families understand what that implication, what that really means. That that's their responsibility, that's unsecured debt. And so if we start with the basics of honest financial aid packaging, of having a debt to income ratio assessment and a realistic judgment of whether or not a family can theoretically afford to repay, we can talk about, will you have options? You don't necessarily have to go to that particular school. If you're Pell eligible, you can go to the community college down the street and as long as you maintain a 2.5 GPA, have automatic acceptance to any one of the state four year colleges or universities and a lot of states have that type of agreement. So it's talking about policy in the long term, but it's also looking at what's happening right now and being able to address those issues. That if you have a response to anything in those statements you'd like to make before we move along? I would totally agree with the fact that we need to provide more meaningful information to students about their financial aid packages and their obligations. You know, we're looking at the plus loan program, also trying to get ready for reauthorization of the Higher Education Act if that ever occurs. You know, and we think that this is a program that needs tweaking along a number of fronts, you know, including the financial literacy. This is a program that doesn't really have a financial literacy component to parents and you know, where you might think, well, parents do they really need that and even highly educated people get confused about student financial aid terms. It's talking to my brother-in-law whose daughter is a student at University of California in Davis. And he was confused about what's a direct loan versus a staffer loan. What's a parent plus loan? Who, you know, whose obligation is it to pay? So I think even highly educated people need some form of literacy counseling. I think we'd like to see as part of plus loan 2.0, some thought given to how that might be incorporated into the program. Particularly for, you know, less educated parents who want to invest in their kid's education. You know, I think we need to think about how we provide that kind of intensive counseling. If I have any response, it's just, I get really frustrated when we talk about this issue and we say that all we're going to do is make sure that the only people who get loans are the people who have guaranteed ability to pay. I mean, I grew up in an era when post-secondary all of education was considered an investment in the future and of course there's some risk. I mean, I gotta tell you, if my parents, middle-class, rural, Wisconsin folks who had four kids in college at once had been told you've got a guarantee that you can pay off all of the loans, I probably wouldn't have got to go to school. So we start with that and part of the problem here in this whole discussion is we're all saying we're going to put all the pressure on that family or that student to prove their fiscal integrity. Well, what about the government? I mean, the reality is that the projections are the Federal Department of Education had a profit of $41.3 billion on the Stafford, the Plus Graduate and the Plus Parent Programs last year. CBO projects that over the next decade they will have a profit of $175 billion on these three programs. You saw in Ben's presentation what the origination fee and what the loan rates were going to be for the Plus program. So before we point fingers at everybody else, I think the government, the Department of Education has some responsibility in this conversation as well. Well, I don't know if this is pointing fingers and I would just say that Steve, when you went to school, I'm guessing it was a little bit cheaper than it was today. Oh, sure. I mean, the states have withdrawn their support. That's no question about it. Right. So I mean, it's not necessarily an apples to apples comparison and saying what a student received in a grant or loan 30 years ago is the equivalent of what it is today. So let's just talk about it from a business perspective, right? If minority serving institutions, the evidence would show that perhaps their endowments aren't as large as other institutions and perhaps maybe that would be why they rely on plus loans to disproportional percentage than other institutions. If we just look at this from a business perspective, if the goal of any institution would be to have strong supportive alumni who contribute to the institution because they believe in the mission, they believe in the value of their investment, they wanna see other people benefit from it going forward, then it would behoove the institutions not to saddle those potential graduates with debt because the evidence in common sense has shown that students with high levels of debt are less likely to donate to their institutions from which they graduated. So it's all part of the challenge or the problem. And it's not something that's simply financial literacy and saying, I agree with you Cheryl because there are people I see on a daily basis highly educated who are unaware about the difference between grants and loans. When I give presentations, I say what's the principal difference between a grant and a loan? Silence, tumbleweed rolls by sometimes. And then finally someone will be like grants are free? I'm like, yes, grants are free money. And then they're like loans you have to pay back? Yes, loans you have to pay back. And loans you have to pay back if you're, and I asked the question, do you have to pay the back of the loan if you don't complete the program? Half the people say yes, half the people say no. Do you have to pay the loan back if you're not satisfied? You could graduate and not be satisfied with the quality of education or the college experience and you still have to pay. And there's some confusion about that. So you can have financial literacy but the issue is these are real dollars that we're talking about. And when, I'm not suggesting that you tie the plus and say you can only take out a loan if you can pay it back. But there's a huge issue with giving somebody a loan that exceeds their income. Like if you're giving somebody a $30,000 loan and they make $20,000 a year and they're a parent and their income is pretty much capped potentially, I don't understand how that makes sense. You know, at least with students and income-based repayment, it's a different investment in that you're betting on the student to be able to increase his or her income over time and utilize income-based repayment to therefore provide students some financial relief until their income gets up to speed with being able to satisfy the loan that they already borrowed. With parents, it's a completely different story. Well, I don't think you and I disagree. The reality is, when and if we ever get to reauthorization, I think there's a growing consensus. I mean, every white paper I've seen from everyone says that we have to redirect more of our financial aid programs into financial aid for low-income students, I mean. I think every higher education association says you start with that. I think most, certainly we do, suggest that we have to have simplicity in the loan programs and grant programs because it is too confusing. We actually support one grant, one loan program so we can move in that direction. So I think there are a number of things like that that can be done, but what I'm saying, and I said in my opening remarks, is you can't just deal with plus and isolation. What you've got to do is deal with the issues of access, affordability, and all of the other accountability issues that fit into this and how do we design and deliver a policy that engages in opportunity for low-income students? I mean, I look at one of the things that's happening and if you look at Rachel's numbers and I agree with most of the numbers in her report, there was one number there where she said we have 6% of the students and 17% of the plus loans. We don't think that was an accurate number because everything we've seen says we have 13 to 14% of the post-secondary students, so the 17% would be absolutely about right, okay? But if you look at all of the other numbers there, I think there is a recognition that all of us need to step back and figure out how are we going to fund access moving forward. Rachel, did you have a point you wanted to jump in with? Well, there's a couple things that have been going on here and