>> the senate judiciary committee held a hearing on snunt loan debt and reform. they discussed the rising cost of higher education and the barriers when trying to discharge their student loan debt through bankruptcy. >> the y committee held a hearing on student loan debt and bankruptcy reform. witnesses discussed higher education and the barriers encountered when trying to discharge student loan debt through bankruptcy.

>> today we examine the unfair way that student loan debt this is a problem we should have addressed a long time ago. i actually chaired a hearing on the same subject in the same room in 2012, at times i was alarmed that student loan debt in america had surpassed $1 trillion. no less than a decade later, it has climbed to 1.7 trillion. 45 million americans carry student loan debt. they're not just young people. eight million are over the age

of 50. some learn that their social security checks are being garnished to pay the debt. if you fall on hard times, forced to file bankruptcy, your mortgage debt can be discharged. your automobile debt can be discharged. your vacation home loan debt can be discharged. the mortgage you cosigned with your kids so they can buy their first home can be discharged. but it is virtually impossible to get relief from student loans. why? because student loans are one of the very few types of debt that are exempted from discharge in bankruptcy. the concept of bankruptcy is a clean start. but not if you're dealing with child support, alimony, overdue taxes, criminal fines and student loans. i would would like to turn to a brief video that highlights the need for this conversation. >> i have paid $120,000 and i

still owe $76,000. >> we put off having children. >> i can't afford to retire with interest and there is about an extra $20,000. >> united states student debt crisis is up to $1.7 trillion. >> if a university degree was supposed to give you a head start, crippling debt is the ball and chain. >> student debt in the u.s. is now bigger than debt from credit cards and auto loans and is second only to mortgages. >> the number of americans age 60 and older with student loan debt quadrupled between 2005 and 2015 to nearly $3 million. >> debt is penalizing. >> bad debt is one that has many americans pulled down in the pandemic. >> the federal government has the vast majority of student loan debt.

>> it is nondischargeable in bankruptcy. >> don't forget, bankruptcy is not a crazy thing. it happens in american life all the time. medical bills file for bankruptcy. >> even a bankrupt gambler gets a second chance. >> can work so hard in 1965 has not been met. >> since i announced this hearing, people have been sending me stories. linda navarro, veteran of the u.s. navy went back to school when she was 39 years old. she is now 70. she has $145,000 in student loans. she has carried this debt for 31 years. a single mom with three kids, she is a hotel desk clerk. she has 511,000 in student debt, she is trying to get it discharged in bankruptcy, the department of education is fighting her all the way saying

she spent too much money on buying food for her children. lisa from arizona, mother of two, filed for bankruptcy in 200813 years ago but couldn't discharge her student loans. she now owes $217,000. this is new in america, it didn't used to be this way. before 1976, student loans were treated like other types of unsecured debt in bankruptcy. if you were facing financial ruin, you could get relief. then congress got the idea that student borers were running to bankruptcy court after graduation. this was based on more anecdote than data. congress started passing laws to make it harder to discharge student loans. from 1978 to 1998, congress made it there were two ways to get a student loan discharge, first it was a five-year waiting period, then it became seven years, then

in 1998, congress rewrote the higher education act and as a budget offset tucked in a provision getting rid of the waiting period for student loan dischargeability. under the law now, there is no length of time, no waiting period, no federal student loans can only be discharged if the borrower proves he or she had undue hardship. that's an interesting standard. how is it applied? proving undue hardship is nearly impossible starting with a 1987 case called bruner, courts have interpreted the phrase to set an impossibly high bar for relief. you have to convince a bankruptcy judge that it's hopeless that you will repay while the department education or its guarantee agents are on the other side arguing against you. in 2017, the "washington journal" looked around for undue hardship cases, they found four, four cases in the nation when a

bankruptcy judge discharged student debt for undue hardship, four. i tried for year to push the department of education for stopping aggressively challenging hardship claims by student borrowers, a quad riplegic veteran, there should be another option. we should go back to how it was before 1998 when borrowers could seek relief after a significant waiting period. that system worked. that's why today i'm introduction a bill with senator cornin, i thank him for joining me in this effort, it's fresh start through bankruptcy act. we have talked about this problem of student loan and student debt long enough. it's time to fix it. our bill would restore the ability of student loan

borrowers to dispatch student loans after a waiting period of 10 years and pair this reform with accountability measures with schools that have consistently high default rates. you are loaning taxpayers money to students who count on your advice, the system is broken down. universities have to be part of the solution. everyone has skin in the game, you are no different. this is a big moment. i have been introducing student loan bankruptcy for a long time. this is the first time it's been bipartisan, thank you, senator. with this bill, we see a growing bipartisan consensus, the status quo isn't working and we need student loan bankruptcy reform. i want to thank our panel of witnesses for being here today. i will introduce them in a moment after senator grassley makes opening remarks. senator grassley: i'm willing to take a look at your legislation.

i'm going to have my remarks related to a larger issue that i hope deals with the problem generally, not a solution to that problem, except some bills that i have in that are in other committees. i think that we've got a major problem we got to deal with on a larger scale, so i thank you for holding the hearing looking at higher education and the possible role of bankruptcy for student loan debt. i want to make clear that i believe we must look at the entire higher education he can echo system to solve these challenges, recommendations to modify the bankruptcy code would address only symptoms of a larger problem. if we don't correct the underlying causes, then we're closing the barn door after the horse has gotten out. nearly 44 million americans owe more than 1.7 trillion of student loans with the average

graduate having debt of over $28,000, the amount of the outstanding student loan debt has doubled in just the past 10 years related to increasing the amount of debt is the increasing cost of college education in the last 20 years, the cost of attending a four-year public college has more than doubled. going back further since 1978, it's had an astronomical percentage increase. this is more than double the rate of inflation and shows that there is a problem with how we're funding higher education. the federal government currently owns 92% of the outstanding student loan debt and that percentage continues to increase. federal loans are available to a large portion of the population regardless of the ability to repay and well in excess of need. this provides colleges with an

almost limitless supply of funding which in turn creates no incentives for college to reduce cost contributing to hire -- higher and higher level of debts. schools are more accountable for the financial outcomes of their students. that's kind of hard to do because every college is different and federal standards may affect some very positively and some negatively and still not solved the problem. i'm also a strong proponent of making sure that people who are thinking about attending higher education are fully informed, so i have introduced three bills to this congress similar to bills that were introduced to previous congresses if we ever have a higher education, a reauthorization, i hope to get

these included, these would provide resources to empower students to better understand college costs so that they can limit borrowing to what they need and can afford. these bills would provide students and their families with better information about the cost of college from initially searching for colleges through the application process to accepting financial aid, increasing transparency and insuring potential students have this kind of information will help lead to more informed choices and hopefully more price competition between colleges. several members on the other side of the aisle have urged the biden administration to cancel tens of thousands to $50,000, 10,000 to $50,000 in student loan debt. this is a questionable idea. debt forgiveness would be highly regressive and overwhelmingly benefit the wealthy at the

expense of others. the administration also lacks the authority to do this even speaker of the house pelosi herself recently said and i want to quote, the president can't do it, so that's not even a discussion. we must consider the moral hazard and the cost to pax pairs. the majority of americans decide to not attend higher education and pursue careers not requiring a college degree, that's their choice. others decide to take out loans and attend college and most are able to afford. that's their choice. i don't think that we -- i don't think that we should ask those who did not attend college to pick up the tabs for those who did. so i urge my colleagues to look at all the factors that are driving high levels of debt in higher education and closely examine the costs associated with any reform.

