© 2015 NASFAA NASFAA Federal Update Stephen Payne 1.

© 2015 NASFAA

NASFAA Federal UpdateStephen Payne

1

© 2015 NASFAA 2

Agenda

• Washington Political Climate

• Federal Budget and Funding Update

• Action on Reauthorization

• NASFAA Influence

• Other Policy Updates:

– Administration Announces Move to PPY

– Status of Perkins

– PPY

– Student Aid Bill of Rights

• NASFAA Research Update

• Get Involved!

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Washington Political Climate

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• Gridlock with minor issues disrupting entire

process

• Leadership Turmoil in the House

• Partisanship

• Deficit Reduction

• Budget Politics Dictating Policy

• 2016 Election!

Washington Political Climate

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“Management by Crisis”

Before the end of the year, Congress will face some major and incredibly divisive policy debates:

• Raising the Debt Ceiling in November• Passing a Continuing Resolution/Budget Deal to

Avoid a Government Shutdown in December• Export-Import Bank, Highway/Transit Funding,

Child Nutrition, Pipeline Safety, Planned Parenthood

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Congressional Approval Numbers

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A Republican Congress & Higher Ed

• New faces on education committees• Sen. Alexander’s HELP Committee

– Focus on simplifying FAFSA and student aid– Eye on innovative higher ed models

• Tough battles over funding– New investments in student aid unlikely– Simplification should not equate to cuts

• Action towards burdensome regulations

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Federal Budget & Funding Update

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Budget and Appropriations 101: What Should Happen

What should happen: • But…Congress rarely follows this process:– Politics jam the gears, no

punishment for not following order

– Instead we more often than not see mechanisms that help to patch the inability to pass separate appropriation bills➢ Continuing Resolution

(CR)➢ Omnibus

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Student Aid and the Budget

• Funding for student aid falls into the Labor, Health, Human Services, and Education Appropriations Subcommittee (Labor-H)

• This is always a very complex bill because so many important programs share the same pot of funds

• Most student aid funds are “forward funded” meaning they fund the following award year

– Ex: FY 2016 funds the 2016–17 award year

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Obama FY16 Budget Request (AY 2016-17)

• Grants

– Maximum Pell Grant of $5,915

– Continue to index Pell to inflation beyond FY17

• Campus-Based Aid

– Level fund FSEOG and FWS (FY 2015 levels)

– Revise allocation formula to direct dollars to schools that enroll and graduate high number of Pell Grant students

– Expand/Reform the Perkins Loan Program

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Obama FY16 Budget Request

• Loans– Expand Paye As You Earn eligibility to all borrowers

– Pay for this expansion by making modifications to PSLF

• Access and Affordability Proposals– America’s College Promise ($60 billion/10 yrs)

– College Opportunity Bonus Program ($7 billion/10 years)➢ Rewards colleges that enroll and graduate low-income students

and encourage all colleges to improve

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GOP FY16 Budget Resolutions

• Political documents, light on specific numbers

• Freeze maximum Pell Grant for next 10 years

– House seeks to address the shortfall “targeting it to students who need the most assistance”

• Fair Value Accounting for student loans

– $220+ billion cost increase over 10 years

• Reconciliation instruction to find an additional $1 billion in savings over next 10 years

– Threat to in-school interest subsidy?

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House Proposes Cuts to Aid Programs

• Eliminates mandatory funding for Pell– Cuts Pell by $89.3 billion

• Eliminates in-school interest subsidy on loans– Cuts $34.8 billion by shifting costs to students

• Eliminates public service loan forgiveness– Cuts $10.5 billion, again shifting costs to students

• Eliminates the PAYE expansion– Cuts $16.3 billion

• All told, $150 billion would be cut from student aid over 10 years

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Senate Proposes Cuts to Aid Programs

• Eliminates mandatory funding for Pell– Cuts Pell by $89.3 billion

• Eliminates in-school interest subsidy on loans– Cuts $34.8 billion by shifting costs to students

• All told, $124 billion would be cut from student aid over 10 years

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The Public Opposes Education Cuts

Source: Pew Research Center for the People & the Press, October, 2012

Would you approve or disapprove of reducing federal funding for education as a way to reduce the size of the national debt?