I think Kevin touched on a point really well. So there's a reason why student loans exist, right? For students because it's to build their human capital. The government is investing in a student because we know it's gonna pay both individual and societal dividends. So we can't really talk about parent plus loans in isolation at all because students have available to them Stafford loans both unsubsidized and subsidized and if they're rejected for a plus loan, they then have access to $4,000 to $5,000 more per year and that loan money is maybe on top of a Pell Grant so you're really starting to hit upon college costs. So you can't deal with plus loans in isolation nor can you deal with college costs in isolation. So we're talking about how can we provide more access? How can the federal government reform its program so that it's providing larger grants to students which we know are better targeted. But I mean, how are your institutions going to address college costs is sort of what I'm trying to get at as well because that can't happen in isolation either. The federal government can't keep throwing money at higher education and higher education institutions basically be let off the hook to increase their tuition to let states off the hook to disinvest from their institutions. I totally agree, we shouldn't let states off the hook in terms of their investment in public higher education. With regard to private higher education, our 37 HBCUs, our private institutions, they don't get state support and they have to support their operations through tuition and fee revenues which largely come through student financial aid. I think if you would go to most of the HBCU campuses, you're gonna see places that are very serious about learning and very serious about college affordability. We are educating a very disadvantaged population. So our presidents are extremely sensitive to the fact that they need to keep their costs down. Our private institutions' cost of attendance is roughly 30% less than the average of other private institutions across the country. It is, I think when we talk about college costs, we also should understand that it is expensive to run colleges, colleges need to meet accreditation standards. Our college campuses, many over 150 years old, do you know what it costs to renovate a building to make it up to date with 21st century technology? So there are costs. I think we shouldn't think that our institutions are just willy nilly raising costs. I think this issue of affordability is foremost in their minds. And I just go back to the point that we're all making and that is we need a larger investment in a need-based aid, which the federal government and many states have gotten away from. We spend more in tax-based assistance through tax credits on an annual basis than we spend on the Pell Grant program. So we've got to take a hard look at raising need-based aid. Low-income students today take out a percentage of rely on student loans more than twice as much as other students. And they still have unmet need. I mean, that's why the PLUS Loan Program is, we think, a critical part of the overall financing package. So these are hugely complex issues. I think we also have to think about, do we want a higher education system that includes choice for students? Lower-cost community colleges are going to be an option for some students. I think there's research increasingly suggesting that if we wanna keep an eye on college completion, going to a community college and working may not be the best solution for many low-income students. Life gets in the way. So we need to think about, are we going to consign low-income students to low-cost institutions? Are we gonna keep other options open for them? That might be a better fit. It might be a better fit, but it's not affordable, and that's incontrovertible. Like, the facts are the facts. Like, is it fair? No. I mean, I'm not, it's not, I don't say this with pleasure, with glee, like maniacally, you know, rubbing my hands together like Montgomery Burns on the Simpsons, like, I'm, it's unfortunate. But if we're talking about the best interests of the students and the borrowers, first of all, the reason why Plus exists in isolation is because it's not included in the cohort default rate, and we don't have as robust data on Plus as we do for the other components of the federal loan programs. So that's why it's in isolation. So I would argue to, let's have some transparency and see what the numbers actually are. I mean, we can extrapolate, we can use anecdotal evidence, and we can attempt to make that statistically significant, you know, or we can actually get the data and see what we're talking about so that we can all be a part of the solution, right? But the facts are the facts. And if, I mean, the letter in Rachel's report, I sat down with that family. Politicians often talk about kitchen table issues. I was at this family's kitchen table sitting with this student whose sole desire was to go to Morehouse and become a Morehouse man in Atlanta, Georgia. His mother works at Verizon, makes $40,000 a year, and his financial aid package was a plus loan in excess of $30,000. So I had to sit with that family and be the bearer of, not the bearer of bad news, because no one wants to have the discussion. It's a difficult conversation to have. You know, the parent, the first generation student, the parents excited, you got into a four year college because you talk about consigning students to two year colleges. I'll tell you what happens in Massachusetts. It's unfortunate, because we have these brand name schools, they get overlooked. In graduate school, I was graduate school with it, Zakiya Smith, member of the audience, Luna Foundation, way to go Zakiya, right? We had students who started at Los Angeles Community College, second largest city in the country, eight million people transferred to UCLA, then went to Harvard Graduate School of Education. Now that student is at Columbia finishing up a PhD. Another student went to UC, I'm sorry, Glendale Community College and went to UC Davis and then transferred. So it's not consigning students to a particular path. It's looking at what's viable and, you know, I talk to parents who say that community college isn't real college. They have a grant to go to school for free and get a Pell Grant refund, but they don't go because that's not real college. Or my son should go to a four year institution. And the headmaster of a high school that we work with is like, you know, no, they're under pressure because they're trying to get kids into four year schools so that it looks better for what they're being measured on their metrics. But what's being lost in all this is what is it at what cost? Always ask yourself at what cost? So yes, give students a choice, give them an option. But it doesn't really make sense to have a student whose mother, single mother, makes $40,000 a year take out a $30,000 plus loan for that first year. That's one year. How many years does it take to get a bachelor's degree? Right, four, if you're lucky, if you're on the five year, six year plan, right? Okay, so in theory, she could have over $100,000 in plus loan debt. And in fact, I'm actually working with a young woman, a young woman, I say everybody's young, she's in her fifties, I'd say that to be polite, but she's a parent who's, she has $120,000 in plus loans right now. So I understand, I get the rosy scenarios, technology, infrastructure, costs, they are what they are, I agree. But if you break it down to the lowest common denominator and say, what is in this student's best interest? And you take that and then you start to have your conversation, I think that's a much different perspective than let's talk about the state's investing and increasing Pell, sure, that would be great, but what is happening right now? And boots on the ground, people are facing financial hardship because of an attempt to take out an investment. And the thing, the point that we haven't touched on yet is how plus can lead to multi-generational debt. So if we're talking about human capital and the evidence is out there how certain communities have issues with wealth management over time and we could, that's a whole nother conversation for another day, right? But a young woman who I helped a couple years ago try to go to Spelman, her grandfather took out a private loan, her aunt took out a loan, her parents took out a