Federal and State Update Agenda

Transcription

1 Federal and State Update Agenda HEA Reauthorization Federal Budget Process, Regulations, and Sequestration 2016 Political Landscape Texas Legislative Interim Charges Reauthorization of the Higher Education Act The Higher Education Act of 1965 (HEA) is due for reauthorization this year, but this process will be delayed until 2016, at the earliest. Senator Lamar Alexander (R-TN), chair of the Senate Health, Education, Labor and Pensions (HELP) Committee, will control the process. Senator Alexander is a former U.S. Secretary of Education and university president. Major themes for this 10th HEA reauthorization will include simplification and streamlining of student aid, oversight, risk-sharing, and student loan debt refinancing; making uniform the loan rehabilitation process for borrowers in default on FDLP and FFELP loans; as well as an emphasis on debt management, counseling, and consumer disclosures. The HELP Committee created four working groups focusing on key parts of the legislation: Campus sexual assault and safety Affordability and financial aid Accountability Accreditation The working groups are bipartisan and staff meetings have been open to any member of the HELP Committee. Affordability and accountability were also key focus areas for Alexander s predecessor, former Senator Tom Harkin (D-IA). Before retiring last fall, Harkin proposed an overhaul of the HEA that would have expanded Pell grants, simplified the Free Application for Federal Student Aid (FAFSA), and created a database for tracking student outcomes. A draft of the new HEA is expected before the end of the calendar year, and Alexander has previously stated that he is optimistic about Republicans and Democrats being able to work together on updates to the law. As a beginning point, Senator Alexander has introduced S. 108 the Financial Aid Simplification and Transparency Act of 2015 (FAST Act) which proposes to simplify the FAFSA, establish one grant and one loan program for federal student aid, and restore yearround Pell grants. This legislation has bipartisan support and is co-sponsored by Senator Michael Bennet (D-CO). Litigation concerning the U.S. Department of Education s new gainful employment regulations will end with a court ruling that overturns part of the new regulations on the grounds that they are arbitrary, capricious, and vague. The U.S. Department of Education made changes in the new regulations that require graduates of for-profit colleges to have 50 percent greater income than the 2011 version of the regulations. Nevertheless, federal and state agencies will continue to enforce the existing regulations. The Administration s expansion of eligibility for the Pay-As-You-Earn Repayment (PAYER) plan added yet another income-driven repayment plan to the current mix. Simplification of the menu of plans is almost certain to come during the HEA reauthorization process, or as a part of the annual budget process with a replacement of the current repayment plans with a single new incomedriven repayment plan. There will then be only two repayment plans for new borrowers (and, probably all borrowers): an incomedriven repayment plan and standard ten-year repayment plan. The HEA reauthorization will also review the roles that the U.S. Department of Education, U. S. Department of the Treasury, the Consumer Financial Protection Bureau, accreditors, and state licensing agencies have in postsecondary education. The functions of each have largely bled together in recent years. It is anticipated that Congress will also closely examine issues surrounding accreditation to determine whether the foundations of oversight need to be reformed. And while the issues of price and cost have been a central focus in previous HEA reauthorizations, it is expected that Congress will once again grapple with ways to address the cost of higher education borne by

2 student borrowers and their families as well as the costs to taxpayers. A serious discussion involving the responsibilities of the three agencies listed above will certainly be a significant part of the reauthorization process and of stand-alone bills. Bills filed as precursors, or markers, for the reauthorization of the HEA include: H.R.242 All-Year ACCESS Act - Directs the Secretary of Education to award an additional Pell grant to an eligible student who: (1) has received a Pell grant for an award year, and (2) is enrolled in a program of study for one or more additional payment periods during the same award year that are not otherwise covered by the Pell grant. H.R.449/S.729 Discharge Student Loans in Bankruptcy Act of Amends the federal bankruptcy code to allow the discharge in bankruptcy of an educational loan or an obligation to repay funds received as an educational benefit, scholarship, or stipend. H.R.456 Reducing Barriers for Veterans Education Act of Makes an individual who is eligible for educational assistance under the Post-9/11 Educational Assistance program eligible for assistance with the fees for applying to institutions of higher education (IHEs). Sets the amount of such assistance payable to an individual at the lesser of: (1) the total application fees charged to the individual by the IHEs, or (2) $750. H.R.1131 Fairness in Student Loan Lending Act - Amends the HEA to provide for the refinancing of certain federal student loans. H.R.1352 Student Loan Borrowers Bill of Rights Act of Establishes student loan