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TRANSCRIPT OF TAPE-RECORDED 

HEARING FOR 

U.S. DEPARTMENT OF EDUCATION 

NOVEMBER 29, 2007 

 
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 MR. BERGERON: -- having to receive public comment 

on the negotiated rulemaking for the 2008 year. I'm David 

Bergeron. I direct policy for the Office of Postsecondary 

Education. With me is Jeff Taylor from our office of 

general counsel department; and at some point this 

morning Diane Jones, the assistant secretary for 

postsecondary education, will join us. At that point 

we'll let her say a few opening remarks. 

 This process is all about establishing the 

negotiating agenda for the upcoming negotiated 

rulemaking. We provided notice to the public in a Federal 

Register notice indicating that we would be holding these 

hearings and that we would form one or two committees to 

develop a Notice of Proposed Rulemaking. 

 Principally, what we'll be addressing are issues 

that arise from the College Cost Reduction and Access 

Act; but if there are other issues that can be addressed 

at the same time, we'll take those into account and try 

to address them through that rulemaking process. 

 We're going to be -- I told you Diane would be here. 

I actually had got -- no, actually, she has -- somebody 

came along and took my cup and cleared it from my table 

before I got back, so -- 
 I'll go ahead and let Diane say a few words and then 

I'll just finish the introduction and we'll get right to 

you all and your comments. 

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 MS. JONES: Good morning, everyone. Thanks for being 

here. We are now starting, you know, yet another round of 

negotiated rulemaking. And your comments through the 

process last year were invaluable to the process and to 

the outcome and so I'm so delighted to see so many people 

here to make comments today. 

 Your comments through these sessions, as well as 

through the negotiated rulemaking process, as well as in 

response to the notices we publish -- we look and think 

about every comment. And I can already tell you that some 

comments that we got at the New Orleans meetings, we're 

already reacting to them. There were some comments that 

came through the earlier hearing where we went back to 

Washington and said, "You know what? We got some ideas 

not really on the new negotiated rulemaking, but on some 

other things we're doing." These were great ideas. 

 And the undersecretary said, you know, "Let's move 

on these ideas now." And I think she had actually made a 

phone call to some of the people who gave those comments. 

 So not only are these comments going to be valuable 

to this rulemaking process, but we also learn things from 

you that we can do in other areas and in other aspects of 
our work. And, you know, we need to hear from you because 

you're the ones who are on the ground. 

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 So I really appreciate everybody being here. We look 

forward to your comments and we look forward to another 

successful round of negotiated rulemaking. Thanks. 

 MR. BERGERON: As I was indicating, we will use the 

information that we attain from these hearings to develop 

the agenda. We anticipate that we'll be convening one or 

two committees beginning in January with sessions, again, 

in probably February and March to develop those -- the 

Notice of Proposed Rulemaking, get that out for public 

comment, and to then finalize the regulations by November 

1st. 

 It is likely we will be moving more rapidly on 

issues around the TEACH grant program as we develop the -

- our implementation for that new program so that can be 

operational by July 1st. So you'll see things maybe done 

a little bit differently as we go forward with that 

particular process. 

 And this is all about your opportunity to provide 

comments. I have a list of people who are already signed 

up to provide their thoughts; and if you didn't have a 

chance to sign up before you came in, or after you got in 

the room realized you wanted to, please go out and see 

Nicki and she'll sign you up for some time. We will go 
and be here as long as we need to, within what the hotel 

will allow us in terms of this room today. And so, you 

know, we encourage everybody to take advantage of this 

opportunity. 

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 With that -- or, the other thing I should say is 

throughout the morning and early this afternoon you may 

see some of us wander in and out -- the people that are 

sitting at this table and other people come and join the 

panel here. And as we do that, I'll ask those -- try to 

remember to ask those folks to introduce themselves so 

that you're not talking to people you don't know. They're 

all our colleagues at the Department, either in my office 

or in Federal Student Aid. So, you know -- and they will 

relay the information in. This is recorded and 

transcribed and the transcripts of the hearings will be 

available on our website shortly as we get into this 

process. 

 So with that, I'd like Paula Cordero to come forward 

from the University of San Diego. Good morning, Paula. 

 MS. CORDERO: Good morning. Thank you for this 

opportunity to provide comments for the development of 

the regulations for the TEACH grants. 

 I'm Paula Cordero, Dean of the School of Leadership 

and Education Sciences at the University of San Diego. We 

prepare approximately 150 teachers per year, many of whom 
fill the critical shortage areas addressed in the TEACH 

grant program. We're a private urban university and we 

value our partnerships with the 42 school districts in 

this county as well as eight community colleges with 

which we have articulation agreements. We also partner 

with foundations and a variety of non-profit 

organizations, such as museums, in preparing highly 

qualified teachers and educational leaders. 

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 Just so that you know, San Diego County has 

approximately half a million children in 655 public 

schools. And in addition to my work at the University of 

San Diego, I was appointed two years ago by Governor 

Schwarzenegger as a member of the California Commission 

on Teacher Credentialing, and the vision of the 

Commission is to ensure high quality educators for 

California's diverse students, schools, and communities. 

California faces a persistent shortage of well-prepared 

teachers, especially in schools with high concentrations 

of non-native English speaking students. 

 We at the University believe the TEACH grant program 

will serve as a wonderful incentive for students to enter 

the teaching profession. Many potential California 

teachers choose not to enter the profession because 

teacher salaries are not sufficient to offset 

California's cost of living. These grants then bring 
people into the teaching profession by making teaching a 

viable career option, one that they can afford. And this 

viability is crucial for recruiting teachers for these 

areas. 

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 We at USD believe the TEACH grant program is a 

proactive measure and we have five questions for you and 

two suggestions. 

 First question: What happens when teacher shortage 

areas change? The TEACH grant requires a four-year 

teaching service commitment in a high-need subject area; 

however, what happens when a person begins teaching in a 

declared shortage area but that shortage area is no 

longer deemed a shortage area in subsequent years? My 

colleagues and I recommend that the teachers teach all 

four years in the same subject area, regardless of 

whether that area remains a shortage area. You've 

probably heard this before at other hearings, but we just 

want to reinforce it. 

 Another question: How many TEACH grants are 

available? It appears that as much funding as is required 

to meet the demand for applicants will be available. It 

would be helpful to have the regulations clarified for 

students and for institutions that the program will 

accommodate as many teacher candidates as apply, and this 

will enable us to engage in extensive outreach campaigns 
without concern for over-promising or over-promoting this 

scholarship opportunity. 

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 Third question: What are the timing and distribution 

of the grants? If institutions of higher ed underestimate 

the number of grants they need, are they able to apply 

for additional funds mid-year or do they have to wait 

until the following year? I would think that institutions 

should be able to apply for additional funds throughout 

the year as students -- and we're getting more and more 

non-traditional students -- as they enter postsecondary 

institutions at various times during the year. 

 Further, student recipients should be made aware 

that a grant has the potential to become a loan -- I 

believe? -- if he or she fails to meet criteria. So 

repayment -- at least I didn't see -- addressed in 

legislation, and we don't understand how the repayment 

process works. 

 Fourth question: What is the reporting process for 

TEACH grantees during their teaching service commitment? 

Now, the universities are equipped to track our students 

during the time of enrollment and we do our absolute best 

to follow up on our students, but tracking transient 

students during an eight year period after graduation 

would create an incredible -- it would put an incredible 

onus on us that I'm not sure that we could carry that 
out, and there's no funding for us to do that. And this 

is especially hard for a school like the University of 

San Diego because in spite of the wonderful weather in 

Southern California many of our students do go back to 

the states that they come from, so -- the parents want 

them to. So we really need to know about that commitment. 

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 The fifth question: Who is eligible to apply for 

TEACH grants in the graduate program part? So it's a 

little unclear. The statute as it's written appears to 

exclude a significant category of potential teachers. Now 

within that career changers group, those who are not 

retired or who may not have the content expertise in the 

teaching shortage area, but who want to go back to get 

their masters degree in that certified shortage area. The 

Department's regulations need to clarify this issue 

regarding eligibility to receive a TEACH grant from 

masters-to-be programs. Regulations should allow career 

changers who are non-current or former teachers or nonretirees to be eligible for TEACH grants. 

 And again, you know, this is particularly important 

in an area like San Diego since we have many military 

families -- we have all of these young men and women 

returning from Iraq and Afghanistan and we want to get 

them into the teaching profession. Many of them want to 

become teachers in these shortage areas. 
 We have two suggestions for you. There's no mention 

made about how the Department is going to evaluate the 

TEACH grant program. In order to better understand its 

impact in addressing the serious and chronic teacher 

shortage not only in California but in the nation, it 

would be most helpful for faculty and administrators and 

schools of ed, as well as organizations such as the 

California Commission on Teacher Credentialing, if there 

was an annual report that was made available. And of 

course that kind of report would include all the good 

things that you normally include in your other reports, 

so I'm sure that's on your burner. 

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 And one of the challenges we foresee for a school of 

education is to ensure that our perspective in current 

teacher education candidates would be aware that TEACH 

grants are available. We don't want this wonderful 

opportunity to be lost. Thus, these grants will have to 

be promoted in a variety of ways, so marketing becomes a 

key issue. And also, the teacher candidates have to 

understand the service obligations connected to this. 

 So the faculty of the School of Leadership and 

Education Sciences at the University of San Diego are 

committed to playing a vital role in spreading the word 

and sharing the fabulous news about TEACH grants with our 

-- not only our teacher education candidates, but also as 
we work in the local schools. And we thank you very much 

for this opportunity. 

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 MR. BERGERON: Thank you. Normally we won't be 

providing comment back on the testimony, but let me just 

say a couple things. In regulation we wouldn't be 

establishing a number of people who qualify because it is 

an entitlement without a limit on number of dollars or 

number of recipients, and we wouldn't want to impose one 

by regulation. So that -- that's something we likely 

won't regulate around. 

 On the issue of timing distribution, these will 

operate just as Cal Grants and ACG and National SMART 

Grants do, where this eligible student comes forward, 

applies, is determined by the institution to be eligible 

and the institution gets the money paid by the board. 

Very -- you know, the same kind of process. So I think 

that -- again, I don't think that's going to be subject 

to regulation. 

 But in terms of many of the other issues, certainly 

they'll be issues that we will address through the 

regulatory process and we thank you for your testimony. 

Anything else? 

 MS. JONES: Sounds like maybe you were listening 

when we had our conversations over the past couple of 

months. Yeah, many of these questions have come up before 
in these fora as well as internally. So you asked perfect 

questions that we've asked as well, and others, so 

thanks. 

