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Washington Update:
Bridging the Political Gaps
Scott E. Miller
PHEAA
[email protected]
October 13, 2010
Today’s Road Trip…
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2010 Highlights
Congress in Hiatus
Federal Deficit Looms Large
Issues in Play
What Lies Ahead
2010 Was Interesting
• SAFRA Signed Into Law on March 30, 2010
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The long battle was over
ED and community move into implementation mode
• FAA’s Successfully Meet Challenge of Rapid
Transition to DL
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All eligible students receive loan funds
ED returns bulk of $50 million transition fund
• In-school Consolidation Window Open Until
June 30, 2011
• College Access Challenge Grant Doubles
DL Issues Going Forward
• Time to Look in Rear View Mirror
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How was DL transition experience?
What could have been done better?
What can be done to prepare for DL reconciliation?
• Comments, Concerns, Suggestions
Must Be Communicated to ED & Congress
• Split Borrowers
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ED resolving DL/ECASLA splits
Additional servicers coming soon
• PLUS Loan Approvals
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About twice as many denials under FFELP vs. FDLP
Implications of parents over-borrowing
• Training Needs and Formats
Congress Punts on Appropriations
• No Appropriations Bills Passed By 9/30
• Continuing Resolution Approved Through
December 3rd
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Congress returns for lame duck sessions in November &
December
• CR Reduces Federal Spending By $8.2 Billion
• No Funding For Pell Grant Shortfall
The Federal Deficit is Daunting
• Federal Deficit for FY 2010: $1.265 trillion
• Federal Debt as of 10/1/10: $13.5 trillion
• Deficit/Debt are Beginning to Drive Policy
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Supplemental Appropriations for military funding
passed in August
Most “extraneous” items stripped from bill
Bipartisan insistence on Pay-As-You-Go
Funding for teachers inserted at the end
Funding to close Pell Grant shortfall among casualties
Will the Deficit Be Addressed?
• National Commission on Fiscal Responsibility
and Reform
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18 members appointed by White House & Congress
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Alan Simpson (former Senator from Wyoming)
Erskine Bowles (former COS for President Clinton, President
of University of North Carolina)
Final report due December 1, 2010
Recommend long- and medium-term measures to
achieve fiscal stability and balance budget by 2015
Address growth of entitlement spending
Recommendations are non-binding
Pell Grant Shortfall
• Currently $5.5 Billion
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Appropriations are insufficient to fully fund Pell
Growth in demand not properly projected
“Mandatory” funds provided in SAFRA assume
adequate appropriations
2011-12 maximum of $5,550 is presumed safe
2012-13 outlook
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Shortfall continues to grow
Appropriations likely to stay stagnant
Growth in Pell appropriations will need to come from other
programs
Fewer sources of mandatory funds
The Pell Funding Gap:
($13-$14 billion per year)
$35.0
Pell Funding Gap Scenario
SAFRA assumed vs. projected appropriations levels
$30.9
$30.8
$31.2 (in billions)
$31.7
$32.2
$32.7
$33.2
$30.5
$33.8
$34.5
$30.0
$25.0
$20.0
$17.7
$17.8
$18.0
$18.2
$15.0
$18.5
$18.8
$19.2
$19.5
$19.8
$20.2
$10.0
$5.0
$0.0
2011
Source:
Robert Moran
AASCU
2012
2013
2014
Projected appropriation level
2015
2016
2017
2018
2019
Funding level needed to meet $4,860 in SAFRA
2020
Other Issues in Congress
• Private Student Loans
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Bankruptcy dischargeability
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H.R. 5043, Rep. Steve Cohen (D, TN)
 Approved on 9/15/10 by House Judiciary Subcommittee on
Commercial and Administrative Law
 Not expected to make it to House floor, but….
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Christopher Bryski Student Loan Protection Act (H.R. 5458, Rep.
John Adler (R, NJ))
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Require private loan lenders and schools that provide student loan
counseling for federal loans to discuss the benefits of advanced
directives with the signers and cosigners of student loans
 Federal & private loan borrowers must be advised of consequences
of death & disability on their loan debt
 Lenders must assure cosigners understand all responsibilities,
including availability of credit insurance
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Private loan debt swap (Sen. Sherod Brown (D, OH))
Issues on the Horizon
• 3-Year Cohort Default Rate
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Projections are that some rates will double or more
2012 & 2013: both 2-year and 3-year rates calculated
-- sanctions based only on 2-year rate
2013: sanctions based on 3-year CDR begin
• Perkins Loans
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Will the program expire?
Will revolving funds be recalled?
Will ED’s proposal to create “Direct Perkins
Loans” be re-tooled?
Gainful Employment Regulations
• A Hot Topic
• Secretary of Education & Administration Going
All Out
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Public relations campaign in full swing
For-profit colleges fighting back
• Recent ED Announcement
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Chronicle of Higher Education: “Education Dept. to
Delay Issuing ‘Gainful Employment’ Rules Opposed
by For-Profit Colleges”
Secretary of Education’s Press Release: “Department
on Track to Implement Gainful Employment
Regulations; New Schedule Provides Additional Time
to Consider Extensive Public Input”
Continuing Focus on For-Profit
Schools
• Senate HELP Committee Hearings
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Undercover investigations
Sen. Harkin promises more to come
Republicans boycott Senate 9/30 hearing
Congress could weigh in to stall ED
regulations
Investigations, regulations could extend to
non-profit schools
November 2nd Will Be Interesting
• Tidal Wave or Just a High Tide?
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Will Republicans capture the House?
By how much will the Democrat’s Senate majority
shrink?
• What to Expect?
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Fewer moderate members
Even more gridlock
Senate gains more power
Focus on deficit reduction
Oversight hearings
2012 campaign begins November 3rd
Looking Ahead to January
• New Committee Chairs?
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Rep. John Kline (R, MN)?
Rep. Brett Guthrie (R, KY)?
• New Members, New Staff
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New opportunities to introduce yourselves,
your school, and your issues
Need to educate before you can “ask”
The Future Looks Challenging
• Student Aid Could Face Funding Obstacles
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Across the board cuts are “easy way out”
Domestic spending priorities battling each other
• Need to Make the Case for Student Aid
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Cannot take support for granted
Key supporters may not be around to help
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Sen. Specter (R/D, PA)
 Rep. Obey (D, WI)
• Reminiscent of 1980’s
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New supporters were cultivated
New arguments were honed
Student aid enjoyed two decades of uninterrupted support
You can’t get to the other side without
paying the toll