borrowers rights to basic consumer protections, reasonable and flexible repayment options, access to earned credentials, and effective loan cancellation in exchange for public service. H.R.1434/S.793 Bank on Students Emergency Loan Refinancing Act - Amends the HEA to provide for the refinancing of certain federal student loans. H.R.3177 Simplifying the Application for Student Aid Act - Simplifies the FAFSA, the application used for the estimation and determination of financial aid eligibility for postsecondary education. H.R.3178 Strengthening Transparency in Higher Education Act - Simplifies and streamlines the information regarding institutions of higher education made publicly available by the Secretary of Education. H.R.3179 Empowering Students through Enhanced Financial Counseling Act - Amends the loan counseling requirements under the HEA. H.R.3180 Flexible Pell Grant for 21st Century Students Act - Amends the HEA to provide students with increased flexibility in the use of Federal Pell grants. S.60 Prohibits undocumented students who are not lawfully present in the United States from being eligible for postsecondary education benefits that are not available to all citizens and nationals of the United States. S.85 The Repay Act of 2015 Described in the next section. S.108 The Financial Aid Simplification and Transparency Act of S.399 The Budget and Accounting Transparency Act of Amends the Balanced Budget and Emergency Deficit Control Act of 1985 to increase transparency in federal budgeting, and for other purposes. This bill amends the Congressional Budget Act of 1974 to revise the budgetary treatment of federal loans and loan guarantees to account for them on a fair value basis. Under a fair value approach, costs are measured using market rates rather than the lower Treasury interest rates currently used. S.687 American Dream Accounts Act - Authorizes the establishment of American Dream Accounts. S.796/H.R.1507 IN-STATE for Dreamers Act of Incentivizes state support for postsecondary education and to promote increased access and affordability for higher education for students, including Dreamer students. S.1102 The Protect Student Borrowers Act of Provides for institutional risk-sharing in the federal student loan programs. S.1872 Simplifying Financial Aid for Students Act of Provides for the use of data from the second preceding tax year to carry out the simplification of applications for the estimation and determination of financial aid eligibility, to increase the income threshold to qualify for zero expected family contribution. S.1892/H.R.3359 Teacher Loan Repayment Act of Provides for loan repayment for teachers in high-need schools. S The Know Before You Owe Federal Student Loan Act of 2015 Revises counseling requirements for certain borrowers of student loans by making the counseling an annual requirement before new loans are disbursed rather than just for first time borrowers; adding several key components to the information institutions of higher education are required to share with students as

3 part of loan counseling, including an estimate of the student s projected loan debt-to-income ratio based on the starting wages for that student s program of study and the estimated total student loan debt the student will likely take out to complete the program, ensuring that students are counseled to borrow only the minimum amount necessary to cover expenses and informed that they do not have to accept the full amount of the loan offered, providing options for reducing borrowing through scholarships, reduced expenses, work-study, or other work opportunities, and the impact not graduating on time has on increasing student loan debt and how they can stay on track to graduate on time. Federal Budget Process, Regulations, and Sequestration Federal Budget Process and Regulations Regardless of whether the HEA is reauthorized, individual changes, like repealing the current student loan repayment plans and replacing them with a single, improved income-driven repayment plan and standard ten-year repayment plan; repurposing Part B of Title IV; enacting tougher oversight provisions; requiring more disclosure and student loan counseling; and some type of refinancing of outstanding FFELP and FDLP student loans can be done through single, stand-alone bills, or through the annual budget process. Major changes to student-aid policy have been made outside of the reauthorization process, in spending bills and federal rules. In addition, since the 2008 reauthorization, the Department of Education has defined a credit hour, expanded state oversight over distance education, and sought to end aid to colleges that fail to prepare students for gainful employment all through regulation. Congress has tightened eligibility for federal student aid, undoing some of the 2008 expansions, and changed how studentloan interest rates are set through enactment of budget reconciliation bills and ad hoc legislation. For example, the most recent substantive changes to the federal student financial aid programs have occurred, not through enactment of a HEA reauthorization bill, but through the Higher Education Reconciliation Act of 2005, the College Cost Reduction and Access Act of 2007, the Health Care and Education Reconciliation Act of 2010, the Budget Control Act of 2011, and the Bipartisan Budget Agreement of Just this year, the following language was unanimously included in the FY 2016 Budget Resolution adopted