those remarks do not preclude my considering legislation that is suggested to that very day and the purpose of this hearing. if i could just elaborate a little bit on why i think we have this bad problem, one of it goes back to a lot of bad federal policies, if you remember during, before obamacare, the federal program was put in obamacare to help pay for some of the costs of obamacare and the federal government was supposed to make a lot of money off of these loans by setting an interest rate, service interest rate. we haven't made any money off of it like it was supposed to be, but when you have banks giving out loans, i think there was more of a consideration of how much loan you should take out as opposed to what a government direct loan gives, so we have a

federal policy that encourages young people to get into more debt than they should. we also have federal policy that encourages our universities to tell students the maximum amount they can loan, they can borrow and consequently i think they borrow more than they should. i remember when president mason, president of the university of iowa, she would come to my office and we would gradually talk about this problem of student debt, she would remind me at that time maybe the average debt was about $29,000, she said if these students would borrow what it took for room and board and tuition and books, there would be several thousand dollars less debt. my university of iowa started

advising students, don't borrow all you can borrow and i think they have reduced the average student debt by about $3,000 per year and so some of these efforts are going to pay the price, but we shouldn't be encouraging people to borrow more than they need to borrow. we don't give enough consideration to that, we have a bigger problem than we ought to have. i could go on and on but i'm going to stop. >> senator grassley, would you like to say a few words? >> thanks, mr. chairman, thanks for scheduling this hearing and all of the witnesses, we appreciate your testimony in person or virtually. this is an important issue and i think our bill is a fresh start to bankruptcy act will provide an important relief to students and accountability for schools. i think those have to go hand in hand. it's not hard to see that the

incentives in higher education are badly broken. teenagers are told they must borrow tens of thousands of dollars in order to get a good education and join the professional workforce. if when they leave school, they realize they had been sold a bill of goods that their options are limited or maybe they just haven't been counseled appropriately when deciding what their course of study might be and what the possibility of actually finding a job adequate to repaying the debt they've incurred and we need to change that. i'm encouraged by the development of income-based repayment, public loan forgiveness and other initiatives that the department of education is providing students. this bill that i've worked on with chairman durbin would increase that relief by including government student loans to be discharged after 10 years. it would help students without encouraging strategic bankruptcy. this helps the individual student which is important, but

it doesn't solve the institutional problem here. some institutions of higher education, no matter the size or the name on the door are playing with house money. they can charge sky high tuition, pocket taxpayer dollars and graduate students who can't find jobs. when that happens, that is simply wrong. schools need to face accountability. i don't want to prevent any student from getting a loan that they need in order to pursue their education. i was fortunate enough to get a student loan which enabled me to go to law school and i'm grateful for that opportunity. these loans can provide young people with a pathway to a better life. many schools provide extraordinary value to their students and i know for a fact, many counsel their students about what sort of indebtedness they are incurring and what that means in terms of their selection about a course of education and the potential for remuneration from their jobs

once they leave school. schools are also selling a product for a price. and that price needs to match what these students get out of it. that's why the second part of the fresh act through bankruptcy act, when enough students default on their loans and fail to continue to repay them. this framework is narrowly tailored and absolutely necessary. some schools have taken advantage of the american taxpayer for too long and the students are the ones harmed by their excess. i'm glad to see this bill introduced today. i want to thank the chairman and i'm looking forward to building support for it and learning more in our discussions with the witnesses, thank you. senator durbin: that question of accountability as we have discussed before is an integral part of this. i would like to credit jack reed of rhode island, one of our first colleagues to introduce

legislation along those lines, i have included a reference to it in this bill and i hope he gets credit for it as he should. so i hope this can move forward. we have four excellent, i'm sorry, five excellent witnesses, people trying to figure out out which one is not excellent, before us today. i want to give a brief introduction to the witnesses. the first is the 42nd attorney general of the state of illinois. he has been a leader in consumer protection working to stop bad actors who prey on illinois consumers and students. he served as attorney general since 2019 after serving 14 years as an illinois state senator. it was kwame who succeeded barack obama in that particular district. he served as prosecutor in cook county and staff county for city colleges of chicago. christopher chapman is here as

president and c.e.o. of excess lex institute, the position he has held since 2008. prior to joining that company, mr. chapman was the president and c.e.o. of a nonprofit student loan provider, served as vice president as the student loan originator, was a staff member in fact u.s. house at one time. diane is with us virtually, network administrator from georgia. she and her husband chris has two kids, she has an associate's degree, bachelor's degree and took out student loans at ashford university, she currently has over $120,000 in outstanding student loan debt. i thank her for being here to share her story. dr. beth acres where her work

focused on the knicks of higher education. previously she worked as a senior fellow at manhattan institute, a visiting research scholar at the federal reserve board, a fellow at brookings and a staff economist at the council of economic advisors under president george w. bush and elizabeth gonzalez is the directing attorney for the consumer law unit in the public law center in santa ana, california. she is a member of the california department of financial protection, she is an adjunct lecturer in law at the university of southern california and she is certainly welcome despite being a packers fan. after we swear in the witnesses, each witness will have five minutes for opening statements and we'll turn to questions from senators. i ask all of the witnesses to please stand and raise their right hand.

do you swear or affirm the testimony you are about to give before the committee will be the truth, the whole truth and nothing but the truth, help you god. they answered in the affirmative. we will start with the gentleman from illinois. >> i must have been that fifth witness, excellent category. thank you, chairman durbin, ranking member grassley, members of the committee for the invitation to speak to your committee. i'm excited to contribute to the discussion of potential bipartisan game changing bankruptcy reform for student loan borrowers, i thank the chairman and the senator for putting for the this measure.

the illinois attorney general's office has extensive experience dealing with the burden of student loans that student loans place on consumers. in 2019, our office received over 700 complaints about higher education, most concerning for profit schools and student loans. these high cost schools target low income students and their federal student loans which are incredibly and unnecessarily difficult for these students to discharge in bankruptcy. as a result, students burden with loans that many never will pay off in their lifetimes. those loans negatively impact student's abilities to make important life decisions. americans hold over $1.7 trillion in student loan debt. nearly 30% of federal student loan borrowers default within 12 years of entering college. a major contributor to debt load are predatory and expensive for

profit schools. for profit schools have the worst repayment rates. a shocking 98% of programs that failed the department of education's employment metrics which measure student's ability to pay their loans by comparing debt to earnings were for profit schools. since i took office in 2019, we have discharged over $20 million in fraudulently obtained student loan debt for illinois borrowers all used to pay for for profit schools. unfortunately, for borrowers, when the schools declare bankruptcy or seek similar refuge in receivership, funds are not available to make borrowers whole. borrowers who need relief must be able to discharge their federal student loans.

our experience investigating westwood college in particular and i.t.t. technical institute helped illustrate difficult, the difficult position these students are in. my office sued westwood college in 2012, despite the school's closure, the widespread discharge of it students' private student loans and my continued from federal student loans. my office brought claims against them for misrepresenting the ability of students with westwood credit to become police officers in illinois. we also had claims against the school for making private student loans. loans they knew the students couldn't pay. these loans were loss leaders designed to bring in just enough money to evade the 9010 rule that requires students to get 10% of their revenue from

sources other than title vii federal aid. default rates were as high as 90% for some cohorts. in 2016 my office applied to the u.s. department of education to discharge the loans of defrauded students. in 2019 i wrote the department, urging it to discharge the westwood loans. july of this year, the department finally began to discharge some of the individual applications based on evidence that we provided with our application. the relief is welcome, but students need more. the department discharged loans for just under 500 borrowers, but we applied for relief for over 3000. the tuition for the westwood criminal justice degree was as high as $75,000.

westwood had other similarly high-priced programs. similar to westwood, itt engaged in a scheme to evade the 9010 rule by pressuring students to take out private loans where the school knew the students couldn't repay it. default rates were estimated to exceed 80% for some cohorts. itt closed its doors and filed for bankruptcy in 2016. as of 2010 approximately 65.8% of their revenue was derived from federal education funds. $1.1 billion. instead of investing these funds in the students, and 2019 they allocated $489 million of their revenue to profit. in june of 2019, my office,

along with 44 other attorneys general in a bipartisan effort announced a settlement against one of the private loan providers. for more than 168 million dollars in private student loan debt relief nationwide benefiting 18,000 students. similarly, in another bipartisan effort in september of 2020 we announced a settlement against pace and others, such private loan providers providing 303 -- 330 million dollars nationwide in private student loan discharges. however, just like westwood, the federal loans continue to burden those students. just of this past april, a group of 25 states, submitted a group discharge application on behalf of itt students who attended from 2007 to 2010.

they were all subject to rick -- misrepresentation by itt regarding overstated income that students could expect to receive. i acknowledge and applaud the granting of 18,000 borrower expenses for former itt students. we can only do so much in enforcing consumer laws. many for-profit schools filed for bankruptcy themselves, including itt and corinthian colleges. the students deserve the same right to bankruptcy relief as the schools. the standard loan repayment plan is designed so that they are payable within 10 years. among the americans who failed to pay their debt in this time are borrowers who will simply not be able to repay this debt.

under current law, the vast majority of these borrowers are not able to discharge their student debt through bankruptcy. allowing student loans to be freely dischargeable after 10 years from the time they first became payable, it serves two key purposes. providing relief for americans experiencing the most violent strain and who are otherwise eligible for bankruptcy relief, while also protecting solvency of governmental student loan programs. as to the theory that those might strategically seek out such bankruptcy, there are ample provisions in the bankruptcy code to guard against fraud, bad faith, and abuse, to ensure that relief is limited to those who deserve relief.

