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On May 9, 2013, House Committee on Education and the Workforce Chairman John Kline (R-MN) and Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC) introduced a bill, Smarter Solutions for Students Act (H.R. 1911), to address the upcoming student loan interest rate increase on Subsidized Direct Loans by moving to a market-based solution. H.R. 1911 seeks to move all federal student loans (except Perkins Loans) to a new interest rate formula based on the 10-year Treasury Note (with a 2.5 percent margin for Stafford Loans and a 4.5 percent margin for Grad and Parent PLUS Loans). The legislation differs from most other student loan interest rate solutions that are circulating in that it would provide for a true variable rate that would change every year for outstanding loans made beginning each July. Many of the other proposals are variable at origination, but become fixed for the life of the loan. The Kline/Foxx proposal also differs in that it provides for a cap during times of high interest rates (8.5 percent for Stafford Loans and 10.5 percent for PLUS Loans). The interest rate for Consolidation Loans would remain unchanged, which means when the interest rates are low, borrowers can lock in their interest rate by consolidating their loans.
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On May 9, 2013, a group of Senate Democrats that include Jack Reed (D-RI) and Dick Durbin (D-IL) introduced the Responsible Student Loan Solutions Act of 2013 (S. 909), which would resolve the student loan interest rate issue on Subsidized Direct Loans by basing the interest rate on the 91-day T-bill plus an add-on to be determined by the Secretary of Education based on the costs of administering the program. The bill would also increase the annual and aggregate borrowing limits for Subsidized Direct Loans. A companion bill was introduced in the House by Congressmen John Tierney (D-MA) and Joe Courtney (D-CT).
According to the press release, interest rates on Subsidized Direct Loans would be capped at a maximum of 6.8 percent, while interest rates for Unsubsidized Direct Loans, Parent and Grad PLUS Loans, and Consolidation Loans would be capped at a maximum of 8.25 percent. The bill would also permit borrowers with existing federal student loans (including FFELP Loans) to refinance those loans into a new variable rate loan.
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On May 9, 2013, Senators Marco Rubio (R-FL), Ron Wyden (D-OR), and Mark Warner (D-VA) and Congressmen Duncan Hunter (R-CA) and Robert Andrews (D-NJ) re-introduced the bipartisan House and Senate bills, Student Right to Know Before You Go Act (S. 915), legislation that would give students and families the information they need to make better choices about higher education. The bills would ensure that a “wide range of accurate and easy to understand data would be readily available online for prospective students and their families. Using information that is already gathered, student records would be matched with employment and earnings data…This would finally provide students and their families the opportunity and tools needed for a more complete picture of the value of their education.”
The proposal would permit students and families to have access to the following information:
- Post-graduation average annual earnings;
- Rates of remedial enrollment, credit accumulation, and graduation;
- Average cost (both before and after financial aid) of the program and average debt accumulated;
- The effects of remedial education and financial aid on credential attainment and a greater understanding of what student success can mean.
The bill would also direct the Secretary of Education to establish a federal “unit-record” system. Individual privacy would be strictly maintained with safeguards to ensure that no personally identifiable information could ever be disclosed. The “unit record” system included in the bill would link individual student records to earnings data in an effort to provide better information to students and families. Under a “unit record” system, these data would be disaggregated and available based on educational program, educational institution, and employment sector.
A ban on the creation of a federal “unit-record” database was authorized under the Higher Education Opportunity Act of 2008 (HEOA), when privacy concerns were raised by private nonprofit institutions and conservatives who were concerned that information from the database could be used for non-education purposes and could expose confidential information. Sarah Flanagan, Vice President for Government Relations at the National Association of Independent Colleges and Universities (NAICU) was quoted in an article of May 10, 2013 in the Chronicle of Higher Education as saying that she worried that earnings information reported to prospective students would overlook other factors that contribute to a graduate’s salaries, such as the geographic region or their career. That same article pointed out that Senator Warner had suggested at a news conference of May 9, 2013 that colleges may be trying to hide negative outcomes from prospective students. However, despite the privacy concerns, policy makers continue to argue for a unit record database at the federal level because it is the only way to accurately measure student success.
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On May 13, 2013, Congressman Luke Messer (R-IN) introduced the Improving Postsecondary Education Data for Students Act (H.R. 1949) that directs the Department of Education to convene an Advisory Committee for Improving Postsecondary Education Data to explore opportunities to enhance higher education transparency. H.R. 1949 requires the Advisory Committee to review existing federal, state, institutional, and private sector transparency initiatives to determine the information that is most helpful to both traditional and nontraditional students, including veterans.
On May 16, 2013, the full committee will take up H.R. 1911, The Smarter Solutions for Students Act, and H.R. 1949.
