Student Loans: The Debt of a Lifetime?

1. Student Loans: The Debt of a Lifetime? Mike Firestone Office of Massachusetts Attorney General Maura Healey

2. Mass AGO Background • First enforcement: Sullivan & Cogliano, recovered $425,000 for medical students (Apr. 2013) • Sued Corinthian for abuse at Everest Institute (Apr. 2014) • Finalized Mass AG’s regulations on for-profit schools (June 2014) • Largest settlement to date, $3.75 million from Salter College (Dec. 2014) • First AGO multistate letter on borrower defense – 9 state AGs (Feb. 2015) • $2.3m from Lincoln Tech & Kaplan Institute (June 2015) • Announced Student Loan Assistance Unit; Debt Counseling settlements (Nov. 2015) • Most recent AGO multistate on borrower defense – 18 state AGs (Mar. 2016) • 13 state AGs urge USDOEd to end ACICS (Apr. 2016) • Outreach to Corinthian students from loan assistance unit tops 800 students. (May 2016)

3. Student Loan Assistance Unit • Income-Based, Income-Driven Repayment plan enrollment assistance. • Alternative to predatory debt counseling (complaint generation / investigation & enforcement). • Closed school discharge. • Borrowed defense. • Identification of abuses by schools, servicers, loan counselors.

4. Members of the Student Loan Team at North Shore Community College in Lynn, MA on May 19, 2016

5. IBR/IDR/ICR Assistance Observations • This work is how our Student Loan Assistance Unit is helping great number and broadest range of student borrowers. • Well less than 25% of borrowers we assist have clear understanding of their loans. • The complexity of federal student loan programs presents a significant challenge for all; • High-quality servicing is essential; but simplification is also key. • Just some factors to know when advising a student: type, size, repayment status of loan, income of borrower, Parent Plus, earning prospects, capacity to repay, other discharge eligibilities.

6. Servicing company quote from the CFPB report, Student Loan Servicing, Sept. 2015 We service loans made under an increasingly complex student loan program. Since 1990, the number of repayment options available to borrowers has increased from two to 15—including multiple income-driven repayment plans with similar sounding names and differing eligibility criteria. There are now eight forgiveness programs and over 35 different deferment and forbearance options. (CFPB Report, p. 20)

7. Getting distressed borrowers into income-based repayment plans is essential CFPB, Student Loan Servicing, Fig. 2, p. 23.

8. Income Recertification in Necessary . . . But not Happening. • To stay in an income driver repayment plan, a borrower must annually recertify income. • U.S. DOEd sample of student indicated that 57 percent of borrowers did not have a timely recertification of income processed. • In addition, nearly one in three borrowers in the sample did not recertify within the six months following their deadline. • Consequences are serious: Can result in payment shock, capitalization of accrued interest, loss of credit towards loan forgiveness. CFPB, Student Loan Servicing, p. 31-34.

9. CFPB, Student Loan Servicing, Fig. 2, p. 33.

11. Other observations: 1) Group Relief • Group relief is essential: U.S. DOEd is authorized to provide automatic group relief for closed school (and false cert.) discharges but has not utilized or underutilized this authority. • “The Secretary may discharge a loan under this [Closed School] section without an application from the borrower if the Secretary determines, based on information in the Secretary's possession, that the borrower qualifies for the discharge.” 34 CFR § 685.214(c)(2). CFPB, Student Loan Servicing, p. 31-34.

12. Other observations: 2) Non-graduates • Very concerned about programs with high numbers of students who do not graduate. • These programs saddle non-graduates with all of the expense but without the benefits of a certificate or degree (and related higher earning potential). • Sunday’s Oregonian featured findings by Susan Dynarski of the Brookings Institution suggesting that it is the debt of non-graduates from non-selective schools are driving defaults and other negative economic consequences, like decreases in home ownership. • Seattle Times similarly reported on 27-year old masters degreed professional with $80,000 in debt and a $70,000 job. A financial planner helped her consolidate her loans with a private lender at a 5.1% rate. The burden may be significant but she has the means to pay it off.

13. “Fast track” announcement for Everest students in Boston by USDOEd, (Mar. 2016)

14. Other observations: 3) BD Outreach • The Massachusetts AGO will be publishing a report on our outreach efforts to students in the Corinthian “fast track” cohorts in Massachusetts that documents more than 1,000 staff hours so far in securing applications from just over 800 eligible student borrowers. • Of student borrowers assisted, less than 1.0% could not recall seeing misleading communications from Corinthian prior to making the decision to enroll. • However, without a group process, the Massachusetts AGO may be required to spend thousands more hours tracking down students and assisting them with the application, simply to avail the students of relief USDOEd has determined they deserve based on the abuse and deception of their schools. CFPB, Student Loan Servicing, p. 31-34.