discharging such debt will allow these former students to have the lives they may have been putting off. buying homes, getting married, even starting families. further, i strongly urge the committee to ensure that institutions are held accountable for failing to provide students and affordable education by tying bankruptcy discharges to institutional finances. aligning the incentives and institutions with student i natural success was a recommendation made by the senate committee on health, education, and labor and pensions in its landmark 2012 report and also a goal of the gainful employment rule. failing to hold these predatory institutions accountable does nothing but line the pockets of

shareholders at the expense of taxpayers. struggling borrowers have been waiting long enough. the time for reform is now. i thank you for the opportunity to speak today and i look forward to answering questions. >> thank you, attorney general. mr. chapman? >> thank you, chairman durbin. ranking member grassley, members of the committee, thank you for the chance to testify about the treatment of student loans and bankruptcy as it has been an often overlooked component of the financial landscape. my name is christopher chapman and i am d.c. oh of the access institute, where nonprofit organizations have a membership comprised of 200 state assisted and nonprofit law schools approach -- approved by the american bar association. we supplied resources to expand access while working to increase affordability for the value,

increase affordability and value for the benefit of aspiring lawyers and ultimately the society they serve. as has been mentioned, reform is necessary to address the negative consequences resulting from what is effectively judicial failure to adapt to legislative changes over the last 30 years. effectively, however, by remaining static in spite of the legislative changes, the test for undue hardship is more from what could be arguably an appropriate asis for analysis in the application of the law to an openly strict and un-easy access of the law for those who successfully navigate procedural hurdles that serve to frustrate the underlying goals of the bankruptcy code and higher education act. . in this proposal today that we have been pushing for almost seven or eight years, it appropriately balances the

interests represented by the discharge of student debt and bankruptcy and it is little different than a fresh start proposal that i just heard about this morning offered in the same spirit. in other words, to fix a problem that exists that doesn't have to exist and can be remedied in fairly simple legislative ways. we have long advocated for responsible borrowing, offered quality counseling and encouraged timely repayment. to that end we offer extensive financial education programs for our member schools and member students, beginning with prelaw and going all the way through repayment. these services include max financial education programs and the ability to talk with credited financial counselors one-on-one. we believe it is a great model for what others can do more broadly in the higher education center and we realize that

access will produce some borrowers who are not able to pay, often for no reason of their own and until we have a working crystal ball, default loans and in some cases bankruptcies are necessary costs of maximizing the intellectual capital of this country. there are three core factors that must be calibrated to maximize the efficacy of the substantial investment from the various stakeholders and value to the country as a whole. first, provision of equal affordable opportunities for all who pursue higher education which for the basis of the act, with the ability of the honest enforcement to obtain a fresh start to promote the equitable treatment of creditors, representing core tenants of the bankruptcy code and finally the ready availability of the availability of capital to ally -- allow americans to pursue their education dreams, equally applicable to the government as a lender and private sector

lenders. in this manner we propose a return to the framework that existed prior to the 1998 amendments with a substantive addition, that undue hardship's stand to remain but only for loans that either first entered repayment within seven years of the applicable filing or loans that without regards to timely repayment are eligible to participate in repayment plans for those no greater than 15% of discretionary income with loan forgiveness available for no longer than 25 years. all other student loans would be evaluated by bankruptcy proceedings consistent with other person -- consumer debt. in addition we strongly encourage congress to revisit the definition of undue hardship itself. the judiciary attempts to resolve it are in a standard that has been unevenly applied that has been exacerbated by the elimination of the limited weighting in which it was applied. creating clear guidelines for

the minimum standard of living with safe harbors for certain types of expenses like caring for sick parents to rationalize it, with larger loan balances than those in prior decades. in some we believe it effectively balances the interests of all parties involved to support vibrant structures for access and affordability with personal responsibility set against appropriate capital risks to the private sector and taxpayers alike. thank you for listening, i'm happy to answer any questions you may have where the committee works to advance these efforts in student roof -- student loan reforms in the future. thank you. >> thank you very much. we will go to two virtual witnesses. miss gonzales will wrap it up. >> chairman, ranking members, members of the committee, good morning. i am 50 years old.

i'm a network manager living in richmond hill, georgia and have been married to my husband, chris, for 10 years. i have over 120 thousand dollars in outstanding student loan debt. i began my education at central technical college in macon, georgia. i transferred to a university where i completed a bachelors degree in applied science and tech knowledge management. upon completing my bachelors i started working in technology for the school district, so i undertook a masters degree and in 2000 11 i enrolled in ashford university online. i had done my undergraduate through the campus so i was comfortable with online structure. i had a pell grant to help me pay for my associates degree, but i also had to take out loans as well and for the rest of my schooling, neither of my parents could afford the costs. in fact i'm the only one of my siblings who attended let alone can college.

i did have to take out loans for undergrad, and i was required to take out almost $54,000 in loans , which is in addition to the 30,000 loans in associates and bachelors degrees in interest. you may be aware of ashford university, which has been under scrutiny and lawsuits because of defrauding individuals and it started as a small catholic liberal college in iowa. ridge point education purchased it to turn it to a for-profit school, took it public and shut down the iowa campus. in the meantime it sold many students, including me, on the idea that it would provide a high quality education in a convenient manner and i enrolled because the recruiter told me the program that i was starting, a masters in teaching and learning and technology would allow me to begin teaching

online right after i finished. i have completed many positions since completing my degree and never even been offered an interview. i now know that bridge point and ashford have been investigated and sued by five separate states and three federal agencies for lying to students and others. in 2012, my husband lost his job as a commercial plumber and at that point 100% of the bills, vehicles, and everything was in my name. so, again without his income, i couldn't ache payments and i had to file for chapter 13 bankruptcy. i cried when i did it but we didn't have other options and i found out from the lawyer that i couldn't allude my student loan debt, the biggest debt we had, in the bankruptcy. i still even though my husband eventually found a job, we are

still not able to make the monthly payments on student loans, which are over $1000. i've tried to enroll in income-based payment. however, i was told i made too much and didn't qualify. who could afford to pay $1000 a month in student loans? i have also applied for large defense repayment for the debt i took out. my payments are possible because of the pandemic. but i worry what will happen when the pause ends. will the government garnish my wages? how can i afford to support my family? i could have discharged my loans in bankruptcy, as painful as it was, it would've been a great relief. i wouldn't still be having sleepless nights worrying about how i am going to pay and what happens to my children, my husband, and me, if i cannot.

thank you. >> thanks. dr. akers. >> members of the committee, good morning and thank you for inviting me to share my thoughts on this important issue. as a typical borrower access to student debt praise and opportunity for economic mobility that would otherwise be unavailable. some students or much worse off financially for having gone to college. the discourse surrounding student debt -- and unaffordable student loans are inescapable. that is pretty far from the truth for borrowers which make up 90% of the outstanding loan balance. over the past decade and a half, policymakers have built a comprehensive safety net to gives borrowers a break when their loan payments are unaffordable. the departed of educations income driven repayment plan allows any student borrower to set his or her monthly payments

to an affordable percentage of his or her monthly income without penalties. borrowers -- whose debt is unaffordable over 20 years we have the balance forgiven. while it can be difficult to choose an income driven plan, these plans are appropriate for the policy challenge at hand and can bring huge financial benefits for those who qualify. however, because idr is administered across a variety of programs, each with a different criteria, parameters and payment calculations, the system is complex to navigate with many unaware of what's available to them. while the protections have been expanding, protections available for bankruptcy have declined. over the past 30 years, a series of policy changes have made it more difficult for borrowers to -- to include-- to have student loans discharged and back of c. the medication for this special

treatment of education debt was an investment education cannot be transferred. this exception would make sense if the investments in education paid off uniformly with large dividends, but the reality is is that some investments in education fall short of that mark. offering literal or no value to the borrower. in an economy that relies on large investments in education, as a primary mechanism for social mobility, it is wrong for them to have to risk their financial well-being without a robust safety net. it is hard to argue that it would be unnecessary for congress to reconsider discharging the bankruptcy due to the more nuanced level that i dr provides. however, idr is in need of serious reform. reinstating the option to have student loans federal and private discharged in bankruptcy under certain conditions would

create a patch, however well-intentioned, but inadequate idr system. the concern of allowing student loans to be discharged in bankruptcy is that some borrowers may use this option, entering bankruptcy as a less costly option to get rid of their loan. it would reduce the financial -- and bankruptcy would increase the cost. it would also be reasonable to require that borrowers with larger balances, like those from professional and graduate programs, are required to pay for a longer time before their loans become eligible for discharge. one consequence of allowing private student loans to be discharged in bankruptcy is it will increase the amount of

