Jump to a Section:
On January 24, 2012, President Obama delivered his State of the Union address to a joint session of Congress. The President called for an expansion of job-training programs at community colleges, an extension of the American Opportunity Tax Credit, which provides up to $2,500 for tuition expenses; doubling the Federal Work-Study Program over the next five years, and maintaining the current interest rates on subsidized loans to the current 3.4 percent, which is scheduled to double on July 1, 2012 to 6.8 percent.
While the President praised institutions that have taken steps to control tuition costs, he also put colleges and universities “on notice” that the Federal government would not continue to “subsidize skyrocketing tuition.” “If you can’t stop tuition from going up, the funding you get from taxpayers will go down. Higher education can’t be a luxury, it is an economic imperative that every family should be able to afford.”
With regard to high school dropouts, the President underscored the need to ensure that students graduate from high school. “We also know that when students don’t walk away from their education, more of them walk the stage to get their diploma. So, tonight, I am proposing that every state require that all student stay in high school until they graduate or turn 18.”
On January 25, 2012, President Obama spoke to University of Michigan students on the importance of making college affordable and accessible to all and issued a new blueprint to reform student aid. In his remarks, the President called college “the single most important investment you can make.” However, he described the high debt loads students must take on to obtain a college degree, pointing out that in 2010, college graduates owed an average of $24,000 in student loans. He also said that more must be done to contain rising tuition costs. “We’re putting colleges on notice, that you can’t assume you’ll just jack up tuition every single year. If you can’t stop tuition going up, your funding from taxpayers will go down. We should push colleges to do better; we should hold them accountable if they don’t.”
The White House also issued a blueprint that outlines the President’s plan to control tuition costs and reform student aid. As highlighted in the blueprint, the proposals include:
Reform student aid to promote affordability and value: The proposal would shift campus-based funds (SEOG, Perkins Loans, and FWS) from colleges and universities that fail to keep tuition down toward colleges and universities that do their fair share to keep tuition affordable, provide good value, and serve needy students well. These changes in campus-based aid would leverage $10 billion annually to keep tuition down. This increase is primarily driven by an expansion of the Perkins Loan Program.
Create a Race to the Top initiative for college affordability and completion: The President would create incentives for states and colleges to keep costs down through a $1 billion investment in a new challenge to spur higher education reform focused on affordability and improved outcomes across state colleges and universities. States would be rewarded if they are willing to drive systemic change in state systems of higher education in order to reign in their tuition costs and promote success for students. The investment would be used to spur the use of cost-saving measures like redesigning courses and making better use of education technology.
Develop a first in the world competition to improve long-term productivity and enhance quality: This initiative would invest $55 million to enable colleges and universities to develop, validate, or scale up innovative and effective strategies for boosting productivity and enhancing quality on campuses.
Provide better data for families to choose the right college: The President would call for a College Scorecard for all degree-granting institutions, designed to provide the essential information about college costs, graduation rates, and potential earnings, all in an easy-to-read format that will help students and families choose a college that is well suited to their needs, priced affordably and consistent with their career and educational costs. The Administration also plans to make an updated version of the “Financial Aid Shopping Sheet,” which had been announced in October, a required template for all colleges, rather than a voluntary tool, to make it easier for families to compare financial aid packages.
Provide federal support to tackle college costs:
Keep student loan interest rates low: The President is asking Congress to prevent the increase in interest rate from 3.4 percent to 6.8 percent on July 1, 2012 in order to keep the interest rate and student debt down.
Double the number of work-study jobs available: The President also proposed to double the number of work-study jobs so that students can gain valuable work experience while in school.
Maintain commitment to college affordability: The President calls on Congress to make the American Opportunity Tax Credit permanent. This tax credit provides tax credits of $10,000 over the four-year period of college.
These proposals are part of President Obama’s larger “An America Built to Last” blueprint that aims to move toward an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.
Copies of the Blueprint for Keeping College Affordable and Within Reach for All Americans can be found online.