by the House and Senate. The Chairman of the Committee on the Budget of the Senate may revise the allocations of a committee or committees, aggregates, and other appropriate levels in this resolution for one or more bills, joint resolutions, amendments, amendments between the Houses, motions, or conference reports relating to addressing student loan debt, which may include reducing overlapping student loan repayment programs and creating a simplified income-driven student loan repayment option by the amounts provided in such legislation for those purposes, provided that such legislation would not increase the deficit over either the period of the total of fiscal years 2016 through 2020 or the period of the total of fiscal years 2016 through The floor statement and explanation of the impact of this provision by the sponsor, Senator Richard Burr (R-NC) included the following: Mr. President, I rise today to offer a deficit-neutral reserve fund amendment to the budget that will allow the chairman of the Budget Committee to revise allocations to provide for a simplified income-driven repayment program for Federal student loans. This budget amendment is offered with the hope that it would allow for legislation similar to another bipartisan HEA Reauthorization bill, S The Repay Act of 2015, which I introduced earlier in this Congress with Senator King, Senator Alexander, Senator Warner, Senator Shaheen, Senator Ayotte, Senator Rubio, Senator Capito, Senator Collins, and Senator Carper. The Repay Act proposes a simplified income-driven repayment plan that would base a new borrower s monthly loan payment on ten percent of discretionary income up to $25,000 and 15 percent for discretionary income above that amount. The $25,000 threshold would be adjusted annually for inflation. Remaining debt would be forgiven after 20 years for borrowers whose initial balance was less than $57,500 (the cumulative Federal Stafford loan limit for independent undergraduate students) and after 25 years for borrowers with initial debt above that amount. Application of loan forgiveness would shorten to ten years for new borrowers as of July 1, 2015 who work full-time in a public service job for the ten-year period, similar to the provisions of the current Public Service Loan Forgiveness Program. All three types of loan forgiveness would be tax-free. New borrowers would be limited to a choice between this repayment plan and standard ten-year repayment. The Department of Education would be required to mandate that FFELP and FDLP servicers provide all borrowers with information regarding their repayment options and to enroll borrowers in alternative repayment plans, as defined in the bill, for which they are eligible.

4 Sequestration Sequestration is a set of automatic spending cuts that is part of the Budget Control Act (BCA) passed by the 112th Congress in August The cuts, which are projected to total $1.2 trillion in savings between 2013 and 2021, are evenly split between defense spending exempting spending on wars and discretionary domestic spending, exempting most spending on entitlements like Social Security and Medicaid. For 2016, the following are the impacts of this process on student financial aid programs. Pell Grant Program The law specifically exempts the Pell Grant Program from the effects of the sequester. Therefore, the maximum Pell grant award for remains at $5,775. Direct Loan Program While the sequester does not otherwise change the limits, terms, or conditions of Direct loans, the terms of the sequester decrease the loan fees charged to Direct subsidized, unsubsidized, and PLUS loan borrowers. The percentage of the loan origination fee is determined by the date of the first disbursement of the loan. Any subsequent disbursements, even if made on or after the relevant October 1, have the same loan fee percentage that applied to the first disbursement of that loan. For Direct loans for which the first disbursement is made on or after October 1, 2015 and before October 1, 2016 The loan fee for Direct subsidized and unsubsidized loans will be 1.068% (reduced from 1.073%). The loan fee for Direct PLUS loans (for both parent borrowers and graduate and professional student borrowers) will be 4.272% (reduced from 4.292%). Iraq-Afghanistan Service Grants An Iraq-Afghanistan Service Grant for which the first disbursement is on or after October 1, 2015 and before October 1, 2016 requires a reduction of 6.8 percent from the award amount for which the student would otherwise have been eligible (reduced from 7.3%). TEACH Grants A TEACH Grant for which the first disbursement is on or after October 1, 2015 and before October 1, 2016 requires a reduction of 6.8 percent from the award amount for which the student would otherwise have been eligible (reduced from 7.3%). Most of the other Title IV programs have been level funded at 2012 levels Political Landscape In August, Democratic presidential candidate Hillary Clinton unveiled a $350 billion plan aimed at cutting the cost of college tuition and reducing the debt burdens for those struggling with high-interest student loans. The objective of her proposal, entitled the New College Compact, is to allow students to attend in-state colleges and universities without ever having to take out a loan. Under the proposal, students would get free tuition at community colleges; this is an initiative that has also been floated by the Obama Administration. About half the cost of the