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COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES
APPROPRIATIONS COMMITTEE BUDGET HEARING
PENNSYLVANIA HIGHER EDUCATION ASSISTANCE AGENCY
STATE CAPITOL HARRISBURG, PENNSYLVANIA ROOM 140, MAJORITY CAUCUS ROOM
TUESDAY, FEBRUARY 12, 2019 3:00 P.M.
BEFORE:
HONORABLE STANLEY SAYLOR, MAJORITY CHAIRMAN HONORABLE MATT BRADFORD, MINORITY CHAIRMAN HONORABLE ROSEMARY BROWN HONORABLE SHERYL DELOZIER HONORABLE GEORGE DUNBAR HONORABLE JONATHAN FRITZ HONORABLE MATT GABLER HONORABLE KEITH GREINER HONORABLE MARCIA HAHN HONORABLE LEE JAMES HONORABLE FRED KELLER HONORABLE JOHN LAWRENCE HONORABLE JASON ORTITAY HONORABLE CLINT OWLETT HONORABLE CHRIS QUINN HONORABLE GREG ROTHMAN HONORABLE JAMES STRUZZI HONORABLE JESSE TOPPER HONORABLE RYAN WARNER HONORABLE MARTINA WHITE
Pennsylvania House of Representatives Commonwealth of Pennsylvania 2
1 HONORABLE DONNA BULLOCK HONORABLE MORGAN CEPHAS 2 HONORABLE MARIA DONATUCCI HONORABLE AUSTIN DAVIS 3 HONORABLE ELIZABETH FIEDLER HONORABLE MARTY FLYNN 4 HONORABLE EDWARD GAINEY HONORABLE PATTY KIM 5 HONORABLE STEPHEN KINSEY HONORABLE LEANNE KRUEGER 6 HONORABLE STEPHEN MCCARTER HONORABLE BENJAMIN SANCHEZ 7 HONORABLE PETER SCHWEYER
8 NON-COMMITTEE MEMBERS PRESENT:
9 HONORABLE CURT SONNEY
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1 COMMITTEE STAFF PRESENT:
2 DAVID DONLEY REPUBLICAN EXECUTIVE DIRECTOR 3 RITCHIE LAFAVER REPUBLICAN DEPUTY EXECUTIVE DIRECTOR 4 MIRIAM FOX DEMOCRATIC EXECUTIVE DIRECTOR 5 TARA TREES DEMOCRATIC CHIEF COUNSEL 6
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1 I N D E X
2 TESTIFIERS
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4 NAME PAGE
5 JAMES STEELEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER 6 ...... 8
7 NATHAN HENCH, SENIOR VICE PRESIDENT OF PUBLIC AFFAIRS 8 ...... 6
9 ELIZABETH MCCLOUD, VICE PRESIDENT OF STATE GRANTS & SPECIAL PROGRAMS 10 ...... 7
11 (NO SUBMITTED WRITTEN TESTIMONY.)
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1 P R O C E E D I N G S
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3 MAJORITY CHAIRMAN SAYLOR: We'll call
4 the Appropriations Committee back to order here,
5 and I will ask President Steeley, Nathan, and
6 Ms. McCloud if you would rise to be sworn in.
7
8 Whereupon, the testifiers were duly
9 sworn and testified as follows:
10
11 MAJORITY CHAIRMAN SAYLOR: Thank you.
12 Very good.
13 We'll start off with our first
14 questioner, Representative DeLozier.
15 REPRESENTATIVE DELOZIER: Thank you, Mr.
16 Chairman. Thank you, gentlemen, for being here
17 and answering a lot of questions that I know
18 people have on PHEAA.
19 There's been a lot of information put
20 out there on PHEAA. Recently, it's been in the
21 news a lot, good and bad, and a lot of court
22 hearings.
23 And as a disclaimer, I do sit on the
24 Board, so I have the luxury of being able to
25 have heard a lot of the background dealing with 6
1 PHEAA. But there's a lot of really good things
2 happening at PHEAA. And one of the programs
3 that I have always asked about and have pushed
4 tremendously is the Ready to Succeed Program.
5 I know we have grant programs, which are
6 great programs for low-income students. Ready
7 to Succeed was something that was substituted
8 not too too long ago for the folks that are a
9 little bit -- make too much for the grant
10 program but don't make enough, certainly, to
11 write the checks.
12 I mean, but I think it's a good balance;
13 so I wanted to ask you a few questions about
14 that. You had asked for a little over 5
15 million, and 5 million was used last year.
16 Did we use all that 5 million, and can
17 you tell me the types of families that received
18 this?
19 MR. HENCH: Thank you, Representative.
20 Yes, we did use all 5 million. The program is
21 overprescribed. We do have to deny students.
22 If we would want to fully fund the program, it
23 would be roughly 7 million to 8 million dollars.
24 REPRESENTATIVE DELOZIER: Okay. And so
25 is there a waiting-list-type thing or -- I mean, 7
1 you have to apply each year, is my
2 understanding. Do you keep a waiting list for
3 those that are eligible, or how does that work?
4 MS. MCCLOUD: Yeah. So we look at all
5 of the eligible students who meet the
6 requirements of the minimum GPA of 3.5 and have
7 family incomes up to 110,000; and then, because
8 that population exceeds the available funding,
9 we next look at the order in which the students
10 applied for financial aid that's needs based.
11 REPRESENTATIVE DELOZIER: Okay. So
12 early birds get the worm?
13 MS. MCCLOUD: That's right.
14 REPRESENTATIVE DELOZIER: Okay. And the
15 ability for us, in dealing with Ready to
16 Succeed, many times we have talked about the
17 issue that students that don't get a Ready to
18 Succeed grant or don't get a low-income grant.
19 One of the things that the state has
20 been able to -- as we know with PHEAA -- and
21 many people don't realize, is that we have been
22 a servicer here in the state and service many
23 other people's loans and other states' loans to
24 earn income.
25 PHEAA, it's my understanding, is getting 8
1 back into the loans and business to be able to
2 help additional students here in Pennsylvania.
3 It is a transition that PHEAA is going through.
4 So, Mr. Steeley, I know you are the new
5 CEO. If you could please inform us about this
6 new loan program and also the benefit of it.
7 One of the things I think is a strong point is,
8 it's much lower in percentage in loan than the
9 federal program. So I think that that's a
10 strength that we will be able to offer our
11 Pennsylvania residents.
12 But, also, just what the plans are, how
13 many students we would plan on serving here in
14 Pennsylvania and the benefits of this program.
15 MR. STEELEY: Thank you, Representative
16 DeLozier. So one of the things I'm probably
17 most excited about that PHEAA's currently
18 working on is our new loan program. PHEAA --
19 that's core -- when we created in the early 60s,
20 one of the prime reasons we were created was to
21 finance education.
22 And PHEAA itself has not actually funded
23 a loan in about 11 years. First, it was because
24 of the financial crisis; and then it was because
25 the vehicle that we lent through, the Federal 9
1 Family Education Loan Program, ended in 2010.
2 What's interesting, since 2010, PHEAA
3 has mostly been focused on being a federal
4 servicer and using any earnings to give back to
5 the grant program.
6 What excites me with the loan program,
7 is that it really gets us back to one of the
8 core reasons we were created; and it also helps
9 really expand the audience that benefits from
10 the public service side of PHEAA.
11 If you think about the grant program, I
12 view it pretty much as it's targeted towards
13 lower and middle -- you know, a little bit into
14 the middle-income families in Pennsylvania.
15 The loan program is really focused
16 solely on the middle-income families of
17 Pennsylvania. It is going to be a credit-based
18 program. Unlike the FFELP program, it's not
19 federally guaranteed, meaning PHEAA is going to
20 be exposed to credit risk. That, in turn, means
21 we will have to perform underwriting. But as a
22 result of that, we believe that we will be able
23 to access the capital marks at a relative cost
24 advantage compared to -- and be able to pass
25 that on to loan recipients compared to some of 10
1 the other loan programs out there.
2 REPRESENTATIVE DELOZIER: That means --
3 I'm sorry. That means lower interest rates
4 then?
5 MR. STEELEY: Lower interest rates. And
6 then, also, I'll just compare and contrast it to
7 the Federal Plus Program. So, typically, we
8 always want people to borrow the Stafford
9 options, the subsidized and unsubsidized loans.
10 Those are very cost -- you know, the cost of
11 those programs are excellent.
12 Unfortunately, the caps on those
13 programs -- and those are federal programs --
14 are relatively low. And that's where, when we
15 looked at the environment across Pennsylvania,
16 there was about a $2-billion unmet need. So
17 after people applied for financial aid, borrowed
18 from the federal government through Stafford,
19 they had about a $2-billion funding need.
20 And we see about half of that being
21 filled through the Plus Program. We also see
22 about half of that funded program and half of
23 that being filled through the private sector.
24 Plus Program, the interest rate for the
25 current year is about 7-and-a-half percent. And 11
1 there's, I believe, 4.25 percent origination
2 fees. So 4-and-a-quarter percent right off the
3 top is an origination cost.
4 Our loan program, if we would have
5 floated a municipal issuance this year for the
6 '18-'19 year, we would have been able to be off
7 -- we would have had loans somewhere in the
8 4-percent to 7-percent range, no origination
9 fees.
10 We've built in a half a percentage point
11 discount when students complete their education,
12 when they graduate and another quarter percent
13 discount if they sign up for direct debit ACH.
14 So it's really -- you know, from a benefit to
15 the people of Pennsylvania, we believe it has a
16 high potential to benefit folks particularly in
17 the middle-income group.
18 REPRESENTATIVE DELOZIER: Thank you very
19 much. I know that there's a big gap there,
20 people trying to help their kids or students
21 that are trying to find ways to fund college.