With regard to the specific proposals, like extending the American Opportunity Tax Credit, doubling the number of FWS jobs, and keeping the interest at 3.4 percent, the President has not said how he would pay for the proposals. Most of the proposals would require congressional approval, and it is unlikely that Republicans would vote for spending more money. Of concern to many in the higher education is the proposal to punish colleges who cannot reign in tuition costs by denying campus-based aid to them, aid that supports needy students. Many colleges have asked how the Administration would determine how a college is controlling its tuition costs. State colleges and universities ask how the Administration can punish them for increasing tuition when they have to make up for lost state appropriations. While many members of the higher education community have voiced concern about any federal involvement in keeping tuition costs low, many support the expansion of the Federal Work-Study program and the Perkins Loan Program and in maintaining the low interest rate in the Subsidized Loan Program.
Details about the President’s proposals will be included in his budget proposal for FY 2013. However, the proposals have an uncertain future because of the current deadlock in Washington.
back to top
On January 25, 2012, Congressman Joe Courtney (D-CT) introduced H.R. 3826, legislation to amend the Higher Education Act to extend the reduced 3.4 percent interest rate for Subsidized Direct Loans for undergraduate students. Without legislation, the interest rate would increase to 6.8 percent on July 1, 2012. The College Cost Reduction and Access Act (CCRAA) phased-in cuts to the fixed interest rates on newly originated Subsidized Stafford Loans for undergraduate students. Under the CCRAA, interest rates on Subsidized Stafford Loans decreased from 6 percent in 2008-2009, to 5.6 percent in 2009-2010, 4.5 percent in 2010-2011, and 3.4 percent in 2011-2012. Unsubsidized Stafford Loans and all graduate level Stafford Loans have remained at a fixed 6.8 percent rate.
On February 3, 2012, Senator Jack Reed (D-RI) introduced S. 2051, a bill to extend the 3.4 percent interest rate for Subsidized Direct Loans for undergraduate students. The bill is the Senate’s companion bill to H.R. 3826, introduced by Congressman Courtney.
House Education and the Workforce Committee Chairman John Kline (R-MN) issued a statement:
“The president’s remarks correctly describe the value of a higher education and the challenges facing many individuals who are eager to pursue the dream of a college degree. We all want to promote efforts that will reduce college costs, but the era of empty promises has to end. The interest rate hike students face is the result of a ticking time bomb set by Democrats five years ago. Simply calling for more of the same is a disservice to students and taxpayers.”
Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC) issued a statement:
“I appreciate the president’s remarks today and for helping to shine a spotlight on the challenges students face earning a college degree. However, I am disappointed the president failed to take a comprehensive view of the problem. Any discussion about the cost of higher education must include the role played by federal regulations…Onerous regulations come with a price and that price is often paid by students.”
Senator Lamar Alexander (R-TN) released a statement on the President’s address:
“Within the same paragraph of his State of the Union address, the president first promised to increase student aid, and then threatened to reduce it, saying that if tuition goes up, taxpayer funding will go down. But federal taxpayer funding for colleges and universities is almost all through grants and loans that go to about 20 million students, so his threat to reduce federal spending for colleges is really a threat to cut federal aid to students.”
On February 2, 2012, the Senate Health, Education, Labor and Pensions Committee held a hearing entitled “Innovations in College Affordability.” Chairman Tom Harkin (D-IA) stated in his opening statement that college affordability is a major issue facing Americans since student debt now exceeds credit card debt. Ranking Member Mike Enzi (R-WY) acknowledged that the cost of higher education has outpaced inflation and healthcare costs, and remarked that he wanted to look at all problems in higher education over a year ago, but the Committee has focused only on the for-profit sector. Senator Harkin said that he supported the President’s proposals and believes that the Committee needs to incentivize states to make investments in higher education and understand how technology can reduce costs. Concern was expressed to Martha Kanter, Under Secretary of Education, by the Republicans about the Administration’s proposals to reward colleges and states that hold down tuition. Ms. Kanter responded that the Administration would judge states based on their “long-term policies in place to stabilize tuition.” When asked by Senators from both parties what the Administration was doing to rein in regulations, Ms. Kanter indicated that the Administration has directed all federal agencies to scrub their regulations.
back to top
On December 23, 2011, the President signed into law the Consolidated Appropriations Act of 2012 (P.L. 112-74), which significantly impact the Title IV student assistance programs, as identified below:
Automatic Zero EFC Income Threshold: The income threshold for an automatic zero expected family contribution (EFC) was reduced from $30,000 to $23,000 for the 2012-2013 award year for both dependent and independent students. The Central Processing System (CPS) has been updated and began processing FAFSAs for the 2012-2013 award year using the new automatic zero EFC threshold.