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On May 9, 2013, Congresswoman Rosa L. DeLaura (D-CT) introduced H.R. 1928, To Clarify the Calculation of Cohort Default Rates for Proprietary Institutions of Higher Education under the Higher Education Act of 1965. H.R. 1928 would modify the definition of a default for the purposes of calculating cohort default rates at proprietary schools, which would count as a default any current or former students who have been granted a forbearance or deferment for any period exceeding 6 months after entering repayment before the end of the second fiscal year following the fiscal year in which the students went into repayment.
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On April 25, 2013, members of the House Education and the Workforce Committee called upon students, parents, college leaders, and higher education stakeholders to share their views on policies and amendments that should be included in the upcoming reauthorization of the Higher Education Act (HEA). Chairman John Kline (R-MN) said: “The reauthorization of the Higher Education Act is no small undertaking. These policies affect families nationwide, and the committee must carefully consider feedback from the public as we develop proposals to strengthen the law.” Ranking Member George Miller (D-GA) said: “It is my hope that the results of this process will help ensure that all qualified students have access to the quality and affordable higher education they need to succeed in the 21st century. It is also my hope that, in the upcoming committee process, among other things, we thoughtfully and comprehensively address the increasing cost of higher education and the growing debt burden on students, completion barriers for traditional and nontraditional students alike, and strengthening the roles of community colleges.”
In a letter signed by Chairman Kline, Ranking Member Miller, Subcommittee on Higher Education and Workforce Training Chairman Virginia Foxx (R-NC), and Ranking Member Rubén Hinojosa (D-TX), members write:
“In preparation for the upcoming reauthorization of the Higher Education Act, the Committee will begin exploring proposals to improve postsecondary education in America. To assist us in this process, we are seeking input from students, parents, the higher education community, employers, and other stakeholders on suggested policy changes and amendments to strengthen the law…We are particularly interested in examining ways to:
- Empower students as consumers in higher education;
- Simplify and improve the student aid and loan programs;
- Increase college accessibility, affordability, and completion;
- Encourage institutions to reduce costs;
- Promote innovation to improve access to and delivery of higher Education; and
- Balance the need for accountability with the burden of federal requirements.”
Feedback should be submitted at HEA.Reauth@mail.house.gov.
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On April 18, 2013, House Committee on Education and the Workplace Chairman John Kline (R-MN), along with Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC), and Representatives Robert Andrew (D-NJ), Carolyn McCarthy (D-NY), and Alcee Hastings (D-FL), sent a letter to Secretary of Education Arne Duncan urging him to drop the gainful employment and state authorization regulations and instead work with Congress to address program integrity issues as part of the Higher Education Act reauthorization.
Chairman Kline said that “[t]he gainful employment and state authorization regulations resulted in several legal challenges and sparked heated congressional debate.” For example, Chairman Kline indicated that in 2011, the House of Representatives voted 289 to 136 to prohibit the Department of Education from implementing the gainful employment regulations. Additionally, he noted that in 2012, the House voted 303 to 114 to repeal the state authorization regulation. Congressman Kline went on to say that members have sent countless letters to the Administration stating their concerns about the program integrity regulations. “Higher education leaders and members of the higher education community on both sides of the aisle fear the regulations could raise college costs and limit students’ education options. Yet the administration continues to doggedly pursue implementation, disregarding the concerns of policymakers and institutions. We strongly urge Secretary Duncan to abandon these harmful regulations and instead work with Congress to strengthen the nation’s higher education system through reauthorization of the Higher Education Act.”
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On April 24, 2013, Senators Richard Burr (R-NC) and Tom Coburn (R-OK) sent a letter to Secretary of Education Arne Duncan requesting an update on the Department’s implementation of the Inspector General’s suggested corrective actions for improving transparency and proper management of the negotiated rulemaking process in light of the Department’s recent announcement that it would be commencing new public hearings and negotiated rulemaking. On November 27, 2010, the Senators had initiated a request to the IG, Kathleen Tighe, to conduct an investigation into the Department’s handling of program integrity rules for federal student aid programs because they were and continue to be concerned that Department employees engaged in improper release of information that might have resulted in the financial gain of certain individual investors. As a result, on June 21, 2012, the OIG had made several suggestions for how the Department should handle sensitive information and the Senators are seeking information as to how the Department is addressing the suggestions made by the OIG.