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 MR. BERGERON: Jackie Fairbairn? Jackie is from the 

Great Lakes. 

 MS. FAIRBAIRN: That's right. Thank you. Good 

morning. My name is Jackie Fairbairn. I am the Director 

of Policy and Regulatory Compliance for Great Lakes 

Higher Education Guarantee Corporation. 

 Great Lakes is a private, non-profit corporation 

that administers Federal Family Education Loan Program. 

Our mission is to make the dream of education a reality. 

We work with students, borrowers, schools, lenders, and 

community organizations to change lives for the better 

through higher education. As a leading guarantor of 

student loans for over 40 years, Great Lakes is a 

private, non-profit guarantee agency serving more than 

two million student loan borrowers, 2,700 schools, and 

1,400 lenders across the nation. 

To begin with, Great Lakes would like to express our 

support of the testimony given by Shelly Saunders [ph] 

representing the National Association of Student Loan 

Administrators, otherwise known as NASLA. In particular, 

we support the call for the National Association of 

Student Loan Administrators to be represented in the 
1 negotiated rulemaking activity. 

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 As in prior years, we feel that NASLA has been an 

effective voice for student loan guarantors whose mission 

it is to ensure consistent and reliable student loan 

services to America's students, parents, and 

postsecondary education institutions. Importantly, NASLA 

is not a Washington, D.C. based trade association. 

Rather, it operates through the consensus of its members 

without a paid staff or outside consultants. Accordingly 

it brings to the table the direct and unfiltered use of 

actual operational FFEL agency participants. 

 We believe that together with program beneficiaries, 

students, and parents, it is the operational program 

participants who should be at the negotiated rulemaking 

table. Since it is impossible for all to participate, the 

secretary should recognize that those associations and 

consortiums that most directly represent the operational 

participants should be appointed. 

 Appointment of umbrella organizations or trade 

associations as direct negotiators would appear 

appropriate only when the umbrella organization 

represents constituencies too numerous to be separately 

seated, or who have no separate voice. Therefore, we 

encourage the Department to consider, once again, 

extending an invitation to the nation's guarantors. 
 Regarding the issues for negotiated rulemaking, we 

know that the Department has heard a variety of very 

important issues through these scheduled hearings which 

underscore the necessity of engaging in the negotiated 

rulemaking process. Great Lakes would also like to echo 

the testimony brought forth by our guarantor members of 

NASLA, one of which will be following me. Our NASLA 

colleagues will be covering a number of the items that 

also appear in our written testimony document, and so for 

the interest of brevity I'm only going to cover three of 

the mini-list that I will be submitting to you in 

writing. 

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 In keeping with our principles, Great Lakes 

encourages the Department to focus on changes to the 

regulations that enhance borrower benefits, preserve 

borrower choice, simplify student loan borrowing, and 

promote successful repayment. So the three issues I'm 

going to bring to you today in this hearing are: the 

first will be the issue regarding teacher loan 

forgiveness, and consortiums and cooperative agreements. 

 As a result of Great Lakes' recent efforts to 

promote teacher loan forgiveness program we have received 

a number of applicants that have indicated that they are 

employed through consortiums or cooperative arrangements 

-- or co-ops -- that allow teachers, particularly special 
education teachers, to teach at a number of schools. 

These types of arrangements help schools that do not have 

enough students to warrant employing a full time teacher 

in a certain curriculum. 

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 When asked if the teacher loan forgiveness program 

may be available to these teachers, the Department has 

indicated that they do not qualify since they are not 

employed by an individual school or a school district 

[recording blip] by the consortium or the co-op. That 

conclusion seems to be counter to the intent of the 

teacher loan forgiveness program and we believe it should 

be reevaluated. 

 In addition, it appears counter to the Department's 

policy on allowing a Title IV recipient to attend more 

than one institution through a consortium agreement 

between schools, including study abroad programs, and 

still qualify for Title IV aid. We believe that the same 

logic should apply once the loan goes into repayment and 

the borrower is working toward eligibility for teacher 

loan forgiveness. 

 The second issue we are hoping that the Department 

will add to the negotiated rulemaking agenda is with 

respect to establishing repayment terms after 

rehabilitation. Defaulted borrowers who request 

rehabilitation will provide to us as a guarantor 
documentation establishing that their reasonable and 

affordable payment does not meet the $50 dollar minimum, 

and this creates a problematic situation for us under the 

FFEL. Now such a payment will assist the borrower in 

regaining Title IV eligibility. This monthly payment 

amount is not sustainable after the loan is rehabilitated 

and sold to a lender as there is no flexibility to the 

lender to establish a monthly payment amount below the 

$50 dollar minimum or any amount of accrued interest, 

whichever is greater; we know this. 

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 In other cases, while the amount of the monthly 

payment during rehab may be above the $50 dollar minimum, 

or at least the amount of accrued interest, the required 

monthly payment amount may still increase dramatically 

after the purchase of the loan by the lender. While a 

variety of repayment plan choices are available to these 

rehabilitated borrowers, the regulations require the 

borrower to proactively request a repayment plan choice 

and is generally not offered that choice until after the 

standard repayment schedule is issued by the lender. 

 We contend that in many cases the borrower's post 

rehabilitation repayment plan choice is information that 

could be secured prior to the completion of the 

borrower's rehabilitation period. This information could 

then be relayed to the purchasing lender at the time when 
the loan is sold, allowing the lender to honor the 

borrower's choice immediately, as well as ensuring the 

repayment terms are appropriately aligned as possible 

with the monthly payment amounts required during the 

rehabilitation period. 

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 For borrowers under the $50 dollar minimum monthly 

payment requirement, or accrued interest, the borrower 

should be allowed to choose to have his or her FFEL loan 

consolidated under the direct loan program in order to 

obtain the income-contingent repayment immediately upon 

successful rehabilitation. Versus the current rules which 

require that the borrower apply for direct loan 

consolidation after the rehabilitation loan once again 

becomes delinquent. This is a problem. 

 And finally, we would like to make sure that we do 

address the military grace period and the new deferment 

rules. The heroes and the CCRAA have created an overlap 

in the deferment criteria applicable to borrowers serving 

in the military. Thus, we encourage the Department to 

provide clear regulatory guidelines that allow maximum 

benefit to borrowers. 

 Toward that end, we advocate that the Department add 

a regulatory language to define "demobilization" and 

define that as it is based upon the date that a borrower 

arrives back home from a tour of duty as stated in the 
borrower's military orders as we -- this is documentation 

we already have. This definition would allow a borrower 

to utilize this benefit without requiring additional 

documentation. In addition, we encourage the Department 

to allow the 13-month post active duty deferment to be 

consecutive and not concurrent with the 180-day 

transition period as provided for in the statute. 

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 Finally, we advocate that the Department provide 

this benefit to borrowers on a per occurrence basis. 

 In closing, I would like to restate that Great 

Lakes' mission is to make the dream of education a 

reality. We work with students, borrowers, schools, 

lenders, and our community organizations to change lives 

for the better through higher education. Toward that end, 

Great Lakes supports the comments endorsed by NASLA; our 

NASLA colleagues who will be testifying after me, later 

this afternoon; and those of our student groups and the 

associations that represent them. So thank you. 

 MR. BERGERON: Thank you, Jackie. Tammy Halligan. 

She's from Career College Association. 

 MS. HALLIGAN: Hi. I'm Tammy Halligan with Career 

College Association. I'm going to try not to read 

directly from this, but I didn't memorize it last night 

so you're going to get a lot of reading. 

 CCA is a voluntary membership organization of 
accredited private postsecondary schools, institutes, 

colleges, and universities. We have over 1,400 members 

that offer everything from certificate programs to degree 

programs associated with bachelors, post-baccalaureate 

degrees, and professional degrees. So we run the gamut. 

Our schools graduate approximately one-half of the 

technically trained workers who enter the U.S. workforce 

each year, and we also provide re-training for displaced 

workers. All of our members are licensed by the state I 

which they are located; accredited by a recognized 

regional or national accrediting body, some have both; 

and they are all approved by the U.S. Department of 

Education. 

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 We believe students and institutions would benefit 

if the Department re-visited the regulations surrounded 

preferred lender lists, particularly as they relate to 

limitations on lenders assisting schools to educate these 

students about lending and repayment options. Many CCA 

member institutions, and other schools outside of sector, 

are small. They do not have large financial aid staffs 

that can provide the optimum level of counseling at all 

stages of the loan process. 

 The lenders have the expertise and can provide the 

additional human resources to increase the counseling to 

students, and they have done so historically. The 
Department, Congress, and our schools are also guest on 

ensuring that these students have the best loan package 

available to them. Student loan default rates should 

continue to go down and prohibiting lenders from 

providing this in-person loan counseling prevents 

students from having direct access to these experts who 

can provide them with the best information about interest 

rate repayment options and debt management. 

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 Additionally, many of these small institutions may 

not be able to create a lender list with three lenders 

willing to make loans to their students due to the low 

volume of business they would receive from that 

institution. We've heard from a lot of our schools that 

have 30 students at a time enrolled in a program and only 

run the program twice a year. They have very small 

programs. They have very small loan volumes. They're very 

concerned about the fact that they're not going to have 

lenders who are going to be willing to provide these 

benefits to their students on a preferred lender list. 

 In these cases if the institution discloses the 

requirements and criteria used for selecting lenders to 

be placed on this preferred list, and only one or two 

lenders meet that criteria, such as providing the 

permitted borrower benefit, we believe these institutions 

should be provided a waiver for the number of lenders 
required on the list. They can apply to the secretary for 

other waivers. If they go through this process, they 

provide that information to the secretary, waivers could 

be granted on a case-by-case basis to institutions. 

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 We also have several concerns regarding the TEACH 

grants established in the CCRAA. I know you have heard 

all of these complaints before. Our colleagues from NASLA 

elaborated on them very nicely in Washington at the 

hearing there, so I won't go into it full time. But one 

of the concerns we have is the burden of tracking 

students after completing the courses study. Who is going 

to do this? Is it supposed to be the institutions, the 

Department, will be a shared responsibility between them? 

Like my colleague who spoke from San Diego, their 

students move around, our students do a lot of this 

through distance education. It's going to be hard to 

track them. 

 Also, if a recipient should change his or her major 

from teaching to another field and the grant would 

convert to loan, this could put that student over his or 

her loan limit. It's a very real scenario that such a 

student in this situation would be forced to leave school 

because without the traditional financial aid package of 

grants and loans, that he or she would have been eligible 

for before the grant to loan conversion, he or she will 
not be able to attend school. Students who do not 

complete their programs also tend to be those students 

who default on their loans. 

