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Under pressure from the White House, on July 18, 2013, Senators Joe Manchin (D-WV), Richard Burr (R-NC), Angus King (I-ME), Tom Coburn (R-OK), Tom Carper (D-DE), Tom Harkin (D-IA), Lamar Alexander (R-TN), and Dick Durbin (D-IL) introduced a bipartisan compromise, the Bipartisan Student Loan Certainty Act, that will lower interest rates for 100 percent of the borrowers who have taken out, or will take out, a new federal student loan on or after July 1, 2013.
Senator Manchin said in a press release of July 18, 2013: “When Democrats and Republicans work together and have a real debate on a real problem, we can come up with commonsense solutions that benefit all Americans. It is refreshing that on such an important issue we stopped playing politics with our students’ future to come up with a bipartisan, permanent fix that lowers interest rates for all students, especially the poorest, while also putting in place strong protections to ensure that student loan interest rates never become unaffordable. I look forward to working on more bipartisan efforts in the future. When we put our country first, we can do the right thing.”
The other Senators made similar comments. Senator Alexander said: “This long-term, market-based solution means that interest rates on all undergraduate loans — which are two-thirds of all student loans — will be 3.86 percent this year. Rates on all other student loans will also be reduced. This saves billions of dollars for the 11 million students who will borrow money to go to college this year.”
The Bipartisan Student Loan Certainty Act requires that for each academic year, all newly-issued student loans are set to the U.S. Treasury 10-year borrowing rate plus add-ons to offset costs associated with defaults, collections, deferments, forgiveness, and delinquency. The resulting interest rates for loans taken out this year, on or after July 1, 2013, will be 3.86 percent for subsidized and unsubsidized loans for undergraduate students, 5.41 percent on unsubsidized loans for graduate students, and 6.41 percent on PLUS loans for parents and graduate students. The interest rate will be fixed for the life of the loan to provide borrowers with certainty to plan for the future. Additionally, this bill protects against the threat of unforeseen circumstances by imposing a cap to ensure interest rates never exceed 8.25 percent for undergraduate students, 9.5 percent for graduate students, and 10.5 percent for PLUS borrowers. The Congressional Budget Office (CBO) has determined that this bill would save taxpayers $715 million over ten years.
The bill will likely be considered on the Senate floor next week. Next stop: the House. The House had passed their bill, Smarter Solutions for Students Act (H.R. 1911), on May 23, 2013. H.R. 1911 also set interest rates based on the market. However, unlike the Senate bill, the interest rate was not fixed for each loan and could change each year up to an 8.5 percent cap for Stafford Loans and 10.5 percent cap for PLUS loans.
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On July 10, 2013, Chairwoman of the Subcommittee on Higher Education and Workforce Training Virginia Foxx (R-NC); Chairman of the House Committee on Education and the Workforce John Kline (R-MN); and Congressman Alcee L. Hastings (D-FL) introduced the Supporting Academic Freedom Through Regulatory Relief Act (H.R. 2637), a bill that would seek to repeal the gainful employment rule, the state authorization regulation, and the federal credit hour regulation. The legislation builds on The Protecting Academic Freedom in Higher Education bill that passed in the House last year, which would have eliminated the federal credit hour and the state authorization rules. Last year’s bill was unable to gain support in the Senate.
According to the July 10, 2013 press release, the bill would:
- Permanently repeal the gainful employment regulation, which would levy reporting burdens on community colleges and for-profit schools and would force administrators to seek federal approval before creating new programs. (Note: The reporting requirements and program approval requirements are no longer in effect. The only requirement in effect currently is the requirement institutions have to disclose specific information on their gainful employment programs.)
- Permanently repeal the state authorization regulation, which forces states to follow federal requirements when deciding whether to grant institutions, including those offering online education programs, permission to operate in the state.
- Permanently repeal the federal credit hour regulation, which establishes a federal definition of a credit hour, providing the government increased control over institutions’ academic affairs.
- Amend the incentive compensation regulation to ensure third-party service providers are allowed to enter into tuition sharing agreements with nonprofit colleges and universities to aid in the development of distance education platforms.
- Prohibit the Department of Education from issuing additional higher education regulations in several of these areas until after Congress reauthorizes the Higher Education Act.
Congresswoman Foxx said: “These regulations are stifling pioneering institutions at a time when forward-thinking solutions are desperately needed. The Supporting Academic Freedom through Regulatory Relief Act will remove the threat gainful employment, state authorization, and federal credit hour regulations pose to student choice, innovative schools, and an American economy that stands to benefit from responsive higher learning institutions. Republicans and Democrats should toss these bad ideas aside and work together to strengthen higher education for students and taxpayers while maintaining flexibility and choice that set American colleges and universities apart.”
