Reauthorization for GP –
What Are The Issues?
Tami Sato - Marshall B. Ketchum University
(MBKU)
Vicki Shipley - National Council of Higher
Education Resources (NCHER)
WASFAA Annual Conference
April 14, 2014
Agenda – Let’s Talk!
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Reauthorization 2008 – Then and Now
Reauthorization 2014(?) – Lay of the
Land
For GP - It’s All About Loans
Reauthorization Themes
Reauthorization 2014(?) – What’s on
Your Wish List?
UG Issue, Possible GP Issue
Other Things to Watch
What’s Next? Make Some Noise!
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Then and Now
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State higher-education spending $80b to
$71b
Average tuition/fees at 4-yr publics $6.8k to $8.6K
Number of questions on paper FAFSA –
98 to 102
Consumers have more information
Lawmakers and families questioning
value of a college degree
Source: Center for the Study of Education Policy, College Board
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Consolidated Appropriations
Act of 2014
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Signed into law January 17th
FY 2014 Appropriations
Maximum Pell Grant for AY 2014/15 =
$5,730
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$85 increase
Increase in recipients from 9.1 million to 9.3 million
Direct Loan Origination Fee Increases
Remain in Place
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Loans first disbursed on/after 12/1/2013
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Stafford 1.072%
PLUS 4.288%
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Consolidated Appropriations
Act of 2014
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FWS: $974,728,000
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$49,133,000 increase
$2 million below pre-sequester level
SEOG: $733,130,000
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$36,955,000 increase
$1.5 million below pre-sequester level
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Student Loan Interest Rates
Bipartisan Student Loan Certainty Act of 2013
Interest Rate Determined Based on Final Auction of 10-year
U.S Treasury Bills prior to June 1
Loan Type
Rate Formula
Projected Rate
(2014-15)*
Cap
Stafford
Undergrad Sub.
and Unsub.
T + 2.05 percent
4.75 percent
8.25 percent
Stafford Graduate
Unsub.
T + 3.60 percent
6.30 percent
9.50 percent
PLUS Loans
T + 4.60 percent
(Grad and Parent)
7.30 percent
10.50 percent
*Assumption: 10-year T-Bill rate = 2.70 percent
Fiscal Year 2014 Outlays
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President’s FFY 2015 Budget
Proposal - New Stuff
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Pay As You Earn (PAYE) Repayment Plan
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Proposal to limit Public Service Loan Forgiveness to
$57,500 (aggregate limit for independent
undergraduates)
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Proposal to make all FFELP and Direct Loan borrowers eligible
For new borrowers on or after 7/1/2015, PAYE would be the only
income-driven repayment option
Modify PAYE formula to eliminate unintended benefits for high
income, high balance borrowers
“…protect against institutional practices that may further increase
student indebtedness”
Establish 25-year forgiveness for amounts above $57,500
Counting only payments made via an income-driven repayment
plan towards PSLF
Proposal to make All loan forgiveness amounts
exempt from taxation
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College Board – Trends
Report
College Board – Trends
Report
For GP – It’s All About Loans
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Is reform needed of the Income-Driven
Repayment (IDR) plans? Should IDR be
automatic?
Keep Perkins for GP (only subsidized
loan left)?
Should DL unsubsidized go to COA limit?
Why are DL interest rates higher for
graduate students?
If student loans make a profit for the
government – where should the profits
go?
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Criteria
Income- Based Repayment
Income -Contingent
Repayment
Pay As You Earn
Eligible Loans
FFELP & Direct Loans
Direct Loans
Direct Loans
New Borrower
Requirement
Not applicable
Not Applicable
Must be new borrower to qualify
Discretionary
Income
Adjusted Gross Income (AGI) minus
150% of applicable Poverty Line
Adjusted Gross Income (AGI) minus
100% of applicable Poverty Line
Adjusted Gross Income (AGI) minus
150% of applicable Poverty Line
Income
Derived
Payment
15% of Discretionary Income ÷ 12
Minimum monthly payment = $0
Lesser of:
20% of Discretionary Income ÷ 12
OR
12-year standard payment x Income
Percentage Factor published by Dept.
of Ed
Minimum monthly payment = $0
10% of Discretionary Income ÷ 12
Minimum monthly payment = $0
Temporary
Interest
Subsidy
Yes (first 3 years)
Not applicable
Yes (first 3 years)
Payments
Required for
Forgiveness
25 years
25 years
20 Years
Interest
Capitalization
Yes
Yes, up to maximum of 10% of loan
balance at beginning of repayment
Yes, up to maximum of 10% of loan
balance at beginning of repayment
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Reauthorization of the Higher
Education Act – Timeframes?
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Hearings still underway in House and Senate
Senate accepting public input on current
hearing topics
Possible release of DRAFT bills this year?
Legislative action is unlikely, but not
impossible
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Possibility House Education and the Workforce
Committee could consider a bill
Maybe 2015? 2016? 2017?....
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Process is complicated by pending retirements of
Sen. Tom Harkin & Rep. George Miller
Rep. John Kline is technically term-limited
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Reauthorization Themes
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Simplify - One loan program/one grant program
Funding tied to cost reduction/success
Automatic Income-Based Repayment
Accountability and transparency
Reining in abuses in student loan system
Simplify - One tax credit
Streamline FASFA/apply through tax return
Better consumer information – more disclosures
Interest rates may, again, be on the table
Serving “contemporary” students
Student loan servicing
Institutional risk sharing on student loans
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What’s On Your Wish List?
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Maintain campus-based programs?
Restore students’ eligibility for
subsidized loans?
Retain tax-free treatment for cancelled
or forgiven loans?
Exclude graduate schools from R2T4?
Consumer information – restrict to
undergrads or allow flexibility in
tailoring?
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UG Issues, Possible GP
Issue
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Added fields in COD for 150% Rule
Net Pricing Calculator extended to GP
schools?
Shopping Sheet Mandatory?
College Rating Plan
Gainful Employment NPRM –
Expanded disclosures
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Other Things to Watch
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Negotiated Rulemaking
Campus Crime Changes
Program Integrity (additional issues on
fraud, debit cards, disbursements,
state authorization, GP PLUS adverse
credit)
Telephone Consumer Protection Act
Gaps in student and borrower services
President’s College Rating System
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Student Loan Borrower Bill
of Rights Act
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Introduced by Senators Durbin, Warren
and Boxer
Aims to reform disclosure and servicing
standards for both federal and private
student loans
To ensure student loan borrowers
understand the full range of repayment
options available to them
Would grant the CFPB authority to
regulate Title IV loans
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Reform Needed?
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Telephone Consumer Protection Act
(TCPA)
Income Driven Repayment Plans
(e.g. Income-Based Repayment - IBR)
Student and borrower services
What’s on your list?
Make some noise!
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What’s Next? Make Some Noise!
Thank you!
Questions/Comments?
Comments???
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