Ability-to-Benefit: Students who do not have a high school diploma or a recognized equivalent or have not completed a secondary school education in a home school setting that is treated as a home school or private school under State law will no longer be eligible for Title IV federal student assistance if enrolled in a program of study on or after July 1, 2012. Students will qualify for Title IV under one of the ability-to-benefit alternatives if the student was enrolled in an eligible program prior to July 1, 2012.
The Department promises to provide further communication, including examples under which a student who was enrolled prior to July 1, 2012, would remain eligible under the ATB alternatives. What is not clear is the effective date. Does the effective date refer to the current program? Would a student who attended anywhere in any program prior to July 1, 2012 lose eligibility? What about a student who transfers into the institution on or after July 1, 2012? What does “enroll” mean – accepted, registered, attending?
The Pell Grant annual maximum award will remain at $5,550 for the 2012-2013 award year.
The minimum Pell Grant award was modified. The new law establishes the minimum Pell Grant award for a student at 10 percent of the maximum award amount for the award year. Further, it eliminates the provision in which a student who would be eligible to receive a Pell Grant of between 5 and 10 percent of the award year’s maximum award would be eligible to receive an award of 10 percent of the maximum award. Instead, beginning with the 2012-2013 award year, students will not receive any Pell Grant award if they are not eligible for at least 10 percent of the maximum award for the academic year.
Beginning with the 2012-2013 award year, the duration of a student’s eligibility to receive Pell Grants is reduced from 18 semesters (or equivalent) to 12 semesters (or equivalent). No current Pell Grant recipients will be grandfathered.
For new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012 and before July 1, 2014, the interest subsidy provided during the six-month grace period provided to students who are no longer enrolled on a least a half-time basis is eliminated. Questions yet to be answered include what is a “new” loan. Is it at the point of origination or is it the first disbursement?
The Department of Education issued a Dear Colleague letter (GEN-12-01) summarizing the Consolidated Omnibus Appropriations bill, FY 2012, but questions remain as to the various implementation dates. Stay tuned for more guidance.
back to top
The Obama Administration is looking to add a new tool to its College Affordability and Transparency Center that is intended to assist prospective students and their families in comparing colleges using key measures of affordability and value. The purpose of the “College Scorecard” is to help the college-going population to choose high-quality colleges that provide good value. The Administration has posted a draft scorecard online, and is seeking public comment.
back to top
On January 30, 2012, the Department of Education published a request in the Federal Register from institutions of higher education, non-profit organizations, States, systems of higher education, adult education providers, researchers, and institutional faculty and staff seeking information about promising and practical strategies, practices, programs and activities that have improved rates of postsecondary success, transfer, and graduation. The information that is received will be posted on the Department’s Postsecondary Completion Web site that will allow the information on promising strategies to be shared, commented on, and discussed by interested parties. Comments should be submitted by April 30, 2012.
back to top
On January 23, 2012, Senator Dick Durbin (D-IL) held a forum in Chicago, IL, which focused on the marketing and recruitment practices of for-profit colleges. He indicated that when he returned to Washington, DC, he would be introducing legislation to modify 90/10. Two veterans testified at the forum described their experiences as students at two for-profit colleges and both stated that they were encouraged to borrow private education loans.
Holly Petraeus, Assistant Director of Servicemember Affairs at the Consumer Financial Protection Bureau, was most critical of the 90/10 rule and supported Senator Durbin’s plan to close the loophole that incentivizes schools to recruit military students.