22 So thank you very much. My time has run out.
23 Thank you, Mr. Chairman.
24 MAJORITY CHAIRMAN SAYLOR:
25 Representative Krueger. 12
1 REPRESENTATIVE KRUEGER: Thank you, Mr.
2 Chairman. And thanks so much, folks, for
3 joining us here today.
4 So in the hearing right before this, the
5 Chancellor of the State System of Higher
6 Education pointed out that Pennsylvania is 48th
7 in the country for percentage of funds invested
8 in higher education from the Commonwealth,
9 almost last when we look at other states, and
10 also pointed out that state funds cover about 27
11 percent of the costs, whereas most states on
12 average invest about 54 percent.
13 So we're woefully behind other states in
14 terms of how we're investing in higher
15 education. So we've got a fundamental challenge
16 when it comes to college affordability. And if
17 the state is not investing at a level that
18 competes with other states, then students really
19 have no place to make up the difference than
20 through grants and through the kinds of programs
21 that you offer.
22 So can you talk a little bit about the
23 state grant that's available? How much is the
24 maximum state grant? How often do students
25 actually get the maximum, and how much does that 13
1 cover in terms of the average tuition costs and
2 fees?
3 MS. MCCLOUD: Sure, I'd be happy to talk
4 about that.
5 So the average state grant award is not,
6 you know, obviously, the same for students at
7 all institutions. Our program, as a need-based
8 program, looks both at the need the student
9 shows as measured through their applying for the
10 federal aid and the FAFSA. It also looks at the
11 cost of the institution that they're attending.
12 And so, for this current year, the
13 maximum state grant that a student can receive
14 is $4,123; and that is down from the high-water
15 mark of funding to the students in the program
16 of $4700 student dollars, which occurred during
17 the 2007-2008 academic year.
18 So, interestingly, you were talking
19 about statistics for Pennsylvania. Pennsylvania
20 does rank third in the nation for dollars going
21 to need-based grant programs for students, and
22 we definitely have a high demand for that in the
23 Commonwealth.
24 We also rank in the top 10 states in the
25 number of Pell Grant recipients and Pell Grant 14
1 dollars coming to our students. So there's a
2 significant needy population there that this
3 program is assisting.
4 REPRESENTATIVE KRUEGER: And again, on
5 average, how much does this cover, that maximum
6 grant of $4,123?
7 MR. HENCH: I would say it's roughly
8 about 12.3 percent of every average tuition of
9 fees across all sectors. So we look at all
10 tuition and fees across all the various sectors
11 and then the average state grant against that is
12 about 12.3 percent of that cost.
13 MS. MCCLOUD: And if I could just add?
14 With the Governor's recommended appropriation of
15 10.233 million to the State Grant program,
16 that's projected to cover an average of 10.8
17 percent of the average tuition and fees in the
18 Pennsylvania schools.
19 REPRESENTATIVE KRUEGER: Okay. Great.
20 And how much would the General Assembly need to
21 provide to fully fund the grant formula, and
22 what kind of an impact would that have in
23 average grant amount to students?
24 MS. MCCLOUD: So to fully fund awards at
25 that maximum level that the formula allows for, 15
1 of $4,700, the General Assembly would need to
2 appropriate 394.566 million for 2019-'20; and
3 that would provide students with that maximum
4 award of $4700, which is a little over a
5 thousand dollars more than what students will
6 receive if we receive the appropriation that the
7 Governor is recommending.
8 If we're looking at just trying to
9 maintain the current maximum year award of
10 $4,123, the General Assembly would need to
11 appropriate 347.2 million for '19-'20. So that
12 would keep student awards at that maximum of
13 this current year's award of 4123, and that
14 would be about $460 more than the maximum award
15 of 3663 that students would receive based on the
16 Governor's recommended appropriation.
17 REPRESENTATIVE KRUEGER: And about how
18 many of the students benefit from this program
19 right now?
20 MS. MCCLOUD: So right now, it's about
21 140,000 students, yes; and that is anticipated
22 to drop to about 139,3 for next year.
23 REPRESENTATIVE KRUEGER: Okay. Thank
24 you so much.
25 MAJORITY CHAIRMAN SAYLOR: I wanted to 16
1 recognize, we've also been joined by
2 Representative Mike Jones from York County,
3 who's also here.
4 With that, we'll move on to the next
5 questioner, Representative Jim Struzzi.
6 REPRESENTATIVE STRUZZI: Yes. Thank
7 you, Mr. Chairman.
8 Good afternoon. One of the concerns I
9 have relates to the trade industries. In 2016,
10 Allegheny Conference published a report, the
11 Reflection Point Study, which showed there would
12 be a shortage in the trades of about 80,000
13 workers in the next five years.
14 Obviously, we're approaching that
15 five-year window. And my question then relates
16 to the Targeted Industry Cluster Certificate
17 Program.
18 You know, I've seen it firsthand. I'm a
19 member of the Tri-county Workforce Investment
20 Board. I'm also a previous Chamber of Commerce
21 president. I need to know that in order to
22 attract businesses to Pennsylvania we have to
23 have a workforce. I'm seeing employers right
24 now struggling to find people who will fill
25 these jobs; like welders, like electricians, 17
1 plumbers. So in the previous year, you know, $6
2 million was put into the fund. So I'm curious
3 to know, you know, how is that fund performing?
4 You know, how many students have you been able
5 to address?
6 And looking ahead, is 6.3 million in the
7 next budget, is that going to be enough to fully
8 address the workforce needs we have here across
9 the Commonwealth?
10 MS. MCCLOUD: I'd be happy to address
11 that.
12 MR. HENCH: Representative, just great
13 question; and thank you for the opportunity to
14 respond.
15 So the Governor did recommend a $300,000
16 increase, 6.3 million for that program. Right
17 now, how the Legislature framed that program
18 that has legislative authority passed by the
19 General Assembly, was to really identify key
20 areas of high occupation need that gets to the
21 Allegheny Report that you were referencing.
22 And so there's three areas right
23 now: Energy, advanced material diverse
24 manufacturing, agriculture, specific to food
25 production; so those are the three buckets. And 18
1 then what PHEAA does, is we partner with PDE and
2 Labor & Industry to back into programs of study
3 that will yield a qualified candidate for
4 employment.
5 So we've been looking at that program.
6 It's been a few years since we've looked at
7 those three buckets. Right now, we are spending
8 the full allocation of 6 million; so it is
9 anticipated that we will be able to spend the
10 6.3 million with the increase encumbered into
11 that.
12 However, we probably should be looking
13 at those three areas and see if they're still
14 other areas of high occupation need that we
15 should venture into.
16 REPRESENTATIVE STRUZZI: Right. And how
17 many students does that address?
18 MR. HENCH: Go ahead.
19 MS. MCCLOUD: The annual recipient count
20 is around 1700 to 1800 students.
21 REPRESENTATIVE STRUZZI: Does that fully
22 fund their education, or does that just get them
23 started down the path?
24 MS. MCCLOUD: That can match up to 75
25 percent of their costs, minus other gift aid. 19
1 REPRESENTATIVE STRUZZI: And you
2 mentioned that was in clusters. Is that
3 geographical clusters or areas, or just --
4 MS. MCCLOUD: The clusters are the
5 workforce need clusters, yes.
6 REPRESENTATIVE STRUZZI: Okay. Okay.
7 Do you see that? Is there a need for additional
8 funding in that regard? Because I really do see
9 that, you know, as a fundamental concern moving
10 forward. We could lose businesses if we don't
11 have the workforce.
12 MR. HENCH: If the money is
13 appropriated, we'll find ways to spend it. One
14 area --
15 REPRESENTATIVE STRUZZI: For sure.
16 MR. HENCH: -- for career advancement --
17 and not to be just about that -- some of the
18 stakeholders have been talking about the need in
19 the medical field for not registered nurses, but
20 other phlebotomist certificate programs the
21 hospitals need; so that might be an area that we
22 could venture into.
23 REPRESENTATIVE STRUZZI: Maybe I'll
24 phrase that a different way then. But were you
25 turning students away that applied for this? 20
1 MS. MCCLOUD: Yes.
2 REPRESENTATIVE STRUZZI: You are. Okay.
3 Okay. Thank you.
4 MAJORITY CHAIRMAN SAYLOR:
5 Representative Kinsey.
6 REPRESENTATIVE KINSEY: Thank you, Mr.
7 Chairman.
8 Good afternoon. I'm scrolling through
9 my phone, and I'm reading here; it says, the --
10 okay, let me find it. I just lost it. I found
11 it. All right. Basically, the article talks
12 about -- I want to talk about student debt for a
13 second.
14 And the article that I'm looking through
15 states that Pennsylvania ranks number 2 in
16 regard to college graduates and the debt that
17 they owe to pay for college.
18 And, Mr. Steeley, I think I heard you
19 mention some -- you spoke a little bit earlier
20 about some of the discounts, or someone
21 mentioned some of the discounts that are given,
22 and then referenced middle-income groups.
23 So I guess my question relates to, Is
24 there anything that PHEAA's doing -- and I
25 recognize that we went from loaning and 21
1 servicing and maybe back to loaning again. But
2 is there anything that PHEAA's doing to educate
3 college students as it relates to debt and
4 costs? Just so, that way, when they graduate,
5 they're not just simply using, you know, their
6 income to pay back student loan, but also to
7 have thriving lives.
8 So is there something that PHEAA's doing
9 to educate individuals as they apply and take
10 out these loans or as you're servicing the loans
11 that exists?
12 MR. STEELEY: There's actually quite a
13 lot that we actually try to do in that regard.
14 Both in Pennsylvania, and because we service
15 nationally, we make some resources available
16 nationally as well, as it relates to the
17 servicing business.
