Legislative and Department of
Education Update
Spring 2013
Lori S. Hartung
Regional Sales Manager
Todd, Bremer & Lawson, Inc.
P.O. Box 36788
Rock Hill, SC 29732-0512
800.849.6669
lori.hartung@tbandl.com
The 113th Congress
House
Senate*
• 231 Republicans
• 200 Democrats
• 54 Democrats*
• 45 Republicans
• Vacancy probably yield
234-201
• Previous Congress at its
end:
• 241 Republicans
• 190 Democrats
• 4 Vacancies
• One vacancy: (MA,
Kerry seat)
• Current Congress:
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53 Democrats
47 Republicans
* Dems now and next year include
two independents who caucus
with D’s
Senate HELP Committee Leadership
o Health, Education, Labor & Pensions Com.
• Tom Harkin (D-IA) Still Chairman, Still Chairs
Appropriations Subcommittee on Labor, HHS,
Education
o New Ranking Republican…
Lamar Alexander (R-TN)
replaces
Mike Enzi (R-WY)
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House Education & Workforce
Leadership: No changes
Chairman Kline (R-MN)
Ranking Dem. Miller (CA)
Higher Ed Subcommittee
Ranking Dem. Hinojosa (TX)
Higher Ed Subcommittee
Chairwoman Foxx (R-NC)
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Elections: Some Perkins Champions Do
Well (on a Bipartisan Basis)
o Rep. Cathy McMorris Rodgers
(R-WA) now GOP Conference Chair
o Rep. Tim Bishop (D-NY) won and
remains leading voice among House Dems
o Rep. Jaime Herrera-Beutler (R-WA) gets
Appropriations Committee post
The Fiscal Cliff:
Some Key Players
Stepping Back From the Fiscal Cliff
Massive tax increase averted, saving
economy from recession and stock
market from depression
Oops… One tax increase went through for all who
work: FICA up 25% + other increases for people
making over $250K
For Those Who Prefer to Pay Less Tax
Made Permanent (or at least until Congress changes
them again):
o Lower “Bush” marginal federal income tax rates
for vast majority of taxpayers
o Expanded Coverdell Education Savings Accounts
o Exclusion for employer-provided educational
assistance
o Student loan interest deduction
o The exclusion from income of amounts received
under certain scholarship programs
o Tax-exempt private activity bonds for
qualified education facilities
More Happy Tax News…
The following provisions were temporarily
extended:
o The American Opportunity Tax Credit (5 year
extension)
o The above-the-line deduction for qualified tuition
related expenses. (2 years: 2012 and 2013)
o The deduction for certain expenses of elementary
and secondary school teachers. (2 years: 2012 and
2013)
o Tax credit for research and experimentation
expenses. (2 years: 2012 and 2013)
“Sequestration” Happened
o Budget Control Act of 2011 set in law
discretionary spending caps for 10 years (FY ‘12FY ’21)
o Supercommittee failure triggered sequestration
as of 3/1/13.
o $1.176 trillion in automatic cuts between FY
13-21. (Cuts reduced $24 billion in 1/1/13 deal)
o 50% from defense, 50% from nondefense
programs.
o FY 13 cuts now start on March 1, 2013.
o Education cuts start July 2013.
Sequestration for 2013
Still Major Education Cuts
o FY 13 = fixed percentage across-the-board cuts.
• “Cliff” deal of 1/1/13 reduced 2013 cuts to $83
billion – 5.1% for discretionary
• Pell grants exempt in first year only.
• Loan origination fees up 5.1% to 1.05% for
Stafford and 4.2% for PLUS
• Cuts to SEOG, GEARUP, TRIO, Work Study
• Cuts to NIH, NSF, NEH, DOE, other research
o FY 14-21 – lowers discretionary caps instead
of across the board cuts
• Squeezes education $$; Pell no longer
exempt.
FY 13 Education Appropriations Report
o Senate Appropriations Bills passed 3/21/13. %
months and 21 days after start of FY 2013.
o Education funding frozen at 2012 levels, minus
sequestration cuts
• Small very targeted exceptions: political science research
funding transferred to NSF
o Military tuition assistance funds mostly restored
o Process was bi-partisan and done before the 3/27/13
continuing resolution deadline.
• Gives hope to less rancor
No Shutdown, Back to Work!
o Next deadline: expiration of the suspension
of the debt ceiling in May
• Leads to possible crisis in late June or early July.