credit available to students with economically disadvantaged students affected the most. the equity applications might seem concerning but they could actually be beneficial to borrowers. the loans that will no longer be made were likely unaffordable in the first place. additionally, those who have access to credit may see higher interest rates. this seems to be a reasonable price to pay to allow struggling borrowers to be able to discharge their loans in bankruptcy. thank you for the opportunity to give testimony in this important hearing. i commend you for considering bankruptcy reforms, knowing it doesn't pack the same punch as other proposals on the table but has the potential to improve our system of higher education finance without exorbitant expense. i look forward to your questions. >> thank you very much. miss gonzales? ms. gonzalez: thank you for

inviting me to testify today. i am here on behalf of public la center clientsw who have low income. it is a legal services organization committed to providing access to justice for low income residentss or orange county. the consumer law unit, we provide direct representation to assist low-income individuals with student loans as well as bankruptcy. our clients are usually over 35. sometimes over 50. and in far too many cases over 60 and above. and in all of these cases, our clients are struggling to make ends meet and have almost always suffered an unexpected loss of income making paying their bills a challenge. when student loan borrowers come to us for assistance, we look first at non-bankruptcy alternatives. usually an income driven repayment plan to but, despite

the availability of these plans, so many borrowers are under -- unaware of these programs or find the application process confusing. by the time they come to us, we are able to enroll most of these borrowers in an idr program that provides a payment they can afford. if we are not able to enroll them in an idr program, other students have other options such as the total -- discharge. in many cases, however, students enrolled in the idr program are unable to make monthly payments because paying 10% to 15% of discretionary income is not possible given the cost of living in orange county. orange county is at 87%. the cost of living is 87% higher in orange county than the national average. housing costs alone are over

375% higher in orange county. so, discretionary income in orange county is anything but. the failure to make their idr payments results and borrowers defaulting on student loans and in some cases having their wages or taxes garnished or having a federal judgment entered against them, making them actually ineligible for idr programs in the future. the borrowers who cannot afford their idr plans have conditioned -- have additional consumer debt , including medical debt, they also cannot afford to pay. it makes my heart break for ms. barta. her story is one that i hear far too often. despite being so overwhelmed by debt, my clients, they hesitate to even bring up bankruptcy in a meeting with me. there's a stigma associated with

filing for bankruptcy. these students, these borrowers understand that banker c makes it harder to find a place to live -- bankruptcy makes it harder to find a place to live and means that it will be difficult to access affordable credit for years. overwhelmingly our clients are ashamed that bankruptcy might be in their future. they did not plan to be unable to pay their bills, and they see filing for bankruptcy as a failure of sorts. so, for the most part, by the time a debtor gets to the point of considering bankruptcy, they have exhausted their options for increasing -- in fact, borrowers are often unable to afford rent and end up relying on friends and family. these families are working as much as they can and usually have some limitations as to the type of work and how much work they can perform. these limitations, however, do

not rise to the level of a disability, making it unable for them to engage in gainful activities. since 2012, plc has provided approximately 5000 banker c consultations -- banker c consultations. out of these thousands of consultations, plc has only filed five adversary -- for attempts to discharge student loans. the undue hardship bar is so high, that we do not believe the other borrowers would be able to successfully discharge their loans in bankruptcy. when plc does decide to seek a discharge of student loans for the client complaints we file detail heartbreaking facts to support a finding of undue hardship. a client who relies on family for housing who cannot afford to rent a room in a house who feels like a burden on their friends and family. a client, who despite being told

by doctors they should not work, continue to work in order to pay their bills, including student loan payments. a client who has to deny a child a trip to the movies or toys, because all of their income is spent on necessary expenses, including the federal student loans. despite these facts, these discharge cases are always contested. borrowers are made to justify expenses such as paying for internet service and questioned about their financial situations to such an extent that borrowers sometimes just want to give up. the current system is just not working. the demands of the undue hardship analysis places tremendous burden on debtors and government counsel. the undue hardship standard creates arbitrary conflicting and unfair results that negatively impact debtors.

most use the -- test to determine whether a student loan should be discharged in bankruptcy. there are three prongs to the test. i do want to focus on two of them. the difficulty in the undue hardship analysis usually comes from those two prongs. maintaining a minimal standard of living and that the circumstances are such that this will continue for the foreseeable future, the second prong. for the first prong, minimal standards of living. while being able to, not being able to afford your own place to live sounds like a borrower is unable to maintain a minimum standard of living, this is always a point of contention in these bankruptcy cases. their reasoning seems to be something like, but that borrower has a place to live they don't have to pay for. what is the problem? as if depending on friends and

family for shelter in your 30's and 40's and 50's is a positive situation. the second prong requires the court and the government to predict the future. based on the past and how ever many numbers of years here, will that be the same in the future? here, excuse me -- while borrowers have established years of hardship, this is also a point of contention, because did the borrower do enough to increase the income? surely, the borrower will earn more money in five or 10 years. by the time the borrower comes to plc and has filed a case to discharge student loans, the borrower has exhausted options for increasing their income and hit the maximum earning potential. re-introducing the discharge option would remove the arbitrariness and unfairness from the undue hardship analysis

by, in a sense, codifying the second prong of the test. if a borrower finds themselves in a situation where they have to 54 chrissy, -- for bankruptcy, seven or 10 years after the student loan became due, they've established the situation has persisted for a significant amount of time and will maintain for the future. actually, i'm, i'm happy to hear that everyone seems to be in agreement. all of the witnesses seem to be in agreement that re- introducing the temporal discharge will help borrowers unable to afford evenan idr payment. there seems to be agreement that not only won't students rush to file for bankruptcy, but the bankruptcy system has in place protections against the abuse of the bankruptcy process. everyone also seems to agree that the curtain idr program-- the current idr program and they

system of undue hardship, they are not working. something has to change. low income borrowers, many of whom are individuals with color -- of color are unable to pay their student loans, even idr plans. they default and then they have their wages garnished. then fall back into default. for those borrowers who have no other option's, being able to discharge their federal student loans in bankruptcy is the only way to truly have a fresh start and a chance at a financially stable future. chair durbin: thank you very much, miss gonzalez. i understand five minutes is not enough. and many of you have come great distances. i hope in the questioning period, you will have opportunities to expound. mr. chapman, you closure statement by talking about congress creating a definition of undue hardship. something has to give. whatever the definition under the bruner test is, it

tragically is no relief. you look at the other areas of nondischargeability under the bankruptcy code, whether it is alimony or child support her taxes, that sort of thing. -- or taxes, or that sort of thing. there is no undue hardship escape your dye thing congress believed it was creating some sort of an out for the hardship case. but that test, that just does not work. do you have a definition that you have created? you made a reference to some. >> we've not created a specific definition, but it is really, it is a combination of the temporal discharge period as well as the definition of undue hardship. i think both should be addressed, albeit with the reinstatement of a temporal discharge, the undue hardship definition becomes less impactful but still important. chair durbin: i have tried, with no success, to appeal to the department of education, which is the bill collector in name to

establish some sort of reasonable standard. i used the example of the quadriplegic disabled veteran in a terrible state and is never going to see a change in circumstances and needs a helping hand. it doesn't seem to touch them in any way. i believe they are contracting out some of these collection services, and perhaps, there may be some reverse financial incentives to always say no. in 5000 cases since 2012, you had 5000 claims since 2012, you have five cases only? gives you an indication one out of a thousand you think may even have a chance under undue hardship. is that correct? >> just to clarify, 5000 consultations. but yeah, the number is very low. chair durbin: i also want to address the issue, and i think rightly so, the ranking member raise the issue of moral hazard. whether we make it too easy to

foul up see and people will be taking advantage of that opportunity. you do make the argument that this is a tough thing to sell to a lot of people even though they desperately need bankruptcy as their only escape from their current situation. that strikes me as an honest appraisal of what most human reaction is to going to baker cpa people are not happy or anxious to do it in most cases -- to to go through bankruptcy. people are not anxious or happy to do it in most cases. >> absolutely. chair durbin: you have seen for-profit schools, in particular. she's a victim of one of them, ashford. these schools are notorious. 8% of high school student go to for-profit colleges and universities. 30% of student loan default are from for-profit colleges and universities. they borrow too darn much money.

