October 24, 2016
Senate Hearing on Student Debt and Financial Literacy
While the big news in the corridors of the Capitol last week pertained to the strike by faculty at the State System universities, the Senate Policy Committee and the Senate Education Committee held a hearing where college and university representatives provided information on student debt and financial literacy. The hearing, chaired by Senate Policy Committee Chairman David Argall (R-Schuylkill), was held at the request of Senate Majority Policy Committee Vice Chairman Guy Reschenthaler (R-Allegheny). Senator Reschenthaler is proposing a “truth in lending” bill similar to legislation in Indiana and Nebraska requiring higher education institutions to disclose specific information regarding their current and projected student debt.
PHEAA CEO and President Jim Preston, the lead-off speaker, discussed the online tools that PHEAA has available for greater transparency and information pertaining to student loans.
www.MySmartBorrowing.org provides unique estimators that help determine a student’s possible higher education costs at different colleges, future salary expectations for a particular degree, and other critical information. During questioning of Mr. Preston, Senator Ryan Aument (R-Lancaster) contended that the key to saving money is to graduate in four years.
Brad L. Yeckley, assistant director of financial literacy for Penn State, indicated that PSU is pioneering one-on-one personal financial sessions with students who are finance majors so they can be peer counselors to their fellow students. Randall L. McCready, director of financial aid for the University of Pittsburgh, testified that the university has lower default rates for its graduates then the national average of 11.3 percent (including proprietary schools). Pitt graduates have a default rate of 3.84 percent, and PSU graduates have a default rate of 4.9 percent. Many testifiers agreed that students need to learn about the consequences of taking on debt at an earlier age, suggesting elementary and secondary school financial literacy education. Kim Anderson, director of financial aid at Lincoln University, emphasized this point saying that in a recent study graduating high school seniors averaged a failing grade of 52 percent in basic personal finance.
Mary Young, AICUP’s vice president of government relations, testified for the association. She noted that debt is often misunderstood and that a college education is really an investment that can pay dividends of over a million dollars in lifetime earnings. She highlighted that Pennsylvania is blessed with numerous private colleges and that those who graduate with debt from private four-year nonprofit colleges and universities have an average debt level of $32,833, similar to the price of a new car. Yet newspapers are not full of stories about people taking out too much debt to buy cars. Young briefed members on the difference between net price and sticker prices, noting that private colleges are more affordable than they are perceived. She also showed that according to a study on student debt by the College Board in 2014, 39 percent of student loan borrowers had debt below $10,000, while only 4 percent of borrowers accrued debt over $100,000 and this debt was often related to further schooling such as medical or law school.
Young emphasized the importance of the legislature’s continued support for the PHEAA grant program. Discussing the continuing problems in funding PHEAA, she focused on the use of PHEAA earnings to augment the grant program while cutting the state appropriation. The formula for grants is still only 93 percent funded. She also noted that the Ready to Succeed Scholarship (RTSS), a program set up by the Assembly to help middle-income families with debt, received no increase last year while most other higher education programs received a 2.5 percent increase.
Nicholas C. Neupauer, president of Butler County Community College (BCCC), discussed the partnerships between community colleges and other sectors, and representatives from the State System and Temple University also provided testimony. At the end of the hearing, Senator Reschenthaler praised participants for testimony as he called for “innovative solutions that help students.”
Did you know: Video and testimony from the hearing is available at the
PA Senate Majority Policy Committee website under “Student loans and financial literacy pertaining to higher education.”
