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On June 5, 2012, the U.S. Court of Appeals for the District of Columbia Circuit vacated or remanded certain portions of the program integrity rules in Association of Private Sector Colleges and Universities v. Duncan. The Court of Appeals ruled on three provisions: incentive compensation; misrepresentation; and state authorization including distance education.
With regard to incentive compensation, the Court of Appeals ruled that the Department of Education did not exceed its authority by not permitting “salary adjustments” based upon success in securing enrollments or the award of financial aid. Nor did the Department exceed its authority in applying the incentive-based compensation prohibition to higher level employees. However, two aspects of the regulations were remanded for further explanation from the Department. On remand, the Department must better explain its decision to eliminate the safe harbor on graduation rates and it must address the comments that the new regulations might adversely affect diversity outreach.
With regard to misrepresentation, the Court of Appeals held that the rules exceed the Higher Education Act’s (HEA) limits in three aspects: by allowing the Secretary to take enforcement action against schools without any statutory procedural protections; by proscribing misrepresentations of subjects that are not covered by the HEA; and by proscribing statements that are confusing.
Finally, with respect to the state authorization requirements, the Court of Appeals upheld the regulation that the school must be authorized to operate in the State as to “land-based” schools in a State. However, schools that were distance-education schools were not given notice that would have required them to meet the requirements of every State from which they “operated.” The Court of Appeals upheld the District Court’s finding that the Department of Education had failed to provide adequate notice that “distance learning” schools must comply with the requirements of every State in which they “operated.”
APSCU President and CEO Steve Gunderson released a statement on June 5, 2012 stating that “[t]he decision grants significant relief to APSCU’s members and the regulated community, and students will benefit as a result.”
Terry Hartle, Senior Vice President for Government and Public Affairs at the American Council on Education (ACE), was quoted in a June 5, 2012 article from The Chronicle that “colleges will be looking at more regulatory uncertainty.”
Click here to read the Court of Appeals decision.
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On May 24, 2012, the Senate rejected two separate bills that aimed to prevent a scheduled interest rate increase on undergraduate Subsidized Stafford Loans to 6.8 percent from going into effect. In 2007, the Democrats enacted the College Cost Reduction and Access Act (CCRAA) to reduce the burden of student loan debt. CCRAA reduced the fixed interest rates on newly originated undergraduate Subsidized Stafford Loans from 6.8 to 6 percent in 2008-2009, to 5.6 percent in 2009-2010, to 4.5 percent in 2010-2011, and to 3.4 percent 2011-2012. The phased-in cuts permitted Congress to provide some relief to the debt burden and remain budget neutral with the savings created by cuts to the lender subsidies.
Amendment 2153, introduced by Senator Mitch McConnell (R-KY), which is identical to the text of Senator Lamar Alexander’s (R-TN) bill, Interest Rate Reduction Act (S. 2366), was rejected by a vote of 34 to 62, with one Senator voting present. The Amendment would have provided a one-year extension of the 3.4 percent Subsidized Stafford Loan interest rate for undergraduates by eliminating the health prevention fund in the Administration’s health care law to help prevent chronic disease. Most of Amendment 2153 is the same as the House-passed Interest Rate Reduction Act (H.R. 4628). H.R. 4628 was passed on April 27, 2012, by a vote of 215 to 195.
Next, the Democrats proceeded with a vote on S. 2343, the Stop Student Loan Interest Rate Hike Act, a bill that would have extended the current 3.4 percent interest rate on Subsidized Stafford Loans for one year by making changes in the tax treatment of S corporations in order to pay the $6 billion proposal. It was voted down by a vote of 51 to 43, with one Senator voting present.
On May 31, 2012, House Speaker John Boehner (R-OH), Senate Republican Leader Mitch McConnell (R-KY), House Majority Leader Eric Cantor (R-VA), and Senate Republican Whip Jon Kyl (R-AZ) wrote a letter to the President stating that “there is no reason we cannot quickly and in a bipartisan manner enact fiscally responsible legislation” to prevent the coming rate hike. The Republican leaders offered various approaches including alternative options based on the President’s own budget and expressed interest in discussing these proposals.
According to an article in the Washington Post of June 5, 2012, the White House was dismissive of the Republican proposals to keep interest rates from doubling on July 1, 2012. Vice President Joe Biden was reported to have said that the White House was open to listening to offers but suggested that he did not take the Republican offer seriously. “We’re not going to trade off student loans for other vital, vital programs.”
On June 6, 2012, Senators Tom Coburn (R-OK) and Richard Burr (R-NC) introduced a bill, the Comprehensive Student Loan Protection Act, which would provide a long-term solution to the interest rate problem. The annual interest rate would be set at an interest rate equal to the bond equivalent rate of 10-year Treasury bills plus 3 percent of these federal loans. Under this methodology, federal Stafford and PLUS loans disbursed in the 2012-2013 award year would have an interest rate around 4.6 percent.
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On May 31, 2012, the Department of Veterans Affairs issued a letter encouraging colleges and universities that are approved for VA educational benefits to commit to the Principles of Excellence developed in President Obama’s Executive Order 13607 issued on April 27, 2012. The letter requests that all schools provide a written response stating their compliance with the Principles of Excellence no later than Saturday, June 30, 2012.
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On May 23, 2012, presumptive Republican candidate Mitt Romney issued his plans for education reform in a platform entitled “A Chance for Every Child: Mitt Romney’s Plan for Restoring the Promise of American Education.” The higher education plan includes strengthening and simplifying the nation’s financial aid system; embracing private sector participation once again in the student loan marketplace; and replacing burdensome regulations with innovation and competition. Mitt Romney believes that the current system with two major grant programs (plus numerous others) and three varieties of student loans is “needlessly complex.”