they then drop out or get a worthless degree and cannot pay back and it just keeps building an interest. you tried to appeal on behalf of some of these classes of students with some success. i'm happy to report. but many of them do not get that kind of relief or protection from the deception they have been witnessing. >> that's right, mr. chairman. there's consensus among states attorneys general, as i mentioned in some of these actions, there's a bipartisan effort to hold these bad actors accountable. and, even with a limited success, there are many students who just left without relief. chair durbin: i'm going to defer to my colleagues. but i think we are moving toward, i hope we are moving toward a consensus, certainly we invite others to join us in this conversation we have talked about student debt for how long? decades. and we have not done a darn

thing about it in a long time. we can do something now. that is reasonable and meaningful. restoring the 10 years is a reasonable step in that direction, as well as accountability for schools that are abusing the student loans from their point of view. but i think about a 19 or 20-year-old young man or woman facing the prospect of 10, 20, $ 40,000 in debt and signing on the bottom line at that point in their lives, they need some help, they need some advice, going back to the point made by senator grassley. someone has to say, wait a minute. you do not need to bar all that money or there is another way to do this or perhaps you need to reassess the whole situation. they do not have that kind of counseling. it is university selling student loans from the government, and students, many of them with no life experience, and no reliable parent, the parents may never have been to college themselves, it puts us in this predicament many times. so i think we're moving the

conversation in the right direction and i think the panel for being here. sen. grassley: i want people to think about whether it is done by a government decision or by the bankruptcy courts, if student loan debt was forgiven, more than half of that money would float to families in the upper 40% of income for your the top 25% of household in the united states with incomes above $173,000 now holding 34% of all outstanding debt. my question is, what are your thoughts on the immediate student loan forgiveness and do you believe that this would be a regressive policy? >> i do believe it would be regressive policy. i think it is a terrible policy idea. not only is it regressive but it creates incentives for future borrowers. i read a book advising people on how to pay for college.

advising people to borrow even more. that's the problem that we create with that forgiveness plan. sen. grassley: i've already referred to several ells i have created in this congress. for instance, my know before you owe federal student loan would require schools to inform students about their likely debt compared to their likely salary based on their program of study. combine that bill with the college transparency act, which i also support, students would know how much they are likely to make based on their chosen major and the specific college -- from previous graduates. do you think this kind of information could help borrowers avoid taking out loans beyond what they can afford to repay, and what do you think better information for students would do for the cost of colleges?

>> absolutely. i'm a big fan of improving information students have available to make decisions about their investments in themselves. i think the government can only do so much in regulating institutions to ensure that quality exists and people are their own best advocate when it comes to shopping for colleges and know what is right for them. we need people to be more aware of at the value of a degree is so they can put pressure on institutions -- to charge prices in line with value. it is asking a lot of consumers but i think it is something we can do effectively. sen. grassley: do you have anything to advise beyond what i have already talked about my legislation would do?: >> no particularly. one thing i'm concerned about about accountability is the lack of discretion front national --

financial aid offices have to counsel students. i speak to financial aid officers who know they are giving loans to students who cannot afford it but they do not have the ability to -- >> mr. chapman, do you have anything you would like to add to this discussion we have just had? >> thank you, mr. grassley. with respect to student loan forgiveness, we've never supported blanket student loan forgiveness. we the believe the government's role is to provide access to opportunity and serve as a backstop for those borrowers who struggle at the back end. we think it would be better use of money then a blanket discharge of loans across the board. for that reason, and for some of the other reasons around moral hazard and the like. sen. grassley: the cost of attending college continues to increase. the cost has doubled in the last

20 years. grown twice as fast as inflation. college continues to grow -- build lavish facilities off the never-ending stream of government money. what do you think could be done to help reduce the cost of colleges and secondly, should schools have some sort of skin in the game to hold them accountable? >> i do think that colleges should have some skin in the game, meaning their financial accountability for when their students struggle financially to repay their debt. what can we do to ease up inflationary pressure on them? we can make it reasonable for him to choose not to go to college. that is the only way institution will face the pressure that it will take not to charge prices that are not in line with value. consumers put pressure on all kinds of sellers to charge prices that are in line with

what the product or services were. that cannot happen in education. sen. grassley: thank you, mr. chairman. chair durbin: senator whitehouse? sen. whitehouse: thank you, mr. chairman, for your leadership on this issue. attorney general -- i don't know what you are hearing. i'm sure you meet with a lot of constituents in illinois, but i want to share with my colleagues that when rhode island's -- come in to see me to ask for what they need to support them and their professions, in the last couple of years they have started raising this question of student that. -- student debt. they are recognizing there is so much student debt out there, it is starting to depress their ability to put people who should be in houses into houses because they are so burdened with debt. so, it's telling for me when you hear the realtors of the country

coming and saying, you have to do something about the student loan debt. because we are seeing people who we should be able to put into a house, at the wright, their lives, they have the right level of income, they are ready for this responsibility, they just have too much student loan debt. i'd appreciate everyone's attention to this issue. it also strikes me that mortgages are available at3% or 4% readily, student loan debt charges 8%, 10%, 12%. i wonder if miss gonzalez and the attorney general could comment on that interest rate discrepancy and what that does to borrowers in an environment which other people are getting loans at much more favorable rates. ms. gonzalez: i can say that, because of the idr program and the interest that accumulates when basically you're -- paying less than her interest on

loan, the borrowers who took out x amount of loans and up owing three or four times that amount because of that accrued interest. this is especially true for those borrowers are took out loans in the 1990's and 2000's. we are 20 or 30 years out at a 6% or 7% interest rate. in some cases, the amount of the interest is larger than the amount of the principal. sen. whitehouse: in bankruptcy can a debtor and the entity holding the loan agreed to lower the interest rate? ms. gonzalez: yes. there are settlement options in bankruptcy. that is usually the way these cases go, rather than going to trial. but, you know, it is a hard row to hoe in terms of convincing government counsel that this is the case that should be settled out of court and whether it is a lower interest rate, whether it

is a zero payment for a certain number of years, things like that. sen. whitehouse: a bank of c is a bankruptcy and a whole lot of different things -- a bankruptcy is a bankruptcy and a whole lot of different things can put in america into a bankruptcy. one areas i have been working on his medical bankruptcies. edible bankruptcies, it is hard to say that there is moral fault -- for medical banker sees. on the part of someone who was driven into bankruptcy by getting a horrible diagnosis, facing an issue that puts them into an impossible financial situation. that is not of their own making. it is an illness. and is the case that the student loan debt is non-dischargeable, whether or not that is the cause of the bankruptcy? >> the issue you raise about moral fault, the notion of characterizing somebody who's

trying to obtain higher education knowing the difference is in income between those who obtain higher education -- sen. whitehouse: we don't want to do that. >> exactly. the idea of being able to characterize the ones who seek out the higher education and the loans as a result of being, in m oral fault for -- sen. whitehouse: people do make that point, nevertheless. i agree with you but people make that point. i think medical debt, as an example of a place where nobody can make the argument fairly. if somebody has a terrible diagnosis, then that changes their lives and it can wipe out their finances and if they need to go into bankruptcy, that will be what drove them into bankruptcy and there is a trustee sitting there going, i would like to help you out but there is this law about your

student loans. even though you're perfectly good about paying back, even though you intend to do, you got wiped out by something else -- even then. >> you are absolutely right, center. -- senator. i go back to a point you made and that ms. gonzalez talked about as she talked about the realtors in your area. the student loan burdens prevent people from what we as americans believe is living out the american dream, being able to purchase a home, start a family, educate your kids. as a result of the higher interest rates, many of these borrowers will have that burden for the rest of their lives. sen. whitehouse: my time is up. i would like to thank the chairman and the whole panel. chair durbin: senator cornyn? sen. cornyn: thanks for the witnesses. there have been a lot of

different efforts made, including in my state, to try to provide students with multiple options when approaching their education. obviously, for people who do not want to go to a four year liberal arts college like ideas, they can train for a trade, we lder, plumber, which are in high demand and well compensated. there are a lot of opportunities there. or, in my state, i'm sure it is typical of most states, you can get college credit still in high school if you are so motivated. our community colleges offer the best bang for the buck in terms of low-cost education that, and then again, i'm sure my state is typical of others and that the pipeline is then created for people who want to pursue a four year college degree and beyond. but we also have seen some interesting entrepreneurs, people like steve -- who started something called modern state educational lines.