loan, okay? She took out loans. She could no longer afford to go to school so now she's working at the Boston Aquarium. And we don't really measure student, we measure debt from students who graduate, right? What about the students who don't graduate and who have debt? Are they better off? Because they attempted to go to a school that they couldn't afford and they went for a couple years and they dropped out and now you have debt and no degree? Like how is that in the best interest of students? I wanna take off at that point actually and ask another, and we could get back to this, I'm sure we will get back to this, but ask a sort of a more specific question which is we're talking about not dealing with plus loans in isolation and in dealing with this during our authorization. The department is preparing to deal with plus loans in isolation. They have a rulemaking session coming up on plus loan lending criteria. I'm sorry to say the word rulemaking, I know some of us have sat through too much of that already. So they are, regardless of what people would prefer, they are preparing to take on this issue in kind of a singular way. And so I wanna ask, do you think the program needs changes? Lending criteria is, you don't have to say three years or five years or seven years on the credit history, but should a plus loan be an entitlement like a student loaner? Should there be people who cannot take out a plus loan? I would say that there should be people who should not be taking out a plus loan. And those are families that are not making enough money. Like when you, you know, I ran some numbers on NPSAS data and I saw that there are Pell Grant students. And so we're talking about students who mostly come from families making less than $40,000 who are taking out plus loan debt. And that concerns me and it should really concern the federal government too because we wanna make sure that the federal government is not put in a position of lending money to parents who are unable to pay them back. And we don't want to put parents in that position either. You know, I read this morning in the Chronicle of Higher Education had article about this event and they featured a parent who basically said she's financially ruined from taking on this loan, but that her son had graduated and she's like, you know what? I would financially ruin myself all over again if that were, you know, cause he did graduate and you know, his life is gonna be better for it. But that really puts the federal government in a terrible position. They should not be allowing parents to do that. So I think something must be done. I think the only thing they really could do was change the adverse credit history as Ben explained, but adverse credit history doesn't do a really good job. So maybe you have an adverse, so maybe something's going on with your adverse credit history, but as it turns out you do have the resources to pay the loans back. You know, that should be taken into account. You wanna make sure that if we are going to be lending parents money that they do have the ability to repay the loans. Just a couple of comments. One is about sort of intergenerational effects. And again, we don't want parents to take on more debt than they can manage. On the other hand, you know, college is a significant investment that has intergenerational effects and you know, for low income Americans in particular. You know, that is the pathway for them, their kids to the middle class. So I think we also have to look at that kind of intergenerational effect when we start discussing student loan issues. I think there's one thing that we probably could all agree on and I'm hoping that we will get a bigger window into the Parent Plus Loan Program during rulemaking. And that is, this is a program we don't know very much about. We do need more transparency. We need more data, more information. The Department of Education now is the sole administrator of this program. The Department of Education issues the loans, collects the data, and we know very, very little about this program. So, you know, we can all kind of mention our anecdotes, but I think the Department would do us all a great service if it put out more information about who's borrowing, income characteristics, what's happening with default rates. There's a whole host of questions around this program that I think more information would help inform not only the rulemaking, but the policymaking on this program. I just want to go back to what I said at the beginning that I think if we deal with plus and isolation, we do a disservice to everything and that we don't create a solution. So I want to start with that premise, but that being said, do I think there are changes that can be made plus? Absolutely, I think that there's no question that the issues of transparency and financial literacy are essential here and I think that we ought to be separating the eight awards for the student and the plus loan. I totally agree with that. We, as you mentioned, Rachel, I think the adverse credit issue has to be dealt with and I think also that we can cap here in loans at an appropriate level now. We happen to believe that the colleges ought to have some campus-based authority in determining what those caps are, whether it be on this loan program or any other loan program. I mean, I don't believe in 2014 that the federal government can sit there and say one size fits all for all students, all schools, all parts of the country and I really worry that we're getting way too much into that one system when we really need to have the flexibility of discretion by those campuses in dealing with those situations. Obviously it has to be open, it has to be transparent, it has to be fully understood, all of those kind of things, but? Well, colleges do have professional judgment, financial administrators do, and have some limited flexibility. Not in the loan programs. Correct, but that goes, if you talk about the federal methodology doesn't allow for tons of things that cost the attendance, debt already incurred from students in college, so that's a potential solution as well, but the first thing is just to start with the data is to get an accurate scope of what we're talking about here, so it's not strictly, I agree, I'm not saying that the anecdotal evidence is statistically significant, and if I could do that I'd be a PhD in stats, so I'm all for that and seeing more data and having a cap, I mean that's a reasonable discussion if we're talking about loan limits for undergraduate students and there's no loan limit for plus, that is not sound policy or common sense, so. This is what I get for asking a multi-part question. I'm gonna ask a yes or no question. Should there be underwriting criteria for plus loans, in your opinion? If we're gonna allow parents to borrow up to the cost of attendance, which is the current case and I think probably should remain, I think it's reasonable to have underwriting criteria. You know, the difficult question is, you know, what makes sense? So that the government's interests are protected, but parents and children's interests are protected. You know, and so that's not an easy question. I think the current underwriting criteria are too narrow. You know, it's been presentation indicated, relying primarily on a backward looking credit history check. We probably do need more, you know, flexibility. The department needs more flexibility to look at current financial circumstances of parents and expected financial circumstances. You know, that flexibility is not in the current regulation. You know, I'd like to see the department do some work and be transparent in, you know, validating, you know, what criteria help predict parents' ability to repay a loan or not repay a loan. You know, there's a lot of work, I think, to be done here on what the right underwriting standards are, you know, so that we can maintain access to college for low-income students. You know, also I think just philosophically, for low-income students in particular, because that's the frame that we're focused on, this program, you know, should be looked at as a method to provide capital to families who may not be able to get capital in the private sector. I mean, that's a premise that's undergirding our student loans, the Stafford Loan Program. This is a program that Steve mentioned is profitable for the government. You know, this is a program that, over the lifetime of Parent Plus