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 A student who is forced to drop out of school before 

earning their postsecondary credential, because of 

reaching their maximum loan limit, will be in a position 

of having a debt that simply cannot be paid. We urge the 

Department to consider these big picture factors when 

regulating this program and other areas of the HEA that 

it could affect. 

 We feel the Department must carefully consider the 

regulations to establish procedures to annual determine 

the borrower's eligibility for the income-contingent 

repayment program, including the verification of the 

borrower's income and amount of their loan. This valuable 

program needs to be regulated in a manner that will 

provide the most benefit to students with the least 

amount of burden. 

 Finally, we encourage the Department to add the 

financial responsibility regulation to the negotiated 

rulemaking agenda. There have been a number of changes to 

GAAP and new accounting policies that have had a 

significant impact on the current financial ratio 

analysis. The current regulations do not properly account 

for some of these changes. During the negotiated 
rulemaking sessions stemming from Fed Up legislation in 

2002, this topic was not discussed because of the already 

ambitious agenda. 

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 The Department has shown this past year that it is 

possible to successfully hold multiple negotiated 

rulemaking sessions at the same time. Addressing the 

financial responsibility regulations has been put off for 

quite some time and it's time for them to be fully 

discussed. I know that with the very short time frame we 

have for these negotiated rulemaking sessions it's most 

likely not going to be possible. We would very much 

appreciate it if it is. If not, I think the Department 

should fully consider adding it to the next round 

stemming from the HEA reauthorization. There's a lot of 

legislation that's going to change, a lot of the rules 

that really impact these financial regulations. 

 Thank you for the opportunity to discuss this. We 

hope to provide further assistance to you as the 

negotiated rulemaking sessions unfold. We feel that with 

the input of committee members on the negotiated 

rulemaking teams -- who are knowledgeable about their 

topics and represent a very definitive section of 

postsecondary education, enabling them to speak with 

authority on behalf of the constituency they represent -- 

that we can arrive at good regulations. 
 Thank you. And always, you know, you can call me 

with any questions. 

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 MR. BERGERON: Thank you, Tammy. I should have -- 

when I provided my comments before about TEACH grants I 

should have added one other observation. That is that we 

envision that the Department will be the entity that 

tracks these individuals who receive these awards and 

make sure that they are aware of their obligation to 

fulfill that service and do all of that kind of 

servicing, and putting it in quotes, of these grants. 

 MS. HALLIGAN: Very good to know. 

 MR. BERGERON: So that's our current thoughts with 

regard to that. 

 MS. HALLIGAN: If those thoughts became reality that 

would be wonderful. We'd appreciate it. Our schools would 

appreciate it. 

 MR. BERGERON: Thank you, Tammy. 

 MS. HALLIGAN: Thank you. 

 MR. BERGERON: Robert Hendricks, please. Robert is 

from the University of Arizona. 

 MR. HENDRICKS: Good morning. I'm Bob Hendricks and 

I'm the Associate Dean at College of Education, 

University of Arizona. And I, too, would like to applaud 

the legislation that has led to the authorization of the 

TEACH grant initiative. And we're truly hopeful that it 
will provide incentives for more students to consider the 

profession of teaching, that it will in fact increase the 

teacher candidate pipeline, and particularly in high-need 

content areas. 

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 There's a couple issues of practicality that I'd 

like to talk about from a perspective of working daily in 

the trenches of teacher education. And one concerns the 

language, and I would say a fairly ambiguous language, 

dealing with "interest in teaching." We're not quite sure 

what that means and we're not quite sure when that gets 

applied because we have a lot of students who enter our 

university, our college, as pre-ed interested students. 

Some of them become less interested as they progress 

through the program. 

 Our program at the University of Arizona is a twoyear program, which means that during those first two 

years, while there may be some association with interest 

in the profession of teaching, the real commitment 

doesn't become apparent until the second semester of the 

sophomore year. So does the interest begin when they 

enter the doors, or does it begin when they're poised to 

apply for the program? 

 We know there are many configurations; ours is only 

one of them. Some are four-year programs. There's the 

consideration of the community colleges, many of whom are 
offering associate degrees. In our case, a third of the 

students who come into our program are transfer students 

who come to us after their sophomore year. There are 

post-bac programs, there are fast track programs, there 

are mid-career programs, there are alternative 

certification programs, there is really a tremendous mix 

and it isn't one size fits all. So that whole area of 

interest I think is really something that you're going to 

have to wrap your hands around and decide how that's 

going to look. 

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 But secondly, beyond that, I think there's really a 

-- there has to be perhaps career guidelines as to what 

level of commitment exists. Now this is a level of 

commitment on the part of two parties. It's a level of 

commitment on the part of the student. It's also a level 

of commitment on the part of the institution because 

there are some folks who are interested in teaching that, 

quite frankly, we are not interested in. And so, you 

know, I don't know how I can be, you know, more direct 

about that. And so the reality is, if they're -- I wish 

my dean were here. 

 So, you know, we deal with that every day and so if 

that level of interest doesn't match our interest, it's 

going to lead to frustration, it's going to lead to 

unfulfilled promises, it could even lead to award of 
monies that at some point you're going to have to get 

back. And so I go back to that issue of, you know, what 

do we -- at what point do we warrant that interest in 

something that's validated? 

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 For example, you know, in the legislation it talks 

about GPA. GPA is very important. We don't minimize the 

value of that. However, there are other criteria that we 

also consider in the admission of a student into a 

program, and among them -- and this is another sacred 

topic --is the disposition of those individuals who are 

interested in becoming teachers. And particularly we see 

this in some of our mid-career changers whose vision of 

what it looks like in the classroom may have been 

something that has long passed them by. And so it's -- 

you know, it's an issue of interest matching the reality 

of, you know, accepting students into our program. And, 

trust me; we want to accept as many students in our 

program that can become highly qualified teachers. But 

we've got to match that interest with eligibility. 

 The third thing, and you've heard this from two 

other speakers, is the whole issue of data tracking. And 

I do appreciate the fact that you're going to do that. I 

would suggest that there's some other opportunities for 

data tracking in this whole experience. 

 For example, if you're going to invest and support 
these candidates, do we know that it's going to make any 

difference first of all in the number of additional 

candidates that we're introducing to the pipeline? Are we 

simply competing with those people out there already who 

want to become teachers? The goal ought to be to increase 

the number of candidates. 

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 Secondly, do we know -- or will we know if there's a 

correlation between the retention rates and the success 

rates of these teachers compared to those who come to us 

in other ways? Is there a different level of commitment? 

Is there a different level of motivation? We know that 

there are some programs that are very successful on a 

short-term basis because candidates view them as a social 

service experience, but they don't really see teaching as 

a lifelong commitment. I would hope that we could track 

some of that data to see if this really is making a 

difference. 

 The state infrastructure, and our institution 

infrastructure, for tracking this information is really -

- I wouldn't even say it's broken. I don't think it's 

even in operation. It's been very difficult. So I would 

encourage you not only to do that, but to work hand in 

hand with the state agencies because I think there's an 

added value of the benefit to the states if you're 

collecting this information, that it will be helpful to 
the states as far as them tracking as well, you know, 

what their teacher initiatives are producing. 

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 I thank you for your review and consideration of 

these comments. 

 MR. BERGERON: Thank you. Mary Mowdy from NCHELP. 

 MS. MOWDY: Good morning. I can't say that too much 

longer. My name is Mary Mowdy. I am the Executive 

Director of the Oklahoma Guarantee Student Loan Program, 

and I also currently serve as the Chairman of the board 

of directors of the National Council of Higher Education 

Loan Programs. We like to call ourselves NCHELP. 

 NCHELP is a non-profit association with a very 

diverse membership, guarantee agencies, secondary 

markets, lenders, loan servicers, collection agencies, 

schools, and other organizations involved in the 

administration of the Federal Family Education Loan 

Program. We have approximately 190 members and many of 

those are organization members. I represent NCHELP in my 

testimony today. 

 In its October 22nd federal register notice, the 

Department of Education requested suggestions for issues 

that should be considered for the negotiated rulemaking 

agenda. I am pleased to offer some comments and 

recommendations on six topics. 

 Item one is simply support for negotiated rulemaking 
NCHELP believes that negotiated rulemaking provides a 

valuable opportunity to engage stakeholders in the 

regulatory development process. We believe that active, 

in-person negotiation allows for real input and that the 

ultimate result is better rules. For these reasons we 

commend the Department for undertaking this negotiated 

rulemaking endeavor. 

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 The benefits of the process, however, are limited if 

real negotiation does not occur. We were disappointed 

that the negotiated rulemaking that preceded the 

publication of the loan regulations earlier this month 

was cut short, ending without consensus. We believe that 

a consensus rule could have emerged had the process been 

permitted to continue. We hope for a better outcome in 

the upcoming negotiation and encourage the Department to 

support the process. 

 Item two, composition of the negotiated rulemaking 

committee. Approximately 80 percent of federally 

sponsored education loans are made in the Federal Family 

Education Loan Program, the FFELP. NCHELP recommends that 

the negotiated rulemaking committee include 

representatives of each of the principal constituencies 

within the FFELP, specifically guarantee agencies, 

guarantee agency servicers, collection agencies, forprofit lenders, non-profit lenders, and loan servicers. 
NCHELP will be making specific nominations to the 

Department for negotiators from each of those groups. 

Also, we recommend that the school representatives at the 

negotiated rulemaking table include a representative 

group from those schools that participate in the FFELP. 

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 The negotiated rulemaking committee for the 

negotiation that was conducted earlier this year was 

unfairly weighted toward representative from schools that 

participate in the William D. Ford Federal Direct Loan 

Program, rather than the FFELP. Those schools that 

participate in the FFELP cannot be adequately represented 

on the committee if a majority of the negotiators 

representing educational institutions come from schools 

that participate in the direct loan program. 

 Item three has to do with preemption. The October 

22nd notice states that the Department expects to conduct 

negotiated rulemaking on other regulatory issues, 

including potential federal preemption of state laws that 

may conflict with the Department's regulations on 

improper inducements and on the use of preferred lender 

lists in the FFELP. NCHELP supports adding this to the 

agenda, as we believe there is a real need for federal 

preemption in these areas. The final regulations for the 

federal student loan programs, published by the 

Department on November 1st, 2007, contain comprehensive 
sets of rules governing both prohibited inducements and 

preferred lender arrangements. 

