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DeVos decries student-loan program as a ‘looming crisis’

Education Secretary Betsy DeVos on Tuesday warned that the federal student aid program is a “looming crisis in higher education,” in a speech that some education experts say lacked an understanding of the problem or solutions.

“Our higher ed system is the envy of the world, but if we, as a country, do not make important policy changes in the way we distribute, administer and manage federal student loans, the program on which so many students rely will be in serious jeopardy,” DeVos said at the Education Department’s annual Federal Student Aid training conference in Atlanta.

Higher-education experts have long criticized the Education Department’s lending program as unwieldy because of varying loan limits and repayment plans that have mushroomed over the past few administrations.

The federal student loan portfolio has surpassed the trillion-dollar mark in the face of rising college costs, stagnant wages and paltry state investment in higher education. Many Americans saddled with even small amounts of education debt are struggling or taking longer to repay the debt, raising questions about the sustainability of the program.

“The student-loan program is not only burying students in debt, it is also burying taxpayers and it’s stealing from future generations,” DeVos said Tuesday. The state of the program, she said, “demands the attention of Congress, the American taxpayer, colleges and universities, parents and students.”

Yet she laid much of the blame for the mounting debt on the Obama administration’s decision to lend directly to students and eliminate a $60 billion program that backed private student loans with federal subsidies.

“Since 2010, when the previous administration orchestrated a government takeover of student lending, [Federal Student Aid’s] portfolio has skyrocketed. Over 8 percent annual growth. Two times faster than the growth of the cost of attendance and almost four times faster than the growth of our economy," the secretary said.

Jason Delisle, a resident fellow at the conservative think tank American Enterprise Institute, argues that cutting banks out of the federal lending program had no bearing on the rise in student debt levels. He said DeVos’s budget proposals have not called for bold revisions of the existing program.

“The first two policy proposals from the Department of Education and Secretary DeVos don’t look like they came from the same person who wrote this speech,” Delisle said. “The first budget seemed pretty complacent with the status quo. In terms of really changing the federal footprint in lending, there was nothing.”

DeVos has embarked on an overhaul of the federal student loan program through a project dubbed Next Generation Financial Services Environment, or NextGen. This year, the Education Department rolled out a smartphone application to make it easier for students to apply for loans and grants.

Student advocates and financial aid professionals have been largely supportive of the department’s attempts to modernize the system but have encouraged the administration and lawmakers to take further steps to simplify the process for families.

The National Association of Student Financial Aid Administrators issued proposals, including the elimination of origination fees and annual loan limits, that policymakers could implement to help curb over-borrowing. The trade group’s president, Justin Draeger, said he agrees with DeVos’s assessment that it will take a joint effort among stakeholders to turn the student aid program around.

“The financial aid community stands ready to work with policymakers to find and implement solutions that will help keep college affordable without burying families in levels of debt that cannot be repaid,” he said, in a statement.

Rachel Fishman, deputy director for research with the education policy program New America, a left-leaning think tank, agreed that changes are needed but said the “fear mongering” in DeVos’s speech pitting students against taxpayers is divisive.

“If you really want to curb the problems we’re seeing with lending . . . you could address things that reduce debt like improving grant aid programs,” Fishman said.

Education Secretary Betsy DeVos had trouble answering questions and seemed to contradict herself during her interview with CBS’s “60 Minutes” on March 11. (Video: Taylor Turner/The Washington Post)