Loans, the government recoups 99% of loan proceeds. So I think we have to think about whether it's appropriate for the government to undertake some risk to finance capital for low-income students. That's probably offset in this program by providing capital to more well-off parents who are paying down their loans timely. And, you know, figuring out what the right balance is. I don't think we have that right balance now. Steve? Is, I think Cheryl did it much more eloquently than I could. I would just say underwriting standards, sure, but the devil is in the details. So one of the suggestions Rachel made in her paper was ending the program entirely. And again, understanding that you don't necessarily want to deal with these issues in isolation, if that were to be done in isolation, what effect would that have on students and what do you think the outcomes would be? I know that there are, I think, almost a million parents across the country that are taking out parent-plus loans. So, you know, both middle-income and low-income families. So I think if we were going to end the program, that would have very significant impacts on college access all across the country, both for middle-class families and others. We saw, as Ben said, just with the tightening of the credit criteria that resulted in a loss of 1.2 billion dollars across the country and student aid available to students for college access. So I think if we were to, if policymakers were to end this program, we have to give some very serious thought to what should replace it. In looking at Pell Grants and Stafford Loans, and other possibilities, particularly for low-income families, I don't think that the department or Congress have focused enough on things like asset building. UNCF is running a small pilot with the Kip Charter Schools to help low-income students and families build college savings accounts. Pretty interesting initiative. We've got about 8,000 students enrolled now. We've been going at this for almost four years. And it's built around financial literacy and some other things. And, you know, I think asset building is one thing that we need to think about, not only in terms of helping them build the financial resources for college, but we're also seeing some very positive effects just in terms of helping these kids understand what it takes to be academically prepared for college, to have sort of a college-going culture and those families, you know, and really to get those kids into college and to persist in college. So I think we're gonna need to be creative and look at some other policy initiatives as well, not just fully looking at student loan and Pell Grants. But what else can we do, you know, to help these kids get to the finish line? Eliminating plus in isolation is, I think, dangerous because it's one more step of Big Brother federal government deciding who's gonna go to school and where they're gonna go. I mean, the reality is, and I'm a big fan of community colleges. Anybody who knows my legislative history knows that. But to suggest there's a lot of access and opportunity in the community college system in America today is to be ignorant of the reality. I mean, they don't have the support. They don't have the ability to enroll a number of students. And I mean, 70% of the students who enroll as adults in our schools, 70% have had a different college experience that didn't work for them. So let's recognize that in today's diverse population and diverse workplace, we have to recognize and empower the diversity of our post-secondary delivery system. I appreciate that, that you mentioned how two-year schools sometimes have difficulty in supporting students because of the argument that we hear a lot in my region of the country. My counter-argument to that would be, though, who would be there to support the student after they took on the education debt in order to attend their institutions? So it's kind of a... I'm happy to say that my organization as a debt management organization fits that bill and helps people once they've already borrowed figure out how to manage their repayment. But you're talking about, you're saying that community colleges don't support students and therefore, that's not a solution for students who may not be able to afford other types of institutions. But where is the support for after the debt is already incurred? Don't look at inputs as the final decision-maker here. It needs to be outcomes. It needs to be accountability in those outcomes. If you will look at our proposal for reauthorization of Higher Education Act, we suggest that every school ought to have a risk-based metric on retention, graduation, placement, earnings gain, all of those issues. So what we ought to be doing... If they don't meet those goals, is their ability to... What you do is you look at the schools and you say, look, we're not going to penalize your school because you are serving low-income students and you take a higher percent of Pell Grants or Plus Loans or whatever else it is. But what we are going to do is we're going to say to you as a school, we're going to judge you on retention. We're going to judge you on graduation. We're going to judge you on placement in your field of interest. We're going to judge you on lifetime or even 10-year earnings gains. I mean, we're willing to hold our schools and every other school in America on an appropriate risk-based metrics for accountability and outcomes. But don't judge our schools with the Princeton's and the Harvard's of the world. We attract different students, different economic environments. We're never going to compare with them and if that's going to be the standard, we're going to deny access to a whole percent of America. But again, let's define access. What is access? Is access just getting in? No, I just got done telling you, man. Access ought not just be entrance. It ought to be outcome. I concur. We're there. We're there. All right. But don't hold us responsible or indict us because we serve a constituency that is low-income and at-risk for starters. It's not an indictment. Please don't misunderstand me. I'm not indicting your institutions at all. It's more a reflection of, are you aware of the implications of your policy? I think a lot of times with policy, it's like we have what we design. Can we all agree that there are unintended consequences of policy? And there's no one policy that can help everybody. You create the policy with the intent of helping its utilitarian principle, John Stuart Mill, helping the maximum amount of people as possible. There will always be people who fall through the cracks. Fine. We can accept that. We can't accept that, but that's just the reality of life. Are we good on that? So if that's the case, and students are not able to continue and be retained because they can't afford to continue because perhaps they've been off more than they could chew to begin with, and they're not completing because they're financial constraints, and once they leave, if they successfully complete the program, they're in a challenging state of affairs with regards to what their income is and their ability to repay. Is your mission, really achieving what you're setting out to do? Take a look at the data, Kevin. In two-year programs, my schools have the best graduation rate of any two-year program delivered by any sector of higher education today. Now, what we ought to do, and we've seen this with the MOOCs, we ought to ask real questions of whether or not we need some kind of different criteria for all of our online programs because they have the poorest completion rates. So we ought to look at that or we ought to look at some other delivery system and ask those kind of questions if we want. But I think we have to be really careful here in terms of automatically saying one size fits all in terms of the students we serve or the pedagogy of the delivery of our education. Right, and I would argue that when you're talking about, because completion rates are a point that's brought up frequently, if you go to a two-year school and you're Pell eligible and you have no out-of-pocket cost, if you don't complete the financial consequences are not the same as if you go to Morehouse and take out a $30,000-plus loan and you find that in the middle of that you're not able to sustain those costs and now you're saddled with that debt and inability to repay it. But, you know, when is it? Next week the White House is holding