NASFAA Washington Update

Megan McCleanNASFAA

Agenda • Washington Political Climate

• Update on Federal Education Budget

• State of the Union Proposals

• Reauthorization Update

• Status of Perkins

• Update on recent Negotiated Rulemaking

• Relevant NASFAA Task Forces

• Public Service Loan Forgiveness Task Force

• Servicing Issues Task Force

• Consumer Information Task Force

Washington Political Climate

Washington Political Climate

• Partisanship, Brinkmanship, and “Blame Game”

• Deficit Reduction

• Budget Politics Dictating Policy

• 2016 Election!

Impact of the Election

• New 114th Congress began Monday, January 5th

• Republican control in BOTH chambers

• Major changes on Education Committees:

• Senate: New Chairman, Senator Alexander (R-TN) & Retirement of previous Chairman, Senator Harkin (D-IA)

• House: Congressman John Kline (R-MN) remains and Chairman & Retirement of prior Ranking Member Congressman George Miller (D-CA). New ranking member Congressman Bobby Scott (D-VA)

What Does This Mean for Us?

• Productivity = Likely the same (minimal)

• Focus on halting many of the Obama Administration’s initiatives: healthcare, ratings, new “free” community college plan

• Ramping up for 2016 elections starts NOW!

Budget/Funding 101

What Should Happen:

• President delivers Budget Request to Congress

• House and Senate draft Budget Resolution

• 12 Appropriations Subcommittees draft bills

• All should be completed by Oct. 1 (beginning of new fiscal year)

But…Congress rarely follows budget rules• Why? Politics often get introduced to the process and it

slows things down. Plus, there is no punishment for breaking them!

• Instead we more often than not see mechanisms that help to patch the inability to pass separate appropriation bills

• Continuing Resolution (CR)

• Omnibus Spending bill

• Why is this problematic?

• Creates an incredible amount of unpredictability

• Does not allow for committee experts to thoughtfully and carefully debate spending levels for the issues they are most well versed in—cuts against democratic process

Student Aid & 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

Budget Update: FY 2015

• Finalized in December 2014

• Provided final funding for FY 2015-16 award year

• Main Provisions:• Fully fund Pell, level funding for most programs, slight increase to

FWS• Partial reinstatement of Ability-to-Benefit

Where Are We With Sequestration?

• Still in effect—ten year cutting mechanism• Technically in the third year• Unlikely that it will be repealed—more

likely to be replaced• Continues to impact origination fees

Future Funding Outlook: More Cliffs!

CR Funding Department of Homeland Security Expires (2/27)

Debt Ceiling reinstatement & subsequent expiration (3/15 & Fall)

Congress must pass FY 16 budget by new fiscal year (10/1)

President Obama’s FY 2016 Budget Request

• Coming Monday, February 2!

• Can expect to see many of the same proposals:

• Perkins, PSLF, and TEACH refore

• And new proposals from State of the Union:

• Two-years “free” community college

• Higher Education tax reform

SOTU Proposals: Two-years “free” community college• Two-years free community college for “responsible” students

• Involves multiple stakeholders: Federal government, states, students, and institutions

• Students:

• Attend at least half-time; maintain a 2.5 GPA; make steady progress toward completing their program

• Federal Government:

• Cover three quarters of the average cost of community college (tuition and fees)

• States

• Contribute remaining funds needed

SOTU Proposals: Higher Education tax reform• Broader tax reform, including higher ed reform

• Consolidate existing credits into AOTC (and make permanent)

• Increase refundable portion of AOTC to $1,500

• Expand AOTC to non-traditional students

• Eliminate tax forgiveness on income-driven plans

• The broader proposal would pay for the nearly $60 billion pricetag (over 10 years) of the free community college proposal.

Reauthorization Update

Three main efforts:

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

2) Bill from Senator and Chairman of the Health, Education, Labor and Pensions Committee, Tom Harkin (D-IA)

3) Three bills from House Committee on Education and the Workforce

FAST Act: Sens. Alexander/Bennet

Financial Aid Simplification & Transparency Act

• Officially introduced two weeks ago

• Eliminate FAFSA (AGI & family size only)

• Shift to one grant/one loan

• Prior-prior year

• Two repayment plans: IBR and 10-year

• Authority for FAA to limit loan amounts

• Prohibit part-time students from borrowing full annual loan amount

Reauthorization: Sen. Harkin

Higher Education Affordability Act• Prior-prior year

• Eliminate origination fees

• One IBR plan (auto enrollment if 150 days or more delinquent)

• Private loans dischargeable in bankruptcy

• Full school certification of private loans

• Exclude HHS loans from definition of private loan (thanks GPIC!)