Concerning private sector loan providers, Mitt Romney’s plan calls to “reverse President Obama’s nationalization of the student loan market and welcome private sector participation in providing information, financing, and the education itself.” The plan also seeks to address college affordability and debt. “And now that Washington has taken over the federal loan system, the Department of Education operates as one of the largest banks in the country, with taxpayers on the hook, America is fast becoming a society where education is unaffordable, a government loan is an entitlement, default is the norm, and loan forgiveness is the expectation. America needs a new norm, where college is affordable and paying off debt is achievable.”
Mitt Romney announced his plan during remarks made at the Latino Coalition’s Annual Economic Summit in Washington, D.C. He spoke of the need to address the continued increase in college tuition rates and to ensure that students have educational options. “Students must have access to a wide variety of options that will give them the skills they need for successful careers. We must stop fueling skyrocketing tuition prices that puts higher education out of reach for some and leave others with crushing debt.”
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On May 16, 2012, Congressman Bruce Braley (D-IA) convened the House Subcommittee on Economic Opportunity to examine the potential costs and benefits of President Obama’s Executive Order that ties military and veterans’ education benefits to marketing and recruitment practices at postsecondary educational institutions. The Executive Order, signed on April 27, 2012, calls for the establishment of new outcomes measurements, improved support services for service members and veterans, a centralized complaint process, and strengthening enforcement of student protections.
While the majority of those who testified asserted that it was too early to assess the impact of the Executive Order, a representative from the American Association of Collegiate Registrars and Admissions Officers (AACRAO) said that the Executive Order would likely increase institutional costs but that it would hopefully be offset by added protections for veterans.
An analysis of VA data, conducted by a Senate Health, Education, Labor and Pensions Committee (HELP) shows that of the $4.4 billion in VA education benefits disbursed to 5,985 institutions in 2010-2011, more than 37 percent went to for-profit institutions. The HELP Committee pointed out that several colleges have high drop-out rates and low graduation rates and devote as much as 30 percent of their revenue to advertising, marketing, and recruiting.
APSCU President and CEO Steve Gunderson testified that “We are encouraged that the Executive Order calls for developing new, appropriate metrics to measure a veteran’s academic progress – individually and collectively – and stand ready to work with the Administration, Congress, and all interested parties to develop a fair, appropriate measurement. Until that process is completed, no set of data will be relevant for or related to the realities of either a service member or veteran’s educational experience.”
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On May 29, 2012, attorneys general from 21 states and one representative from an Office of Consumer Protection sent a letter to House and Senate leaders of education and veterans affairs committees to modify the 90/10 rule so that GI Bill and Veterans Assistance educational benefits would be included in the 90 percent. Currently, these funds are treated as part of the 10 percent. The letter says that “for-profit schools are targeting military men and women and their families with high pressure recruiting tactics in order to meet the 90/10 requirement. Moreover, perversely, schools are actually using the military benefits to leverage even more Title IV funds since each ($1) they obtain from DoD or VA sources allows them to obtain an additional nine ($9) dollars in Title IV funding.”
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On May 24, 2012, Senator Al Franken (D-MN) introduced the Understanding the True Cost of College Act to mandate that higher education institutions use a standardized award letter, uniform financial aid terms, and provide information about student loan repayment as well as a number of other student aid-related disclosures. In a press release of May 24, 2012, Senator Franken said that “families and students will gain a more accurate picture of exactly how much college will cost them before deciding which college to attend under bipartisan legislation he authored.” Senators Tom Harkin (D-IA), Chuck Grassley (R-IA), Richard Blumenthal (D-CT), Chuck Shumer (D-NY), Barbara Mikulski (D-MD), Tim Johnson (D-SD), R. Wyden (D-OR), and Ben Cardin (D-MD) joined as original cosponsors.
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On June 5, 2012, the White House convened a roundtable discussion on higher education affordability, with 10 college presidents, who agreed to provide increased disclosures on college costs and financial aid, similar to what the Consumer Financial Protection Bureau (CFPB) has proposed in its “financial aid shopping sheet.” Among those pledging to support the increased disclosures were the State University System of New York, University of Massachusetts System, Arizona State System, University of North Carolina at Chapel Hill, University System of Maryland, and University of Texas System. The types of information to be included are: average cost for one year of college; financial aid options that differentiate between grants and scholarships; net costs after these financial aid awards; estimated student loan monthly payments upon entering repayment; and enrollment and default rate statistics.
This past year, the Department of Education and the CFPB and its “Know Before Your Owe” initiative, released a draft “financial aid shopping sheet” to provide students and their families with a model financial aid letter that discloses the type and amount of financial aid they qualify for and seeks to make it easier to compare financial aid packages offered by different institutions. Public comments are still being accepted on the model “financial aid shopping sheet.”
Vice President Joe Biden, Secretary of Education Arne Duncan, Director of CFPB Richard Cordray, and Domestic Policy Council Director Cecilia Muñoz, participated in the discussion and urged other college presidents to make the same commitment to provide easy-to-understand financial data about their higher education investment.
One issue that continues to be debated is whether standardization is necessary. NASFAA argues that the award letters should contain certain types of information but institutions should be allowed to adjust the letters themselves. Others argue that the lack of standardization leads to confusion when comparing colleges.
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On May 24, 2012, the Department of Education released “The Conditions of Education: 2012,” this year’s annual report, for the period 2009-2010 academic year. The report provides comprehensive information on postsecondary education. Information is provided on enrollment, graduation rates, financial aid, fields of study, institutional expenses and revenues, and faculty salaries and benefits at public institutions, private nonprofit institutions, and for-profit institutions.
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