this seminar to get traditional liberal arts schools to reach out to attract and enroll more minority students and low-income students and all that. And my membership says, Steve, why aren't you there? Why aren't we invited to this? And I said, relax. I said, this isn't about us. I mean, there is an important conversation in America today that suggests that we ought to diversify liberal arts education in this country in ways that we have not yet done. But that's not my mission at my schools. The mission of my schools is for the most part post-secondary career education. And so I don't belong at that conversation in the White House a week from now. I hope it works. I'll support it. But I don't need to have a seat at that table. We need to recognize this diversity of post-secondary education. We were really far afield from Plus Loans although that was really interesting. So I want to do, I think I'll do one more question and then we'll do audience questions. So start thinking of your questions. I'm interested in this idea of loan limits and institutional loan limits as well as federal loan limits. And Steve, I know this is something your institutions have said, is that they wish they could limit over-borrowing from students or what they see is maybe over-borrowing from students or borrowing for living expenses and online programs or things like that. I'm wondering, Rachel, if you think that would be something that could be a solution to some of the issues you see in the Plus programs and whether the rest of you think that this is a wise idea or whether this should be a broader criteria for loans as a whole rather than leaving it up to financial aid administrators. Great. And one of my smaller recommendations that schools can adopt right now is that schools don't have a lot of, they don't have any flexibility basically for the Stafford loan program. They have to give students the full amount that they're entitled to, but it's not the same for the Plus loan program. Plus loans don't have to be in a financial aid award package. In fact, the Department of Education has a financial aid award letter that they are encouraging students to use called the Financial Aid Shopping Sheet. And on there, Plus loans are only mentioned as an additional resource that students should contact their financial aid offices for. So I think Cheryl talked about financial literacy of parents and students. And I think especially with first-generation collegegoers, you see what the cost of attendance is and then maybe you see a Plus loan soaking up that full cost of attendance and you think, wow, this is how much it costs to go to college and I have no other choice but to borrow this loan. Now, if you take the loan out of the package, it pushes the family to hit pause and to contact the financial aid office and to really think about whether or not they're going to be able to afford that education, not for it to just be immediately available to them. But in addition to that and just taking out of the financial aid award packages, I think would be a very helpful first step that institutions should already be doing. I think capping the loans is a smart idea. And it was one of my recommendations in the choose your own adventure sort of recommendation. You could cap it to what we give independent students. So independent students, you're either dependent or independent for financial aid purposes and usually if you're above the age of 24, that's the easiest check. You're considered independent. And so you get extra student loans because you don't, the thought there is that you don't have a family to help support you. So maybe we capped the student loans at the extra four or five, the Plus loans at an extra four or $5,000 what the independent students would be getting. Or you could cap them, for example, at expected family contribution, which is the federal financial aid equation is very wonky. But basically once a student fills out the FAFSA, it gives them an expected family contribution and that could be anything from zero to 3,000. So, you know, to anything above that. So for example, if it was zero, you wouldn't be able to borrow any more money. If it was $3,000, your family would have access to $3,000 of loans. So doing something like that. I think we have to be very careful about loan limits and capping loan limits and do some careful analysis as to what that means for low-income student access. I do think that giving institutions some additional flexibility that goes beyond, right now schools do have ability on a student-by-student basis to adjust aid packages and to limit borrowing, but it must be on an individual-by-individual basis. They can't, for example, kind of develop an objective criteria that apply to everybody. I do think it would be worthwhile while looking at giving institutions some broader flexibility to look at borrowing because institutions are closest to the students. I'm not certain that I've seen good information that suggests the extent to which excessive borrowing is a real problem. Certainly we hear anecdotes, but I do think this is something worth looking into. Steve, that's on... I mean, we have said that we support the ability primarily of the school to cap loans, this loan, any other loan. I think we can start with that. I also think, though, that if we're serious about access and financial integrity, accountability, same time, then I think we also ought to ask the question of A, should there be some kind of income-based repayment program for plus loans as well? Or B, should we get to that proposal which says that you can come up to this cap, but if you're going to go beyond that cap, whatever that cap is, then maybe you need a cosigner so that there's one more step of transparency and understanding of exactly what it is you're taking on. So, I mean, there are different options to dealing with that issue. Yeah, thanks for the question. I think that the evidence would suggest that a cap on plus would be reasonable. Part of doing that would be to get more data on plus, which we all agree. I think we can all agree that that's something that would be necessary going forward. So if you had data on plus, and Cheryl mentioned that there's not much, there may not be much data on what constitutes excessive borrowing, I mean, that's a subjective term. If a parent, so let's take a hypothetical situation. If a parent borrowed $80,000 cumulative in plus, so they borrowed $20,000 a year, presumably their son or daughter was on the four-year plan, and they have an income of $50,000, then on a repayment to repay that monthly, it would be roughly 23% of their income. And if you push that out to a 30-year repayment plan, it would be probably around 16%. Now, the general rule is that 15% of your income in making repayment is a tough stretch regardless of your income. And then if we can say, regardless of your income, we could probably say that if you're low income or middle income, it's probably more difficult. So if you took those numbers and we were able to get a larger data set, then we could come to hopefully an agreement about what would be excessive borrowing or what is responsible borrowing and what is realistic to repay. Income-based is a reasonable solution, and I would argue that all ideas should be on the table. However, the distinction in income-based is when you have, again, when you have a parent, their income ladder or income earnings potential is not the same as a 22-year-old who just finished college and will probably be working until he or she is 60 or 65, in fact, maybe even longer. So it might be a temporary solution, but maybe a long-term solution would probably work a little bit better in that instance. I'm going to go ahead and get started with questions. I'm shocked that a panel has decided that we need more data and that we should address things in a holistic way in reauthorization. I have never heard such a conclusion before. But I've seen lots of talk on Twitter, so I assume there's some questions in the audience. Do we have a microphone going around? Perfect. Surprise. David Bergeron, now at the Center for American Progress, and since Steve said that I should have been up there and said to him, I figure I should say a couple things and then ask Rachel a question. A couple things about what we know about plus loans. Remember that until E-CASL, Ensuring Student Loan Access Act, plus loans went into repayment immediately as soon as they