Thank you for that introduction, Mark Brown. And let me add what a pleasure it has been having you on our team. You bring important focus, vision, and discipline to the job, and I’m so pleased to begin to see the results of your leadership. You ensure we “aim high” every day, General.
I’m pleased to be back at this conference with people who work with and for students every day. Your role is crucial. You’re with students in times of joy and sorrow as they navigate formative years. Students rely on you, and you make significant impacts on their lifelong learning journeys. So, let me thank you for all you do to put students first.
Federal Student Aid was established in 1965 to do just that. To come alongside students who lack financial resources to pursue higher education. To expand access to learning for those who aren’t wealthy, powerful, or well-connected. That’s been the mission of federal student aid programs since the beginning.
But students don’t pursue higher education in the same way they did back then—more than 50 years ago. And students don’t pay for higher education like they did then, either. Today, they use different financial instruments in a different, constantly iterating economy.
At last year’s conference, I urged everyone to rethink student lending. And with the limited tools Congress gave us, we are rethinking FSA. The financial aid process must be modern, streamlined, and simply easier for students—and for you.
That’s how processes are in every other area of finance. Think about how you pay for your car. Or how you pay for your home. Simplicity is commonplace in the private sector.
I know a thing or two about that, as do many others on our team who haven’t spent a lot of time working in government. Some might question the presence of outsiders in this space, but, as it’s been said, maybe what students need is someone who doesn’t yet know all the things you “can’t do.”
So, we are modernizing FSA’s infrastructure and totally revamping the way we connect with students. Last year, we called this initiative “NextGen.”
This year, “NextGen” is “NowGen.” General Brown will talk about this in greater detail later. So, let me just say this: we are undertaking a rigorous transformation of government services, bringing everything together behind one, digital gateway.
Now, this isn’t exciting in the private sector—in fact, it’s expected. But for government services, our long-overdue updates are well ahead of the curve.
No longer will students have to sift through countless websites; there will be one website. No longer will students have to dial wrong numbers, be transferred to different ones, and then sit on hold indefinitely; there will be one phone number.
No longer will students have to complete their FAFSA® tethered to a desktop; now, students can start on their tablet, continue on their phone while commuting to work…and complete it on any one of their devices—including through the new myStudentAid mobile app.
You’ll remember we exceeded expectations when we unveiled it last year. In the app, students will now have more real-time and transparent information with which to plan for their education.
From submitting the FAFSA® to submitting payments; from seeing what a loan will cost over time to participating in exit counseling—we are updating everything.
And we’re doing it so that students are better informed borrowers. So that students will be able to see what they owe, what they will owe, what ways they can repay what they owe, and acknowledge all of that each year before they borrow any more. Surprisingly, students will be able to do that for the first time ever.
And if they do have questions—we know they do—they will be able to ask Aidan.
Aidan isn’t the only way we’re empowering students with relevant, accessible, and actionable information. Our transformative updates to the College Scorecard empower students to seamlessly access more information about their education than ever before.
For the first time, students will be able to find data on debt and potential earnings by field of study. For example, if a student wants to study psychology, he can see what other graduates in the field are earning and how much debt they took on to earn that degree from different institutions.
And for the first time, College Scorecard offers information on all types of higher education options including traditional degrees, two-year programs, certificates, apprenticeships, and even some graduate programs.
Think about the power of having relevant and accessible information, and how having that data facilitates more informed decision-making.
That’s important. But implementing each of these tactical measures still isn’t enough for FSA to truly “sponsor the American mind.”
FSA’s mission is to serve students and their families, but its structure is set up to serve politicians and their policies. As it’s been said, no one can serve two masters.
Consider that initially the federal government’s role in student lending was just a guarantor, and a lender of last resort. Congress never set up the U.S. Department of Education to be a bank, nor did it define the Secretary of Education as the nation’s “top banker.” But that’s effectively what Congress expects based on its policies.
FSA’s portfolio has skyrocketed at more than 8 percent annual growth on average since 2010—almost four times faster than economic growth.
And today, FSA holds more than $1.5 trillion in outstanding loans to 42 million borrowers. That portfolio makes Federal Student Aid bigger than Bank of America, bigger than J.P. Morgan, bigger than Capital One. Indeed, it represents the country’s biggest consumer lender.
Now consider this government monopoly was coupled with each new political project of each new Congress. Every couple of years, FSA—and the students it serves—have been pulled in a new political direction.
Just look at today’s parade of repayment options, forgiveness plans, unlimited lending, and complex rules that FSA—and you—have been asked to implement, and then explain to students and their families.
Eight different repayment plans, five of which are income driven, each with different eligibility requirements. More than 30 variations of deferment and forbearance options. Fourteen forgiveness options. And 11 different servicers, all with totally separate websites and platforms, phone numbers, and forms. Is it any wonder students are having bad experiences?