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 However, prior to November 1, and in the absence of 

federal rules, a number of states passed their own 

legislation pertaining to one or both of these subject 

areas. Others are considering similar legislation. While 

the Department's regulations and the various state laws 

deal with common issues, the way these issues are 

addressed is not uniform. 

 The federal student loan programs are national in 

scope. Participating educational institutions typically 

enroll students from across the country. Many student 

loan providers operate on a national or regional basis. 

Even those whose student loan program is localized 

regularly lend to residents who attend out of state 

schools. It is common for lender located in one state to 

make loans to students attending school in a different 

state. The student may be a resident of a third state, so 

what law applies in these cases? 

 The willingness of some states to enforce their laws 

against out of state educational institutions if any 

state resident attends the school, and against out of 

state student loan providers, underscores the dilemma 

faced by educational institutions and lenders alike. The 

Department's regulations are both tough and 
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 The various state laws deal with essentially the 

same issues, but with different wrinkles. The confusing 

pattern of requirements makes both compliance and 

enforcement difficult. Because of the need for uniformity 

and consistency, NCHELP strong believes the Department 

should, by regulation, preempt state laws in these areas. 

 Item four, income-based repayment. NCHELP has been a 

supporter of legislation to help those who are having 

difficulty meeting their student loan repayment 

obligations. While we believe the student loan program is 

of tremendous benefit to the vast majority of borrowers, 

we recognize that debt is a challenge and burden for 

some. For this reason we supported efforts to address 

this subject in the College Cost Reduction and Access Act 

of 2007. 

 The new income-based repayment option enacted in the 

CCRAA represents a significant step forward. However, the 

legislation was developed without specific input from the 

loan community on operational issues. We believe that 

operational issues embedded in the legislation can be 

worked out as a part of negotiated rulemaking and 

strongly endorse including this subject as part of the 

upcoming negotiation. 

 Item five, Parent PLUS loan option. The CCRAA 
directs the Department to auction off the rights to make 

Parent PLUS loans beginning July 1st, 2009. NCHELP 

strongly opposes student loan auctions within the FFELP. 

The foundation of the FFLEP is that borrowers have a 

choice of lender. This pro-consumer competition has 

driven down borrower costs and increased innovation and 

efficiencies within the program. Instead, under the CCRAA 

borrowers no longer will be able to choose their lender, 

but rather will be required to utilize a lender selected 

by the government, the lender with the winning auction 

bid. 

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 NCHELP recognizes, however, that between now and 

July 1st, 2010, the Department must plan and implement an 

auction process for Parent PLUS loans in FFELP. FFELP 

participants, educational institutions participating in 

the FFELP, and representatives of Parent PLUS borrowers 

all should be part of this process. To the extent 

implementing regulations are contemplated, they should be 

developed through negotiated rulemaking. 

 And the final item has to do with reauthorization. 

The October 22nd notice states that if legislation to 

reauthorize the Higher Education Act is completed prior 

to the first negotiation session, the Department may also 

include on the negotiation agenda additional changes to 

the regulations. 
 While it is possible, if not likely, that HEA 

reauthorization will not be completed prior to a January 

negotiating session, we believe in any case that final 

legislation will be enacted soon thereafter. NCHELP 

recommends that the Department consider expanding the 

negotiating agenda even after the first session, if 

legislation is enacted. These negotiations are major 

undertakings by the negotiators and by the organizations 

they represent. It would be unfortunate if the Department 

failed to take advantage of the negotiation in progress 

to address additional regulatory issues stemming from the 

reauthorization. 

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 Thank you for the opportunity to provide these 

recommendations. 

 MR. BERGERON: Thank you, Mary. 

 (End of Tape 1, Side A) 

 (Tape-recorded hearing 11-29-07; Tape 1, Side B) 

 MR. BERGERON: Ms. Diaz from the Center for 

Employment Training? 

 MS. DIAZ: Thank you. 

 MR. BERGERON: You're welcome. You said you wanted - 
1 MS. DIAZ: I wasn't expected to -- 

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 MR. BERGERON: I know. You were -- had asked to 

speak this morning if we had time, and we have time so I 

wanted to move you up in the agenda. 

 MS. DIAZ: Thank you. I appreciate that, the 

opportunity also, and I did prepare myself, as well as 

everybody else because I am taking the opportunity to be 

here and get involved in this situation. 

 I have three issues that I would like to discuss, or 

to bring to your attention, and one of them has to do 

with the new regulations for the FFELP program. I'm the 

financial aid director for the Center for Employment 

Training. We have 20 schools throughout the country and 

we are, as a matter of fact, a direct lending 

institution, yet I have been blessed with the opportunity 

to work with the state guaranty agency by having -- just 

because the Department could not support the training 

needs that we would like them to have, and especially in 

the area of default prevention. 

 So I receive a lot of support from them in training 

in default prevention initiatives. We have been 

establishing different programs with my different schools 

and working together we have been able to review one 

school in particular that we have been working with for 

the past two years with a new project. In collaboration 
with the guaranty agency we're able to reduce the default 

rate from 14 percent to five percent. So I'm really happy 

about that, but at the same time very concerned with the 

fact that they will not be able to provide the support 

that they have been providing to us right now. 

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 And I'm wondering if the Department of Education is 

going to be able to provide the same resources like 

institutions like ours who, to begin with, we are nonprofit, but I know there are a lot of small institutions 

out there who do not have the kind of resources, nor 

would have the staff necessary to provide all this type 

of activities. So I encourage the Department to really 

look at that and take in consideration the small 

institutions like us who do not have enough resources. 

 My second concern comes as a parent. I do have a 

teenage daughter who started school last year just in 

time when the interest rate went up to nine percent. And 

here we are competing with credit cards giving us a lower 

interest rate. So that was very discouraging for me as 

financial aid director having to know that I'm getting a 

better chance of paying for my daughter's education 

through a credit card because the interest rate is lower 

than what the class loan can offer us. Yet I don't see 

any conversation right now in terms of trying to lower 

the interest rate of class loans. 
 The -- not taking in consideration the fact that as 

financial aid officers or directors we have to promote 

diversity between lenders, yet as a parent I have to go 

with what the government is going to choose for me on my 

behalf and have no choices, basically, providing better 

education for my daughter. So I’m very concerned as a 

parent with the class loan interest to be in with -- in 

the limitations of the choices that we're going to have. 

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 My third concern is as a Hispanic and immigrant in 

this country. I attended the Hispanic survey initiatives 

up in Portland and I have been to that for several years, 

yet I was very surprised this year to find out that the 

focus of that group is on supporting the administration 

of the schools, not in expanding the services to the 

community. I would like to encourage the Department to 

look at those resources and be sure that the money is 

invested and really provide that information to the 

community in serving those students who really need to be 

aware of the opportunities that we have through Title IV 

funds. 

 Thank you for the opportunity. 

 MR. BERGERON: Thank you. I'm going to step out for 

a minute and see if there's anyone else signed up to 

speak this morning. If there is somebody that's in the 

room that is, you can come to the microphone, but I'll go 
check with my staff and see if they have any new folks 

signed up for the morning. 

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 That did conclude our -- the list of folks who had 

signed up to speak this morning, so we will adjourn until 

1:00 o'clock. Then we will have our next speaker with us. 

So enjoy your lunch. See you all at 1:00 o'clock. 

 (End of Tape 1, Side B) 

 (Tape-recorded hearing 11-29-07; Tape 2, Side A) 

 MR. BERGERON: Good afternoon. 

 MS. KOWALSKI: Good afternoon. My name is Laura 

Kowalski. I'm the Assistant Manager of Policy and 

Regulatory Affairs with Texas Guaranteed Student Loan 

Corporation. TG is a public, non-profit organization 

serving as a guarantor in the Federal Family Education 

Loan Program. I'm speaking today on behalf of TG and also 

in support of the testimony offered by the National 

Association of Student Loan Administrators, NASLA, at the 

Department of Education's regional hearing in Washington, 

D.C. on November 16th; and also the testimony that was 

offered this morning by my NASLA colleague from Great 

Lakes. 
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changes to student loan borrowing, and the fact that the 

FFELP is by far the largest source of federal student 

aid, TG believes it is important that guarantors 

participate as both a lead and an alternate negotiator in 

negotiated rulemaking. A core focus of guarantors is to 

maximize the success of borrowers in repaying their 

loans. As an administrator of the FFELP, a guarantor 

works closely with the Department, students and families, 

schools, lenders, and loan servicers throughout the life 

of the loan. Inclusion of a guarantor voice in the 

negotiations will promote broad-based, well-informed 

rules. 

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 In the Federal Register notice dated October 27th 

the Department stated that the number and organization of 

the negotiating committees will be based on the comments 

receive as a result of that notice. In order to establish 

a manageable committee size and an agenda that reasonably 

can be addressed in only three negotiation sessions, TG 

strongly recommends that the Department establish two 

committees to prepare proposed regulations, one committee 

for loan related issues and a second committee for nonloan related issues. The expertise required of 

negotiators to affectively and efficiently analyze and 

develop proposed regulations on loan issues is very 
different from the expertise needed of negotiators for 

non-loan issues. 

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 TG feels that there are several overarching 

principles on which the Department should concentrate 

during the negotiated rulemaking process, focusing 

specifically on changes to the regulations that enhance 

borrower benefits, simplify student loan borrowing, and 

promote successful loan repayment. In keeping with these 

principles, TG proposes a total of seven issues for 

negotiation for both the FFELP and the Live Rock loan 

program, and all of these are included in our written 

testimony. In my oral testimony this morning I'm only 

going to highlight three of those, so you don't have to 

listen to all seven. 

 Okay. The first topic is federal preemption of state 

laws pertaining to prohibited inducements and preferred 

lender lists. We support the Department's interpretation 

of its authority to exclusively regulate prohibited 

inducements and preferred lender lists and believe that 

the Department should explicitly state in the regulations 

that these are areas reserved solely to federal 

jurisdiction in order to allow for a consistent 

administration of the Title IV student loan programs 

throughout the nation. 

 Currently several states either have passed or are 
contemplating laws which regulate the conduct of Title IV 

institutions acting within the state or in interstate 

commerce with state residents. In order to facilitate the 

accomplishment and execution of the full purposes and 

objectives of the FFELP administration, the Congress and 

the Department have already created a detailed regulatory 

framework for these areas which provides specific 

guidance to every entity participating in the program as 

to what activities are allowed and what obligations are 

incurred. State regulation in this area in addition to 

the federal laws will confuse or even undermine the 

FFELP's carefully crafted administrative framework. 