were fully dispersed. Since E-CASL, those loans only go into repayment when the student graduates, when they finish or leave higher education. And so any data the department had on repayment histories and default rates, forget it. It's useless, meaningless, irrelevant to the current state because E-CASL changed that. So just keep that in mind when you call for data is the data are what the program was historically, not what the program is today and the program has changed, changed fundamentally. Second thing is I agree with everything the panel has said about, you can't deal with this issue in isolation and that we need to do more in terms of increasing grant support. And I would just assert that the $41 billion in profit that Steve referenced is being used to pay for Pell grants today. That's where that money goes. It doesn't go to Arnie and goes to his Desteron. I'm not saying that to defend my former boss just to make the point that this is a longstanding problem. We've decided that we're going to disinvest in higher education as a nation and we've done it at our peril and it's harmed our students. And so my question to you, Rachel, is if we were really going to deal with this system holistically and we were going to say, okay, what would be an appropriate way to replace plus on, not for upper income and middle income students with, you know, a grant aid, but for low income students, where should we be thinking about the, for low income students the amount of grant support we're providing to replace what's currently going into plus on? So this gets more into the realm of reauthorization in a very hopeful way that we would have a really wonderful reauthorization. But I think the main, and I agree with Steve, I really do agree with a simplified, you know, one loan, take the parents out of the picture, one grant system, and we know grants are better targeted. So trying to figure out how to increase the Pell grant is always going to be an issue. But I think the real issue at large, and again, this is speaking very hypothetically, of course, is that the major issue of college costs going up has been state disinvestment. So how do we ensure that states get skin back in the game is really the biggest question mark right now. And, you know, historically there have been a lot, there has been a partnership between the federal government and states to invest in their higher education institution. And that has eroded in time. And so I think back to one of my favorite acts because I went to a state school, so the Morrill Land Grant Act. And that was a federal state partnership there to ensure that there were universities that existed, that state universities that were affordable for students that provided access. So we really need to get back to this federal state partnership. So yes, we need to increase grants, but we also need to really tackle education and really get at what is one of, what is the biggest cost driver of higher education and it is disinvestment. 70% of students go to public colleges and universities and we really need to get at that issue. So I'm Zakiya Smith, Lumina Foundation and really appreciate the conversation thus far. I would actually like to follow up on what Rachel just said and go back to the affordability question because so much of this conversation is really about whether college is affordable or not for students and whatever you think about the type of institution or what have you, we all seem to agree that we want more students to go to college and complete and that's a good thing for our economy. So with respect to what Rachel just said, I would argue that that's really irrelevant the state disinvestment for the people that are on this panel. We've got private HBCUs and we've got private sex colleges and universities who do not receive any state money. So question then, which I know Kevin always brings up when we talk about the state disinvestment, is what's going on there? We've got tuition continuing to go up on that side and it doesn't have anything to do necessarily with what states are doing by and large. So we've got an affordability problem that's larger than just what's happening at the states that we've got to grapple with particularly in private colleges and universities. One way that we've been able to kind of stave off the immediate issue is to have loans for students to take out and now loans for their parents to take out. And I guess, so one question is, what do we do about affordability if we're just kind of moving toward loans that kind of help with the increase in college costs on the private side? And is there a connection that I... This is kind of a controversial question that I was thinking before you started this, Rachel, but the conversation about private loans, right? We've kind of tried to move people away from private loans, but plus loans to parents who do not have... One of the most interesting things that was said this whole time or that's probably in your report is that we give loans to parents and don't have any ability to repay. And to David's point, so we've said that the parent has a zero EFC, which means right now, today, we do not think that they can give $1 to pay for their student's higher education. But then we go back around and give them potentially unlimited amounts and up until recently they were required to start paying on those almost immediately. And so I'm having a difficult time reconciling that in my head and you don't want to restrict access to... I love Morehouse College I think every black male in America should go there and become a Morehouse man. I'm kind of conflicted in how do you deal with the fact that the price is escalating. So that's kind of my broad question. We talked about this being a broader problem. So outside of the state piece, what do we do about the college affordability problem? And I know we've talked about increased grant aid. It irks me to know in because while I was in the Obama Administration we increased Pell Grants from $16 billion to almost $40 billion. Pretty large investment in grant aid and I know the individual Pell Grant on average has not necessarily kept up but that was a pretty large investment. So is that the answer? More dollars to Pell Grants? $100 billion to Pell Grants? A trillion dollars for Pell Grants? Or is there something else that we can do to address the affordability issue? We have half an hour we can solve this, right? Can I speak to that just briefly? I was the clerk of the Labor HHS Appropriations Subcommittee and so I spent many days, weeks, hours and months grappling with Pell Grants and how to help Congress raise that maximum grant. And I think it's possible to do more there. We have to get Pell Grants on a financially sustainable path but I don't think we should just put our right hands and say we can't do more. And I think we have to look at are there other things that we can do in the financial system overall, the financial aid programs overall to redirect more aid to low-income students. And also, and I think the Obama administration is very focused on this, how do we get students and low-income students in particular to finish college faster, meaning four years instead of six years or longer. And that will entail things like hopefully we can get summer Pell Grants back so that there can be year-round support acceleration of their programs. And as you know, there's a lot of innovation that's going on right now to look at how we can increase time to a degree because that will help make college more affordable for students as well. It's a pretty complicated picture but we've got to look at these things, the things that we can do within the financial aid programs but also how can we incent institutions to focus on making sure that students have a clear path so that they can get their education in time, that they're not wasting time taking courses that don't help get them there and what else can we do within the higher ed system to increase time to a degree? I'll be very brief. When Mitch Daniels became the president of Purdue, I sent him an e-mail and I said welcome to the revolution in higher education. I think everything is changing how we teach, how we teach, et cetera but I have to say that I don't think that same revolution in terms of how we finance post-secondary education has occurred and I think we need to and I'm going to just give you one data point. Most of you know I was at the council on