18 We have a couple of resources available
19 that we try to encourage high school students to
20 take advantage of. For instance, we have some
21 websites where students can actually go in, they
22 can actually put in their intended major,
23 college that they hope to go to, some other
24 information and then information such as the
25 geography that they hope to live upon when they 22
1 graduate. So we'd be able to theoretically say
2 that -- and it produces some pro forma
3 calculations so that a student would be able to
4 see that if they're a nursing student, they want
5 to live in Philadelphia after they graduate,
6 they're going to this school, this is the amount
7 of debt that they are going to take on, this is
8 going to be their estimated income based on
9 statistical data; and they can see the percent
10 that their repayment amount will be of their
11 income. So we try to provide resources on the
12 front end.
13 We actually devote a lot of energy,
14 particularly in Pennsylvania, in that regard.
15 We have high school access partners that travel
16 the states. We joke they live out of their
17 Chevy Impalas. They go to financial aid nights
18 all over the state at high schools.
19 So we try to put as much information
20 into the hands of rising -- you know, seniors
21 rising into the college ranks as we're able to.
22 Then once people are out of school, we have a
23 number of tools to try to help them responsibly
24 manage their debt.
25 We have a website, and this we promote 23
1 nationally, You Can Deal With It dot com -- or
2 dot org. That basically provides useful tips on
3 how to repay their student loan debt.
4 One of the things that we are very
5 cognizant of, we are very cognizant of the fact
6 that we have the second highest debt per student
7 graduating throughout the country.
8 So as we designed our own loan program,
9 we really did not want to make that situation
10 worse. We actually want to use the loan program
11 to try to make that situation better. And we're
12 going to do that in a couple of ways.
13 First, there's a group that we're part
14 of, the National Education Finance Council, that
15 has a guide that they publish annually for state
16 agencies to use; and it's basically a guide to
17 develop a responsible state-based loan program.
18 So we use that as our starting point.
19 We're trying to incorporate education
20 into the actual application process to force
21 recipients to actually take some sort of online
22 tutorial to make sure that they understand that
23 they are signing up for debt and they understand
24 the repayment obligations.
25 And then what we're really trying to do 24
1 is try to promote and teach responsible behavior
2 early on in the life cycle of the student loan,
3 even when they're in college.
4 For instance, if you can get folks in
5 the habit of paying a small amount while they're
6 in school, even if it's just 10 or $20, while
7 that might not be covering the interest that's
8 accruing on the loan, it develops that
9 responsible financial habit and it also helps
10 minimize the amount of interest that's accruing.
11 REPRESENTATIVE KINSEY: Mr. Steeley, my
12 time is almost running out; so let me see if I
13 can just squeeze this in really quick. Maybe
14 the Chairman would be so kind.
15 You talked about, I guess, educating
16 recent graduates. And so what about for some of
17 the older graduates who may have graduated years
18 ago when they were young, raised a family,
19 didn't have an opportunity nor the finances to
20 contribute back; so now they're being -- I don't
21 want to say punished -- but their loan amount
22 due is a large amount based on, you know,
23 interest and so forth on.
24 How do make that information available
25 to those folks, as well? That's one question. 25
1 Then the second question is, How do we reach out
2 to low-income families to ascertain them as
3 well?
4 I know there's Act 101. I just want to
5 know, how do we promote that information? And,
6 Mr. Chairman, I don't know -- maybe I can come
7 back in a second round.
8 Mr. Chairman's okaying for you to answer
9 that. So I tried to pack in a lot there,
10 Mr. Steeley. Older folks who have student debt,
11 you know, we don't want to take all their income
12 away. So how do we address that?
13 And then, secondly, how do we also reach
14 out to low-income families to educate them on
15 maybe some of the special programs like Act 101
16 that they can take advantage of?
17 MR. HENCH: So specific to the
18 counseling of borrowers, I would probably speak
19 to our servicing activities; and we work with
20 many lenders, including the federal government.
21 So those are the holders of the loans that we
22 service on behalf.
23 And so through our customer call
24 centers, as borrowers call in and they have
25 trouble making those payments, we try to counsel 26
1 them to the right repayment plan that might best
2 fit their --
3 REPRESENTATIVE KINSEY: Are those the
4 older adults that we're talking about?
5 MR. HENCH: Those adults who have either
6 graduated or have stepped out of their higher-ed
7 career and then they have to repay those loans.
8 Now, we only have that for the portfolio of
9 the loans that we service. And then the second
10 question, I believe, you were looking for --
11 REPRESENTATIVE KINSEY: Low income.
12 MR. HENCH: So the Act 101 program is a
13 great program. We have about 30 schools that we
14 partner with across the Commonwealth. As they
15 identify disadvantaged students that they're
16 enrolling, those programs provide a safety
17 network.
18 And then as Mr. Steeley mentioned,
19 through our access partners, we also held about
20 3,000 different events across the Commonwealth,
21 where we reach about 75,000 different students.
22 Now, mostly those students are going K through
23 12 directly into their higher-ed career and
24 trying to educate them mapping, as Mr. Steeley
25 mentioned, about the My Smart Borrowing tool. 27
1 You know, if you want to have a particular
2 profession, and mapping the anticipated college
3 debt that you might incur at the institution
4 where you want to enroll into, to see if your
5 career will actually be able to support that
6 debt level.
7 REPRESENTATIVE KINSEY: Okay. Thank
8 you.
9 And, Mr. Chairman, if there's an
10 opportunity, I'd like to come back and address a
11 few other question, if possible.
12 Thank you.
13 MAJORITY CHAIRMAN SAYLOR:
14 Representative Hahn.
15 REPRESENTATIVE HAHN: Thank you, Mr.
16 Chairman.
17 Good afternoon. How are you today? To
18 qualify for the student grant program, the
19 student has to be in a postsecondary setting,
20 correct? And I'm assuming that includes
21 community colleges, universities, what we
22 usually think of as a four-year college.
23 Are there any other postsecondary
24 education or schools that they can go to that
25 they would qualify for? 28
1 MS. MCCLOUD: Yes, I think that is one
2 of the strengths of Pennsylvania's need-based
3 grant program is that it is available to
4 students and the money goes with the students to
5 any state-grant approved institution, which
6 includes not only the State System schools, our
7 state-related universities, the many private
8 colleges and universities across the
9 Commonwealth, but also the many business, trade,
10 and technical schools throughout the
11 Commonwealth.
12 State grants can go with students to any
13 program that's two years in length or more, and
14 so it can go to students for associate degree
15 programs and some of those --
16 REPRESENTATIVE HAHN: Nursing, you don't
17 have to go get your BSN? You can go to --
18 MS. MCCLOUD: Yes. And we do have
19 nursing schools participating in the state grant
20 program, as well.
21 REPRESENTATIVE HAHN: Are there any
22 post-secondary schools that don't qualify?
23 MS. MCCLOUD: There are schools that do
24 not qualify for the state grant program at this
25 time. As a grouping of schools, the cosmetology 29
1 sector would not be eligible and there are just
2 some general requirements for schools to be
3 eligible, such as being accredited by a United
4 States Department of Education accreditor, you
5 know, having some of those benchmarks that are
6 nationally recognized for educational
7 institutions.
8 We also limit some of the funding,
9 particularly for students enrolled online to
10 schools that are headquartered and domiciled in
11 Pennsylvania, as opposed to --
12 REPRESENTATIVE HAHN: Are some of the
13 technical schools not accredited?
14 MS. MCCLOUD: I can't give you
15 specifics. I could look into that and get back
16 to you on non-accredited schools in
17 Pennsylvania, since I'm focusing primarily on
18 administrating the state grant program.
19 REPRESENTATIVE HAHN: I think when we
20 look at the workforce, you know, somebody wants
21 to become a welder; or, you know, we have a lot
22 of need, especially in my area, a need for truck
23 drivers. So I know community college has a
24 program. I'm not sure if that program qualifies
25 for a grant because of the length of time of the 30
1 program. Is that --
2 MS. MCCLOUD: Yeah, there are some
3 certificate and diploma programs that qualify,
4 as well, and programs that don't qualify.
5 REPRESENTATIVE HAHN: Through community
6 colleges or in other --
7 MS. MCCLOUD: In both.
8 REPRESENTATIVE HAHN: In both.
9 MS. MCCLOUD: In both community colleges
10 and in the business, trade, and technical
11 sector. And programs that don't qualify for the
12 Pennsylvania state grant program are oftentimes
13 eligible for the PA-TIP Program. The PA-TIP
14 Program is specifically funding that goes to
15 students enrolled in programs that are from 10
16 weeks to two years in length.
17 REPRESENTATIVE HAHN: So you had talked
18 about high school students. So some high school
19 students are taking college classes. They have
20 like a dual enrollment. Do they qualify at that
21 point for a grant?
22 MS. MCCLOUD: They would not. They
23 would need to be a degree-seeking student who
24 has completed their high school credential.
25 REPRESENTATIVE HAHN: They have to have 31
1 their high school credentials first. Okay.
2 If we would expand to include some of
3 those technical schools because of workforce
4 development, what are some of the options, I
5 guess, or pitfalls with expanding that program
6 and picking up other programs, other schools?
7 MS. MCCLOUD: Well, I can tell you that
8 we work with schools on a regular basis as
9 they're introducing new programs to evaluate
10 eligibility within the current statute and
11 regulatory requirements of the state grant
12 program and are consistently funding new
13 programs as schools introduce programs that meet
14 those criteria.
15 And then within the PA-TIP Program, as
16 well, schools are able to request that new
17 programs of study be added to the list of
18 approved programs; and that happens on a yearly
19 basis.
20 REPRESENTATIVE HAHN: Okay. Do you have
21 a breakdown of what percent of grants would go
22 to community colleges or the four-year colleges,
23 universities, trade schools? Do you have a
24 breakdown of that?
25 MS. MCCLOUD: We do have all of that 32
1 available, and that's available publically
2 through our website on an annual basis and --
3 REPRESENTATIVE HAHN: Can you share that
4 with us?
