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On January 26, 2013, Senator Tom Harkin (D-IA), Chairman of the Health, Education, Labor and Pensions Committee, announced that he will not seek re-election for his Senate seat in 2014. Senator Harkin has played a key role in higher education issues strongly advocating increased funding for student aid programs. He also was a frequent critic of for-profit colleges and schools. He said that his proudest achievement was serving as the chief sponsor of the Americans With Disabilities Act, which expanded the rights of individuals with disabilities.
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On February 11, 2013, Republican members of the House Committee on Education and the Workforce sent a letter to President Obama urging a fiscally responsible, long-term solution to the Stafford Loan interest rate problem. “We cannot continue kicking the can down the road, creating confusion and uncertainty for student loan borrowers,” Chairman John Kline (R-MN) said.
In 2012, Congress approved a proposal to delay for one year a scheduled interest rate increase on subsidized Stafford Loans to undergraduate students. Unless Congress takes action again, the interest rate will increase from 3.4 percent to 6.8 percent on June 30, 2013.
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On January 23, 2013, Senator Richard Durban (D-IL) reintroduced S. 113, Know Before You Owe Act, legislation that would prohibit private loan lenders from disbursing private education loans without obtaining the school certification of enrollment, cost of education, and estimated financial assistance. Senator Durban also reintroduced S. 114, Fairness for Struggling Students Act, legislation that would repeal the change made by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which made private education loans nondischargeable unless excepting the loan would impose an undue hardship on the debtor and the debtor’s dependents.
The bills are sponsored by Senators Dick Durban, Tom Harkin (D-IA), and Al Franken (D-MN) and have been referred to the Senate Committee on Banking, Housing, and Urban Affairs (S. 113) and the Senate Committee on the Judiciary (S-114). When Senator Durban introduced the bills, he said on the Senate floor that these bills are “critical steps toward addressing the student debt crisis facing America.” He said that student loan debt outstanding surpassed $1 trillion last year and the amount of outstanding private education loan debt surpassed $150 billion. In his closing remarks on the Senate floor, Senator Durbin called to “restore transparency, fairness, and common sense to private student loans” and urged his colleagues to support the two bills.
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On January 1, 2013, President Obama signed into law the American Taxpayer Relief Act (H.R. 8), which is P.L. 112-240. Earlier in the day, the House voted 257 to 167 to approve the compromise package avoiding the fiscal cliff that would extend the current tax rate for most Americans, delay automatic sequester cuts for two months and extend the popular tax breaks. The Senate had approved the compromise package in the early morning by a vote of 89 to 8. Among the many provisions, the American Taxpayer Relief Act calls for:
- Permanently extending current tax policy for income up to $400,000 for individual filers and $450,000 for married filing jointly;
- Raising taxes on capital gains and dividends for income over $400,000 for individual filers and $450,000 for married filing jointly up to 20 percent from 15 percent;
- Permanently indexing the Alternative Minimum Tax (AMT) for inflation;
- Turning off sequester for two months paid for with a reduction in the discretionary spending cap for 2013 and 2014, and expanding eligibility for Roth conversion;
- Allowing temporary payroll tax cut to expire;
- Keeping federal debt limit at its current limit of $16.394 trillion; and
- Extending unemployment insurance for long term jobless and the “doc fix” for one year.
The Education Incentives included in P.L. 112-240 are as follows:
- Temporarily extending the American Opportunity Tax Credit (AOTC) for five additional years through 2017. (Created under the ARRA, the AOTC is available for up to $2,500 of the cost of tuition and related expenses paid during the taxable year.);
- Permanently extending the student loan interest deduction. (Certain individuals who have paid interest on qualified education loans may claim an above-the-line deduction for such interest expenses up to $2,500. Students and families may claim the interest deduction beyond the 60 months.);
- Permanently extending the Coverdell Accounts. (The Coverdell Education Savings Accounts are tax-exempt savings accounts used to pay the higher education expenses of a designated beneficiary. The annual contribution is increased from $500 to $2,000.);
- Permanently extending the exclusion for employer-provided educational assistance. (The employee may exclude from gross income up to $5,250 for income and employment tax purposes per year of employer-provided education assistance.); and
- Permanently extending from income amounts received under certain scholarship programs. (Scholarships for qualified tuition and related expenses are excludable from income.)