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On March 26, 2013, President Obama signed into law the FY 2013 funding bill, the Consolidated and Further Continuing Appropriations Act that will allow the federal government to continue operating until September 30, 2013. With the passage of the bill, a government shutdown has been prevented. While the across-the-board cuts under sequestration continue to be in effect through the end of the fiscal year, H.R. 933 moved some of the funding around within agency budgets to try to alleviate some of the impact of sequestration. In addition, H.R. 933 expanded on the initial House-passed bill and includes full appropriations bills covering the Departments of Defense, Commerce, Justice, Veterans’ Affairs, Agriculture, and Homeland Security, as well as science agencies like NASA and military construction activities. The Senate-approved version that went to the President included an amendment sponsored by Senators James Inhofe (R-OK) and Kay Hagen (D-NC) to restore funding for military tuition assistance programs that were recently suspended due to the sequestration. It is not clear from the amendment how the Department of Defense will cover the costs of tuition assistance with a tighter budget. [Fourteen higher education associations had sent a letter to Secretary of Defense Charles Hagel on March 18, 2013 asking for reconsideration of the decision made by the Army, Air Force, Marine Corps, and Coast Guard to suspend new applications for the Tuition Assistance Program as part of the sequestration.]
A press release issued on March 20, 2013 from the U.S. Senate Committee on Appropriations provided the following comments:
“Working across the aisle and across the dome, the Senate has come together to prevent a government shutdown,” said Chairman Barbara Mikulski (D-MD). “I am so proud the Senate bill protects national security while meeting compelling human needs.”
“This is an important step in breaking from crisis mode in Washington,” said Vice Chairman Richard Shelby (R-AL). “Chairwoman Milkulski and I set out to prevent a government shutdown, provide flexibility for those implementing budget cuts, and produce a bill that both parties in both chambers can support.”
House Appropriations Chairman Harold Rogers (R-KY) said in his committee’s press release: “We have proved that when we set our mind to it, we can get complicated, hard things done.”
We understand that the tuition assistance funds are now flowing again.
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On April 24, 2013, the House Subcommittee on Education and Workforce Training convened a hearing on “Keeping College Within Reach: Enhancing Transparency for Students, Families, and Taxpayers.” Chairwoman Virginia Foxx (R-NC) stated in her opening remarks that in looking at reauthorization of the Higher Education Act, the Subcommittee must look at ways to improve data without placing additional burdens on institutions or creating more confusion for students and families. She said that Congress should also explore opportunities to better align federal transparency initiatives with state and accreditors’ reporting requirements. Ranking Member Tim Bishop (D-NY) stated that data can be of great benefit for students to make informed decisions; however, he acknowledged the need to meet the Administration’s data transparency initiatives to aid students in their selection of postsecondary educational institutions. The witnesses agreed that better information is needed for students and families to make informed decisions, particularly on college costs and financing options for higher education.
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The Higher Education Act expires at the end of 2013, but no one knows when it will be reauthorized but it is likely not to be soon. To begin the process, both the House Subcommittee on Higher Education and Workforce Training and the Senate Committee on Health, Education, Labor and Pensions held hearings on the upcoming reauthorization of the Higher Education Act on April 16, 2013.
The House Subcommittee chaired by Congresswoman Virginia Foxx (R-NC), held a hearing entitled, “Keeping College Within Reach: The Role of Federal Student Aid Programs.” Congresswoman Foxx said: “In this debate, we find ourselves at a crossroads between accountability and limited government. The federal government spends more than $140 billion on financial aid programs annually. Given the significant amount of taxpayer money being spent and our nation’s budgetary challenges, we all want to ensure these dollars are actually helping more students earn college degrees.”
One of the witnesses to the House Subcommittee hearing, Terry Hartle, Senior Vice President of the American Council on Education, gave an overview of financial aid policy, indicating that federal aid is a student voucher, with the goal that the federal funds will be used for access and help for the middle class. He described the changes in the student population, all of the new providers, and the amount of government regulation of schools. Trinity Washington University President Patricia McGuire agreed that the aid programs needed to be updated to accommodate the new student population. Dan Madzelan, former Acting Assistant Secretary of the Department of Education, recommended simplifying the aid application using tax information, simplifying the loan programs, and automatic enrollment in an income-based repayment plan, which is an idea promoted by Congressman Tom Petri (R-WI). Mr. Madzelan said: “We should have accountability for all federal aid dollars through a multi-pronged assessment of institutional eligibility for Title IV financial aid that considers measures of access and equity, loan repayment, and risk-adjusted completion rates.”
Members of the Senate Committee on Health, Education, Labor and Pensions questioned students, a student advocate, and a higher education researcher about the challenges students face in being able to afford college. Committee Chair Tom Harkin (D-IA) noted in his opening remarks that due to cut backs in state higher education appropriations, students are shouldering more college operating and administrative costs than ever through higher tuition rates. He asserted that the nation cannot continue to keep shifting these costs to students.