Compact s plan will go toward grants meant to ensure tuition without borrowing through federal cash incentives provided to states. The grants are targeted toward reducing debt at 4-year public colleges, supporting private nonprofit colleges that keep costs low and provide value, and relieving debt for students who commit to national service. The new grants would be paired with initiatives that hold states and colleges accountable for bringing down costs. The plan also proposes to reduce interest rates on student loans by allowing all borrowers with outstanding federal or private student loan debt to refinance at current rates for federal Direct loans, capping payments at 10% of income, and forgiving remaining debt after 20 years. The plan provides incentives for colleges to modernize their enrollment and payment systems, providing new ways of learning through extension programs, and increasing graduation rates. The Compact borrows from similar proposals from other Democratic presidential candidates seeking to appeal to the younger generation of voters.

5 In July, fellow Democratic presidential candidate Martin O Malley released a debt-free college tuition plan. The former Maryland governor s plan would freeze college tuition levels, tie loan costs to income, and expand federal student grants. Vermont Senator Bernie Sanders has also released a plan, but his is far to the left of both Clinton s and O Malley s. Under Sanders plan, the federal government and states would partner to foot the full cost of public colleges, making them tuitionfree for students. That s estimated to cost $700 billion, or roughly twice what Clinton is proposing. While not currently a candidate, Massachusetts Senator Elizabeth Warren has introduced the Bank on Students Emergency Loan Refinancing Act (S.2432), which would allow student loan borrowers to refinance their loans at current rates. The Republicans are currently fielding 15 candidates. While none of the candidates have released specific, detailed higher education proposals yet, the records and public statements of the current top-tier candidates give voters plenty to contemplate for now. Donald Trump has said little that is concrete about higher education. He told a Tea Party Convention that the Department of Education could be cut way, way, way down. On student loans, he agrees with Massachusetts Democratic senator Elizabeth Warren that the federal government should not profit from them but has not elaborated much. Jeb Bush, during his run as Florida s top executive, eliminated race-based admissions by executive order. His administration then created a program guaranteeing the top 20 percent of high school graduates admission to college, similar to Texas law guaranteeing admission for its top 10 percent. He also advocated for the First Generation Matching Grant Program, a 2006 law designed to help low-income students attend college. Former Arkansas governor Mike Huckabee has endorsed S and, in 2012, supported a Democratic plan to hold down student loan interest rates. During his time as governor, Huckabee expanded two state-funded scholarships: the Governor s Distinguished Scholarship and the Academic Challenge Scholarship. He supported a measure that, if it had passed, would have allowed the children of illegal immigrants to receive the Academic Challenge Scholarships. His administration increased higher education spending in nine out of the 10 years of his governorship, and redirected federal funds to community colleges for career education and work training programs. As New Jersey governor, Chris Christie: Signed New Jersey s version of the DREAM Act, allowing undocumented immigrants to pay in-state tuition at public colleges. Signed a bill establishing a College Affordability Study Commission, tasked with exploring a Pay It Forward program. This proposal involves the state covering students tuition by allowing them, instead of paying up front, to pay for college through a fixed percentage of their future income. In addition, Christie has supported: Income share agreements, which allow students to pay a percentage of their future income in return for private financing of their education. Tuition cost itemization, which allows students to know where their tuition money is being spent and have a choice in how it is used. Stackable credentials, allowing students to enroll and earn credentials at multiple institutions without having to retake credits. Expanding apprenticeships and training programs and strengthening links between schools and employers. He favors expanding the Federal Supplemental Education Opportunity Grant and Perkins Loans programs. He also favors tax credits for individuals or businesses that provide student aid. John Kasich of Ohio issued an executive order in February creating the Ohio Task Force on Affordability and Efficiency in Higher Education. The nine-person group is tasked with finding ways to cut costs while maintaining quality. In July, Kasich signed a budget that will freeze tuition for two years at state colleges and universities. The budget also increases state funding for a program to help poor students get college credit; it sets aside funds for dealing with campus sexual assault; and it increases funding for several state scholarships. Some other policies Kasich has enacted: Performance-based funding, tying state funds to college outcomes. Previously, Ohio s colleges and universities received funding based on enrollment.