A fact sheet from the White House is available online.
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On September 11, 2012, the House passed the Improving Transparency of Education Opportunities for Veterans Act of 2012, H.R. 4057, a bill sponsored by Congressman Gus Bilirakis (R-FL). H.R. 4057 was steered through the Senate by Senator Patty Murray (D-WA), and the Senate passed an amended version of H.R. 4057 by unanimous consent on December 19, 2012. It was then returned to the House for reconsideration, and the amended bill was passed by the House on December 30, 2012. The President signed the bill into law on January 10, 2013, and it is now P.L. 112-249.
The bill’s objective is to improve outreach and transparency to veterans and members of the Armed Forces through the provision of information on institutions of higher learning by the Department of Veterans Affairs. Each institution would be required to disclose the following information for the most recent academic year:
- Whether the institution is public, private nonprofit, or proprietary for-profit;
- The name of the accrediting agency that accredits the institution;
- Contact information on the State approving agency;
- Whether the institution participates in the Title IV programs;
- The institution’s tuition and fees;
- The median loan debt from Federal student loans;
- The cohort default rate;
- The total enrollment, graduation rate, and retention rate;
- Whether the institution provides students with technical support, academic counseling, and job placement; and
- The transfer credit policies.
H.R. 4057 has received broad support from veterans’ groups, for-profit institutions, as well as the traditional higher education community.
A copy of the Senate-passed bill is available online.
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On January 21, 2013, the Senate Health, Education, Labor and Pensions (HELP) Committee announced the selection of Senator Lamar Alexander (R-TN) as Ranking Member of the Committee, a role previously held by Senator Mike Enzi (R-WY).
Senator Alexander said in a press release: “I am honored that my Republican colleagues elected me as the Ranking Member of the Senate Committee on Health, Education, Labor and Pensions. Tennessee is helping lead the country in health care and education innovation, and this opportunity will give me a strong voice in reducing regulations that get in the way of private sector innovations, and getting Washington out of decisions that would be made by states, communities, and individuals.”
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The Office of Inspector General (OIG) released its FY 2013 Work Plan that details the assignment areas and resources the OIG plans to devote to evaluating the efficiency, effectiveness, and integrity of Department of Education programs and operations. According to the Message from the Inspector General, the OIG plans to “dedicate a significant proportion of its resources in FY 2013 to addressing issues associated with the student financial assistance programs, including the investigation of allegations of fraud in these programs. The OIG plans audit work in areas that include not-for-profit student loan servicers, Federal Student Aid’s implementation of a new Debt Management and Collection system, institutional loan entrance and exit counseling practices, and student loan debt and repayments.” The OIG also plans to devote its resources “to determine whether selected proprietary schools are in compliance with incentive compensation regulations” and “to determine the adequacy of FSA’s contingency plans in the event of the closure of a significant number of schools or locations by a publicly traded postsecondary institution.”
Continuing work includes the following:
- The evaluation of the effectiveness of FSA’s oversight of schools participating in the Direct Loan Program;
- The determination whether the audited financial statements submitted by proprietary schools included information about the schools’ use of Title IV funds to provide the transparency needed for FSA to make informed decisions about program effectiveness; and
- The determination whether schools and servicers comply with requirements for processing direct payments to students to ensure that students are not unfairly charged fees and have ready access to their credit balances.
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On February 4, 2013, the Department issued an electronic announcement announcing its plan to release draft cohort default rates to all eligible schools, guaranty agencies, and lenders. The Department plans to issue the cohort default rates as follows:
- On February 19, 2013, ED will release the FY 2011 2-year draft cohort default rates; and
- On February 25, 2013, ED will release the FY 2010 3-year draft cohort default rates.