Dr. Sara Goldrick-Rab, Associate Professor of Educational Policy Studies and Sociology at the University of Wisconsin-Madison, described her research which showed that there was an increasing perception that college is unaffordable, that there is a diminishing amount of purchasing power in the Pell Grant Program, and that there is an increasing reliance on student loans. All of these perceptions affect education decisions and decrease the likelihood of college success, particularly for the neediest students.
Burdensome regulations and an overly complicated financial aid system were also topics that were discussed throughout the hearing. Senator Lamar Alexander (R-TN) pointed to an “absurd barrage of well-intentioned regulations as another driver of increasing college costs.”
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On May 10, 2013, the Department of Education released Dear Colleague letter GEN-13-13, which provides guidance and examples critical to the implementation of the 150 percent Direct Subsidized Loan time-limited eligibility provisions. On July 6, 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21) (P.L. 112-141) was enacted. MAP-21 added a new provision to the Direct Loan statutory requirements that limits a new borrower’s eligibility for Direct Subsidized Loans to 150 percent of the program. This DCL relates to reporting to COD. Further guidance and a webinar will be provided on the new provision.
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On April 10, 2013, the Government Accountability Office (GAO) issued a report titled “Higher Education: Experts Cited a Range of Requirements as Burdensome.” The GAO report (GAO-13-371) analyzed the opinions of 18 experts to determine which requirements create burden. No single requirement was cited as burdensome but the majority of the experts cited various consumer disclosure requirements, such as those pertaining to campus crime, primarily related to the time and difficulty in gathering the information. Four experts cited the Return of Title IV Funds as burdensome. Six of the experts said that the cumulative burden of multiple requirements is a substantial burden.
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On April 11, 2013, the Consumer Financial Protection Bureau (CFPB) released its newest version of a tool that allows students and their families to compare financial aid packages and college costs. The new version allows more students to compare financial aid offers across all education sectors and degree levels, from community college, bachelor’s, certificate, and graduate programs. CFPB has also incorporated a more user-friendly design and reintroduced the GI Bill Calculator, which gives service members the ability to calculate the benefits available to them through the GI Bill and tuition assistance programs. CFPB notes that more than 700 schools have adopted the Financial Aid Shopping Sheet to send to prospective students this year.
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On May 8, 2013, the Consumer Financial Protection Bureau (CFPB) released a report titled “Student Loan Affordability: Analysis of Public Input on Impact and Solutions,” which summarizes and analyzes the comments it received from a request for information it published on February 21, 2013 seeking alternatives for increasing the availability of affordable payment plans for borrowers with private student loans. The report also highlights the ways in which student loan debt can serve as a roadblock for consumers. Finally, the report outlines options for policymakers and market participants to consider in order to help borrowers manage their private student loan debt.
The CFPB noted that many stakeholders who had submitted comments were concerned about the potential domino effect of student loan debt on the economy. A number of commenters described how monthly student loan payments can deplete consumers’ personal savings, may crowd out other types of consumer spending, and may shape the choices young graduates make about their careers and the communities in which they live. Many of the commenters were particularly concerned with the student debt’s impact on housing, small business development, retirement savings, and rural communities.
Potential policy and market-based solutions described in the report include:
- Providing refinance relief for borrowers who pay on time;
- Offering a “road to recovery” for borrowers in distress, such as a solution for struggling borrowers trapped in the terms of their private student loans by lowering monthly payments; and
- Providing a “credit clean slate” for borrowers in default who need a way to repair their credit and get out of default, similar to loan rehabilitation options that are available for federal student loans.
On May 8, 2013, Director of the CFPB Richard Cordray addressed the public’s response to how student debt impacts lives at a field hearing held in Miami, FL. He said that the public response was “overwhelming, hearing from over 28,000 Americans who shared their day-to-day struggles with expensive private student loans and steep monthly payments.” Mr. Cordray pointed out that many commenters described how they were postponing or forgoing major financial milestones like living on their own, starting a family, or buying a home due to high monthly student loan payments. In prepared remarks, Mr. Cordray said: “What is clear is that the overhang of high student loan debt can restrict the choices many young graduates are able to make about their careers and the communities in which they live.”
Mr. Cordray concluded that the CFPB will be doing its part to examine the issue and pointed out that the CFPB recently proposed a rule [March 28, 2013] that would allow the agency to oversee many of country’s larger student loan servicers. “This oversight would allow us to keep a watchful eye over any servicing company that engages in unfair or deceptive acts or practices toward student loan borrowers.” Mr. Cordray also commented that “We will also continue to cooperate with the Justice Department to hold accountable those who violate the rights of our women and men in uniform.”
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