-- alliance. there is so much content available online, provided by some of the most famous universities in the world. and he started something called free first year to find some way for students to access that free content from these outstanding educational institutions and get credit toward their degree. so, there is a lot going on in this space, because of the concern we all share about the burden of student debt. i'd like to just ask you, dr. akers, sometimes people have suggested that the fact that government student loans are available almost without limitation and without really assessing the ability of the student to repay or the course of study they take is causing inflation in tuition costs at our colleges and universities.

you agree with that or disagree? >> i believe it is true. in theory, economics tells us that necessity raises the prices -- simple economics. access to loans is spending with their own dollars which should have inflationary pressure. students after they find their first promissory note, they have no sense they have even borrowed sometimes. the availability of student debt has contributed to tuition inflation over time. sen. cornyn: you have gotone, two , three ,four former attorneys general up here and a lot of recovering lawyers, but i'm concerned and i know that this is something chairman durbin has spent a lot of time on these for-profit schools that, in particular, those who target veterans and others who have g.i. benefits and the like, and take advantage of their

naïveté perhaps about what they will actually learn, whether it will allow them to earn a living or the like. could you talk about the consumer protection aspects of not only misrepresenting what sort of educational benefit you will receive, but also perhaps maybe the importance of having the school itself have some skin in the game or have some responsibility to counsel their students and help them along the way, to help them understand that just because you want to major in basket weaving rather than computer science, maybe you ought to think about what your prospects are for the future in terms of paying your outstanding student debt. >> absolutely, sudden. i don't know whether to call you senator or general. skin in the game is important.

i think the gainful employmentr rule was a means of trying to create that but it was gamed as well, as i talked about in two of the examples i presented in my opening remarks. as i mentioned, we, as attorneys general, states attorneys general on a bipartisan base and try to use the consumer protection tool to protect students, but i t's limited in what it is able to provide. ironically, these for-profit institutions can seek refuge by way of bankruptcy and the way that the students that they prey upon cannot. and, so that's why i'm here. and i appreciate your effort as well as the chairman's effort to try to address this. sen. cornyn: miss gonzalez, let me ask one final question about

the consequences of banker see. there is concern about the moral hazard -- that people will borrow the money and knowing that they can clear bankruptcy perhaps trying to declare bankruptcy, the bill that senator and durbin and i proposed of the 10 year delay before that can happen addresses some of that moral hazard. but can you talk about the other consequences to an individual who declares bankruptcy. if you declare bankruptcy, it does not just potentially discharger student debt. it has a lot of other consequences for an individual, doesn't it? ms. gonzalez: yes, senator. some of the big ones, the bankruptcy stays on your credit report for ten years. that stays on for ten years, which is a very long time. access to credit. it is not so much that someone who has filed for bankruptcy won't be able to access credit. it is that they will not be able to access credit -- they will be

able to access credit at very high interest rates. so, someone who did not file for bankruptcy could get a car loan for not the lowest because their credit is not the greatest, 7%. after bank or see you are looking at a 22% interest rate for a car loan -- aftet bankruptcy. there is also a housing aspect to it. even though technically may landlords are supposed to use the filing of a bankruptcy as a reason to refuse to rent somebody, it is looked at in the context of the credit worthiness as a whole, whether someone is being -- is willing to pay their rent on time. in some cases employment is also affected. in my state, in california, there are certain job categories were an employer is allowed to look at your credit without any reason. so, a bankruptcy can affect your employment prospect and

practically speaking, a lot of employees ask permission to pull the credit report and providing that permission, now the employer can look at a credit report and see the bankruptcy and what that means for this person in the future. i think those are sort of the big ones. i think we can't get, i have to mention again just the -- just the shame. the emotional and mental stress of the process of filing for bankruptcy and then, after the fact, knowing you are starting at the bottom, even if you have a good credit score 20 years ago before you had the medical emergency or before you had the loss of income because of a pandemic. chair durbin: senator blumenthal? sen. blumenthal: thank you for your leadership on this issue and to you and your senator -- and senator cornyn, thanks for your initiative on the fresh

start bankruptcy act. i'd very much like to be part of that bill. i've been working on this issue for a while with other members of this committee. pleased to join senator whitehouse and introducing the medical thank of see fairness act. the major reason that people go into bankruptcy, the precipitating factor is most often medical costs and health care emergencies. and just last week i introduce the strengthening loan forgiveness republic servants act which would reform the eligibility for student debt relief for public health workers, teachers and others who dedicate their lives to public service. right now someone has to work for ten years before reaching the point where public service can be a reason for eliminating that debt.

what i propose very simply is that it should be forgiven in intervals of two, four, six eig ht,, so someone does not have to stay in the same job for 10 years in order to be eligible. there are all kinds of reforms we can do, and some of them as senator durbin mentioned, can be done administratively right now by the department of education. i think we ought to put a little bit more persuasive pressure on the department of education to take a more enlightened approach here. but we all know that the undue hardship test, whatever it was meant to be, is really not working right now, like other parts of the bankruptcy code, frankly. we've i think overlooks the opportunities to reform it, because sometimes it is viewed

as technical and complex and difficult to reduce to a soundbite, but i'm particularly interested in this idea that somehow students take this debt with the idea they will not have to repay it, there is a moral hazard. ms. gonzalez, you just described the burdens that result from resorting to bankruptcy. i'm assuming that students understand those consequences and wouldn't take debt with the idea they are just going to willy-nilly resort to bankruptcy to discharge it. they would go into that debt still with the idea they are going to repay. mi correct and that? -- am i correct in that? ms. gonzalez: nobody plans on being in a situation where they have to file for bankruptcy. sen. blumenthal: those burdens

stay with people for a while and they can be crippling in terms of getting a job, buying a house, all kinds of practical human consequences that anybody, thinking about going into bankruptcy would have to consider. ms. gonzalez: that's correct. sen. blumenthal: attorney general raul, is there more that you think we can do against the kinds of predatory lenders that all too often take advantage of veterans or others who may be lured into taking degrees that will not give the benefit of education that they think will provide careers or the terms of a loan that may be predatory as well? >> senator, i think, yes.

i think, as i illustrated in my example where the resources were shifted to profit instead of helping students, the notion of -- profit, an easier way of getting there. the notion that these institutions can rely on bankruptcy as a way that -- in the way that students cannot protect them from such is, is i ronic at best. unjust. sen. blumenthal: let me ask the question a different way. if lender's knew that the debt ors could discharge the debt in bankruptcy, maybe they would be more careful about they practices they used to lu re those debtors into debt in the

first place. chair durbin: thank you, senator blumenthal. continue with the former attorney generals club. >> thank you for holding this here. thanks to all of the witnesses for being here. it is great to see a current attorney general on the panel as well. there a couple of things i wanted to focus on. the first is while i do not support cancellation of all student debt for reasons that have been talked about, the massive subsidy for wealthy americans, i cannot think of very many good reasons to keep students with massive amounts of debt in a lifelong search of banks and search of universities by not allowing them to discharge in bankruptcy their debt under appropriate circumstances. i would like to thank senator cornyn and senator durbin and others. i think this is a sensible approach. i also want to say i think we need to focus on the role of the

universities themselves. attention has been drawn to for-profit universities in terms of concerns there. let's not let the more traditional universities off the hook. and i want to come back to what the traditional four year public and private universities have been doing. just look at the numbers here. the annual cost over the last few decades, the annual cost of tuition fees, room and board at public four year universities has increased 543% from about $3800 in 1985 to almost $21,000 in 2018. that is unbelievable. it's increased 438% for -- public university. the only product or good in services in america that is outstripped education is health care, which is stunning. we know the deep dysfunctions there. this is totally unsustainable.

i want to come back to a point that i think it was senator whitehouse made, that research shows that higher levels of student loan debt can lead people to delaying marriage or not getting married, not being able to purchase a home, not being able to start a family in terms of having kids or invest in a family if they do have kids. so, it is just unbelievable. and i think that the role of the colleges and universities in perpetuating this, in taking the money that has been allotted to students, and the federal reserve bank of new york did an analysis that showed for every new dollar for subsidized loans they raise their tuition cost 60 cents. talk about capturing the money and pocketing it. it is unbelievable. let me ask you because i know you have looked at this. how do you think we should increase accountability on institutions that receive student loans and are charging increasingly outrageous tuition while profiting and padding their endowments? what do you think that we can do about that? >> yeah, so, first, if the

colleges really spent this but deliver huge dividends consistently, and terms of grade earnings opportunities, then good on them. we do not have that consistent outcome. i think regulation should be looking at this. what students are getting in order to determine eligibility for federal financial aid. gainful employment regulations made that the case for for-profit and training programs, i would like to see outcome based accountability, meaning some measure of roi, return on investment for the students used rather than the current system of accreditation that we have in place today, as a gatekeeper of federal funding. >> i want to ask you about this. i've introduced legislation that would make participating higher education institutions liable for up to 50% of any student loan balance that goes into default and that has been used towards the cost of attendance at the institution.