foundations before I came over here. Boston College study on social welfare, intergenerational transfer of wealth said we're going to have a $40 trillion transfer of wealth in the next 50 years. I had two years ago when I was at the council, I had Missouri do an update of that study after the recession. You know what they said? The intergenerational transfer of wealth isn't $40 trillion anymore it's $74 trillion. We can't be looking at this as Rachel and Kevin both said as just a public sector financed post-secondary system. It has to be a public-private philanthropic partnership and that takes a real step back and some creative thinking about how we design and deliver it. Thanks, I'll be brief as well. In my opinion, as I appreciate all the policy that will be turned through over the next few years any sort of change with regards to affordability or higher education is going to come from the outside. It will be consumer driven. I don't necessarily believe that the Thiel Fellows will be expanded from 20 to 200,000 and for those of you who don't know, Thiel Fellows the inventor of PayPal gives people $100,000 I believe not to go to college and to work on your invention. That's not going to be large scale or onion commonance generation debt and do-it-yourself education is very keen on do-it-yourself school and edu-preneurs she calls them. I don't necessarily think that that's going to be the revolution. It'll be looking at alternate ways of credentialing because we are we any it'll get back to the bait we had in grad school to Key and I about is college a is it a signal to an potential employer about your skills and capabilities or is it a credential particularly if you're doing going to a skills-based program where there actually is a trade that you're learning right and so you'll start to see some more differentiation in the models of higher ed and to address that question. At the same time you'll also see I believe alternate forms of credentialing that we'll call into question is this you know $80 or $90,000 investment for a particular private school worth the return that I'll be getting and so it you know it will be market driven. There are policies that can be undertaken to ameliorate the condition right now because the horse is left to barn and how we fund education in this country so it's not the shift isn't going to go back to more grants versus less loans like it is what it is right now you know I saw in your notes we you know you recommend maybe adopting an Australian model of repayment Canadian wrong repayment and perhaps those could be some solutions that are explored down the road but it's if we if we bring it if we talk about what's in the best interest of the borrowers and educating them you know hopefully that leads to some market correction with regard to the costs and people making different choices based on being financially literate and potentially wise borrowers so yeah of course I talked about the 70 percent of students but it's also important to remember that 30 percent of millions of students is you know very important to you and and those 30 percent of students are going to institutions that typically have high net prices and and I think these institutions are at a point where they're really going to have to innovate and figure out how to contain and reign in costs along with us coming up with solutions with you know trying to increase the Pell Grant which is pretty much a non-starter right now yes I would love that but I mean still we couldn't give a Pell Grant that would be large enough to cover the high net prices at these institutions so what can the institutions do and what should they be doing given that you know the cost of college in the in the nonprofit sector has been raising faster than that rate of inflation in many instances and yet wages have remained stagnant so there are pockets of innovation going on at institutions around the country at nonprofit and private institutions flexible degree pathways I mean but these need to be at scale and the most important thing is that the cost savings that come with this can't be need to be passed on to the student because not always passed on to the student we've just figured out better ways to get them through faster and we've figured out how to lower costs but because of the cross subsidy involved often times these cost savers are not passed on to students so figuring out sort of a way to pass savings on to students and coming up with a wholesale answer to the affordability question that doesn't just focus on state government and federal government but also focuses on the institutions themselves hi Jonathan Palmer with Madill News Service this is actually directed for Carol Smith my bad Carol Smith I was wondering you mentioned a couple of times that you were wary of the capping on the plus loans and I want to understand what was your wearing this on cap putting a cap on the plus loans well plus loans do help low income students finance with their parents finance total cost of finance and there are there are low income students who need that extra need that extra help so I think just before committing to you know radically changing the program we need to understand what the impact of that change would be and if that change were made it would need to be made in concert in all likelihood with other changes like raising the limits on staffer loans which go directly to students by the way I'm a middle grad go cats hi when Vin Mailer gave his introduction and explanation of the program he mentioned oh I'm sorry Maureen Bedetti at NICU he said that there were two explanations that had surfaced about the immediate problem that this was supposed to be about which seems to have drifted a bit and the one thing that you have been talking about has been the issue of if I could you know kind of say it in a shorthand over borrowing but what hasn't been discussed much is the change in the from the FELP program to the direct loan program and I just wondered what it was that you were alluding to with that and if you could give us a little more information about why you thought that was an explanation for the change in the plus acceptance rate yeah so the basic idea is that the lenders in the FELP program had their own discretion for how to do the adverse credit history they had to look at everything in the regulations but they had the ability to look at some additional factors that they wanted to or not and the general understanding is that it was common practice in the FELP program to include those additional factors as part of what they looked at to determine whether or not a loan was 90 or more days delinquent because in their minds they thought that something that had flipped into collections or been charged off had already hit 90 days delinquency and it just wasn't measured in a time-based delinquency anymore so that was just sort of their common practice in trying to make sure that the banks that had been operating as banks sort of take their lead from what they were doing could I add a little more color to that so as I understand it so before the banks were taken out of the Stafford loan program as the mental man part of the plus loan portfolio was issued by private banks under the FELP program and part of the program was issued by the Department of Education and as Ben said the banks were allowed under the program to implement more restrictive lending criteria when the department essentially assumed responsibility for the entire program my understanding based on conversations with the Department of Education folks is that they internally then made the decision that they wanted to use the more restrictive criteria that had existed in the FELP program so we think that there was a choice and the department decided to go with more restrictive lending criteria and that of course is kind of what set off this crisis at least within the HBCU community but this was a very substantial change even though the regulations didn't change and that is why we think this was a flawed process procedurally that the department before doing that major change should have at that point gone through a rulemaking process Hi Shelly Rep from N chair here a couple of people on the panel talked about the intergenerational aspect of this we don't have one loan we have two loans here a plus loan a parent loan parent taking out a loan plus or minus a few years might be 40 years old with a 20 year, 30 year Kevin