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On July 9, 2013, the House Committee on Education and the Workforce, chaired by Congressman John Kline (R-MN), held a hearing titled “Keeping College Within Reach: Improving Higher Education Through Innovation.” The hearing is one of a planned series of hearings to address issues related to the upcoming reauthorization of the Higher Education Act. The hearing explored state and school approaches to increase innovation and encourage college completion. In his opening remarks, Chairman Kline said that while most people think of rising tuition as the biggest challenge in higher education, demographic changes have also been significant. He quoted the National Center for Education Statistics as stating that the nontraditional student is the fastest growing segment in higher education. He went on to describe the types of innovative ideas that may address the rising costs and changing demographics, including competency-based learning, prior learning assessment, MOOCs, and schools offering general education courses online for a fee. Congressman Kline also noted that there were burdensome and unnecessary regulations standing in the way of innovation, like gainful employment and state authorization regulations, and recommended that these regulations be repealed.
Mr. Scott Jenkins, Director of External Relations for Western Governors University, one of the witnesses, testified that the nation is currently facing a crisis in higher education with more than 2 million more qualified graduates needed each year. He pointed out that a competency-based model like that used at Western Governors University (WGU) measures learning rather than time and can save students money by decreasing the amount of time needed to obtain a degree. Mr. Jenkins asserted that WGU also places emphasis on technology-based learning to promote college access and urged Congress to fund a project to examine the competency-based model, much like it did with distance learning.
Another witness, Dr. Joann A. Boughman, Senior Vice Chancellor for Academic Affairs, University System of Maryland, described the challenges of delivering an education to a diverse student body. Dr. Boughman discussed the innovations that the University is employing to aid students and increase degree completion.
The Democrats used the question and answer portion of the hearing to express outrage at the increase in the Subsidized Loan interest increase on July 1, 2013. They asked the Republicans to sign a petition requesting a vote on H.R. 2574, a bill sponsored by Congressman George Miller (D-CA), that would extend the 3.4 percent interest rate for another year.
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On June 13, 2013, Senator Al Franken (D-MN) reintroduced his bill, S. 1156, Understanding the True Cost of College Act of 2013, which would require the creation of a universal financial aid award letter so that families and students can easily compare financial aid packages from different schools. It also seeks to clarify what financial aid families will receive from a school and create standard terminology for the aid offered so that students and their families can accurately compare offers from different schools. Senator Franken previously introduced a similar bill in 2012. S. 1156 is cosponsored by Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-IA), and Senators Chuck Grassley (R-IA), Marco Rubio (R-FL), Kirsten Gillibrand (D-NY), Patty Murray (D-WA), Ben Cardin (D-MD), Charles Schumer (D-NY), Tom Carper (D-DE), Richard Blumenthal (D-CT), Ron Wyden (D-OR), Richard Durbin (D-IL), Sheldon Whitehouse (D-RI), Tim Johnson (D-SD), Christopher Coons (D-DE), and Barbara Mikulski (D-MD).
The Understanding the True Cost of College Act of 2013 would:
- Require institutions of higher education to use a uniform financial aid award letter;
- Require the Department of Education to work with colleges, consumer groups, students, and school guidance counselors to develop standard definitions of various financial aid terms for use in the uniform financial aid award letters;
- Establish the type of information that must be included on page one of the uniform financial aid award letters such as: cost of attendance, grant aid, work study assistance, eligible amounts of federal student loans, and the net amount a student is responsible for paying after subtracting grant aid; and
- Require the Department of Education to establish a process to consumer test the uniform financial aid award letter and use the results from the consumer testing in the final development of the uniform financial aid award letter.
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On June 25, 2013, the Senate Committee on Banking, Housing and Urban Affairs held a hearing on private student loans and the regulatory requirements that relate to them, including risk assessment and refinancing options. One of the witnesses, Rohit Chopra, Student Loan Ombudsman for the Consumer Financial Protection Bureau (CFPB), said that it would be “prudent to address the large pool of existing debt owed by millions of Americans.” In May 2013, CFPB issued a report on student loan affordability that included ideas from the public on potential solutions for the student loan market. Of the 23 recommendations in the report, Mr. Chopra highlighted two ideas: spurring loan restructuring opportunities and jumpstarting a student loan refinance market. “For borrowers who have dutifully managed their monthly payments on high-interest private student loans, many raised the need for a way to refinance.”
While the majority of the hearing was focused on discussing private student loan lending, Senators Elizabeth Warren (D-MA) and Joe Manchin (D-WV) used their time to question the witnesses about the profits made by banks and the federal government on student loans.
Following the hearing, Senators Sherrod Brown (D-OH) and Heidi Heitkamp (D-NC) announced a plan that would help Americans saddled with private education loans to refinance their loans through more affordable repayment options. The bill text was made available on July 8, 2013 and is titled, “Refinancing Education Funding to Invest (REFI) for the Future Act of 2013.” Under this bill, the Secretary of Education would be authorized to establish lending, purchase, and other credit facilities to accommodate reasonable refinancing opportunities or other loan adjustments to benefit borrowers that are most likely to have private debt service obligations that represent a disproportionate share of their income, and to ensure that borrowers pay lower interest rates that are commensurate with credit risk. The bill provides that the credit facilities shall not result in any net cost to the federal government. '
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On June 27, 2013, the Department of Education released its third annual list of comparative costs and ranks the highest cost institutions by sector (less-than-two, two-year, and four-year; public and private; non- and for-profit). It is often referred to as “The Wall of Shame.” The list is posted on the Department’s College Affordability and Transparency Center, which is one of the Administration’s efforts to increase transparency around the cost of education. The list highlights the highest and lowest tuition and fees, highest and lowest net prices, and highest percentage increases in tuition and fees and average net prices. It is found at:
In addition to the lists, the Administration has released other tools to help families with “easy-to-understand information about institutions.” Among the resources are the College Scoreboard and the Financial Aid Shopping Sheet. According to the July 5, 2013 ED Review, these tools “aim to hold institutions accountable for cost, value, and quality, so that students choose institutions that are well-suited to meet their needs, priced affordably, and consistent with their educational and career goals.”
