Rep. Andy Barr (R-KY) said at a House Financial Services Committee hearing on Tuesday that Congress created the $1.5 trillion student loan debt crisis affecting 45 million Americans.
Barr asked one of the witnesses, Jason D. Delisle, a resident fellow at the American Enterprise Institute, a series of questions about the companies that issue federal student loans.
“Some of your colleagues on the panel seem to be blaming the student loan servicing industry for the $1.5 trillion student loan crisis in this country,” Barr said.
“Do student loan servicers advise students as to which school to attend or which degree to pursue?” Barr asked.
“No,” Delisle said. “The servicer isn’t involved in the front end of the loan dispersant at all.”
“Do student loan servicers set tuition rates?” Barr asked.
“No,” Delisle said.
“Do student loan servicers advise a student as to how much money to borrow?” Barr asked,
“No,” Delisle responded,
“Do student loan servicers underwrite student loans at origination?” Barr asked.
“No,” Delisle said.
Barr then asked if these servicers “actually issue debt to students?” And whether they “set the terms of the loan?”
“No,” Delisle answered both questions.
Barr asked if they set the loan interest rate or “create the income-based repayment plan.”
“No,” Delisle said.
“Who did that?”
“Congress did and the Department of Education,” Delisle said,
“Did they create the graduated repayment plan?” Barr asked.
“It’s in statute, so Congress,” Delisle said.
Barr went on to lay out the case that student loan debt has become even worse since Barack Obama was president:
Since the Democrat Congress and the Obama administration orchestrated the government takeover of student loans in 2010 the total amount of student loan debt has exploded. The federal government is now the largest consumer lender and owns or guarantees 92 percent of the more than $1.5 trillion in student loans.
“The remaining roughly $100 billion are private loans,” Barr said.
“The number of federal student loan borrowers has exploded by 50 percent since the government takeover,” Barr said. “At the end of 2018, 70 percent of college students graduated with student loan debt.”
Barr went on to say:
Private loans, in contrast, with underwriting standards that actually involve underwriting that allows lenders to determine whether or not a borrower has the ability to repay have a repayment rate of 98 percent. Meanwhile data from the Federal Reserve suggests that approximately 20 percent of federal borrowers are either seriously delinquent or in default.
Barr asked Delisle about the difference between private loans and federal loans and got a stunning answer.
“Federal loans are open access,” Delisle said. “So, for example, if you lose your job and become unemployed you become an excellent candidate for a federal student loan.”
“I think all of this is Exhibit A of not just the total incompetence of the federal government but the victimization of students by Congress, by the federal government, by the U.S. Department of Education,” Barr said.
“I know everyone wants a boogeyman,” Barr said. “And the student loan servicers are a convenient boogeyman.”
“But guess what? Look in the mirror Congress,” Barr said. “Congress created this crisis.”
Barr said the federal government “gave loans to students and didn’t even care whether or not they had the ability to repay.”
“Meanwhile, we have a dramatic shortage in the skilled trades,” Barr said. “We have a dramatic shortage of nurses. We have a dramatic shortage of welders.”
Barr said that rather than scapegoat an industry that is just following laws created by Congress, they should be helping young people get good-paying jobs through a trade training education.
“Let’s graduate these people with $100,000 a year jobs with no student debt,” Barr said. “That might be a better solution than trying to blame an industry that’s just following federal law created by Congress.”
The other witnesses at the hearing shared story after story about how Americans are struggling to pay off student loans, with many having to delay getting married, buying a home, and having children.
“Last year more than one million borrowers defaulted on a student loan,” Seth Frotman, executive director of the Student Borrower Protection Center said at the hearing. “That’s more than the population of each of your districts.”
“In fact, every 28 seconds another borrower defaults,” Frotman said. “That’s every 28 seconds of every hour, every day, every week, every year.”
Frotman called the student loan debt crisis “a trillion-dollar black hole.”
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