Students are borrowing tens of thousands of dollars, but many do not understand the implications of that debt. Is it any surprise, then, that both principal and interest are currently being paid down for only one in four loans? Nearly 11 million borrowers have loans that are delinquent or in default? And 43 percent of all loans are considered “in distress”?
It can only lead you to the conclusion that FSA is “in distress.”
Since the federal government inserted itself everywhere in student lending, everything has become more cumbersome and more confusing for everyone.
And while everything about our world has changed, everything about Federal Student Aid’s structure and governance has stayed the same. Congress might’ve created the first financial aid program, but it set in motion an untamed beast.
Congress asked FSA to implement each new program and each new plan, with the same old infrastructure, and no common-sense governance model.
FSA simply cannot satisfy the ever-changing political whims of Washington. In its current form—which no one likely ever imagined—it cannot fulfill its mission.
Now, I’m not so sure the federal government should monopolize student lending, but if it does—and, for now, it essentially does—then it must provide services on par with world-class financial firms.
And that starts with acting like a world-class financial firm. One that is truly independent from interference, political or otherwise. One that puts its customers—students and their families—at the center of everything. One that focuses on and achieves its mission.
One has to wonder: Why isn’t FSA a standalone government corporation, run by a professional, expert, and apolitical Board of Governors?
A separate FSA would be better positioned to deliver world-class service to students and their families as they finance higher education. It would manage the student loan portfolio and work to secure its financial strength and sustainability. And it would do all the things it’s been charged to do—only far better.
This notion doesn’t come out of “left field.” You’ve all been attuned to it for some time. Through the National Association of Student Financial Aid Administrators, you all have offered some useful insights.
NASFAA found that while Federal Student Aid is ranked for total assets alongside the country’s biggest banks, the similarities end there. Banks rely on boards of directors for strategic direction and oversight. FSA has no such thing.
This is an idea that warrants far more discussion. We should be discussing whether FSA would be stronger as a standalone entity—wholly and entirely separate from the U.S. Department of Education. We should be talking about the benefits of professional, experienced leadership who, as in the private sector, would be responsible for setting strategy for FSA, for overseeing the management of the loan portfolio, for ensuring institutions hold up their end of the bargain, and for reporting to Congress.
To be clear, I don’t think such an agency should look like another CFPB. Nor should it be a return to FFEL. And it would not report to the Secretary of Education.
Under this scenario we’re discussing, Federal Student Aid would be empowered to focus on its mission—partnering with institutions and all of you to serve students and their families.
At the same time, students must be responsible consumers of education, seriously committed to their own success. They need to have the best possible tools, data, advice, and support. And they need to be free to learn.
We can provide students with better information. We can provide students with better products. We can ignore the Siren songs of easy—very expensive and very unfair—fixes. We can get this right for students, and for our country.
President Trump and this Administration are committed to transforming Federal Student Aid for students. Congress needs to come alongside us to make this happen.
We live in some of the most exciting and opportunity-filled times ever. As our country’s horizons are ever-broadening, so too is American imagination, American ingenuity, and American achievement.
So, let’s renew our commitment—each and every day—to each and every student’s success. Thank you.
A full transcript of the remarks by Secretary DeVos is above.
Today, during a major speech at the annual Federal Student Aid (FSA) Conference, U.S. Secretary of Education Betsy DeVos unveiled a vision for a stronger, student-centered FSA. She detailed both what FSA can and is doing now, including continued enhancements to customer service through the transformative myStudentAid app, and what requires the action of others, including improving how FSA is structured and governed.
“From submitting the FAFSA® to submitting payments; from seeing what a loan will cost over time to participating in exit counseling—we are updating everything,” said Secretary DeVos. “And we’re doing it so that students are better informed borrowers. So that students will be able to see what they owe, what they will owe, what ways they can repay what they owe, and acknowledge all of that each year before they borrow any more. Surprisingly, students will be able to do that for the first time ever. And if they do have questions—we know they do—they will be able to ask Aidan.”
Aidan, the new chatbot, will be able to answer many of the routine questions borrowers have about their loans including how to make a payment and what types of repayment plans for which they might qualify. If Aidan doesn’t have the answer, he can show customers where to find it.
To help FSA better achieve its mission, Secretary DeVos also discussed structural changes she believes would improve operations and better serve students, including that FSA become “a standalone entity, wholly and entirely separate from the U.S. Department of Education.” Such reforms are needed to better manage what has become the nation’s largest lender, with nearly $1.6 trillion in outstanding loans.
Assessing the drawbacks of FSA’s current organizational structure, Secretary DeVos said, “FSA simply cannot satisfy the ever-changing political whims of Washington.” The new proposed leadership model for FSA “is truly independent from interference, political or otherwise.”
Since taking office, Secretary DeVos has made clear that if FSA is going to be the nation’s largest private lender, it needs to function like a 21st century “world-class financial institution” that treats borrowers like the customers that they are. “We can provide students with better information,” she concluded. “We can provide students with better products. We can ignore the Siren songs of easy—very expensive and very unfair—fixes. We can get this right for students, and for our country.”