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 We recognize that wholesale preemption of state 

laws, regulations, and rules is outside of the purview of 

this negotiated rulemaking process. Therefore, the new 

regulation should state that the regulation of prohibited 

inducements and preferred lender lists in the FFELP are 

areas of regulation exclusively reserved to the federal 

government and state laws; regulations and rules in this 

area are completely preempted. And this way, all FFELP 

participants will share a common source of guidance, thus 

avoiding the very sort of patchwork regulatory scheme 

which allows for problems and uneven application of the 

federal law to arise. 

 The second topic I'd like to talk about is the pilot 
PLUS auction program. This program raises several issues 

that will need to be addressed in regulatory language. As 

others have already testified, almost all of these issues 

concern borrower choice, and just a few examples include: 

situation where borrower's dependants transfer from a 

school in one state to a school in a different state; 

consolidation rights, where the borrower has loans with 

multiple lenders due to multiple dependants attending 

schools in different states; and whether a borrower would 

be able to borrow from a lender other than one of the two 

winning lenders for a particular state, thus preserving 

the potential serialization benefits of a single PLUS 

master promissory note that we've had for the last 

several years. 

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 Finally, TG is very concerned about the guarantor's 

role in the pilot auction process. The law does not 

address the guarantee of the Parent PLUS loans made under 

this program. The industry would like for the Department 

to clarify in regulations the guarantor's role. 

 And the third topic I'd like to highlight is having 

to do with economic hardship. We would like to advocate 

for the continuation of the debt burden test that the 

secretary retained in regulations, even though the test 

was removed from the Higher Education Act in the CCRAA. 

Indications from the Department are that this debt burden 
test will remain in regulations for the time being, and 

we strongly support the test being retained permanently. 

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 In addition, we encourage the Department to consider 

revising other areas in the regulation. For example, the 

mandatory forbearance provision, where such an income 

measurement or guideline could be useful and benefit 

borrowers. The application of the new debt burden test 

could prove beneficial to a borrower who has exhausted 

all of his economic hardship deferment eligibility but 

still needs to postpone payments and obtain forbearance. 

Currently the mandatory forbearance provision does not 

incorporate this new debt burden test or the borrower's 

actual family size. 

 Those are the only three I'm going to talk about 

this morning, so in conclusion I just want to say TG 

appreciates the Department's consideration of this 

testimony and offers itself as a resource to the 

Department on these and other issues that the Department 

may consider in the negotiated rulemaking process. Thank 

you for your time and consideration. 

 MR. BERGERON: Thank you. The reason we have 

indicated that we're retaining at least for this time is 

that we wanted to make sure that whatever we do with 

regard to the income-based repayment option, that was 

also provided for in the CCRAA, is somehow -- 
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 MR. BERGERON: -- consistent or coherent with that. 

So that's the reason we phrased it the way we have at 

this point is just to recognize that we want to make sure 

we look at that issue when we're negotiating. So thank 

you. 

 MS. KOWALSKI: You're welcome. 

 MR. BERGERON: Dan Madzelan is joining the panel up 

here. Dan is the director of Forecasting and Policy 

Analysis in the Office of Postsecondary Education. I was 

wondering if we have Phyllis Fernlund in the room? 

Phyllis, come and talk with us. Phyllis is with 

California State University. 

 MS. FERNLUND: Thank you. 

 MR. BERGERON: Thank you. 

 MS. FERNLUND: I appreciate this opportunity to 

provide suggestions for the development of the 

regulations for the TEACH grants. I'm Phyllis Fernlund, 

Dean of the College of Communication and Education at 

California State University, Chico, located in Northern 

California and serving a region about the size of Ohio. 

 The School of Education at Chico State graduates 

approximately 450 new teachers every year and we are 

collaborating with our College of Natural Sciences on 

several projects to increase the number of teachers in 
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 Today I'm speaking on behalf of the California State 

University, the CSU. Our system of 24 campuses prepares 

over half of the state's teachers in California and 10 

percent of the nation's teachers. Teacher preparation is 

a central mission of the CSU and we are strongly 

committed to partnerships with the P-12 schools to 

educate highly effective teachers. 

 The CSU system is excited about the TEACH grant 

program and we believe this will be a powerful incentive 

tool in our efforts to recruit and support teachers. As 

with every state, California is facing teacher shortages 

in the critical areas. The TEACH grants represent a 

significant investment on the part of the federal 

government in addressing these shortages. And as teacher 

preparation institutions, we look forward to working with 

the Department in the development and implementation of 

the program. 

 I have five issues I'd like to raise. Several of 

them have been raised by Dean Paula Cordero this morning, 

so I will briefly comment on those that are repetitions. 

 First of all, clarifying who is eligible to apply 

for the TEACH grant. You probably know that most of the 

teacher candidates in California are post-baccalaureate 

students. They come from a variety of majors in their 
teacher preparation program and it's important that our 

institutions can accurately advise our students as to 

their eligibility for the TEACH grants. So let me give 

you several examples of areas where we would have some 

questions. 

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 A student who is a senior takes several prerequisite 

courses before graduation and before formal admission to 

the teacher credential program. These courses -- these 

prerequisite courses are required by the program in the 

state, but will this undergraduate senior be covered by 

the grant for both their undergraduate work and their 

graduate studies -- their post-baccalaureate studies? 

 Second case: is a credentialed special education 

teacher who wants to complete advanced work with a 

special education masters degree eligible for the TEACH 

grant for the two years of graduate study? 

 The statute as written appears to exclude a category 

of potential teachers. These are career changers, not 

retired teachers, and they do not yet have content 

expertise in their teaching shortage area. They want to 

go back to school to get their masters degree and become 

certified in a shortage area. Are these teachers 

eligible? 

 The CSU system recommends that the Department of 

Education's regulations clarify these issues regarding 
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 A second area is in the extensive clinical 

experience required. Clinical experience is crucial in 

teacher preparation. Students can have excellent subject 

matter expertise and knowledge of child development and 

pedagogy, but clinical experiences provide opportunities 

to apply that knowledge in elementary and secondary 

classrooms. 

 At CSU Chico we require over 700 hours of supervised 

field experience for our candidates in special education 

and in elementary education. Students participate in 

clinical experiences for 30 weeks in several different 

types of classrooms and school populations. We believe 

this experience is critical as these new teachers will 

field jobs in a wide variety of schools and must be 

prepared to provide all children the opportunity to 

learn. The regulations need to include a standard of at 

least 450 hours of supervised clinical experience, as 

recommended by the American Association of Colleges of 

Teacher Education. 

 A third area Dean Cordero has already spoken to and 

that is the number of TEACH grants available. And I 

believe you have answered that question earlier this 

morning. 

 A fourth area, clarifying the payee of the TEACH 
grant program and the timing of the distribution of 

grants. We need timely confirmation of tuition support 

prior to the beginning of fall semesters. We recommend 

the institutions be able to apply for additional funds 

throughout the year a students, particularly our nontraditional students, tend to enter our institutions 

throughout the year. 

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 And the fifth area, clarifying the reporting process 

for TEACH grantees. The state of California has no data 

system for tracking the teacher's employment over time 

and the CSU recommends that the Department of Education 

assume responsibility for receiving the evidence required 

of an applicant's employment at the end of each service 

year. 

 Finally, I'd like to urge the Department to carry 

out an extensive marketing campaign to let candidates and 

potential candidates know about the TEACH grants. As an 

AACTE board member, I know that AACTE will work closely 

with its members to publicize this wonderful opportunity. 

The CSU system is ready and willing to partner in this 

effort and we look forward to working with you to ensure 

that the TEACH grant program is a successful one. 

 Thank for the opportunity to present these comments. 

 MR. BERGERON: Thank you. Lauren Asher from the 

Institute for College Access and Success. You're welcome. 
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 MS. ASHER: Since you've already said who I am I 

won't repeat it. Thank you very much for this 

opportunity. 

 My comments are focused really on the provisions 

that are directly concerned with student loan repayment 

and forgiveness, though there are many other important 

provisions in the bill. And I'm pleased to submit this 

testimony on behalf of America's past, present, and 

future student borrowers. 

 The new income-based repayment program is in fact 

modeled on a proposal that was developed by the Project 

on Student Debt with students' parents, lenders, and the 

higher education industry and community. And its purpose 

is to make sure that loan payments are fair and 

manageable. Comments on the IBR program focus on making 

sure that it is in fact as accessible and helpful to 

those who it's intended to help as possible. 

 I'll start with the maximum repayment period. The 

secretary has the authority to set the maximum repayment 

period for IBR at anywhere up to 25 years. We recommend 

that she set the maximum at 20 years. A 20 year rule 

would reduce the risk that loan payments would 

permanently displace critical savings for retirement, 

children's education, and other costs that families need 
to meet in order to function. Also, after 25 years of 

qualifying payments, any remaining balance is likely to 

be only or mostly interest. They would have paid off 

their principal probably more than one time over. 

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 In addition, and regardless of the length of the 

qualifying period, we believe that payment should be able 

to accrue throughout the borrower's life time. 

 As for qualifying payments, the statute makes clear 

that all of the payments in this list I'm about to read 

are valid, in combination of any kind, whether 

consecutive or not, and whether or not they occurred 

before the law's enactment: payments made while in IBR; 

payments made while in income-contingent repayment, ICR; 

period of economic hardship deferment; payments under a 

standard 10 year repayment plan; and, regardless of the 

repayment plan, payments that are at least equal to or 

exceed what they would have been under the standard 

repayment plan. 

 We believe the rules must be very clear about the 

payments and period that qualify towards the maximum 

repayment period and we support rules that make sure that 

borrowers who act in good faith are eligible for the 

benefit that IBR is supposed to provide. To that end we 

suggest that qualifying payments also include payments 

made under any other payment plan that equal or exceed 
what the borrower's payment would have been under IBR or 

ICR, whichever would have been lower. That would include 

payments of $0 if those would been the payments required 

under IBR or ICR. And we also think that that same rule 

should apply to payments made while the borrower is in 

forbearance, rehabilitation, or any other repayment 

status. 

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 Interest coverage. For subsidized Stafford loans the 

IBR statute is clear that the government pays the 

interest for up to three years. The rule should clarify 

that these three years could occur any point and not just 

simply during the first three years of repayment. 

 We also believe that there needs to be a simple 

process for income confirmation that needs to be as easy 

for borrowers as possible. We suggest that it be no more 

complex and require no more information than it takes to 

currently complete the IRS form 4506-T, which is how you 

request to have your IRS tax transcript sent to a third 

party, which would include the Department of Education. 