Pell/Student Aid Cuts Already Enacted
o Eliminated the interest subsidy for graduate
student loans and for the six-month grace period
for undergrads for two years;
o Limited to 150% of program length the period an
undergrad can receive a subsidized Stafford loan;
o Eliminated summer Pell and reduced to 12 the
number of semesters a student can receive a grant;
o Eliminated ATB and made it more difficult for
some low-income students to automatically
qualify for the maximum Pell grant; and
o Cut eligibility for the minimum award.
Pell/Student Aid Cuts Enacted
o College students have contributed $4.6
billion out of their pockets to deficit
reduction.
o 145,000 students have lost their Pell grant.
o Maintaining Subsidized Stafford interest
rates also costs roughly $6 billion per year
• The one year extension expires in July 2013
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Student Aid and the Future
o Is remaining Stafford Loan subsidy for
undergrads soon to be an “offset?”
o Are fixed interest rates done?
o Back to the future: variable rates?
o Pell shortfall and doubling of subsidized
Stafford interest rates loom soon
o How to pay for it?
o Mini-reauthorization in 2013?
College Cost: Bipartisan Concern
o “College Price Increases out of control”
o “Student Loan debt burden excessive”
• Debt “bubble?”
• Whose fault is it?
• Something must be done!
o Colleges Are Targeted for “something”
College Prices and Costs
o Obama campaign highlighted cost of college
• Full PR campaign launched with allies in
consumer groups, blogs, other media, CFPB
• Promised to halve the rate of HE price increases
o Risk sharing by colleges
o Obama will push already announced initiatives,
including campus-based program changes
o But…Congress needs to go along for anything big
to happen
President’s Plan: Use Campus Based
Programs to Control College Costs
o “Address rising college tuition costs” by "rewarding
colleges and universities that act responsibly in setting
tuition, providing the best value, and serving needy
students well.”
o Proposal: new “Unsubsidized Perkins Loan” program
now with up to $8.5 billion in loan volume (was $8 bil).
o Current Perkins volume is about $1 billion a year.
o Like previous proposals, ED would originate and
service Perkins Loans, which would look the same to
students as Unsubsidized Stafford Loans:
o Congress: Not the least bit interested
o Using “Fair Value Accounting” it costs the government
$7.2 billion over 10 years – Republicans favor FVA
Value of Traditional Education
Questioned Like Never Before
Ongoing Student Loan/Higher Education
Consumer Issues to Monitor in the 113th
o HEA—will it happen? Mini Reauth in 2013?
o CFPB, particularly interaction with ED
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Shopping sheet
DL servicers?
Re-fi market?
Private loan servicing standards?
Federal loans? (tug of war with ED?)
o Loan repayment and federal loan servicing
• Is IBR a panacea?
• Complexity an ongoing issue
o PLUS Loans: underwriting issues
• Too lax or too tough?
Perkins Funding Picture 2013
o No funds appropriated for Perkins in FY2013
because President didn’t ask for them.
o BUT: the Perkins Loan Program continues to
operate at least through FY 2015, and the
Department advises that schools should make
as many loans as possible!
COHEAO Report: Perkins In the Future
o Priority for advocacy this year: restore
funding for loan cancellations
• FY 2014 appropriations legislation still pending
• Importantly: Predicted Pell Grant funding
shortfall not expected until 2015.
• Funds remain tight, but now is the time to make
good on the obligation to fund cancellations.
• No divisions in higher ed community on this
COHEAO Goals 2013
o Federal Perkins Loan Program
• Restore Cancellation Appropriation
• Advocate for Perkins Capital Contribution
• HEA Reauthorization – Work begun on proposals
for Congress. Contact COHEAO if interested in
participating: hwadsworth@wpllc.net
o Negotiated Rulemaking 2013 – Dates not set
• Financial Aid Fraud
• Regulatory changes related to Campus issued Bank
Cards
• Analysis of Campus-Based Program
Regulations – Update and Streamline
COHEAO Goals
o Consumer Financial Protection Bureau:
• Stay engaged, responding to requests for
meetings, submitting comments on proposals
• Represent schools on issues related to A/R,
disclosures and collections
• Monitor activities and educate COHEAO
membership on CFPB regulations and practices
o Financial Literacy
• Collect and share best practices in developing
financial literacy programs on campus
• Monitor activities related to financial literacy
legislation or oversight
COHEAO Goals
o Accounts Receivable
Act as a forum for discussion and sharing of best
practices, and advocate where appropriate on issues
related to:
• Collection Regulations on Campus Debt
• Truth In Lending Act– as related to Tuition Payment
Plans and non-federal, campus-based loans.