5 MS. MCCLOUD: Absolutely. Yes.
6 REPRESENTATIVE HAHN: Okay. Thank you.
7 Thank you, Mr. Chairman.
8 MAJORITY CHAIRMAN SAYLOR:
9 Representative Cephas.
10 REPRESENTATIVE CEPHAS: Thank you, Mr.
11 Chairman. So I have a quick question in
12 reference to, you mentioned you are a part of a
13 national collaborative around education
14 financing council. You mentioned that.
15 Are there any best practices that other
16 states are considering when it comes to creating
17 like loan forgiveness programs? So I know,
18 currently under -- on the federal level, we have
19 that forgiveness program.
20 Are there any other best practices that
21 kind of mirror them in that approach in making
22 college more affordable?
23 MR. STEELEY: At the state level, I'm
24 not familiar offhand with any state-based loan
25 forgiveness programs. I know there are some new 33
1 proposals out there. I believe New Jersey is
2 floating an idea, and I believe also the State
3 of Washington is floating an idea where,
4 actually, they would use state funding to
5 actually subsidize some of the interest and
6 other costs of state-based loans. But in terms
7 of a state-based loan forgiveness program, I'm
8 not aware of any.
9 As you noted, there are programs at the
10 federal level. We actually are, through our
11 servicing contract, the administrator of the
12 public service loan forgiveness program. And we
13 administer a Teach Grant Program for the US
14 Department of Education. Those are both
15 national programs.
16 REPRESENTATIVE CEPHAS: Thank you.
17 MAJORITY CHAIRMAN SAYLOR:
18 Representative Owlett.
19 REPRESENTATIVE OWLETT: Thank you for
20 your time today. And I have just a couple of
21 quick questions on online education. With Act
22 5, what types of restrictions has PHEAA placed
23 on distance education and awards; and how long
24 might that be necessary with online becoming a
25 very important need, especially in rural 34
1 communities? How does PHEAA see that going?
2 MR. HENCH: Sure. Thank you.
3 So Act 5 did fully integrate distance
4 education into the Pennsylvania State Grant
5 program. Prior to that integration, there was a
6 5-year pilot program that really formed that
7 decision.
8 The PHEAA Board of Directors, in the
9 legislation that was passed, was empowered that
10 they could contain the costs of full DE
11 integration. What we call integration from that
12 50 percent up to a hundred percent of online
13 education.
14 So the Board did decide to limit that.
15 They placed an aggregate dollar amount of around
16 $14 million, and that basically cut that -- as
17 Mrs. McCloud spoke about the maximum award of
18 4123, cut that award in half, of those DE
19 students that enrolled beyond 50 percent in
20 distance education per semester.
21 REPRESENTATIVE OWLETT: So if a student
22 goes below that 50 percent even while being
23 located at a state university, what happens to
24 their PHEAA grant from there?
25 MR. HENCH: So if they were below 50 35
1 percent, if they're a 100-percent traditional
2 student, they would get the full maximum state
3 grant award.
4 REPRESENTATIVE OWLETT: So if a
5 student's enrolled at Mansfield University and
6 we start this sharing system and they all of a
7 sudden are taking, you know, 60 percent of their
8 classes online and 40 percent actually in the
9 classroom at the university, they would be able
10 to hold a hundred percent of their PHEAA grant?
11 MS. HENCH: If they're over 50 percent
12 online right now in this current academic year,
13 they would receive a reduced state grant.
14 REPRESENTATIVE OWLETT: So would you see
15 a fix needed soon for that, with the importance
16 of online education?
17 MR. HENCH: I think it's a great
18 conversation that the PHEAA Board of Directors
19 is going to have as they go into building the
20 formula for '19-'20; and we have received
21 feedback that that has definitely driven
22 behavior at the student level of, you know,
23 stepping back into that traditional classroom;
24 and maybe that will limit students not to be
25 able to graduate on time because they can't get 36
1 all the classes. And it's a conversation that
2 we've had with the Chancellor, as well, as they
3 are looking at modernizing their system and
4 moving to more of a DE format. There's going to
5 be more pressure points for distance education
6 funding.
7 REPRESENTATIVE OWLETT: Well, that was
8 my point. I heard the testimony earlier and was
9 able to ask that question. I could see this
10 becoming more of an issue, and it came up in my
11 district. I had a student that lost his funding
12 because he's enrolled in the university, but he
13 started taking an extra class that was online,
14 and that put him below and he lost his grant.
15 So I hate to see that happen, you know,
16 to a lot of students, any students, you know,
17 especially if we move into this system where we
18 are really sharing online resources and
19 resources in our state universities.
20 It's going to be important to look at
21 this, and I appreciate any additional
22 information and being involved in that
23 conversation.
24 Thanks.
25 MAJORITY CHAIRMAN SAYLOR: 37
1 Representative Gabler.
2 REPRESENTATIVE GABLER: Thank you, Mr.
3 Chairman; and I'm over here (indicating).
4 I appreciate the opportunity to ask a
5 couple questions. I wanted to understand a
6 little bit better some of the responsibilities
7 that PHEAA has in relation to the national loan
8 servicing functions that you provide.
9 And, specifically, it's my understanding
10 that the Federal Public Service Loan Forgiveness
11 Program is exclusively serviced by FedLoan
12 Servicing, which would be under your operations,
13 correct?
14 I know there's been some concerns that
15 have been expressed nationwide about some
16 problems with students receiving bad advice --
17 or not students, rather, but student loan
18 recipients receiving bad advice from their
19 servicers pertaining to qualifications for the
20 program.
21 And being that this program involves
22 people making life choices for ten years of
23 their adult life, could you maybe detail to the
24 Committee what actions are being taken to make
25 sure that going forward, the Public Service Loan 38
1 Forgiveness Program is serviced in a way that
2 these loan recipients need?
3 MR. STEELEY: Thank you, Representative.
4 Couple of comments, broadly, I think initially
5 asked about the scope of our federal servicing.
6 We received a federal servicing contract
7 in 2009 from the US Department of Education
8 while they were in the early stages of
9 developing and launching the direct loan program
10 and also our purchasing large portfolios of
11 student loans to maintain market liquidity after
12 the financial crisis.
13 So that's when we first entered the
14 federal student loan marketplace. We directly
15 actually service about 7.4 million borrowers for
16 the US Department of Education, representing
17 approximately 320 billion in assets owned by the
18 US Government.
19 So probably about 20 percent of all the
20 federal direct loans in the United States are
21 serviced by FedLoan Servicing, which, in
22 essence, is just a brand name that PHEAA uses.
23 With respect to the actual program of
24 Public Service Loan Forgiveness, you know, I
25 think it's a program that honestly if we had a 39
1 time machine and could appropriately assess the
2 reputation risks that came with the program back
3 when we became the sole servicer in 2013, we
4 would not have added that to our contract
5 because of the litigation and other reputational
6 challenges with that program.
7 I will stress that, oftentimes, what you
8 read in the media is a little distortive; and
9 even some of the consumer groups that talk about
10 the program, you're getting one side of the
11 story.
12 For instance, one of the stats that's
13 commonly referred to where there must be a
14 servicer problem is the high amount of
15 rejections.
16 Well, one of the basic requirements of
17 the program is that borrowers have to be in
18 repayment for ten years; and they have to be in
19 a particular repayment plan.
20 A lot of the repayment plans they need
21 to be in didn't come into existence until 2011,
22 so they need to be in the repayment plan making
23 120 monthly payments under a repayment plan that
24 didn't exist ten years ago.
25 So a majority of folks applying right 40
1 off the bat are not eligible simply because they
2 have not met the time requirements. That's
3 something that's not widely understood in the
4 media. It's not widely understood on the
5 consumer group side.
6 There are a number of program flaws. As
7 a servicer, we see some of them firsthand. We
8 do actively encourage the US Department of
9 Education to the extent that, you know, we mine
10 the complaints, to the extent that there's
11 something that seems fundamentally wrong from a
12 policy perspective, we percolate that back up to
13 the Department, and sometimes they're able to
14 make changes. Sometimes they're not able to
15 make changes because of the way the
16 congressional legislation was written for that
17 program in 2007.
18 And in some cases, actually one of the
19 good stories, is that there was a Congressional
20 fix that fixed some of the issues with PSLF in
21 the most recent federal budget cycle.
22 There was a new program called Temporary
23 Expanded Public Service Loan Forgiveness. That
24 was announced, I believe, in the spring time
25 frame. We began to process applications for it 41
1 in the August/September time frame. Again,
2 because of the 10-year requirements, you know,
3 there's not a lot of people eligible yet but --
4 REPRESENTATIVE OWLETT: And, sir, if I
5 could? My time -- I see I'm down to 30 seconds.
6 But, specifically, the concern that I have is
7 that I have heard a number of cases where
8 individual loan recipients have received bad
9 advice from their servicer from the person on
10 the other end of the line that they're working
11 with as far as them being told they were in the
12 right program when, in fact, they weren't.
13 Could you address any internal education
14 that you've done with your servicers to make
15 sure that that advice is correct going forward?
16 MR. STEELEY: Actually, one of the
17 biggest problems with the program is, until the
18 loans are transferred to FedLoan Servicing,
19 they're often handled by another servicer who's
20 not familiar with the program.
21 So, oftentimes -- you know, I won't say
22 that PHEAA never gives bad advice. You know,
23 with 7-and-a-half million borrowers, we make
24 mistakes; everyone makes mistakes; but at least
25 with PSLF, we have a dedicated split with people 42
1 that all they do, day in and day out, is work
2 with that program.
3 But if a borrower is at another servicer
4 and they call and ask a question, that
5 servicer's not going to have the expertise to
6 necessarily answer the question. That's the
7 actual issue that Temporary Expanded PSLF was
8 aimed to solve, borrowers that were told by
9 their servicers that they were on the right
10 repayment plan, only to move to FedLoan
11 Servicing, we go to look at their payment
12 history, realized they were not in the right
13 repayment plan. That's really the cases that
14 Temporary Expanded PSLF is aimed at addressing.
15 REPRESENTATIVE OWLETT: And I appreciate
16 that, and I realize I'm almost out of time.