And I have a whole report about how that's okay, but it 

could certainly be worked out that the amount of data to 

be refined to just give you what you need. Right now the 

ICR program uses a very simple form even shorter than the 

4506-T to get the necessary income data to calculate 

payments. That form could potentially be extended to IBR 
and an improvement would be to allow the applicant to use 

an electronic signature and not just a hard signature to 

that end. 

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 It could also help reducing processing, storage, and 

security burdens for the Department because then you 

wouldn't be getting inundated with lots of paper and will 

be getting it in a simple form in an electronic stream 

from the IRS. 

 Alternative documentation for changed circumstances 

also needs to be an option for people whose tax data may 

not reflect their current situation, especially if it's 

taken a turn for the worse. There needs to be a way for 

them to document changed employment, family situations, 

and other factors that affect their income and required 

payment level. 

 I'm going to now address some issues around 

consistency between IBR and ICR. They are two programs 

with, in some ways, very similar goals but somewhat 

different operations and also different statutory 

requirements. The secretary has a great deal of 

flexibility in how ICR operates and certain areas of 

flexibility for IBR. 

 On the maximum repayment period, we recommend that 

it be the same as we recommend for IBR, 20 years rather 

than 25 for the same reasons. Rights for borrowers in 
default should be the same under both programs. Currently 

borrowers can exit default by consolidating their loans 

into direct loans and then entering ICR to repay the 

consolidated loan. This is a critical lifeline for 

borrowers who would otherwise find it impossible to ever 

rehabilitate their loan. We think they should have the 

same rights upon entered IBR regardless of whether they 

consolidated their loans in direct or in FFEL. 

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 The minimum payment right now in ICR, if it is more 

than $0 but less than $5 dollars it's still $5 dollars. 

We think that to reduce unnecessary paperwork for both 

borrowers and the Department it should be set at $0 for 

both programs so that anything between $0 and $4.99 

defaults to $0, rather than defaulting up to $5. 

 On interest capitalization, for unsubsidized 

Stafford loans and subsidized Stafford loans after 

borrowers have exhausted their three years of interest 

coverage, as I've described, the IBR statute clearly says 

that interest is charged but only capitalizes if and when 

a borrower exits IBR. That means that even if their 

income increases and they remain in IBR, their payments 

do not exceed what the standard repayment would have been 

for their original amount, not the capitalized amount. 

 The current ICR rules allow capitalization until the 

added interest equals 10 percent of the original 
principal, and after that it's treated as not 

capitalizing until they exit. We think that they ought to 

be made the same so that ICR conforms to IBR and that 10 

percent goes away. 

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 On income percentage factors, ICR has a payment 

adjustment factor based on borrower's income level and it 

had the benefit of reducing the maximum required payment 

for low income borrowers with relatively low debt who 

might otherwise end up with payments that would be 

burdensome and create the kind of hardship that the 

program is designed to help them avoid. We think that 

they would be maintained and added to IBR, however the 

ICR payment adjustment factor also increases the maximum 

payment for borrowers with high incomes, which can create 

an incentive for them to switch back and forth between 

IBR and ICR, which we think would be administratively 

unpleasant for the Department and divert taxpayer 

resources from other important purposes. It would make 

sense to have a payment adjustment factor of no greater 

than one in either program. 

 On protected income, the intent is to keep loan 

payments from causing undo hardship. The level of 

protected income in IBR is mandated at 150 percent of the 

poverty level for the borrower's family size and 85 

percent of income above that baseline. We believe that 
ICR should conform to that standard as opposed to the 

lower one at 100 percent poverty and 80 percent of income 

above that level. 

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 Loan forgiveness for public service employees I have 

a few comments on. The program is intended to encourage 

and reward public service and it needs to be clearly and 

easily accessible to the people who serve their fellow 

citizens, country, and community. Qualifying jobs are 

clearly defined in the statute that full time employees 

in government, military service, and 501(c)3 non-profits 

are covered. It does not specify what their jobs need to 

be and our understanding is that it should be any job, 

especially since often the lower level jobs are the worst 

paying and most in need of this kind of relief. 

 The rules should confirm that all employees in these 

sectors are eligible, regardless of their specific job. 

It should explain the circumstances under which borrowers 

in the other professions named in the statute qualify if 

they fall outside of those three sectors, government, 

military, (c)3 non-profits. And it should rely on the 

employer's definition of full time unless that exceeds 40 

hours per week. 

 For confirming qualifying employment we think 

borrowers should be able to confirm their qualifying 

employment on a yearly basis. That would help avoid very 
difficult paperwork at both ends if, after they've 

completed their 10 qualifying years -- perhaps in 10 

years, perhaps in 20 -- they have to go back and find 

accurate and valid documentation for that entire period 

of time. We would urge the Department to set up a userfriendly system for year-by-year employment confirmation 

for people who are participating in the program. 

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 As for its relationship to other loan forgiveness 

programs, some of the people who are going to fall under 

the public service loan forgiveness program may qualify 

for other kinds of loan forgiveness before they reach 

that 10 year point under other federal and private 

programs, which vary greatly in the number of years of 

service they require and the specific types of job you're 

supposed to be performing and how much loan they forgive 

-- which types of loans or what amount. We think that 

people who receive partial loan forgiveness through other 

programs before they qualify for public service loan 

forgiveness should still be able to get the remainder 

forgiven once they reach the 10 year qualifying time 

period for public service loans. 

 There's no minimum qualifying period specified in 

the law. If the statute is clear that the 10 years of 

qualifying employment don't have to be consecutive, we 

think the minimum should be set at two months, or eight 
weeks, that could add up to a year, that could add up to 

10 years. 

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 Again, to make sure that these programs are actually 

accessible to the people who need to use them and 

qualify, there needs to be some investment in awareness, 

and the responsibility lies both on the part of lenders 

in the lending industry and the Department. The 

Department should hold lenders accountable for informing 

each borrower about all of their options, especially if 

their financial circumstances change over time. And 

interested borrowers must also be able to get accurate 

and up-to-date information about IBR and public service 

loans from the Department before regulations are 

finalized, based on whatever information is available and 

a way to know when more information will be available. 

 So on the due diligence front, we recommend that 

lenders, servicers, and guarantors should have a clear 

and enforceable responsibility for helping borrowers 

identify the best repayment plan for their circumstances, 

as well as informing borrowers that they can change plans 

if their circumstances change. If lenders fail to do so, 

they should lose their guarantee. And any borrowers who 

receive a real runaround from lenders should be able to 

consolidate or reconsolidate into a direct loan where all 

options are available. 
 To prevent defaults the due diligence regulations 

should be amended to require lenders, when a borrower is 

first delinquent on a loan, to notify the borrower of the 

availability of IBR, as well as the ability to 

consolidate into ICR through direct loans. The Department 

should also require lenders, servicers, and guarantors to 

provide information to all borrowers about available loan 

forgiveness programs. 

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 On the Department side we think that there ought to 

be an information registry set up for people who are 

asking now, as they are of us and I suspect of you, about 

IBR and the public service loan programs so that they can 

say, "I want to know more." And they can get a notice, 

whether through an RSS feed or something that says, 

"Okay, we now have more information." This is especially 

important for public service loans because the time from 

when your work may qualify began when the law was 

enacted, so some people may already be starting to 

accumulate those 10 years or not know what they need to 

do to make sure that their time period is going to 

qualify. The Department should create a webpage with the 

most current information about these programs and conduct 

trainings about the new programs for 800 number staff and 

other employees who have direct contact with borrowers 

and students. 
 The Department should also notify eligible employers 

whose employees are likely to qualify for public service 

loan forgiveness and provide them with some information 

they can give to their employees about it. 

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 On TEACH grants, while we understand that the 

intention is to help aspiring teachers enter and stay in 

the profession, we have serious concerns about the design 

of the program and believe it would be best if it were 

not implemented. Some aspiring teachers may ultimately 

benefit, but many more will end up with higher loan 

and/or interest debt because they won't meet all the 

criteria that you have to meet to get the forgiveness, 

and they'll be worse off than if the program hadn't 

existed at all. 

 The label is false and misleading. They are not 

grants, they are loans. They are unsubsidized Stafford 

loans and they're only forgiven after a specific amount 

of time and specific types of schools teaching specific 

type of subjects, which all depend on external factors 

that students can't control, including whether they turn 

out to be good teachers or not, but also whether jobs are 

available at the times they would need to have them. 

 If a student has any financial need and isn't 

absolutely sure that they're going to succeed in meeting 

all of these criteria, including being a good teacher, 
they'd be better off with a subsidized Stafford loan. If 

they take the unsubsidized Stafford TEACH loan and don't 

meet all the criteria for forgiveness, they will owe 

nearly $3000 dollars more because of capitalized inschool interest and then also be subject to higher 

interest rates in repayment because the new interest rate 

only applies to subsidized Stafford loans. 

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 In addition, these grants -- or so-called grants -- 

could easily displace real grant aid in schools financial 

aid packages if treated as grants by colleges. You could 

end up with people having the average amount of debt for 

undergraduate, which is $20,000, plus up to $16,000 in 

additional loans which look like grants but aren't, and 

then having to pay all of that off; whereas they might 

have qualified for other grants from the school if the 

TEACH grants were treated as loans in a package. Those 

who do get their TEACH loans forgiven may be no better 

off because they might have qualified for grants anyway. 

 If the program is implemented the regulations should 

require that all participating colleges and universities 

treat and label the awards as loans in financial aid 

office, provide all of the counseling information 

required for other borrowers of federal loans, and inform 

potential recipients of the estimated proportion of 

students in the program who are actually predicted to 
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 A couple of other issues. Loan forgiveness should 

not create new hardships for students and borrowers, 

particularly IBR and ICR which are designed to help avoid 

extreme hardship. We know that this is not in the purview 

of the regulatory process at this time, but those two 

programs, when the loans are forgiven that amount is 

taxable to the borrower -- or can be made taxable to the 

borrower -- which if they haven't been able to pay off 

all their loans in 20 or 25 years, odds are they're going 

to be seriously burdened by that tax. So we just 

encourage the Department to work with the IRS to ensure 

that the amounts forgiven under ICR and IBR are not 

considered for tax purposes. It appears that the public 

service loan forgiveness program would not be taxable 

because it's under the IRS code a type of forgiveness 

tied to a type of job which means it's not taxes. We have 

more details on that if you want. 