• Telephone Consumer Protection Act changes – (permit
ethical use of predictive dialers for collection on
campus A/R and institutional loans)
• Bankruptcy (private loans/impact)
• VA/Military Issues
What You Can Do
o Join COHEAO: costs are low for institutional
members
• Conference, webinar discounts offset dues
• Ability to help develop COHEAO positions, advocacy,
regulatory responses
o Weigh in: support the Perkins Program
• Message: cost effective financing for students and
taxpayers over the long term; don’t squander it for
short-term goals, even Pell Grants.
o Information on COHEAO activities, including position
papers, available at www.coheao.org.
o Help educate Congress—share your stories
Moving Beyond Perkins: Some More
Key COHEAO Issues
o Consumer Financial Protection Bureau
o Bankruptcy Law Changes
o Private Loan Issues/CFPB
o Telephone Consumer Protection Act
• Coalition Continues – maybe next year for
action on autodialing to cell phone restrictions
o Financial Literacy
o Other AR issues
CFPB
o CFPB here to stay, all agree
o Leadership in Question
• Date departing on January 31, Cordray may
return to Ohio to run for Gov.
o Elizabeth Warren on Senate Banking and
HELP Committees
o For student loans, interaction with Direct
Loans something to monitor
o Everyone needs to have their policies and
procedures in order.
Bankruptcy Law Proposals
o Current law: all education loans as defined
by tax law are dischargeable in bankruptcy
when there is undue hardship to debtor or
dependents
• Recent study: very few try to discharge,
thinking it’s impossible, but it’s not!
o Calls for dropping undue hardship
requirement for private loans only
o Government loans would remain nondischargeable including from any
“government units”
Telephone Consumer Protection Act
o Joint reform effort thwarted when 49 state
AGs opposed bi-partisan Terry-Towns bill
allowing more calls to cell phones.
• Primary reason: pre-emption, telemarketing
o Alliance for Mobile Information: New
coalition led by US Chamber of Commerce to
continue the reform effort to permit use of
auto-dialers to call cell phones
o Action will most likely happen next
year (hopefully).
Tax Reform
o Major re-write of federal tax code for first
time since 1986 being discussed
o Issues facing Higher Ed”
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Charitable donation deduction cut?
Tax exempt bonds, limited use?
Tax credits for tuition, employers etc…
Student loan interest deduction
Role of non-profits in politics
Regulatory Activity
o Negotiated Rulemaking in 2012
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NPRM was published 7/17/12
Closing date for public comment was 8/16/12
Over 2,800 comments submitted
Final Regs published on 11/1/12
• Effective date 7/1/13
Final Regulations
o Pay as You Earn
• Implemented under ICR regulations in Direct
Loan Program
• Borrower must show partial financial hardship
• Interest is capitalized
• 10% cap on annual payments of discretionary
income
• Loan forgiveness after 20 years repayment
Final Regulations
o Total and Permanent Disability
• Revised regulations to provide for direct
application to ED for TPD discharge
• Allows for “borrower representative” to receive
all TPD notifications
• Allows qualifications based on disability notice
award for SSA disability benefits
• The disability notice must state that the SSA will
review the borrower’s eligibility once every 5-7 years
Final Regulations – part 2
o Loan Rehabilitation – definition of one-time
payment
• 20 days after borrower due date.
o Allows assignment of Perkins loan without
SS#
• If loan was made before ?????
Final Regulations – part 2
o Perkins Loan Deferment & Cancellation
• Incorporates Grad Fellowship deferment
eligibility criteria from FFEL regs
• Addresses cancellation progression for
borrowers switching cancellation categories
• Removes debt-to-income economic hardship
deferment category
• Allow break in cancellation service due to
FMLA condition
Dept of ED Initiatives
o Shopping Sheet – Model Financial Aid
Award Letter
• ED and CFPB partnered to promote
transparency in student financial disclosures
• http://collegecost.ed.gov/shopping_sheet.pdf
• Secretary Duncan published an open letter to
College/University presidents asking them to
voluntary adopt the shopping sheet.
Dept of ED Initiatives
o Financial Awareness Counseling Tool
• On-line tool to help students manage loan debt
• Brings transparency to process debt
management
• Provides students with 5 interactive tutorials
covering topics from managing a budget to
avoid default
• Provides borrowers access to individual loan
history
• Accessed through StudentLoans.gov
Dear Colleague Letters
o New Perkins Promissory Notes
• MPN on IFAP at DCL GEN-12-19
• eMPN on IFAP at DCL GEN-12-23
o State Authorization Regulations
• DCL GEN-13-04
o Regaining Title IV Eligibility
• DCL GEN-13-02
o Fin Aid Shopping Sheet
• DCL-GEN-13-05
Questions???