17 Just one comment: I would say, going forward, I
18 think it would be helpful for us to continue to
19 assess this program as we're coming into this
20 10-year period to make sure that we're meeting
21 the marks to service the people that have made
22 life decisions in that program in the way that
23 they deserve.
24 Thank you.
25 MAJORITY CHAIRMAN SAYLOR: 43
1 Representative Kim.
2 REPRESENTATIVE KIM: Good afternoon.
3 Being the State Rep in Harrisburg, I am assuming
4 I have a lot of constituents who are working for
5 PHEAA.
6 Could you tell me what the complement
7 is right now, and has that changed over the past
8 couple of years?
9 MR. STEELEY: Right now, we're about
10 2900 employees, the bulk of which are located in
11 the Harrisburg area. We do have some smaller
12 call centers scattered around the state.
13 REPRESENTATIVE KIM: Okay.
14 MR. STEELEY: And I believe we're down,
15 you know, about -- a little over a year ago, we
16 were probably 475 employees higher than we
17 currently are today.
18 REPRESENTATIVE KIM: Okay. What is your
19 turnover rate like, in terms of, I guess, the
20 callers or the ones who deal with your clients?
21 MR. STEELEY: So it really varies by
22 staff, class, and level of staff. If you focus
23 on the call centers themselves, typically, we
24 have two groups of people in our call center.
25 We have a temporary wage population, and our 44
1 turnover rate for the temporary wage employees
2 is very high. Typically, we will go through an
3 entire -- basically, about a hundred percent
4 within a year. Actually, probably a little
5 higher than that.
6 And then with the traditional call
7 center staff that are unionized, essentially, we
8 lose a quarter of them every year. So
9 basically, over a 4-year cycle, we've turned
10 over our entire call center staff.
11 REPRESENTATIVE KIM: Okay. So that's
12 not good, in terms of experience and being more
13 helpful to the students.
14 MR. STEELEY: So just one comment on
15 that. I think -- it's a difficult job to be on
16 the phone with borrowers day in and day out.
17 People typically aren't calling us to thank us
18 for collecting their student loan payment;
19 they're calling us because they're angry about
20 something, they're having a hardship.
21 There are some reps who find it very
22 rewarding to help others through those hardship
23 situations. But that does begin to take an
24 emotional toll. And, you know, quite frankly, a
25 large component of our compensation is weighted 45
1 towards benefits. And, typically, the people
2 working in the call centers value a higher pay
3 amount more than, you know, necessarily that
4 they get to participate in the state retirement
5 plan.
6 The reality is, they don't stay long
7 enough to vest in that. So that is something
8 that we're looking at, because we do want to
9 improve the retention and we do also want to
10 improve the employee satisfaction.
11 REPRESENTATIVE KIM: What kind of
12 measures have you made to keep the retention
13 or --
14 MR. STEELEY: So one of the things we
15 looked at about a year ago when we did our -- we
16 really took a holistic look at our strategy for
17 the first time in about a decade, since coming
18 out of the financial crisis.
19 We looked at both borrower satisfaction,
20 which we did not fair well compared to some of
21 our peers; and we looked at employee
22 satisfaction.
23 Now, we didn't have great employee data;
24 but, you know, what we were able to look at
25 indicated that there was a sizeable gap between 46
1 ourselves, Nelnet, Great Lakes, and Navient. So
2 one of the things, and one of my priorities
3 since I became the Chief Operating Officer about
4 a year ago and then became the interim CEO and
5 now the permanent CEO, is to improve our
6 employee engagement.
7 We found that there's a lot of things
8 that we can do at very little cost or no cost to
9 really get our employees engaged. And we
10 really, in rolling out our strategy, one of the
11 keys to engagement was, was to really make sure
12 the employees understood the strategy.
13 We really centered it around three
14 themes: give, grow, and transform. And we're
15 really trying to tie that no matter what you do
16 in the Agency, you can have a positive impact
17 and support our public service mission of giving
18 back to Pennsylvania.
19 So we're doing a lot of things like that
20 to really try to improve the employee morale,
21 employee engagement. We're seeing some early
22 results, but we're setting up surveys that will
23 give us more statistical information as to
24 whether or not we're really making the right
25 progress. 47
1 REPRESENTATIVE KIM: I appreciate your
2 efforts. And then I'm just going to pivot.
3 Just because there's a trend where students are
4 taking longer to graduate; and I'm just
5 wondering how does that affect your institution,
6 if at all?
7 MR. STEELEY: You know, it's certainly
8 -- I don't know that it directly impacts PHEAA
9 from a servicing perspective, but it certainly
10 has an indirect impact; because that's one of
11 the key things that's really driving student
12 loan debt. The longer it takes to graduate, the
13 more debt that a student's going to incur while
14 they're in school and it really -- you know, if
15 you think about the impact of an additional year
16 of tuition and the number of years that it will
17 take to repay that additional year of tuition if
18 you're borrowing to meet it, it has a
19 significant impact on the customers we serve.
20 REPRESENTATIVE KIM: Okay. Thank you.
21 Thank you for your answers.
22 MAJORITY CHAIRMAN SAYLOR:
23 Representative Ortitay.
24 REPRESENTATIVE ORTITAY: Thank you, Mr.
25 Chairman. I want to talk about the funds from 48
1 your operation. In the last budget year, you
2 were able to put in a little over $101 million.
3 And this year in the Governor's budget proposal,
4 it's projected to be $58 million. However, in
5 your testimony on page 3, you state that that's
6 not possible.
7 So I guess I'll ask a couple of
8 questions; and I'll start with, What's changed
9 that you were able to do a hundred million last
10 year and why can't you do the same this year?
11 MR. STEELEY: So a couple of comments.
12 First, PHEAA's been providing funds to
13 supplement the State Grant Program for about 15
14 years. The initial intent, and this long
15 predates me, I've only worked at PHEAA for about
16 three years, the initial intent was, in essence,
17 a portion of our earnings would be, in effect, a
18 bonus for students. So that if they're going to
19 get 4100 and PHEAA had a good year financially
20 from an operating income perspective, maybe they
21 get 4500.
22 But what's happened over the last 15
23 years, instead of the PHEAA earnings being a
24 supplement or it actually ended up replacing
25 state funding, the state funding has gone down 49
1 dramatically over the last 15 years; and
2 basically, PHEAA's been plugging a hole to help
3 keep and preserve as much grant dollars going to
4 students as possible.
5 REPRESENTATIVE ORTITAY: So is PHEAA
6 able to provide any money to that line this
7 year?
8 MR. STEELEY: So, ultimately, that's
9 going to be a discussion point for our Board of
10 Directors. But what we've really seen in recent
11 budget cycles is that it's actually gone well
12 beyond taking PHEAA's earnings and supplementing
13 the grant program.
14 Particularly in the four most recent
15 budget cycles, PHEAA, for the grant program and
16 other programs, contributed, I believe, $464
17 million, in cash, to the state's public service
18 program.
19 REPRESENTATIVE ORTITAY: Well, that's
20 all well, and I don't mean to interrupt since we
21 have a limited time here. But if the Governor
22 and the budget office is saying $58 million, I
23 mean, you're not telling me whether you can give
24 anything at all; and I would tend to think if
25 we're at zero, we're at zero, that we're going 50
1 to see a drop-off. What's the disconnect with
2 the budget office?
3 MR. STEELEY: So the key as to why the
4 change is, we've provided 64 million in the most
5 recent four budget cycles. We've only actually
6 earned about 190 million over those four years.
7 So basically what we've done is taken 275
8 million out of our reserves.
9 REPRESENTATIVE ORTITAY: So what's left
10 in your reserves after doing that?
11 MR. STEELEY: So we think we're going to
12 end the year somewhere between 350 and 400
13 million in cash reserves.
14 REPRESENTATIVE ORTITAY: Are you
15 required to keep a certain amount in reserve for
16 federal standards or guidelines?
17 MR. STEELEY: We are. And basically
18 what we're left with is about 6 months of
19 operating income and also enough to pay current
20 liabilities. And you think about why that's
21 critical, it's because all of our cash is tied
22 to the federal government in some respect.
23 We got lucky with the most recent
24 government shutdown. The Department of
25 Education was funded through 9/30. I don't know 51
1 how we got that lucky, but we did. So we really
2 weren't impacted by the most recent federal
3 shutdown. But as a prudent measure, we try to
4 keep six months of cash, liquid cash reserves on
5 hand.
6 REPRESENTATIVE ORTITAY: Well, it's
7 beneficial for us, at least on this Committee
8 when we're crafting the budget, to know how much
9 you can contribute. If you can't, it would be
10 nice to know that sooner, rather than June 29th.
11 MR. STEELEY: I mean, our position is,
12 basically, we're down to the floor as to where
13 we should be, from a reserve and liquidity
14 perspective.
15 I mean, ultimately, it's the Board of
16 Directors' call as to how much they want to dip
17 into reserves. But we're going to finish the
18 year with our cash reserves equalling about 9 to
19 10 basis points of our servicing assets. Not 9
20 to 10 percent, 9 to 10 basis points.
21 REPRESENTATIVE ORTITAY: Okay.
22 MR. STEELEY: So that's a very thin
23 level.
24 REPRESENTATIVE ORTITAY: Okay. So
25 without the $58 million, we're looking at $310 52
1 million in total. And earlier you were asked
2 what the total would be to fully fund it, which
3 I believe you said around 395 million in total.
4 So we would be about $85 million short of the
5 fully funded for that maximum award, correct?
6 MS. MCCLOUD: For the maximum award,
7 yes. If we're trying to maintain this year's
8 award levels, we would need 347.227.
9 REPRESENTATIVE ORTITAY: Okay. Thank
10 you, Mr. Chairman.