 On the more technical side, fixing the medical 

review process for disability discharge requests. Right 

now, doctors are often given unrealistic time tables to 

respond when the Department seeks additional information 

to determine whether someone is sufficiently disabled to 

qualify. Borrowers are not notified if the doctor fails 

to provide follow up information in the allotted time. 
They only find out when they receive a denial based on 

medical review failure, which is the doctor's failure to 

respond. And doctors who fill out the forms in good faith 

are not alerted to the likelihood that they'll probably 

have to submit more information or given a chance to 

submit it at the time that they get the request. 

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 To ensure the process gives disabled borrowers 

meaningful access to important relief, doctors should be 

given at least 30 days to respond to follow up request 

for information. Borrowers should be notified prior to 

denial of a discharge request if a doctor fails to reply 

in the time allotted and given at least 30 days to 

contact their doctor and follow up. And doctors should be 

given a way to provide additional information at the 

initial time of contact. 

 Finally, financial hardship claims in debt 

collections and offsets. All student loan borrowers 

should have the same rights to raise hardship claims when 

facing collection and their claims should be judged by 

fair and consistent standards. Currently the right to 

request a reduction in collection due to hardship or to 

raise hardship as a defense for collection action can be 

evaluated different depending on the type of collection 

action, or may not be recognized at all. 

 Currently wage garnishment through the Debt 
Collection Improvement Act specifically states, "We 

consider objections to the rate or amount of withholding 

only if the objection rests on a claim that withholding a 

proposed rate or amount would cause financial hardship to 

you and your dependants." This same language should be 

added to the guarantee agency wage garnishment hearing 

provisions and to offset provisions. 

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 Thank you very much for this opportunity and please 

call if you have any questions. 

 MR. BERGERON: Thank you. Luke? Who are you speaking 

-- yes. Who are you speaking for first? 

 MR. SWARTHOUT: U.S. PIRG. And then [inaudible]. 

Hello and thank you. My name is Luke Swarthout. I'm the 

higher education advocate for the U.S. Public Interest 

Research Group. U.S. PIRG is a national network of statebased non-partisan, non-profit organizations. We have 

chapters on about 100 campuses around the country and 

organizations in 30 states, and for the last 15 years 

have worked at the federal level representing students on 

issues of higher education access and affordability. 

 I'm going to first speak on behalf of PIRG, but then 

I've also been asked to speak on behalf of Deanne Loonin 

from the National Consumer Law Center. And many of our 

comments are going to be the same, so I'll actually 

probably associate here with a bunch of comments on ICR, 
IBR, TEACH, and public loan forgiveness; and then she 

wanted me to -- wants to put a couple of other issues on 

the table for the negotiating sessions. 

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 And then also because I have a cold and Lauren Asher 

did a very comprehensive job on going through a number of 

the issues, I may walk through sort of the key 

principles, some of the key issues that we see for the 

critical programs and lead you to the written testimony 

for sort of further reference. 

 First off, just want to express our thanks and 

gratitude to the Department for moving so expeditiously 

to rulemaking on law that we see as quite important. It 

has been the intent of law makers on both sides of the 

aisle in crafting the College Cost Reduction and Access 

Act to help address the challenges students pay with debt 

burdens and loan repayments, and so working to quickly 

implement rules so that students can know the changes 

that are coming and prepare accordingly as, we think, 

consistent with their interest and the interest of 

Congress, and so are very excited about that. 

 Would also note that we hope throughout the process 

the Department looks to regulate these rules in the 

interest of students. I think that's overwhelmingly been 

the intent of Congress and I think should be the intent 

of the Department as we move through. 
 I'd like to highlight three main issues. The first 

is income-based repayment, the second is the TEACH 

program, and the third is public service loan 

forgiveness. 

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 Income-based repayment will provide borrowers of 

both the direct loan program and FFEL with meaningful 

flexible loan repayment options. We encourage the close -

- the Department to focus closely on the implementation 

of the IBR program to -- and also where possible to make 

it consistent with the current ICR program available in 

the direct loan program. Providing a consistent set of 

rules across these two programs will simplify the process 

for borrowers attempting to choose an optimum repayment 

plan. 

 Major issues in income-based repayment include 

ensuring access to IBR, mandating that servicers, 

lenders, and guarantors inform students about their 

opportunities; ensuring that students in FFEL have access 

to IBR consistent with what they currently have in ICR; 

and then also that borrowers who wind up defaulting on 

their loans, unfortunately, have access to enter IBR once 

again. 

 I have made notes about making sure that we're 

clarifying qualifying payments so that there's clear -- 

that periods in IBR, ICR, economic hardship, and standard 
repayment all count towards IBR repayment clock and that 

we count previous ICR payments towards IBR in the overall 

calculation of forgiveness. Just as Lauren spoke before, 

making sure that there's an easy way to confirm income 

through the IRS will greatly aid students in easily 

qualifying for IBR. And finally, we encourage the 

Department to shorten the time of repayment in incomebased repayment and income-contingent repayment to 20 

years. It's on the discretion of the secretary to shorten 

this length from the 25 year window that it currently 

exists at. Most borrowers will repay their loans short of 

the 25 year timeline and this will provide serious 

assistance to those students for whom the investment in 

higher education winds up not yielding greater economic 

opportunity. 

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 We've a number of recommendations and we encourage 

the Department to look at conforming IBR and ICR around 

issues of interest, coverage, and capitalization, 

protected income, minimum payments, and income percentage 

factors, and I'll leave you my written comments for more 

details. 

 Second, I'd just like to briefly touch on the TEACH 

program, which I know has received a lot -- duly received 

a lot of attention in this and previous hearings, and I 

know is a top priority for the Department. The TEACH 
program has the opportunity to provide some students with 

financial assistance on their path to becoming teachers, 

however, the program may also unexpectedly saddle 

students with serious debt burdens. 

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 We recommend the Department carefully implement 

rules to ensure that students are aware of the conditions 

of the TEACH program and the consequences for failing to 

meet them. Notably, we would encourage the Department to 

treat TEACH awards as loans for purposes of upfront 

packaging, as well as ultimate forgiveness. As such, we'd 

encourage using a promissory note mandating loan 

counseling consistent with -- with the fact that many 

borrowers may have to pay off their TEACH award. 

 And then we would also encourage the Department to 

look into increased flexibility for TEACH grant loan 

repayment, taking into account situations where the 

student might be called into active service or any number 

of any other reasonable -- you know, situations that 

might make it difficult for them or impossible to fulfill 

their requirements. 

 Third, I'd like to briefly touch on the public 

service loan forgiveness. The first suggestion is one 

that I think may go beyond the scope of normal rulemaking 

but I think is a valuable service the Department can 

provide in the time between -- up until final rules are 
promulgated. One idea is to provide a registry where 

students can sign up to get information and be updated as 

the rules change or as information becomes more 

available. There is a serious interest in this program 

and there is mixed information about how students can 

take advantage of it and what opportunity it provides for 

borrowers. The Department could have a very positive 

impact in providing greater information. 

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 In addition, we encourage just further clarification 

of the professions that qualify for public service loan 

forgiveness, as well as an easy system for confirming 

employment. And finally, a minimum employment period to 

qualify forgiveness. We suggest that at least if a 

student -- excuse me, if a graduate has worked for two 

months, that be considered sufficient to count towards 

the overall 10 year clock. 

 Again, many other issues will likely come before the 

Department and we encourage you throughout the process to 

be thinking of how to -- how to regulate in the interest 

of providing students with more affordable college 

education. And again, want to thank you for convening 

these hearings, of which I've been a dutiful participant 

and visitor, and moving so quickly on this. 

 MR. BERGERON: Before you go to -- 

 MR. SWARTHOUT: Sure. 
 MR. BERGERON: -- Deanne's -- the testimony you're 

going to give for Deanne, on the issue of getting the 

information out, we have limitations on what we can do as 

a federal agency. I don't know that we have anybody 

[inaudible] RSS as a federal agency, at least I don't 

think the Department has adopted that technology. But it 

might -- we might find some ways for us to work together 

to set up -- you know, as we make information available, 

to provide it to some third party who could help us get 

the word out. And so, you know, look for opportunities to 

work jointly and collaboratively on those issues. 

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 It may be that some of our colleagues in the student 

loan side of the world too, and I'm thinking of guarantee 

agencies and the like, that might have some interest in 

all partnering together to work for some solution around 

that particular problem, because I think it's a 

significant issue for everybody that -- getting that kind 

of information out. I know I get telephone calls all the 

time from people who say, "I'm graduating from college 

now and I want my loan forgiven because I'm going to work 

in public service for 10 years." 

 And I go, "Well, that's not the way it's quite going 

to work." 

 MR. SWARTHOUT: Certainly. I put it forward as a -- 

more as a problem looking for solution that works for 
everyone than with sort of a particular attachment to 

that solution. So that -- I would look forward to that 

discussion. 

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 MR. BERGERON: Great. Thank you. 

 MR. SWARTHOUT: That could be the funny comment on 

the record this time. 

 MR. BERGERON: Unlike the other time, definitely. 

 MR. SWARTHOUT: Deanne -- the National Consumer Law 

Center and U.S. PIRG made very similar, in some cases 

identical, recommendations in a number of the pieces that 

I just talked through. Rather than reiterate those, I'd 

like to read for additional -- read from her testimony on 

additional proposals for the rulemaking agenda. And 

you'll excuse me, but I don't know this by heart. 

 Disability discharges were the topic of discussion 

in the 2006-2007 round of rulemaking and, although we are 

not satisfied with the final rules in the topic, we 

understand that a rehashing of the core issues previously 

discussed would be unproductive at this time. Instead, 

the proposal discussed below are intended to supplement 

the final rules and ensure that disabled borrowers can 

access this important relief. 

 The intent of these proposals is to make the process 

more transparent for borrowers, physicians, and loan 

holders. Specifically, we propose adding the following 
topics to the agenda. One is medical review failures. A 

second is due process rights in response to offset. And 

the third is repayment terms after rehabilitation. 

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 The final rules from the summer reserve the right 

for the secretary to require the borrower to submit 

additional medical evidence if the secretary determines 

the borrower's application does not conclusively prove 

the borrower is disabled. This merely codifies an 

existing practice in which the Department routinely 

requests follow up information from doctors who have 

completed disability discharge forms. 

 There are a number of serious problems with the 

medical review process. Statistical analysis by guarantee 

agencies submitted to the Department during rulemaking 

highlighted that the large number of borrowers that are 

denied relief due to medical failures. As a result, many 

severely disabled borrowers are lost in the system 

through no fault of their own. 