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Budget Update: Where did we end up?

• All 12 spending bills passed out of committee for first time since 2009

• House passed 6 of 12 bills; Senate passed 0 of 12

• Democrats blocked bills in the Senate to force negotiation on sequestration

• Confederate flag controversy halted bills in the House

• Because Congress could not agree on appropriations bills or spending levels, a Continuing Resolution (CR) was necessary.

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Budget Update: Continuing Resolution

• Funds the government through December 11, 2015 at levels identical to FY 2015.

• To comply with budget caps under sequestration, the CR includes a small across-the-board cut of 0.2108% with virtually no impact to student aid programs.

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Budget Update: What’s Next?

Congressional leaders, mainly the Senate Majority

Leader and the Speaker of the House, will now look

to come to agreement with Democrats in Congress

and President Obama to compromise on a longer

budget deal when the CR expires in December.

– A small but significant portion of Republicans

refuse to vote for any budget deal that includes

funding for Planned Parenthood

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Is Sequestration Still In Effect?

Sequestration is still in effect. It is a cutting mechanism meant to cut roughly $1 trillion dollars over a decade

• In order for sequestration to be stopped, Congress must pass a bill to either repeal or replace the law

• Appetite is more toward replacement rather than repealing, but this is also the most difficult of options as it requires Congress to come to an agreement in other areas

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Public Attitude Toward Sequestration

Two-thirds want to protect education from sequester cuts

Source: CEF/FEI Poll, December 2012

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HEA Reauthorization

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Reauthorization

• Theme: Hurry Up and Wait!

• Technically supposed to occur in 2014, but automatically extended for one year

• NASFAA's Reauthorization Task Force submitted recommendations to House and Senate Ed Committees

• Glimmer of hope: strong bipartisan passage of ESEA bill in the Senate in early summer hopefully paves the way for productive law-making on HEA

• Movement beyond committee work unlikely

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Reauthorization: Existing Legislation

1. Bipartisan Senate bill from Sen. Alexander (R-TN) and Sen. Bennet (D-CO)

2. Democratic Senate bill at the end of the 113th Congress from outgoing chairman Sen. Harkin (D-IA)

3. Three bills from the House education committee that passed the full House last Congress

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Broad Themes: Simplification; Affordability; Accountability; Transparency

Specific Proposals:• Prior Prior Year• Year-Round Pell• Simplification (Application & Repayment)• Improvement of loan counseling• Authority to limit loans• One grant/one loan

Reauthorization: Emerging Themes

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• House and Senate working behind the scenes to build out ideas and concepts from initial drafts– Chairman Alexander released a set of White Papers further

outlining his ideas

• How will the pending exits of key players impact the process?

– Boehner (Oct.), Duncan (Dec.), and Kline (Jan. ’17)

• May see some movement (new or amended bills) this fall, but unlikely to see final a reauthorization bill that clears both chambers of Congress before 2016 election

Reauthorization: What’s Next?

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Influence on Legislation

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NASFAA Policy Recommendations/Task Force

Legislative and/or Executive Action

Year-Round Pell / “Pell Well”

• Recommended by original RTF

• Recommended in Gates RADD Project

• Sen. Maize Hirono, Pell Grant Protection Act

• Sens. Alexander/Bennett, bipartisan Financial Aid Simplification and Transparency (FAST) Act

• Sen. Harkin, Higher Education Affordability Act

Proposals -- Draft Legislation!

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Authority to limit loan amounts

• Recommended in original RTF

• Recommended by Task Force on Student Indebtedness

• Recommended in RADD

• Sens. Alexander/Bennett, bipartisan Financial Aid Simplification and Transparency (FAST) Act


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Servicing Issues Task Force

• Develop a central loan portal

• Remove servicer branding

• Standard policies and procedures manual

• Improve counseling (make more efficient, etc)

• Student Aid Bill of Rights (Obama Administration)


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Campus-based Allocation Task Force

• Remove base guarantee, fund solely on fair share• Sen. Harkin, Higher Education Affordability Act


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Perkins Loans

• Authorized through September 30, 2015– No Federal Capital Contribution (FCC) since FY 2005– No cancellation reimbursements since FY 2010• Bipartisan congressional efforts to save the Perkins Loan Program failed on September 30, so the program is no longer authorized.– Higher Education Extension Act, which extends Perkins, passed the House unanimously– Sen. Alexander (R-TN) blocked its consideration in the Senate because of his focus on simplification and the “One Grant, One Loan” model

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Perkins Loans

• NASFAA advocated for the program on Capitol Hill, but will now shift focus to ensuring a smooth and equitable close-out of the program.