6 Expansion of dual enrollment; Kasich signed into law a bill requiring public schools and colleges to partner to provide collegecredit courses to middle and high school students. Military privileges, including college credit for military training, more advising for veteran students, and priority course registration. Three freshman senators are major players in the 2016 race for the Republican presidential nomination. All three voted with their party for the Bipartisan Student Loan Certainty Act of That bill was the culmination of a year of attempts by Republicans and Democrats to compromise on prohibiting federal student loan interest rate increases. All three also voted in 2014 to block S to allow students to refinance their student loan debt at a lower rate. Finally, all three have also publicly supported, with varying levels of vigor, abolishing the Department of Education. Florida senator Marco Rubio has been the most active and vocal of the three senators on the issue of higher education. Rubio s activity has included: Cosponsoring multiple times, with Democratic Oregon senator Ron Wyden, a bill called the Student Right to Know Before You Go Act. The bill would require the federal government to post return-on-investment data, intended to shed light on college quality and help incoming students make better decisions. Cosponsoring legislation to award federal funding to innovative outcome-based higher education providers. The goal is to let students use federal financial aid dollars at unaccredited programs that demonstrate high quality and good student outcomes. Cosponsoring a bill, with Democratic Virginia senator Mark Warner, to expand income-based student loan repayment. Former Hewlett-Packard CEO Carly Fiorina has not spoken at length on the topic of college affordability or student loan debt. This year, in Iowa, she said that the student loan industry should be simplified, and does not believe the Department of Education should be eliminated. Kentucky senator Rand Paul has pledged to eliminate the Department of Education, but would retain the Federal Pell Grant Program as a federal function. Another idea Paul put forth is to make college tuition deductible on federal income tax returns, and tie student loan debt to work, making it deductible, as well, over the borrower s entire working career. Ted Cruz, the junior senator from Texas, has said little about education. But, his failed 2013 amendment to defund the entire Health Care and Education Reconciliation Act of 2010 would have affected higher education, because the amendment aimed to defund the law s expanded Federal Pell Grant and Direct Loan Programs and lower monthly student debt payments for borrowers under incomebased repayment plans. Paul and Rubio cosponsored Cruz s amendment. The Obama Administration s proposal for a new college ratings system was supplanted on September 14th with an online college scorecard tool, which provides data on college costs, graduation rates, average graduate debt, and future earnings. The intended objective is to help would-be students make more informed decisions. Whether users will be enlightened is not known, but the scorecard is a better alternative to the ratings plan the Administration scrapped over the summer to tie student aid to the government s value judgments. State Legislative Interim Update The 85th Regular Session of the Texas Legislature will convene on January 10, Beginning late this year or early in 2016, the 50 legislative committees will begin interim studies on issues that will culminate in legislation introduced during the next session. It is expected that the study charges to the House and Senate Higher Education Committees will include student financial aid, student loan debt, affordability, the 60x30TX higher education strategic plan, and the student loan default prevention and financial literacy pilot program.