11 MAJORITY CHAIRMAN SAYLOR:
12 Representative McCarter.
13 REPRESENTATIVE MCCARTER: Thank you very
14 much, Mr. Chairman. And thank you, Mr. Steeley,
15 for being here today.
16 I just wanted to touch real quickly on
17 the Act 101 Program. In the budget, we see that
18 there's a 5-percent allocation that is an
19 increase for the first time in a number of
20 years.
21 And I've had some, you know, very
22 interesting experiences with the students that
23 have gone through part of that program at
24 Arcadia University; and I've been very, very
25 impressed how that program has really helped so 53
1 many students. And I know their statistics are
2 just phenomenal in terms of what's happened.
3 And this is the first time we've seen
4 this increase now in a number of years for a
5 program that was much more funded in the past,
6 significantly so.
7 And I'm curious as to a couple of
8 things. If you could speak to what you've seen
9 in the program and its success and at the same
10 time how these new funds that are going to be
11 appropriated, hopefully, in the budget, will be
12 used, whether that's an expansion of programs or
13 whether, in fact, that is just going to the
14 existing programs for more money there.
15 MR. HENCH: Act 101 is one of the most
16 important programs, in my mind, that PHEAA
17 administers. I was a student at Harrisburg Area
18 Community College, and I participated in the Act
19 101 program, not as a beneficiary but as a
20 mentor for students; so you're tugging on some
21 heartstrings here for me.
22 But the program was better funded, more
23 fully funded; and it did receive cuts over the
24 years. I think it was closer to 9 or 10 million
25 at the high-water mark, and that's just off the 54
1 top of my head.
2 In addition to that, as the program
3 funding declined, a lot of schools and programs
4 backed away from it and didn't want to partner
5 in the Act 101 program because the dollars
6 weren't meaningful enough; so I really have to
7 applaud the institutions.
8 There's about 32 programs that we
9 partner with right now that while they're
10 enjoying a small share of the current
11 appropriation, the institutions are still
12 probably funding 80 to 90 percent of the total
13 cost of their Act 101 program; and so this money
14 will really go to great use if we do realize the
15 increase in the state appropriation, to
16 hopefully expand that program for the existing
17 participants that maybe pull in more schools.
18 REPRESENTATIVE MCCARTER: So if I
19 understand correctly then, you don't anticipate
20 that new programs will developed as a result of
21 this, that most of it will go to the existing;
22 because again, we don't have the funding to be
23 able to expand the program?
24 MR. MCCLOUD: I would say it's likely
25 going to the existing programs and allowing 55
1 those institutions to provide more robust
2 services to their existing student population
3 and potentially bring additional students into
4 their Act 101 programs.
5 However, institutions always have the
6 opportunity to apply to participate in the Act
7 101 program.
8 REPRESENTATIVE MCCARTER: And I think we
9 heard earlier today, you know, a passion plea
10 and a passion plea for trying to help Latino
11 students and others within the higher-education
12 field, inject more students into the PASSHE
13 program.
14 Well, I think the same goes no matter
15 where that is, whether it's private institutions
16 or whatever the case may be. Of the schools
17 that have the opportunity to do that, this is a
18 program that helps with them significantly; so I
19 would hope we would look at that again and more
20 carefully.
21 Thank you. Thank you, Mr. Chairman.
22 MAJORITY CHAIRMAN SAYLOR:
23 Representative James.
24 REPRESENTATIVE JAMES: Thank you, Mr.
25 Chairman. Thank you for your testimony today, 56
1 gentlemen and lady.
2 You have a -- I just want to ask kind of
3 a multiple-choice question. You have an
4 interestingly entitled program called, Targeted
5 Industry Cluster Certificate Program. That's a
6 mouthful. And I think you referenced the PA-TIP
7 issue a littler earlier in your testimony.
8 I wonder if you could expand briefly
9 about the scope of the project and what is the
10 level of demand that you're experiencing?
11 MS. MCCLOUD: Sure. So the PA-TIP
12 Program addresses the need in Pennsylvania for a
13 growing group of skilled workers to occupy
14 positions in high-demand industries. And as I
15 mentioned earlier, funding to these students
16 goes with them to programs that are from 10
17 weeks up to just under two years in length.
18 It goes to students who show need. They
19 have to have an expected family contribution,
20 which is the federal need index, of less than or
21 equal to $12,000.
22 And as we've talked about, the programs
23 that they're enrolled in are in these three
24 targeted clusters of energy, advanced materials,
25 and diversified manufacturing, and agriculture 57
1 and food production right now.
2 We have 104 programs of study that are
3 currently approved and available at 48 different
4 institutions across the Commonwealth.
5 REPRESENTATIVE JAMES: That was a
6 hundred programs?
7 MS. MCCLOUD: 104 programs, yes.
8 REPRESENTATIVE JAMES: Thank you.
9 MS. MCCLOUD: And schools do apply for
10 new programs to be considered. Our top areas
11 that students are studying in and receiving
12 these awards are heating, ventilation, and air
13 conditioning or HVAC, electrical fields,
14 electricians, welding, technology, vehicle
15 maintenance and repair, and building and
16 property maintenance; and we've seen very good
17 outcomes with the program.
18 Our most recent annual report was just
19 released in November. And in that report,
20 you'll see that 83 percent of the graduates who
21 received funding through the PA-TIP Program were
22 employed, with 49 percent of them employed in
23 positions covered within those three clusters of
24 occupations.
25 We've had more demand than what we could 58
1 fund in recent years, and it's certainly been a
2 successful program for the Commonwealth.
3 REPRESENTATIVE JAMES: Clearly you were
4 ready for that question. Thank you for the
5 answer.
6 Just as a final note, have you discussed
7 the benefits of your program with the
8 construction and trades industry folks, by
9 chance?
10 MR. HENCH: Yeah, when we first launched
11 PA-TIP and we -- no disrespect to the
12 Legislature, but we shortened the name to the
13 Targeted Industry Program because it is a
14 mouthful, but we did --
15 REPRESENTATIVE JAMES: I like that
16 cluster bit.
17 MR. HENCH: So we did engage the
18 stakeholder groups and primarily the
19 institutions, and also partnered with Labor &
20 Industry who tracked those high-demand
21 occupations.
22 And one thing that the Legislature did
23 for us, allowing us to track the student after
24 they graduate from the program of study to see
25 if they actually get employed, as Elizabeth was 59
1 talking about, in the particular field.
2 And I think it was around 46 or 48
3 percent actually got employed in the program of
4 study that they were seeking.
5 REPRESENTATIVE JAMES: Okay. Thank you
6 very much. And thank you, Mr. Sailor.
7 MAJORITY CHAIRMAN SAYLOR:
8 Representative Bullock.
9 REPRESENTATIVE BULLOCK: Thank you,
10 Chairman.
11 Good afternoon. Thank you again for
12 your testimony. I wanted to follow up real
13 quick on the PA-TIP Program. You gave us the
14 statistics around -- the particular outcome
15 around jobs. Are there any other outcomes that
16 you've seen from the program that you'd like to
17 share?
18 MS. MCCLOUD: The only thing that comes
19 to mind quickly is just the volume of students
20 served; you know, that we're helping 17 to 1800
21 students per year right now.
22 REPRESENTATIVE BULLOCK: How many was
23 that? I'm sorry.
24 MS. MCCLOUD: 17 to 1800. And the
25 typical student that's served by the program is 60
1 a 27-year-old with a household income of 23,000;
2 and they're in programs with an average tuition
3 and fees of $17,000.
4 So, clearly, their ability to attend
5 those programs and fund them is assisted greatly
6 by the program; and that would help keep down
7 their indebtedness then, as well.
8 REPRESENTATIVE BULLOCK: Thank you.
9 In regards to your employees, in your
10 earlier answer to Representative Kim, you
11 mentioned you had 2900 employees across the
12 Agency, with a call center here in Harrisburg
13 and several others throughout the Commonwealth
14 and that you've seen some significant turnover
15 in the last year. Even with that turnover, are
16 you able to gauge your percentage as far as your
17 workforce diversity, women, minorities? Is that
18 something that's consistent? Is that a number
19 that you can share with us?
20 MR. STEELEY: Yes, we'd be happy to
21 share that. In respects to gender diversity,
22 approximately 60 percent of our workforce is
23 female.
24 REPRESENTATIVE BULLOCK: That was 60?
25 MR. STEELEY: That was 6-0; 60 is 61
1 female, compared to -- overall, I believe the
2 Commonwealth is somewhere around 40, 41 percent.
3 REPRESENTATIVE BULLOCK: Uh-huh.
4 MR. STEELEY: And then in terms of
5 racial diversity and ethnic diversity, I believe
6 we're around 20 percent African-American
7 compared to the Commonwealth, somewhere around
8 10 percent; and that's been pretty -- despite
9 the turnover, that's been pretty consistent at
10 least the last three years that we looked at.
11 REPRESENTATIVE BULLOCK: Uh-huh. So you
12 mentioned African-American. Do you have any
13 numbers on Latino or other minorities?
14 MR. STEELEY: Yes, actually, we do.
15 With respect to Latinos, we're generally
16 hovering between 4.8 percent and just under 5
17 percent for the last three years.
18 Asians, about 2.4 percent; to a high of,
19 most recently, 3-and-a-quarter. And Native
20 Americans, anywhere from a quarter of a percent
21 to, basically, a third of a percent.
22 REPRESENTATIVE BULLOCK: Thank you for
23 that very detailed breakdown. Considering the
24 amount of call and customer interaction your
25 employees have, do you know whether or not -- do 62
1 you have a breakdown of number of employees that
2 speak other languages other than English?
3 MR. STEELEY: Not readily available, but
4 we do actively -- we do have that data. I can
5 get that for you. It's one of the things we
6 have. Foreign language splits in our business,
7 so we actively try to recruit agents that have
8 the ability to speak other languages besides
9 English.
10 REPRESENTATIVE BULLOCK: Thank you.
11 Thank you for your responses.
12 MAJORITY CHAIRMAN SAYLOR:
13 Representative Topper.
14 REPRESENTATIVE TOPPER: Thank you, Mr.
15 Chairman. Over here, to your right. As
16 Representative James said yesterday, that's
17 probably appropriate for some of us.