• Include private loans and HHS loans in NSLDS

• Strengthen entrance and exit counseling

Reauthorization:House Ed and Workforce

Simplifying the Application for Student Aid Act

• Prior-prior year

Strengthening Transparency in Higher Education Act

• Replace College Navigator with College Dashboard

• Institutional-level information (e.g., enrollment, completion rates, costs, financial aid, CDR)

Reauthorization:House Ed and Workforce

Empowering Students Through Enhanced Financial Counseling Act

• Exit counseling: more borrower-specific information

• Entrance counseling would change to annual counseling

• Must be completed before acceptance of loan

• Borrowers must actively accept every loan (i.e., no passive confirmation)

Reauthorization:House Ed and Workforce

Empowering Students Through Enhanced Financial Counseling Act

• Exit counseling: more borrower-specific information

• Entrance counseling would change to annual counseling

• Must be completed before acceptance of loan

• Borrowers must actively accept every loan (i.e., no passive confirmation)

Reauthorization:Other “Markers”

• Fee Free Student Loan Act, Rep. Susan Davis (D-CA)

• End origination fees

• Repay Act, Senators King (I-ME) and Burr (R-NC)

• Streamline repayment plans into two plans: one ten year and one simplified income-driven repayment plan

Perkins?• Authorized through September 30, 2014

• No Federal Capital Contribution (FCC) since FY 2005

• No cancellation reimbursements since FY 2010

• Eligible for, and was granted, one-year automatic extension through General Education Provisions Act (GEPA).

• ED released 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. ED is to release some official guidance this month regarding potential grandfathering.

• If Congress does not proactively act to keep the program, it will expire on September 30, 2016. Predictions on this?

• Interest?

• Cost?

Perkins?• Where is NASFAA on Perkins?

• Reauthorization Task Force (RTF) called for the continuance of Perkins, along with the other campus-based aid programs

• Advocating for the program on Capitol Hill

• If program ceases, NASFAA’s RTF offered the following recommendations:• 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

• Where is the Administration?

• Perkins Reform Proposal (Included in 6 budgets)

Negotiated Rulemaking-Program Integrity and Improvement• No consensus

• State authorization and Cash Management delayed

• Gainful Employment final rule released November 1

• Similar to 2011 regs that were vacated by court

• Big difference: elimination of program level CDR

• New disclosures effective Jan. 1, 2017, current requirements apply through Dec. 2016

• All other GE rules are effective 7/1/15. Most pressing issue is reporting. First batch due in July and goes back several years. ED just did a 2 hr webinar on just reporting, the archive should be up for viewing soon.

Negotiated Rulemaking-PLUS, Adverse Credit• Final rule published in October

• ED just announced early implementation date of March 29

• Main provisions:

• Loosed criteria (debts over $2,085)

• If a borrower has an endorser due to adverse credit history, they will need to complete credit counseling

Neg Reg PAYE

• ED held public hearings to set the agenda this fall: Washington, DC and Anaheim, CA

• ED announced it will hold PAYE Neg Reg this spring• Feb. 24-26

• Mar 31-Apr. 3

• Apr. 28-30

• NASFAA currently soliciting negotiators; nominations due 1/20

NASFAA Policy Task Forces

Consumer Information Task Force

• Study the usefulness of consumer disclosures not related to Title IV aid and determine the most effective, and least burdensome, method of disclosure.

• Eliminate the vague disclosure requirement to report the placement of, and types of employment obtained by, graduates of an institution's degree or certificate programs.

• Establish that the online entrance counseling provided by ED constitutes a compliance “safe harbor.”

• Use consistent metrics when presenting borrowing levels (ie. “median” vs. “average”).

NASFAA PSLF Task Force

Main recommendations:• Keep PSLF

• Forgiveness of up to 100% of the independent, undergraduate aggregate Stafford loan limit (currently $57,500); and

• 50% of any remaining qualifying loan balance, up to a maximum forgiveness amount of the graduate aggregate Stafford loan limit (currently $138,500)

Servicing Issues Task Force

Joint task force with the Direct Loan Coalition

Focus on understanding current servicing practices and making recommendations to FSA and loan contractors on how to improve the process for borrowers

Charged with specific outcomes:

• A report to be delivered to ED and other relevant agencies containing recommendations for improving federal student loan servicing, clearing indicating (1) areas of deficiency in loan servicing, (2) the extent (how widespread) of those deficiencies, and (2) proposed solutions

Servicing Issues Task Force

Recommendations will be voted on by NASFAA Board next week and final report will be released by the end of the month.

Recommendations focus on the two following areas:

1. Information and Communication

2. Standardization

Other Task Force Items of Note

• Campus-based Allocation Formula Task Force

• Benchmarking Task Force

• Return of Title IV Funds Task Force

QUESTIONS?Email mccleanm@nasfaa.org or policy@nasfaa.org