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On January 23, 2013, the Department of Education issued a Dear Colleague letter (GEN-13-04) reminding postsecondary institutions and States that postsecondary institutions are required to have certain types of State oversight and approvals in order to participate in the Title IV programs and explains that enforcement of these state authorization requirements for institutions was previously stayed until July 1, 2013. After that date, institutions not compliant with the state authorization regulations under 34 CFR 600.9(a) and (b) may lose their eligibility to participate in Title IV Federal student aid programs.
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On January 18, 2013, the Department of Education issued an Electronic Announcement providing the institutional data necessary to implement the Financial Aid Shopping Sheet for the 2013-2014 award year. The Secretary of Education first shared the details about the Financial Aid Shopping Sheet on July 24, 2012.
Institutions and their software providers are to produce the Financial Aid Shopping Sheet using the HTML specifications provided in an Electronic Announcement posted on September 28, 2012.
The student information on the Financial Aid Shopping Sheet is populated using the applicable fields from institutions’ existing data systems. The data and information necessary to populate the institutional metrics section of the Financial Aid Shopping Sheet (i.e., the graduation rate, the loan default rate, and the median borrowing figures) are provided by the Department according to information provided in the Electronic Announcement.
The Electronic Announcement reminded institutions that Dear Colleague Letters GEN-12-12 and GEN-12-17 encourage all institutions to use the Financial Aid Shopping Sheets as part of their financial aid awarding process and stated that the Financial Aid Shopping Sheet will help institutions that have agreed to comply with the Principles of Excellence Executive Order 13607 meet the requirement to provide prospective students who are eligible for Federal military and veterans educational benefits with a personalized and standardized form displaying financial aid information.
Information on the Financial Aid Shopping Sheet can be found online.
On January 30, 2013, the Department of Education issued a Dear Colleague letter (GEN-13-05) that provides guidance on the implementation of the Financial Aid Shopping Sheet. The letter sets forth a set of frequently asked questions (FAQs) on the implementation of the Financial Aid Shopping Sheet for the 2013-2014 school year.
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On January 18, 2013, the Department of Education issued an Electronic Announcement providing suggested text that institutions may use to collect verification information for the 2013-2014 award year. ED had noted in its Electronic Announcement of November 1, 2012, that it would be providing suggested language for verification rather than model verification worksheets. ED stated that the use of a comprehensive verification worksheet that includes all or most of the possible verification items for the 2013-2014 award year would suggest to the student and his or her parents that all of the items included on the verification worksheet need to be verified, which would add unnecessary complexity to the financial aid application process and would cause unneeded burden to students and parents. To remove unnecessary burden, the Department is urging institutions to uses a targeted approach to request only required verification information from students and families.
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On February 4, 2013, the Department of Education issued an electronic announcement announcing a new partnership between Federal Student Aid (FSA) and the Internal Revenue Service (IRS) that will focus on reaching more individuals in low- to moderate-level communities to provide them with information, assistance, and access to relevant IRS and FSA services. This collaboration is a result of the relationship initiated when FSA and the IRS developed the IRS Data Retrieval Tool in 2009. “FSA believes that this partnership will contribute to reaching President Obama’s 2020 Goal of having the highest proportion of adults with postsecondary degrees and certificates in the world.”
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On January 4, 2013, Secretary of the Department of Veterans Affairs Eric K. Shinseki announced that the VA has approved a memorandum of agreement between the VA and the National Student Clearinghouse. The Student Veterans of America, an organization with 700 campus chapters around the United States, helped broker the agreement. The announcement was made at the National Conference of Student Veterans of American where Secretary Shinseki said that the best measurements of success are completion rates. In June 2011, the VA had asked institutions to begin voluntarily reporting graduation rates and program-specific rates.
According to an article of January 5, 2013 in The Chronicle of Higher Education, from June 2011 to December 2012, 2,600 institutions reported on 62,000 veterans who had graduated, as well as 4,800 who had completed nondegree training programs at vocational or technical skills. Under the new agreement, the VA will provide the National Student Clearinghouse with information on up to a million beneficiaries of the Post-9/11 GI Bill and the Montgomery GI Bill. The Clearinghouse will compare the date with its own to determine how many veterans hve graduated.