18 Just have a question in regards to
19 dollars that go out of state. Now, correct me
20 if I'm wrong, we do -- if you're a Pennsylvania
21 student, you have access to the PHEAA dollars.
22 Those dollars are reduced, if you choose to go
23 out of state to school. But you still get some;
24 is that correct? And if so, what is the
25 percentage there? 63
1 MS. MCCLOUD: Yes, that is correct. So
2 we do have a small number of grants going with
3 Pennsylvania students to schools located in
4 reciprocal states.
5 For the past several years, starting in
6 the 2015-'16 academic year, we have limited
7 Pennsylvania state grants to only go to states
8 that also send their state grant dollars with
9 their students to Pennsylvania schools. And the
10 reciprocal states right now are Delaware,
11 Washington, D.C., Massachusetts, Ohio, Vermont,
12 and West Virginia.
13 The most recent year where we have
14 complete data both for the grants that went out
15 of Pennsylvania and the grants from those states
16 coming into Pennsylvania, we sent out about $2.4
17 million with our students to their schools. But
18 those grants, as you mentioned, are reduced; so
19 they're receiving $500 to go to those other
20 states, as opposed to the several thousand
21 dollars they could be receiving potentially at a
22 Pennsylvania school. So it is a reduced amount.
23 And then for that $2.4 million that we
24 sent out of state in grants, there were grant
25 dollars coming back into Pennsylvania with 64
1 students from those reciprocal states that
2 totalled about 4.6 million.
3 REPRESENTATIVE TOPPER: 4.6? So we're
4 actually a net --
5 MS. MCCLOUD: Importer, yes.
6 REPRESENTATIVE TOPPER: We're
7 benefitting from this arrangement?
8 MS. MCCLOUD: Yes, we are.
9 REPRESENTATIVE TOPPER: So with that in
10 mind, what other -- are we always looking for
11 ways to find -- like, for instance, I didn't
12 hear Maryland on the list.
13 MS. MCCLOUD: Right. Maryland was not
14 on the list. If you look back multiple decades,
15 there was a time where there were grant funds
16 going to Maryland. But in recent -- the last
17 couple of decades, some of our contiguous
18 states, New York, New Jersey, and Maryland had
19 specifically not been willing to send their
20 state grant dollars with their students to
21 Pennsylvania, because we were such a big
22 importer of students from their states; and so
23 we haven't been sending --
24 REPRESENTATIVE TOPPER: Well, I guess
25 that makes sense for them. In light of the fact 65
1 that we are a net benefactor of that, I was
2 wondering if we continue to look for other
3 states.
4 I asked this question, because in the
5 previous hearing, we talked about how many
6 colleges and universities we have here in
7 Pennsylvania.
8 And, look, it's a lot more than a lot of
9 these other states; so we do have the
10 opportunity to import a lot of students. I just
11 wanted to make sure -- and your answer was
12 correct, that we are actually benefitting from
13 even a small amount of our PHEAA dollars going
14 out of state. You know, if we're benefitting in
15 terms of who's coming in, it's worthwhile so --
16 MS. MCCLOUD: Yes. And to answer your
17 question about looking for other states, states
18 have been increasingly dropping out of the pool
19 of reciprocal states in recent years.
20 But out of that 4.6 million that imports
21 into Pennsylvania, 3.6 million of that comes
22 with students from the District of Columbia; and
23 they will send their dollars with students
24 regardless of reciprocal status.
25 So even if the Pennsylvania State Grant 66
1 Program no longer sent grants out of state on a
2 reciprocal basis, we'd still be having that --
3 REPRESENTATIVE TOPPER: All right.
4 Well, that's interesting. So they would send it
5 regardless, and that makes up a good chunk of
6 what we take?
7 MS. MCCLOUD: Yes.
8 REPRESENTATIVE TOPPER: Okay. So I
9 guess when it gets to the point, and I guess
10 we're already there, when the other states that
11 we're sending to, when that amount falls below
12 what we're getting back from them, then I guess
13 maybe it requires another look as to whether
14 it's frugal for us to do so, right; because
15 D.C.'s going to send them anyway?
16 MS. MCCLOUD: And this is something that
17 PHEAA's Board of Directors considers on a
18 regular basis.
19 REPRESENTATIVE TOPPER: Okay. All
20 right. Well, thank you very much. I appreciate
21 it.
22 Thank you, Mr. Chairman.
23 MAJORITY CHAIRMAN SAYLOR:
24 Representative Fiedler.
25 REPRESENTATIVE FIEDLER: Thank you for 67
1 being here. I just have a brief follow-up
2 question to some of your responses to
3 Representative Kim.
4 You mentioned, I think, that a lot of
5 your workers value -- seem to value the wages
6 over the benefits and that, in fact, a lot of
7 them don't stay long enough to really accrue the
8 pension benefits.
9 The significant turnover that you
10 mentioned, I do find troubling, as I know you
11 must as well, given that we're talking about
12 people who are on the front lines with our
13 students, right, and sometimes in their moments
14 of crisis when they are really grappling with
15 some tough economic choices.
16 Can you tell me what the average salary
17 is and also what the lowest wages that you pay
18 people?
19 MR. STEELEY: To get an exact figure, we
20 would have to get back to you. I mean,
21 typically, our call center employees in terms of
22 the dollar amount per hour are somewhere in the
23 teens.
24 If you load on the cost of benefits for
25 one of the staff members or staff class that are 68
1 part of our bargaining unit, typically the
2 annual cost, so this is fully loaded with
3 benefits to PHEAA somewhere in the 70 to 90,000
4 range.
5 REPRESENTATIVE FIEDLER: And would those
6 fully-loaded benefits also apply to, say, the
7 folks who are on the phone, the call-time folks?
8 MR. STEELEY: Actually, typically, the
9 bulk of the people that are actually on the
10 phones are staff members. It's predominantly
11 the wage-employee class for the most part.
12 We have had them on the phones at
13 various times. We tend to have them more
14 involved in processing activities.
15 REPRESENTATIVE FIEDLER: Thank you. If
16 you are able to give, at some point, a more
17 detailed number, that would be get.
18 MR. STEELEY: We can get a breakout for
19 you of our call center staff.
20 REPRESENTATIVE FIEDLER: Thank you.
21 MAJORITY CHAIRMAN SAYLOR:
22 Representative White.
23 REPRESENTATIVE WHITE: Good afternoon.
24 So I'm out of Philadelphia, and there's a lot of
25 working-class families in my district and across 69
1 Philadelphia there are many -- you know, we're a
2 majority minority city. And, unfortunately,
3 what many news articles say, where basically my
4 generation and future generations are
5 generations of debt.
6 So my thoughts are, in terms of the
7 vicious cycle that we're in where students are
8 attending universities, the population is
9 currently declining in Pennsylvania in terms of
10 the people attending, which is why we have the
11 issues we have; because there's less and less
12 people to charge money to, to go to these
13 schools, right, so the price of tuition goes up.
14 And then the grant moneys, therefore, are
15 getting utilized even more so and draining your
16 coffers.
17 Do you have any suggestions for us in
18 terms of the amount of defaults that are taking
19 place across the country? So do you have a high
20 default rate on the grant programs, or the --
21 are you concerned about that, in terms of the
22 loan program that you're planning to offer?
23 MR. STEELEY: So with respect to
24 defaults on student loans, that is an area of
25 concern. One of the interesting things, the 70
1 area that probably is the most troubled in term
2 of delinquency and performance is actually the
3 federal portfolio.
4 Only approximately 80 percent of the
5 portfolio that we service for the Department of
6 Education, and this is across all servicers
7 publically available on the Department's web
8 site. But only approximately 80 percent are in
9 current repayment.
10 And then, actually, if you dissect,
11 well, what does that mean? There's a number of
12 borrowers in that current repayment bucket that
13 are on income-based repayment plans, which means
14 they might be making payments, in some cases, as
15 low as you can actually calculate and get a
16 payment as low as zero, and they'd be considered
17 current.
18 Well, effectively, that means that the
19 borrowers are experiencing reverse amortization.
20 The interest is accruing on their loans faster
21 than they're paying on the loans. And where the
22 biggest problem of that -- again, you know, I
23 believe the public policy aim of all these
24 income-based repayments was very positive.
25 But, you know, there is a negative 71
1 downstream effect, that unless someone is going
2 to spend their entire career as a low-wage
3 earner, eventually they're going to get a
4 high-income job and then be surprised at how
5 much they really owe.
6 So it's -- we are concerned about
7 default. We are concerned about delinquencies.
8 We did try to take some of that information and
9 benefit from it as we designed our own loan
10 program to try to prevent things like reverse
11 amortization that we see in the federal
12 portfolio we service.
13 REPRESENTATIVE WHITE: And do you do
14 anything in regards to keeping track of this?
15 And I think you actually did mention that you do
16 actually post it online in terms of the students
17 who are receiving grant moneys from 4-year
18 institutions versus 2-year institutions. And do
19 you keep track of the default rates on each of
20 those as well?
21 MS. MCCLOUD: The typical student
22 receiving a state grant would not have anything
23 that they have to repay from that fund. That
24 falls into the category of gift aid where they
25 simply receive the funding and put it towards 72
1 their costs for the year, and that's the end of
2 the story for them.
3 REPRESENTATIVE WHITE: And for the loan
4 program that you're instituting, do you plan to
5 keep track of those types of things?
6 MS. MCCLOUD: Of course.
7 MR. STEELEY: Yeah.
8 REPRESENTATIVE WHITE: Good. And when
9 you had mentioned that we were purchasing debt,
10 are you -- or loans, other peoples' loans, so
11 maybe from other states, does Pennsylvania
12 purchase them in order to --
13 MR. STEELEY: Well, we service loans
14 nationally through -- for the federal government
15 through our FedLoan Servicing line of business.