• NASFAA’s RTF offered the following recommendations in the event the program would expire:

➢ Instruct the Secretary of Education to offset the amount of FCC to be returned to the federal government by the aggregate amount of unfunded reimbursement for cancellations

➢ Ensure that institutional contributions made in excess of the minimum required or made when there was no new FCC are also offset so that the amount due to the federal government is not overestimated

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Perkins Loans

• ED release stated that if schools make first disbursements prior to October 1, 2015, then they are allowed to make subsequent disbursements for the remainder of award year 2015-16– Early Feb. ED issued DCL GEN-15-03– Make loans to certain students through September 30,

2020 to enable students who received loans for award years that end prior to October 1, 2015 to complete their studies.

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Perkins Loans

Grandfathering• Schools may make new Perkins Loan

disbursements if the student:– Received at least one disbursement on or

before June 30, 2015– Is enrolled at the same institution as the last

Perkins disbursement– Is enrolled in the same academic program– Is awarded Subsidized Direct Loan eligibility

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Perkins Loans

Grandfathering

• Expires Sept. 30, 2020

• Only applies to awards from 2014-15 or earlier

• May increase awards amounts for 2015-16, provided at least one disbursement made prior to Oct. 1, 2015

• Additional guidance coming regarding assignments and revolving funds

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White House: Move to PPY

• On September 14, 2015, President Obama announced action to implement PPY on the 2016 FAFSA for AY 17-18.

• Immediately following the President’s announcement, NASFAA announced its intention to form a PPY implementation task force to ensure a smooth transition for financial aid offices nationwide

• Further guidance will continue to flow from the Department of Education in the coming months.

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White House: Student Aid Bill of Rights

• Announced March 10, 2015

• Echoes work of NASFAA Servicing Issues Task Force

• Key points:

– Create a centralized portal in which borrowers could get information on, and pay down, their student loans.

– Develop an online student aid complaint system

– Notification to borrowers of transfer between servicers

– Study multi-year IBR application

– Apply prepayments to the loan with the highest interest rates

– Two pilot studies on how borrowers receive information about servicing and how they choose repayment plans

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NASFAA Research Update

• Collaboration with the Association for the Study of Higher Education – Examining how to make scholarly research more relevant to practitioners– Report Release in late 2015

• Staffing and Salary Models Update– NASFAA distributed our new “Benchmarking Survey" (formerly Staffing Survey

and Salary Survey) – Report release in Winter 2015 along with updated Staffing and Salary Models

website• The Journal of Student Financial Aid is working on a Special Edition focused on the

reauthorization of the Higher Education Act– Publication date: November 2015

• Study on Consumer Information and Law Student Indebtedness– NASFAA received a grant from Access Group to conduct a 17-month study on

consumer information for graduate-professional students, with a specific focus on law students

– Reports will be released throughout 2016

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Past• Reauthorization Task Force• Reimagining Aid Design and Delivery

(RADD) Task Force• Task Force on Student Loan

Indebtedness• Task Force on Public Service Loan

Forgiveness• Task Force on Campus-Based

Allocations• Task Force on Consumer Information• Task Force on Loan Servicing• Task Force on R2T4• Task Force on Innovative Learning

Models• Task Force on Benchmarking

Policy Task Forces

Existing

• One Grant/One Loan Task Force

• Task Force on Graduate Specific Financial Aid Data

• PPY Implementation Task Force

• Dynamic Loan Limit Working Group

Future

• More to come!

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You Can Advocate, Too!

• Join a task force!

• Write a letter!

• Visit with your member of Congress, either locally, or in DC!

• For more information, visit: www.nasfaa.org/take-action/ or email [email protected]

http://www.nasfaa.org/take-action/

© 2015 NASFAA NASFAA Federal Update Stephen Payne 1.

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