Senator Durbin introduced a bill on the day of the forum that would change the 90/10 standard to 85/15, and include all federal funds in the 85 percent of the calculation. Protecting Our Students and Taxpayers (POST) Act would “strengthen” the definition of federal funds to include G.I. bill funds, Department of Defense Tuition Assistance benefits and all other federal funds.
On January 23, 2012, Senator Durbin and Senator Tom Harkin (D-IA) introduced S. 2032, the Protecting Our Students (Post) Act, proposing to amend the Higher Education Act to restore the 90/10 rule to the original 85/15 rule. Specifically, S. 2032 would:
- Re-establish the 85/15 metric and require all “federal funds” (including Post-9/11 GI bill benefits, Department of Defense Tuition Assistance, and Workforce Investment Act (WIA) funding);
- Require schools to lose Title IV eligibility after only one year of non-compliance with the 85/15 rule;
- Require scholarship money to be in the form of monetary aid to count as revenue;
- Require scholarship money to come from an outside source with no affiliation to the institution; and
- Exclude institutional loans, except for payments made by students on such loans, from the definition of “revenue.”
It is unlikely that the bill will advance through the Republican House. However, this bill should be monitored.
back to top
The 2010-2011 version of the Net Price Calculator now is available online.
back to top
On January 23, 2012, the Department of Education published a correction to the gainful employment regulations in the Federal Register. ED said that in the preamble of the final regulations, it used the wrong data to calculate the percent of total variance in institutions’ repayment rates that may be explained by race/ethnicity. The Department’s intent was to use the data that included all minority students per institution; however, the Department mistakenly used the data for a subset of minority students per institution. The Department has now recalculated the total variance that uses the data that includes all minority students. The notice corrects the errors that had been made in the preamble of the gainful employment debt measures final regulations. By failing to count minorities, ED had understated the impact of race. The original analysis said that members of a minority group explained 1 percent of the total variance in repayment rates; however, the actual variance in repayment rates is 20 percent or more.
back to top
On January 17, 2012, the National Advisory Committee on Institutional Quality and Integrity (NACIQI) released its second draft of its higher education accreditation reauthorization policy recommendations. One critical issue that was addressed concerned the extent to which accreditation serves and should continue to serve as the gate keeping function for an institution’s eligibility for federal Title IV funds. NACIQI concluded that the accreditation system serves as “a critical element in providing information about academic quality to satisfy the federal interest in assuring the appropriate use of federal funds.” Therefore, NACIQI recommended that the link between accreditation and aid eligibility should be retained. Clearly, the recommendation from one of the NACIQI members, Anne Neal, that accreditation should no longer be the main gatekeeper for colleges to gain to access to federal aid was rejected.
back to top
In January 2012, the Consumer Financial Protection Bureau (CFPB) issued a summary of feedback it received on the agency’s “Know Before You Owe: Student Loans” initiative, which was developed in conjunction with the Department of Education. Last October, the CFPB requested feedback on the new financial aid shopping sheet designed to help prospective students understand the cost of education and the type and amount of aid they qualify for and easily compare packages offered by different schools.
According to Rohit Chopra, Private Student Loan Ombudsman, in just a few days, over twenty thousand consumers submitted feedback in the “thought starter” disclosure form. When asked to rank the features viewed as most important, the CFPB notes that the top choices of commenters were:
- Estimated debt at graduation;
- Estimated monthly payment after graduation;
- The likely ability to repay my loans;
- A complete breakdown of cost at school by category; and
- Whether students at this school have been able to repay loans.
The feedback suggested that the following items needed to be instituted: • Standardized information is needed;
- Identification of which aid requires repayment including cost per year; loans and work-study options; and amount owed upon graduation;
- The need to include federal work-study information in the shopping sheet, but not with the loans section;
- On including default rate information, some liked seeing whether students who attended a program were able to repay their loans, although others were unclear how it would be interpreted;
- A web-based interactive version of the shopping sheet was essential; and
- On repayment, commenters said they want the ability to compare different repayment options for federal and private loans.