16 REPRESENTATIVE WHITE: But you only
17 service them? You don't like purchase any of
18 the debt so that we can collect the interest off
19 of them?
20 MR. STEELEY: I won't say we never
21 purchase them. Our FFELP Loan portfolio is sort
22 of diverse in geography at this point, primarily
23 was centered in Pennsylvania.
24 But as a function of the federal -- the
25 FFELP Program and being a federal guarantor 73
1 under the FFELP Program, we actually are
2 guaranteeing debt that was originated not just
3 in Pennsylvania but also West Virginia,
4 Delaware, and Georgia.
5 And that's basically a reinsurance
6 program. But when those loans default and we
7 get them -- the borrowers back on a repayment
8 plan, eventually they're considered cured; the
9 federal guarantee is reinstituted, and then
10 technically we would repurchase that loan.
11 So we are buying FFELP loans, which are
12 federally guaranteed, no credit risk from a
13 diverse population across the country, just as a
14 function of being a federal guarantor.
15 REPRESENTATIVE WHITE: So I was just
16 curious as to the level of exposure we have in
17 that regard, especially given all of the
18 conversations around the level of default that
19 could take place in the future when it comes to
20 these kind of federal loans and, in our case,
21 here in Pennsylvania. How exposed are we to
22 this?
23 MR. STEELEY: So the FFELP loans that
24 we're buying from across the country, as well as
25 debt to Pennsylvania residents are -- principal 74
1 and interest is 97 percent guaranteed; some
2 actually 98 percent guaranteed, so very low
3 credit risk.
4 REPRESENTATIVE WHITE: Thank you.
5 Thank you, Mr. Chairman.
6 MAJORITY CHAIRMAN SAYLOR:
7 Representative Donatucci.
8 REPRESENTATIVE DONATUCCI: Thank you,
9 Mr. Chairman; and thank you for being here
10 today.
11 I just have a quick question. You know,
12 for numerous reasons, a lot of students or maybe
13 just some students, choose the option for
14 distance education. It's my understanding that
15 for 2018 and '19, it's been incorporated into
16 the Pennsylvania State Grant Program.
17 Can you explain how it works or what
18 gets paid?
19 MR. HENCH: Sure. So Act 5 that the
20 General Assembly passed and was signed into law,
21 integrated distance education into the
22 Pennsylvania State Grant Program for the
23 2018-'19 academic year.
24 Within that legislation, the Board was
25 privied to have the authority to limit the 75
1 exposure to distance education concerned about
2 cost to the program, that it might dilute the
3 traditional award.
4 So what the PHEAA Board did was they
5 limited the exposure for total distance
6 education to around 14 million. And what that
7 meant for the typical DE student, that's 100
8 percent online in this current academic year,
9 they saw their state grant award cut in half or
10 reduced to half.
11 So the maximum award right now is around
12 4100, so that dropped it down to a little over
13 $2,000.
14 REPRESENTATIVE DONATUCCI: Okay. Are
15 there any exceptions for a disabled student who
16 might have to take other credits or all their
17 classes on long distance?
18 MR. HENCH: There is an exception that
19 we had during the preintegration when the --
20 before the legislation went into effect, that
21 if a student had some incapacity that couldn't
22 afford them to go on campus, that they would
23 receive a state grant that, otherwise, they
24 would've received no state grant.
25 But now that we fully integrated, they 76
1 fall into the overall population.
2 REPRESENTATIVE DONATUCCI: Okay. Thank
3 you. Thank you, Mr. Chairman.
4 MAJORITY CHAIRMAN SAYLOR:
5 Representative Kinsey.
6 REPRESENTATIVE KINSEY: Thank you, Mr.
7 Chairman.
8 I think you partly answered the question
9 I was really driving at, but I'll just try this
10 another way.
11 I want to paint a scenario: This lady
12 in my district in her 70s went to college when
13 she was 18, 19, so forth on. Came out, landed
14 on some hard times; got a job, but actually did
15 not pay back on her loan -- or paid back, but
16 not enough to really cover the loan. I think
17 you sort of talked about it, Mr. Steeley.
18 So she's in her 70s and so she gets into
19 a situation where her -- she tried to make an
20 agreement with PHEAA, I believe it was, or AES
21 or whomever. But she tried to make an
22 agreement, and she was told that basically --
23 she was on a fixed income, and the amount of the
24 loan that she had to pay back was literally her
25 whole monthly income. 77
1 So then I think the next step was that
2 PHEAA garnished her tax return, so she reached
3 out to our office. I think our staff was in
4 contact with your office. I'm not sure of the
5 outcome, because I'm up here now.
6 But is that -- like, what options are
7 available once a person reaches that point? I
8 recognize the need to pay back the loan, but to
9 garnish her tax return and then to -- you know,
10 she wanted to do the right thing, but she was
11 just in a situation where she could not afford
12 to pay back the amount of money that PHEAA told
13 her she would have to pay. She could not
14 negotiate that. So what do folks have -- what
15 options do folks have? Because that's a
16 real-life situation.
17 MR. STEELEY: Without knowing the
18 particulars of the individual borrower and
19 certainly -- it sounds like your office has
20 already been in contact with the Agency. We'd
21 certainly look into the individual borrower as
22 well.
23 But, you know, depending on the type of
24 loan she holds, whether it's private, whether
25 it's a FFELP loan, and looking at the age of the 78
1 borrower, it was probably a loan with the
2 Federal Family Education Loan Program.
3 There's different options. Quite
4 honestly, if it's a FFELP loan, there's probably
5 more options available to her. Income-based
6 repayment plans, although limited, are available
7 in the FFELP Program.
8 If it's a private loan totally outside
9 of the U.S. Department of Education or PHEAA,
10 so bear in mind we service a lot of loans for a
11 lot of different owners, you know, it's
12 ultimately going to be up to the owner of the
13 loan as to how they would allow us to work with
14 the borrower.
15 REPRESENTATIVE KINSEY: Okay. And just
16 the last question. The information that you
17 have of the borrowers, is that information sold
18 to outside companies?
19 MR. STEELEY: It is not. We're not --
20 not only are we not permitted to, it's one of
21 the core things -- you know, our reputation as a
22 servicer really depends on our ability to
23 safeguard and protect our customers'
24 information.
25 REPRESENTATIVE KINSEY: Great. Thank 79
1 you very much.
2 Thank you, Mr. Chairman. Thank you very
3 much.
4 MAJORITY CHAIRMAN SAYLOR: With that,
5 I'll recognize Representative Gainey for final
6 comments.
7 REPRESENTATIVE GAINEY: Thank you, Mr.
8 Chairman. Just briefly, wanted to piggyback on
9 one of Representative Fiedler's comments in
10 regards to the amount of turnover the
11 organization's experiencing.
12 Let me ask the question first: For your
13 customer service, which we know is really the
14 bedrock of any organization, the ability to be
15 able to deal day to day with the public, what
16 type of training do you provide for your
17 employees so that they get better?
18 MR. STEELEY: So when we hire a new
19 agent, we put them through a series of training.
20 Actually, on average, they'll be in a training
21 class for about two months before they actually
22 are on the floor and talk to borrowers.
23 Once they complete the actual two months
24 of instructional period, they're sort of paired
25 up with our agents; so they're not just sort of 80
1 thrown to the wild.
2 So we do have a series of steps that,
3 you know, that even once they complete the
4 training, they're going to be paired up in small
5 groups with individuals that we call leads.
6 And the people that are leads tend to be
7 our higher-performing call-center agents, and so
8 we put them into roles where they help coach
9 other agents, especially as they're new and
10 taking borrower calls.
11 REPRESENTATIVE GAINEY: Is there an exit
12 mechanism that you have in place to try to get a
13 better understanding of why the turnover's so
14 high?
15 MR. STEELEY: There are. And, actually,
16 one of the basic things that we see in driving
17 turnover is, quite honestly, the complexity of
18 student loans and the complexity of the
19 servicing.
20 The majority of our turnover actually
21 happens during that training period. They
22 realize all they have to learn, all they have to
23 understand; and, you know, honestly you can get
24 a -- there's a lot of call-center jobs
25 available, particularly in the Harrisburg 81
1 marketplace, where they're having to know a
2 smaller set of information.
3 So, you know, we see people leave, go to
4 banks, credit unions in the area; Comcast has a
5 large call center in the area.
6 REPRESENTATIVE GAINEY: Well, my time is
7 up. I just wanted to thank you for testifying
8 today. I appreciate all three of you and the
9 information that you gave.
10 Chairman, thank you.
11 MAJORITY CHAIRMAN SAYLOR: You're not on
12 the clock.
13 REPRESENTATIVE GAINEY: Oh. Chairman,
14 thank you.
15 MAJORITY CHAIRMAN SAYLOR: Okay.
16 Finally, I look forward to working with you and
17 the Board of Trustees, Board of Directors, to
18 come up with -- as I start to craft this budget
19 for final passage, I would appreciate
20 communications as to where you're at, since
21 there's a difference between you and the Budget
22 Secretary and the Governor, where we go with all
23 these things; so I'll look forward to that.
24 And I thank you for being here today and
25 answering the questions of the Committee members 82
1 on both sides of the aisle.
2 With that, the Committee will reconvene
3 tomorrow morning at 10 a.m., to hear from the
4 State Treasurer. After that, we'll be hearing
5 from the Attorney General, as well as, the
6 Auditor General.
7 With that, the meeting is adjourned.
8 (Whereupon, the hearing concluded.)
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3 I hereby certify that the proceedings
4 are contained fully and accurately in the notes
5 taken by me on the within proceedings and that
6 this is a correct transcript of the same.
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9 ______Tracy L. Markle, Court Reporter 10 Notary Public
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