Dr. Dynarski. Welcome.

Thank you. Chairman Alexander,

Ranking Member Marie,
members of the committee.

Thanks for the opportunity
to testify today.

First thing I want
to say is that I'm

a first-generation college grad.

My my dad was a high
school dropout.

Expanding opportunity
for low-income students,

motivates my work and
everything I say today.

So that's, that's what underpins
all my recommendations.

I'm going to be focusing
on what we can learn from

other countries in
repaying student loans.

But I want to first
express my strong support

for simplifying the aid
process for students.

And when I say for
students, I mean,

where they actually meet

the student aid system
is where we need to

change things if it's going

to be more effective in getting

more students into college.

So in the US, student
debt has risen

sharply over the
past few decades.

But we should be clear, the
typical undergraduate debt

is not what we see
in the headlines.

For those who don't
complete a BA,

about half of students who
don't actually complete a BA,

debt is less than 10 thousand dollars.

For those who do complete
a BA, it's about 30 thousand.

And only 15 percent of
those who complete a

BA actually end up with
more than 30 thousand.

Just 2% of undergrads end up

borrowing more than 50 thousand dollars.

Now borrowing for college
is common around the world.

In Sweden, where they

don't even have any
tuition charged at all,

people still borrow to pay
their living expenses,

about 20 thousand dollars for
their university education.

In Australia, it's about
22 thousand. In England,

about 70 thousand for the
typical university graduate.

So what's exceptional about the US

is not the borrowing levels,

but the default rates.

Other countries, in
other countries,

loans do not send millions of

borrowers into
financial distress.

In the US, loan distress

is concentrated among
those who borrow

just a few thousand
dollars to attend

to for-profit or a
community college.

It's the smaller loans that go

into default, not
the larger ones.

When fees and interest
and penalties

get piled onto small balances,

they can balloon into
much larger debt

and then end up in default.

Now default is very costly.

It does enormous damage to
borrower's credit ratings.

It leads to higher interest rates

on credit cards, on cars,

employers regularly
check credit reports

of their applicants
and so do landlords.

So defaulting on a loan is

devastating to a
person's financial life.

We need to stop student debt
from ruining people's lives.

So I'm going to tell you
what other countries

do to make their debt work.

First, they allow
borrowers to spread

their payments over more years.

In the US, the standard
repayment period

is 10 years. Sweden,

25. Germany, 20.
England, 30. Australia,

there's no time limit at all.

I know of no other
country that has

repayment period
as short as ours.

But more importantly, in
Australia and in England,

loan payments change
with earnings.

Payments are deducted
from paychecks

rising and falling
along with pay.

This is like the system
used in the US to collect

social security contributions
and other payroll taxes.

In England, there are no
loan payments at income

below 30 thousand and then
they're 9% of income.

So it works out
that if your annual

incomes about 50 thousand,

your payments are
about a 150 per month.

In Australia, the loan payment is

4% of all income, works
out about the same.

You don't pay until
your earnings hit

$46 thousand and then
around a $150 a month.

Again, in both countries,

the key is that loan payments

change automatically
with paychecks,

just like our payroll taxes and

income taxes do. If pay drops,

we pay less in payroll
taxes automatically.

In fact, we'd be pretty annoyed
if our hours were cut,

but our payroll taxes
stayed the same.

In the income-based
plans in the US,

payments do not
adjust automatically.

Instead, they're based on
the previous year's income.

If a borrower needs
to adjust her payment,

she's gotta fill
out an application.

The CFPB has shown
that this is often

a bumpy process that
can take months.

Borrowers cannot
apply by themselves.

Their loan servicers have to

move the application along.

Meanwhile, the student loan bills

keep coming no matter how

small the paycheck is and

millions of borrowers
end up in default.

Now some worry that
payroll withholding put

student loans above
other expenses.

Why should a student loan get

priority over food and rent?

But this is exactly what
payroll withholding prevents.

In Australia and England,
when earnings dropped,

loan payments
disappear immediately.

So borrowers can devote

those shrunken paychecks
to essential needs.

This effectively acts
as social insurance

against shocks to
wages and hours.

And we actually have a system of

automatic loan payments right now

run by the federal
government. But it's brutal.

If a borrower goes into
default to the Department of

Education can collect payments

via the Treasury offset program.

Last year, this program
sees $3 billion in

federal payments
including tax refunds

like the Earned
Income Tax Credit.

And social security payments
to deceased, disabled,

and retired people and
their dependents.

For Social Security, 15 percent of the

monthly benefit gets lopped
off to pay a loan in default.

The GAO finds garnishments

are pushing Social Security
recipients below

the poverty line. We're already

doing automatic withholding
of loan payments,

but in a way that hurts the
most vulnerable people.

There are many models for
funding college in conclusion,

some advocate for free tuition,

others for a system of
targeted need-based aid.

No matter what loans are going
to be part of our system,

whether they're large or they're small,

Even in tuition-free
Sweden, students borrow.

We therefore need to make loans
and loans repayment work.

We need to overhaul a
punishing system that turns

manageable debt into
a financial disaster

for millions of
student borrowers.

Thank you and I look
forward to your questions.

Thank you.