 Now our own experience representing borrowers 

confirms the difficulties involved in communicating with 

doctors and explaining to doctors that previous 

determinations of disability by federal or state agencies 

carry no weight with the Department of Education. There 

is no sigh of relief once a doctor fills out the form 

because we know that at some unanticipated point in the 
future the doctor will get requests for more information 

or in many cases simply resubmit information already 

provided. 

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 While we respect the Department's right to ensure 

that borrowers that receive discharges are truly 

disabled, we have serious issues with the random, 

inefficient, and inequitable way in which this program is 

administered. Doctors are extremely busy. In most cases 

they're even more inaccessible to our low income clients, 

many of whom have limited educational levels or limited 

English skills. It is critical to streamline the process 

so that as much information can be gathered at the 

initial point of contact with doctors, one of the few 

times when the borrower has the doctor's full attention. 

 Borrowers should be provided with comprehensive 

information regarding the Department's planned 

verification activities and associated timelines at 

various points in the process, including on the 

application form and after submission of the form. Such 

disclosures should outline the income documentation 

requirements and what, if any, additional documentation 

may be required within clear and reasonable submission 

and determination timeframes. 

 We urge the Department to address at least the 

following key issues in the next round of rulemaking: 
first, unrealistic and unreasonable deadlines for follow 

up document submission by physicians; second, failure to 

notify borrowers when a doctor has failed to provide 

follow up information; and third, inadequate information 

about the process. On this third problem, we recommend 

requiring the Department to notify doctors they will 

likely be contacted for additional information after 

completing the discharge forms and requiring the 

Department to develop a system that would allow doctors 

to provide this information with initial applications. 

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 In addition, we recommend the Department codify in 

the regulations all of the review and verification 

activities it will conduct during the conditional 

discharge period, along with applicable response and 

review timeframes, and require that this information be 

disclosed to the borrower within the guarantor's current 

notification requirements. Guarantors should be allowed 

to assist borrowers in attaining and submitting 

documentation upfront that may be required later. 

 With respect to due process rights in response to 

offset, currently a borrower's right to request a 

reduction in collection due to hardship, or to raise 

hardship as a defense to collection action, may or may 

not exist and may be evaluated differently depending on 

the type of collection action. This makes no sense. All 
borrowers should have the right to raise hardship and 

should be able to be evaluated under a similar standard. 

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 At a minimum, we urge the Department to ensure that 

all borrowers have the same rights when facing 

collection. Currently the regulations for wage 

garnishment through the Debt Collection Improvement Act, 

specifically provided at -- a quote that you can read -- 

that, quote, "we consider obligations -- objections to 

the rate or amount of withholding only if the objection 

rests on a claim that withholding at the proposed rate or 

amount would cause financial hardship to you or your 

dependants." The same language should be added to the 

guarantee agency wage garnishment hearing provisions, to 

the tax refund hearing provisions, and to the offset 

regulations. 

 The offset issue is particularly important because 

the Department currently takes no -- takes the position 

that they may review the offsets due to hardship at their 

discretion, but are not required to do so. 

 And the third point, repayment terms after 

rehabilitation. The right to a reasonable and affordable 

rehabilitation payment is often wrongly denied. The 

problem arrives in part from the system established by 

the Department which provides compensation to collectors 

for setting up rehabilitation plans only if the plans 
require borrowers to make certain minimum payments. 

Collection agencies may also have their own incentive 

system for employees. 

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 The 2007 wage and hour case describes these 

compensation systems. In this case the collection agency 

award -- 

 (End of Tape 2, Side A) 

 (Tape-recorded hearing 11-29-07; Tape 2, Side B) 

 MR. SWARTHOUT: -- a statutory right to make 

reasonable and affordable payments. The FFEL collectors 

claim that lenders will only purchase the rehabilitation 

loans if the balance is paid down sufficiently. They may 

also claim that negative amortization is prohibited. 

However, there is no explicit ban on negative 

amortization in the rehabilitation regulations, as there 

is in the income sensitive repayment regulations. 

 Further, the FFEL regulation prohibit the imposition 

of a minimum payment. Documentation is required if the 

payment is below $50 dollars, but these payments are 

clearly allowed if that is what is reasonable and 

affordable for a particular borrower. Thus, a very low 
income borrower should be able to set up a rehabilitation 

plan with very low payments, even $0. 

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 The system just simply does not work for low income 

borrowers. It does not work at the front end when 

borrowers are denied reasonable and affordable repayment 

terms. If borrowers clear this hurdle, the next barrier 

arises when the loan is sold and the new lender requires 

a standard repayment plan rather than allowing the 

borrower to choose a more affordable plan. 

 According to guarantee agencies, the repayment term 

guidelines for lenders fail to provide flexibility to 

establish a monthly payment amount below the amount of 

monthly accrued interest. Thus, while the regulations 

allow for all borrowers to seek rehabilitation and 

require the payments to be reasonable and affordable, 

borrowers with very low monthly payments are almost 

doomed to re-default unless these borrowers are able to 

obtain income-contingent repayment under the direct loan 

program. 

 In other cases, while the amount of the monthly 

rehabilitation period may be at least the amount of 

accrued interest, the required monthly payment amount is 

still increased dramatically after the purchase of a 

lender. 

 We believe that a lender's post-rehabilitation 
repayment plan choice is information that in many cases 

the guarantor may be able to secure prior to the 

completion of a borrower's rehabilitation period. 

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 Now these proposed changes in the policy guidelines 

we believe would remove barriers towards long term 

successful repayment of rehabilitated loans. We also urge 

the Department to consider the problem of continued 

collection efforts while a borrower is repaying through a 

rehabilitation plan. There is no prohibition on such 

collection efforts in the regulations that we know of. 

 When representing borrowers we request that the loan 

holder agree to a cessation of collection other than 

routine billing statements. Most collectors agree to this 

provision. We believe this should be standardized in the 

regulations. It's contrary to both the borrower and loan 

holder interest to continue collection efforts while a 

borrower is making the effort to repay through 

rehabilitation. Positive reinforcement is needed during 

this period in order to ensure that rehabilitation 

succeeds. 

 Thank you for your consideration on these and other 

issues. 

 MR. KERRIGAN: I've been instructed to introduce 

myself. My name is Brian Kerrigan. I work in the Office 

of Postsecondary Education along with Danny and David. 
And I guess David's gone for a while and I'm here to make 

sure someone has someone to speak to in case anyone else 

leaves. Do we have anyone else that's coming up? 

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 Next speaker would be Dorothy Young from the U.S. 

Student Association. 

 MS. YOUNG: Hello? Okay. Well that's awkward 

[inaudible]. Hi, my name is Dorothy Young. I'm a third 

year undergraduate student at UC San Diego. I'm the Vice 

President of External Affairs in our student government 

and I'm also here representing the United States Student 

Association. 

 So here because [unintelligible]. I currently have 

about $10,000 dollars in loans and I'm only in my third 

year; I'm going to be staying five years. I live off of 

my financial aid, my loans, and a $95 dollar a week 

stipend. Because of my work with student government I'm 

not able to hold another job. And my future, I want to go 

into community and non-profit work so the couple things I 

want to talk about today are related to loan forgiveness. 

 First off, you know the College Cost Reduction Act 

of 2007 was a great step in increasing affordability and 

access of higher education. We need to make sure that 

we're continuing to support the CCRA and that the 

Department of Education is supporting and strengthening 

it to the best interest of all students. One of these 
ways is about income-based repayment and incomecontingent payment, and in your rulemaking to mitigate 

the disparities between IBR and ICR so that both are 

accessible, for example, so that IBR-2 is accessible to -

- is for those whose income is about 150 percent over the 

poverty income, as well as ICR is. Basically because 

without income-based repayment guidelines, loan 

forgiveness is basically ineffective because people will 

be paying unmanageable amounts every month. 

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 We want the secretary of education to set the 

maximum repayment period to set 20 years because 

currently it's -- the maximum is 25 years. That's kind of 

big because it's up to 25 years but there's not really 

any real date. Twenty years is enough time for most 

borrowers to repay their loan; and those that cannot are 

in the greatest need of relief either because they've had 

extremely low paying jobs for those 20 years, or because 

they have unmanageably high debt. 

 Twenty year rule also reduces the risk that loan 

repayment would permanently displace critical savings for 

them to buy houses, for their children's education, in 

households with little or not financial security. We want 

to make sure that we're strengthening our economy, not 

harming it and those who are fighting to give back to it 

by, you know, participating in public service as a 
career. Debt should not be punishment for trying to 

access one of the most basic rights of the country, which 

is education. 

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 We want borrowers to make payments in good faith, to 

have their payments count towards loan cancellation no 

matter when the payment happens. Which means that if a 

borrower makes payments that would have counted but was 

technically in a different payment status not listed 

above, for example maybe they defaulted on their loan and 

they're doing rehabilitation payments or making reduced 

payments for any reason and they're not counting towards 

that 120 payment that it takes to get loan forgiveness. 

Somebody who is not making a lot of money really needs 

every one of those 120 payments to count in order to -- 

in order to mitigate the current debt that -- that 

accumulates in order to access higher education. 

 That was also connected to the fact that we want 

clear definitions as to what payments count towards loan 

cancellation. Those that have the chance to get a loan 

cancelled are in desperate need of it as they either have 

maintained a severely low paying job for 20 years, or 

have had such an unmanageably high level of debt that 

they really need the loan forgiven. 

 Another factor is for the three years of government 

paid interest after graduation to be -- use that any time 
during that -- during the repayment process, not the 

automatic three years after because somebody might have a 

job right after school graduating. Then their parents may 

be able to pay a little bit more, but then later on they 

really will need that interest to be paid if maybe they 

start a family or buy a house. 

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 Moreover, we also want to make the entire process of 

declaring income, declaring change of income, and other 

associated documents that prove status to be accessible 

online through the IRS or through the Department of 

Education, which would take away the financial cost as 

well as the time consuming cost of faxing things. Also 

save trees, which would be a good idea because we need 

them to breathe. 

 So, I mean, overall, just to urge like throughout 

the entire process to remember to be thinking of the best 

interest of the students who are obviously throughout the 

country. USSA will be submitting additional written 

recommendations. Thank you. 

 MR. KERRIGAN: Thank you. We have no additional 

scheduled speakers at this point in time. We will of 

course wait around to see if anyone else does sign up and 

wishes to address us. 

 (End of Tape 2, Side B) 
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 (Tape-recorded hearing 11-29-07; Tape 3, Side A) 

 MR. KERRIGAN: Okay. Being that it's 3:00 o'clock, 

or very close to it, the hearing is officially closed. 

 (End of Tape 3, Side A)