what do you think about that idea? >> i understand getting institutions to have skin in the game when it comes to federal loan programs. the concerns are the implications for equity. we know that economically disadvantaged students will be the first to lose access to enrollment opportunities as a result of that. we need to become tubal with that happening and the potentially be willing -- we need to be comfortable with that happening and potentially be willing to offset those inequities. >> i wouldn't want to see discrimination against lower income students. quite the reverse. what i do want to see his colleges and universities who charge outrageous amounts of tuition and do nothing currently to have any kind of accountability. to me, is absolutely indefensible for these universities to be getting endowments. the university of michigan has an endowment of $11.9 billion. billion. harvard 38 point $3 billion. stanford 26 point $4 billion princeton $25.9 billion.

i mean, and the tuition that they charge to their students, four are private. one of them is public. i can go on toward the list is unbelievable. it is indefensible that these colleges are charging that they are charging, taking the federal student loan money they're taking, putting students on the hook. then they're accountable for none of it we have got to do something about this. i will end with this, mr. chairman. i also think it is important that we begin to allow a federal loan money and maybe pell grants to go to job training and certification programs. it should not be that you have to go traditional, prescribed route to this particular college and this particular program in order to access pell grants. we should allow folks to take those into job-training, into other certification programs to break up this higher education monopoly. thanks to all the witnesses for being here. thank you, mr. chairman. chair durbin: thank you. >> thank you very much, mr.

chairman. i want to pick up where senator hawley left off. we look at data going back several decades. we can see that there's nothing about the cost of higher education increase that we have seen that can be accounted for just with inflation. the data indicates that back in 1985 to cover room, board, tuition and fees, you are talking about $3859 a year. and for a private four year university, total average was just over $9,000 per year. and a lot of happened since then. wham broke up. parachute pants are no longer cool. nobody watches "alf" anymore, mercifully. but the costs that have increased with higher education are staggering. since then.

we're talking about basically a five fold increase since then. it does not even begin to be something that we can explain through inflation. so, dr. akers, july 2017 federal reserve bank of new york study found that there's a -- effect on tuition of changes in subsidized loan maximums of 60 cents on the dollar. how does this pass-through affect explain these drastic leaps in the cost of higher education? >> well, i think federal subsidies or pell grant spending or the availability of credit through the lending program has contributed in part to the inflation we have seen. i don't think they can explain all of it. the notion behind that pass through subsidies to the

institutions is that basically they increase demand by giving students access to more money to spend on colleges and when there is more demand in the marketplace, the price rises, allowing institution to increase their price. my other belief is that we have been selling americans on the notion that a college degree, now a four year college degree, is essentially the golden ticket to the american dream. i think when we have done that, we've put special pressure on individuals to consume higher education at any price. we h ave not made it acceptable for people to exist and operate in our economy without a degree. by doing so, we have put a lot of power in the hands of the institutions to raise prices. >> it is a social pressure couple perhaps with government backing it up in the process of doing that. i think we've got to make sure. we can't control a lot of things.

there are a lot of things not under our authority -- but we can look at areas where government is making it worse. so, it is one of the reasons why have introduced legislation called the higher education reform opportunity act or hero act. tried to reform higher education system in a number of ways, including by ending this for versailles and triangle -- this perverse iron triangle that exists. it would also, among other things, bring about a cap in the subsidized federal higher education loans. how could caps on federal student loans, coupled with extended repayment periods, end up leading to lower tuition and lower monthly payments for borrowers? >> we know that when credit is made available for students, they are able to spend more, of

course. if you constrain those dollars and those are not available to get private credit or money through other means, they will be unable to spend the amount of money the institution is demanding and that puts downward pressure on prices. i think the place we want to do that is in graduate and professional studies where there could be robust private lending markets but that -- by the unfounded availability of federal credit for graduate students. and in the plus loan program as well. >> adi has summarized student loan default data to try to figure out why those who default do so and what can be done about it. and the researchers preparing these findings concluded "the most consistent predictor of default risk is completion.

students who failed to complete their programs are far more likely to default and then students who received a degree. for this reason default is most common among borrowers with small balances since non- completers attended school for shorter periods and thus accumulated less debt." if that is the case that most defaulters are non-completers, what measures do you think we could take as a legislative branch of the federal government to semper fi the student loans-- to simplify the student loan repayment system? >> one of the issues is -- the period of time over which someone needs to repay their loans if they have a small balance loan. default rates are highest among people have less than a $5,000 bounce. -- balance. with negative amortization happening over the course of 20

years does not seem like an appropriate policy solution. >> my time is expired. chair durbin: thank you, senator lee. >> thank you, m r. chairman. can you describe your own situation particularly the choices you have had to make for you and your family when deciding where to direct the money you have and, also, would you describe how you think your lifecould change if you are able to discharge her student loans through bankruptcy? >> yes, ma'am. it has affected us very much so. right now, since i had to file for bankruptcy in 2012 and still have the student loan debt over my head, our house is in my husband's names. vehicles are in my husband's name. my student loans are in forbearance right now. for the pandemic. but, if i had to pay those,

there is no way it can pay a thousand dollars a month. if i had been able to file bankruptcy, then we could've got a better house, because i would have been -- after ten years, able to put my name on the house, also. be able to get vehicles in my own name. i have to rely and my husband's credit for all that. >> so, you oare describing a situation in which this loan is a continual burden that colors a lot of your, what is happening with your family. >> yes, ma'am. very much so. >> so, ms. gonzalez, you deal with people that are in the kind of situation that she is in. how are the lives of the people that you work with, how would their lives change if they could discharge their loans? ms. gonzalez: it would, their

lives would significantly improve. we would probably have people who would be more able to afford even the tiniest room in the tiniest house so that they have their own place as opposed to burning their friends and families with couch surfing or living with someone else. we would probably have student borrowers who were able to do something that i think a lot of us take for granted, save for emergencies, save for retirement. so many of my clients do not have a safety net, because any income they have goes to their idr payments. >> in your testimony, although if undue hardship can be shown, but that is a very high burden, to the point where only a few of your clients even meet that burden. so, we should look at making some changes to maybe defining

what we mean or i don't know, we need to deal with that. we know, i noticed that for-profit colleges enroll only 9% of students but account for 30% of student loan default. and you have gone after these institutions, many of whom just filed for bankruptcy and they totally escape all responsibility. i'm wondering whether there can be a criminal statute that applies to this kind of behavior. >> legislatures can propose all sorts of

and institutions generally. it is important to note that 98% of the higher education institutions were for-profit institutions. 98%. >> there is a lot of evidence i would say for for-profit colleges. they do not amount to very much in terms of the ability of their graduates for employment. you talked about how these entities make a lot of money, millions of dollars doing that. they just escaped through bankruptcy.

i would ask you to give some thought to whether or not we can -- give us an ability to claw back some of the money they have made over time so there could be that kind of legislation and i would be interested. it seems to me that the more we make those kinds of avenues available, it is a vicious cycle. senator cruz: there is a concept in economics called red seeking. whereby those with political power and influence go to those in government and seek special benefits.

today's student loan racket and it is a racket, i think it is a powerful example of red seeking. the people who are losing are the working men and women of this country. they are losing on multiple fronts. they are losing because the cost of education is skyrocketing. today, the cost of college tuition is 31 times more than it was in 1970. we have seen skyrocketing costs. in 1985, the cost of tuition fees, room and board was 5000 at

a public university and 9000 at a private. those numbers have skyrocketed to 25,000 a year at a public one and 42,000 at a private four-year university. i can tell you that in family that makes a real difference. in 1957, my dad came from cuba to go to school. the university of austin, texas. working as a dishwasher, he was able to pay his way through school. you can do that anymore. i had to take out student loans. it took over a decade to pay off the student loans.

but the racket we have right now involves the federal government subsidizing on limited student loans which then sets up universities to jack up tuition and a jack up costs over and over again. the racket gets even worse because we saw in recent years, led by democrats, they nationalized the student loan industry. now does the federal government that is ballooning the money, directly subsidizing this massive debt. getting paid six-figure sums not to teach. take a university like the university of michigan.