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On July 11, 2013, the Department of Education posted an advance copy of the pending Notice of Proposed Rulemaking (NPRM) reflecting the consensus of the early 2012 negotiated rulemaking sessions that impact both FFEL and Direct Loan borrowers, higher educational institutions, guarantors, lenders, servicers, secondary markets and collection agencies.
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On July 1, 2013, the Department of Education released a Dear Colleague letter (GEN-13-17) that reminds institutions of the statutory requirement that they are required to make a good faith effort to distribute voter registration forms. The DCL noted that Idaho, Minnesota, New Hampshire, North Dakota, Wisconsin, and Wyoming are currently exempt because voters in those states are permitted to register to vote at the time of voting. Additionally, Puerto Rico, Guam, the Virgin Islands, and American Samoa are not subject to the National Voter Registration Act of 1993.
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On July 2, 2013, USA Today reported on an analysis conducted by Andrew Gillen, Research Director for Education Sector, a non-profit, nonpartisan think tank on education policy, based on Department of Education data, which found that 265 colleges and universities have higher default rates (2009 three-year CDR) than their graduation rates (first-time, full-time undergraduate students). The analysis included in the report titled, In Debt and In the Dark: It’s Time for Better Information on Student Loan Defaults, found that almost one-half of the institutions are for-profit and about a third are public community colleges.
The article reported that community colleges and for-profit colleges have argued that graduation and default rates have more to do with the challenges made by students who are among the neediest and the most ill-prepared academically. Further, the completion/graduation rate is based on a smaller percentage of students who attend for-profit colleges and community colleges, which generally serve at risk and nontraditional students.
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On June 20, 2013, the National Consumer Law Center (NCLC) released a report entitled “Searching for Relief – Desperate Borrowers and the Growing Student Loan ‘Debt Relief’ Industry.” The report describes the new “student loan debt relief” industry that has sprung up in response to the demand for borrower assistance to deal with the growing levels of loan debt and the dearth of reliable resources.
The investigation consisted of ten secret shopper calls, an analysis of the web sites of the ten companies to which NCLC made secret shopper calls plus ten others, a review of actual contracts and online complaints, and discussions with other advocates and state and federal regulators.
Numerous problems were found including:
- Mischaracterizing government programs as their own programs;
- Charging high fees for programs that are available for free;
- Selling a one-size-fits-all approach;
- Providing inaccurate information;
- Improperly claiming government affiliations;
- Discouraging borrowers from handling their own cases;
- Focusing on sales, not counseling;
- Limiting remedies and access to justice;
- Violating consumer protection laws, including the federal Credit Repair Organizations Act (CROA), Federal Trade Commission (FTC) Telemarketing Sales Rule, state debt settlement and debt management laws, and unauthorized practice of law provisions;
- Requiring powers of attorney; and
- Establishing practices that cause consumer privacy concerns.
A number of recommendations were offered in the NCLC report:
- Improving government bureaucracy and simplifying student loan relief programs;
- Requiring fair and reasonable fees;
- Prohibiting misleading advertisements or representations;
- Safeguarding consumer privacy;
- Establishing other consumer protections;
- Enforcing consumer protection laws; and
- Expanding the availability of reliable assistance resources.
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On June 21, 2013, the American Federation of Teachers (AFT) released a report titled, “On the Backs of Students and Families: Disinvestment in Higher Education and the Student Loan Debt Crisis.” The report warns that the combination of student debt and public disinvestment in higher education threatens the ability of Americans to gain access to and successfully complete college. If the nation is to be prosperous, AFT identified some of the following goals:
- Relieving the student debt burden of current borrowers;
- Promoting debt-free higher education;
- Enhancing state funding in public higher education; and
- Eliminating fraud and abuse that entraps borrowers in student debt.
The report found that the effect of the withdrawal of public resources from public higher education goes beyond student debt. “The massive and ongoing disinvestment from public higher education that is happening” is the biggest challenge facing higher education. As a result, the continued withdrawal of state financial support:
- Drives tuition cost increases and, therefore, increases student loan debt;
- Decreases the amount of resources necessary to help students gain access to, persist in, and complete their college education;
- Decreases the amount of need-based aid available for the neediest students; and • Increases the search for ways to deliver higher education “on the cheap with technological fixes of dubious educational value.”
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