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On January 29, 2013, the New America Foundation released a package of policy proposals that would overhaul federal financial aid. Rebalancing Recourses and Incentives in Federal Student Aid calls for specific changes in grants, loans, tax benefits, college outreach programs, and federal regulations to provide more direct aid to the lowest-income students while strengthening accountability for institutions of higher education to ensure that more students are able to earn affordable, high quality credentials. The white paper, funded by the Gates Foundation through its Reimagining Aid Design and Delivery (RADD) Project, is one of several proposals that have been released by various higher education advocacy groups. More groups are likely to offer proposals in the next few months.
More than 30 specific policy recommendations were included in the white paper. Some of the policy recommendations include the following:
- Require all federal student loan borrowers to repay their loans based on a percentage of their earnings after they graduate;
- End the subsidized interest rate benefit program, which the report claims is unnecessary due to the income-based repayment program;
- Create a new fixed formula for setting student loan interest rates that adjusts annually according to market conditions;
- Establish a single set of federal loan limits for undergraduate students regardless of dependency status;
- Modify the annual loam limits for all undergraduates to be $6,000 for a first-year student, $7,000 for a second-year student, and $9,000 for a third-, fourth-, or fifth-year student. The aggregate limit for undergraduates would be $40,000;
- End the Parent PLUS and Grad PLUS Loan Programs;
- Raise the annual limit on Unsubsidized Stafford Loans for graduate students from the $20,500 to $25,500 to replace some of the borrowing ability graduate students lose with the elimination of the Grad PLUS Loan Program;
- Give colleges the discretion to lower federal loan limits and restrict eligibility for federal student loans to 150 percent of program length;
- Allow private student loans to be discharged in bankruptcy;
- Put the Pell Grant Program on a more firm financial footing by shifting future Pell appropriations to the mandatory side of the budget;
- Increase the Pell Grant maximum by $500 in fiscal year 2014 to $6,225; by $600 in 2015 to $6,410, by $700 in 2016 to $6,610, and by $800 in 2017 and in each year thereafter through fiscal year 2022 to $6,830;
- Enact a Pell Grant matching requirement for four-year public and private nonprofit colleges that enroll a relatively small share of low-income students but charge them high net prices;
- Limit Pell Grant eligibility to 125 percent of program length; and
- Restore the year-round Pell Grant and eliminate the SEOG Program.
Concerning the tax expenditures, the white paper proposes redirecting more than $180 billion in savings over 10 years mostly to the Pell Grant Program by eliminating tuition tax breaks, tax-advantaged savings plans and the student loan interest deduction. It would triple funding for the GEAR UP Program to improve college outreach. Several of the proposals would hold colleges more accountable on college costs and quality of education; create a competitive grant program to improve college completion and mandate more consistent consumer disclosures.
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On January 31, 2013, the Consumer Financial Protection Bureau (CFPB) announced that it was beginning an investigation into financial products, such as college-affiliated bank accounts and student debit cards, that are marketed to students at colleges and universities. According to the CFPB announcement, the Credit CARD Act of 2009 (CARD Act) restricted financial institutions from using certain types of marketing practices on college campuses and also made agreements between credit card issuers and institutions of higher education subject to public disclosure. However, the CFPB stated that less is known about arrangements regarding other products marketed to students. To better understand the topic of campus financial products that include student identification cards that double as debit cards, cards used to access scholarships and student loans, and school-affiliated bank accounts, the CFPB is seeking public comment.
The Notice is asking for comment from the public, students, families, institutions of higher education, and financial institutions to provide input on their experiences with these financial products with regard to a number of issues, including:
- What information schools share with financial institutions when they establish these relationships;
- How campus financial products are marketed to students;
- What fees students are being charged to use these products;
- How schools set up marketing agreements with financial institutions; and
- Student experiences using campus financial products in their day-to-day lives.
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