talked about repayment plan they're going to be paying this loan off when they're potentially when they're 70 working and all they have is social security and I think we know social security can be docked in part to pay off your student loans I guess my question is particularly plus is packaged do people really know do parents know what they're getting into I know some parents sort of think that their kids are going to take over their payment of their loan but I don't know if that happens or not the liability is on the parent's part I guess my question is really do people have but I know Cheryl talked about financial literacy but do people really are parents entering in these loans with their eyes wide open and one other comment I just have to say is that we talked about here about the government making $40 billion on their student loans a year and I just need to say that there's at least a legitimate question about whether or not the government really is making loans making money on their student loans but to go back to my main question Kevin I'll let you start with that as somebody who's closest to the borrowers themselves Sure, thanks for your question the short answer is no the parents in my experience over the past 12 years prior to ASA I was actually in admissions and financial aid at a private institution in New England are not aware of what the implications are of a plus loan when it's included in the financial aid award often times what will happen at the bottom is the balance will be zero so it will say Pell Grant is X Stafford loan is this Federal plus loan is this and then parent and student responsibility will be zero now if you're a parent and you're looking at a financial aid award letter and one of the things to keep in mind is that for the majority of these people this is the first time they've ever paid for school when you go to public school you pay taxes and your kid goes to school unless you enroll them in a parochial or private institution this is the first time you're ever paying for school this is a foreign concept to you so even if you are aware of grants and loans and what the terminology is which again many of them aren't and part of the issue is in the financial aid financing community or higher ed in general when you're used to dealing with these acronyms you're assuming a level of sophistication on the other side that just doesn't exist it's almost like asking a fish what water is or how does it feel to be wet like a fish swims in water all the time so like what do you mean what does it mean to be wet like you know it's just a foreign concept so when parent and student responsibility says zero the idea is okay well then I don't pay anything out of pocket I bring nothing to the table and it's only after that first bill becomes due is it like oh well okay well I'll pay it for now and then my son or daughter will assume it and that's not the case one of the things that we've tried to do in our community engagement is by operating a college planning center in conjunction with federal education opportunity centers is to really get information to people before they undertake these loans and understand what will happen down the road what is their debt to income ratio currently what are their options going forward and the other thing that's very interesting is that in liaising with a lot of the school's guidance counselors themselves there's a level of misunderstanding and misconceptions among school professionals that is astounding unfortunately so the very same people that we would look to to support our efforts in increasing financial literacy among students and families are unfamiliar with this territory themselves and unfortunately if they are familiar with it oftentimes what I'll hear is that well this is a sensitive topic I don't feel comfortable even though I have the knowledge to talk about these issues, talk about financial aid and affordability I don't feel it's my place as a student's academic guidance counselor to tell them whether or not they can or can't afford this institution the onus is entirely on the family to make that decision and as we've discussed before this is an emotional decision right this is an emotional process this is not thinking purely with your head it's thinking with your heart particularly if you're low income and first generation and what we've attempted to do is encourage families from all walks of life from all income levels is to have the conversations they may be the earlier you have them about what our family can afford because it's not a one size fits all right the definition of affordability is different depending on where you sit so when we talk about that it's we also talk about it's not what the college costs it's what that college costs you so somebody going to a $50,000 school somebody is going to pay $40,000 somebody is going to pay $5,000 and everywhere else in between so the idea is to bring a lot of still a lot of this complex information into digestible portions but it's a heavy lift because there's so much information there's so many opportunities to get it to the families but in the end as Rachel mentioned from the Chronicle article today even if people are facing potential financial difficulties in the future they'll still go ahead with it because they so want their student to succeed and not really understanding what the implications will be I do think this is an area that we don't handle particularly well when I talk to my mom who's trying to figure out her health insurance options she can go to a center that I think is funded under the Older Americans Act and get face to face help navigate through all of these different plans and costs etc you know and I think we need something like that in higher education we actually have something like that with the TRIO programs but you know they're only able to handle so much and we haven't really invested in those kinds of programs so I think that's another to-do item to really think about how do we help students and families navigate you know I think it's just not sufficient to you know maybe for the new generation to have you know the interaction with the internet and the tools that are on the internet but for you know a sizable proportion of our students and our parents you know I think we do they do need that face to face personal kind of counseling you know that we are that is provided in a lot of other sort of non-education programs and I think that navigation personal navigator concept you know is one that we should think about expanding here I think we'll take one last question Hi Jason DeLaule New America Foundation so I've heard from sort of a general theme here that parents and borrowers need better consumer information and presumably then they could make the choice in whether or not they should take out a parent plus loan do institutions of higher education the ones that you represent have a conflict of interest in providing that advice and should they even be allowed to? Well that's a good question I think certainly institutions should be providing you know some and I think they're required to at least under for the for staff at loans providing some some counseling I think by no means they should not be the only ones doing that there should be other independent non-profits other entities other sources that parents and students can go to to get solid impartial advice and counseling My sector schools are obviously very sensitive on this whole issue because we've been often accused of misrepresentation so our sector developed a whole set of best practices on recruitment and admissions and obviously one of those issues is that the admissions in the financial aid conversations have got to be separate our schools have developed some pretty rigorous standards to the point of many of our schools literally have a recording of everything that admissions counselor says so that they have it on tape and they obviously have gone to the point of signing acknowledgments so that the student and or the parents usually student I mean so there's no question about what was said what was not said what the arrangement is because we've got to make sure that when we talk about transparency it is transparency that's also understood I want to thank everyone on the panel this has been a wonderful and wide-ranging discussion and I appreciate your time and Rachel for organizing this and inviting me to moderate it's been a lot of fun