the university of michigan right now, you can expect an in-state student to spend $135,000. an out-of-state student can expect to spend about $300,000 at the university of michigan. why is it so expensive? there is massive overhead. michigan has 163 diversity and inclusion employees. their job -- it has 2.3 diversity and inclusion officers. our universities don't teach anymore. they are instead paid for people who go and work for the government and by the way, they have become among the biggest

donors to democrats. it is striking how many employees are massive democratic donors to each of the senators appear. this was comparing the top donors to donald trump to the ones of joe biden. strikingly enough, among the top donors to joe biden were universities in big tech. according to this bubble chart, the biggest group of donors for joe biden were employees of the university of california. more than employees of google which was right behind, more than amazon. big education supports democrats. what are they saying? we are gonna give massive loans to you and drive up the cost. now we are going to forgive that debt. that shifts all the cost to the

taxpayers. the top fifth of households through three dollars in student loans. what democrats are now proposing to benefit universities and keep jacking up costs is to transfer money from working men and women, the top 25% of households with incomes above $173,000, they hold 34% of outstanding student loan debt. democrats are proposing taking this away from working men and women. these are policies that don't make sense. i believe they are rent seeking and they are hurting men and women. >> thank you, senator cruz. >> thank you two hour panel. i want to extend a warm welcome to you, it is a pleasure to have

you with us, grateful for your testimony. please give my regards to your family. we would appreciate you sharing your story with us. just to help some of my colleagues on the committee to really understand what the situation you're in means to you and your family, to talk a bit more about how the burden of debt that you incurred is impacting your family and your ability to raise your two kids. >> i have over $120,000 in student loans. my palm -- my payments are over $800,000 a month. -- over $800 a month. there is no way i can pay over $800 a month and raise two kids

to do extracurricular activities. i can't even have a car in my name, a house in my name. there is a lot. i wonder if my wages are going to be garnished after the pandemic. they have defrauded lots of students. it is just a lot. >> you wanted to pursue a masters degree because you wanted to engage in public service, correct? >> i worked for the school system for several years. i wanted to do online teaching. i applied for many jobs and never even got an interview. >> is it fair to say that you were misled by the institution

that was marketing that degree to you? >> very much so. >> you took on this debt, you are unable to make the payments, unable to own a car in your name, unable to engage in your community and economic life with your family the way that you want to because you wanted to be an educator. >> correct. senator also -- center ossoff -- sen. ossof: i want to thank you for sharing your story. oftentimes the senate hears from experts but nothing is more powerful than hearing from the people who are impacted by decisions that we make, mistakes

that our predecessors in the congress have made, by the predations of institutions that lured you in to a financially precarious situation and exporting the fact that you wanted to make a contribution to our community and our state and our country. i thank you for your testimony. i look forward to sitting down with you in person and you have certainly strengthened my resolve and inspired me and i hope many of my colleagues to take on this issue with even greater focus and urgency. thank you so much. mr. chairman, i yield back. >> let me join you in thanking you for your testimony. senator blackburn: thank you to each of you for being here today. thank you so much.

i had an interesting conversation with a tennessee mom back during the campaign when president biden was suggesting that he was going to forgive large portions of student debt. this was a single mother who had worked two jobs, her daughter who is now a college senior had worked since she was 16, they had chosen junior-college for her first two years. she would go to a community college. the daughter had continued to work in college. they had done all of this so that their hope being that she would graduate without the burden of student loans. they were diligent, they sacrificed, they saved.

she came to me and she said where is the fairness for somebody like me who has worked hard and saved and has done the right thing? when you talk about discharging student loans? i think that is something that we do consider. where is the fairness for people who have played by the rules? likewise, look at what has happened with private lenders and the federal government, the lack of transparency that is there. the lack of ability for people to find out exactly how they are keeping track of those loans, the interest that is due, the payments that are made. mr. chairman, i think we all agree and everyone can see from the hearing today a need for greater transparency, a need for more diligent oversight in what is taking place around student

loans, what is happening there. also, how this does impact the lives. dr. akers, i think i want to come to you first. as i have listened to the hearing today and your comments, we have defined problems but i am going to come to you and esther chairman, i am coming to you second for an answer to this. what do you think is more effective alternative to student loan cancellation? what is more effective than what we have in front of us? what is a more effective alternative to help those that are struggling to pay those

loans? >> thank you. i firmly believe it is important that we have a safety net for borrowers to ensure that those who do everything they can to come out ahead but still are saddled with debt for the rest of their life, we have worked hard to create a system of income driven repayment to provide that safety net for borrowers. unfortunately, the system created is not working very well. there are tons of ways to reform it. number one, it needs to be made simpler. the set of programs that student borrowers to choose from. we need one single income driven repayment program that students are on medically placed into when they enter repayment. that is the first thing i would like to see. i think we also want to reconsider -- i find her testimony very interesting and she talks about the amount that borrowers need to repay, that still makes

standard other than unaffordable to them. that is something that comes through the income driven repayment program and the parameters of that program rather than more aggressive student loan cancellation broadly or ailing in bankruptcy policy. >> i agree with dr. akers and the audio program should be reformed to be simpler, easier to access and much more clear to borrowers. that said, we also believe -- >> attend to it on the front end. that is what each of you are saying. >> i think it could also be strengthened in the sense that right now it is a one-size-fits-all program to matter what your income is. i work with a lot of graduate and professional schools

students who have bigger debt and bigger incomes. one of the criticisms of the rtr plan is you can have someone making six figures and still paying 10% of their salary or 15% of their salary. there does come a threshold where each additional dollar is more discretionary than those initial dollars. we have been looking at plans to have a graduated increase as income goes up to pay more. what you can do with that is you can use that money to support this mark. that is to offset and do the government does. >> close that money flow. >> that would be one way to do it. >> would you like to weigh in on this? >> my time is over but i want to allow you to respond. >> sure. i would just say that the

program is not working because it has that 10-15% of discretionary income based on a number. discretionary income for one person is not discretionary income for another because people have higher housing costs, childcare costs, medicare costs. that is a big challenge. i do just want to say that in terms of the bankruptcy reform, having the temporal discharge reinstated. it would help borrowers tremendously who are in a situation where they are at their and -- the end of their financial ropes because they are not running for bankruptcy to get rid of the debt. >> thank you all. i think the problem is well-defined and i like the energy you have brought to your answers on how we find alternatives and a solution to this. mr. chairman, thank you for the

hearing. >> thank you senator blackburn. you have to wait until others have their day in court. i think you for your interest and your good line of questioning and comments. i want to thank the entire panel for your contributions. this is an issue that i have dealt with for a long time. i came to this committee over 20 years ago. i was brand-new. i was a senator and member of this committee and we spent several years working on it. i was consulting with professor warren. bankruptcy has always been of interest to me. i think it is particular the important in the context of the student loans. what you have brought out in your testimony really gives me some hope. we for the first time are

talking -- there is bipartisanship behind this concept. i think the senator. 10 years is not a new idea. it was a law that existed during ronald reagan's administration. we have seen it work and it could work again. we are going to embark on an evaluation of undue hardship. not as an alternative to the tenure but another option that could be used for less than 10 years. there should be some reasonable definitions. i think there is a growing sentiment that colleges and universities have to have skin

in the game. they have to realize they are not just giving away taxpayer money without any consequence and that they are held responsible for literally misleading perspective habitants and students for student loans that end up burdening them. i might say a word about her situation. it really breaks my heart. the senator named tom harkin made a special case. it was clearly a disaster in the making. i believe i was caught right in the middle of that and paid heavily for it ever since.

holding these for-profit schools, all schools accountable for the way they spend the public's money. perhaps this administration will be more vigilant. i look forward to passing the fresh start through bankruptcy act. they may come your way. i want to thank the panel of witnesses. i think you all for your participation. the meeting will stand adjourned.

♪ ♪ >> sunday, c-span's series "

january 6: views from the house" continues. >> we didn't really have the highest degree of information because, being on the house floor, you did not really get to see the images and the real-time footage of the ongoing assault on the capital. however, once we arrived in a secure location, we were able to get some understanding of that and could only imagine how our loved ones were feeling watching it all unfold in real time. certainly it was a great comfort to myself and every other member to be able to communicate with our family members back at home. one of the communications i received that was disturbing was my brother reached out to me to

indicate that, to check to see if we were ok, and i of course indicated to him that i was ok. and as an aside, he let me know that he and his family had received a threatening message from someone, indicating they knew where my brother, his wife and their three girls lived, and they had people in the neighborhood and if me, meaning his brother, the congressman, did not stop telling lies about the election, something bad was going to happen. >> this week, you will also hear from two texas representatives. "january 6: views from the house" on c-span, c-span.org or listen on the c-span radio app.

now, house speaker nancy pelosi holds her weekly news conference to discuss the party's legislative priorities. she pays tribute to richard trumka at the top of her remarks . she also touches on the july jobs report, infrastructure, and budget reconciliation bills, covid-19 vaccine mandates, and of the eviction moratorium. this is ju