Washington Update

The Wide World of Political Sport

Scott E. Miller

Director of Federal Relations Pennsylvania Higher Education Assistance Agency [email protected]

April 2013

Covering the Bases

• • • • • The New Congressional Lineup Sequestration Takes the Field Spending In the On Deck Circle The Commissioner’s (aka the President’s) Message Scouting Reports

The New Congressional Lineup

• • White House: Unchanged Leadership in Congress: Unchanged  House of Representatives • • Republican majority shrinks a bit 233 R’s, 201 D’s (1 vacancy)   Senate • Democrat majority expands a bit • 55 D’s, 45 R’s (both Independents caucusing with D’s) One Change in Education Leadership • Sen. Lamar Alexander (R, TN) succeeds Sen. Mike Enzi (R, WY) as Ranking Republican on HELP Committee • HELP Chairman, Sen. Tom Harkin (D, IA), has announced his intent to retire at end of this Congress

Sequestration Takes the Field

• New Year’s Day Deal Delayed Implementation for Two Months     Sequester pushed back for two months $24 billion cost for delay Offset by: • • $12 billion in increased revenue (Roth IRA conversions) $12 billion in unspecified domestic spending cuts Sequestration percentages reduced • • From 8.2% to 5.1% for discretionary spending From 7.6% to 5.3% for mandatory spending

Sequestration 101

• • Leftover from 2011 Budget Deal  “Super Committee” failed to agree on deficit reductions  Threat of Sequestration, especially for Defense programs, was supposed to force a deal Sequestration, Generally, Means Across-the-Board Cuts  Some programs are exempt from sequestration or have special rules • • Pell Grant Program is exempt for first year Direct Loan origination fees increase, but loan amounts and interest rates remain unchanged • Social Security and Medicare exempt

Sequestration: Swing and a Miss

• • President Obama Signs Executive Order Implementing Sequester at 8:31 pm on March 1 st Sequester Immediately Went Into Effect     OMB provides guidance for federal agencies ED releases announcement on student aid impacts • Subsequent announcements published Other government agencies issue similar statements Some “public” impacts: • • • No White House Tours No “flyovers” on Opening Day Blue Angels grounded

Sequestration Impacts

• • • Based on Current Percentages:   Direct Loan fees increase as of March 1? July 1?

• • Stafford: 1.051% PLUS: 4.204% SEOG cut by $37 million   FWS cut by $49 million GearUp and TRIO cut by $58 million Federal Agencies Absorb Reductions in Administrative Budgets  Layoffs, furloughs being considered    Reductions in payments to contractors possible System upgrades, enhancements could be delayed Training and travel budgets could be cut If Left in Place, Sequester Reduces Spending Levels for Next 8 Fiscal Years

Due Up: The Debt Ceiling

• • • Debt Ceiling = $16.394 Trillion No Budget, No Pay Act  Approved in January   Suspends enforcement of the debt ceiling until May, but really August • “…the debt limit does not apply for the period from February 4, 2013 through May 18, 2013 .” (U.S. Department of the Treasury) No offsetting budget cuts or revenues   Required Senate & House to Pass Budget Resolutions • If Budget Resolutions are not passed, pay is withheld for Representatives and Senators – Pay is released at end of 2014 • • Senate had not passed a Budget Resolution since 2009 Does not require House & Senate to agree on a final Budget Resolution Both Chambers Adopt Budget Resolutions Prior to Spring Recess August Deadline Looms

Now Batting: FY 2013 Appropriations

• Currently Operating Under a Continuing Resolution Through September 30, 2013  Maintains funding at 2012 levels, generally  Full year extension incorporates sequestration cuts • Threat of a Government Shutdown Was Not Used as Leverage for a Larger Deal

On Deck: FY 2014 Appropriations

• • No Action Thus Far Budget Resolutions Set the Stage  House and Senate Resolutions are Trillions Apart • • A Larger Deal Could Impact Funding Levels • Good News on Pell  $9 billion shortfall has morphed into a $7 billion projected surplus Don’t Be Surprised to See Another CR

Will There Be A World Series Budget Deal?

• • • • Budget Speed Dating   President Hosting Dinners & Lunches in DC Speaker Boehner calls it a “hopeful sign” Need to Define Parameters   What’s on the table?

What’s not in bounds?

 Lower the level of rhetoric Can a Starting Team Be Identified?

  Bipartisan cooperation will be needed Who will be the coaches?

House and Senate Budget Blueprints Are Likely Not the Starting Line  President’s Budget may or may not be DOA

State of the Union

• • President Delivered the SOTU on February 12, 2013  “…skyrocketing costs price too many young people out of a higher education or saddle them with unsustainable debt.”  • Reprise of proposal to base some Campus Based funding on relative cost of institution and success in educating disadvantaged students?

“The College Scorecard provides a snapshot about an institution’s cost and value to help families make smart decisions about where to enroll .” • New Scorecard released on February 13th Republican Response – Sen. Marco Rubio (R, FL)  “We need student aid that does not discriminate against programs that non traditional students rely on – like online courses, or degree programs that give you credit for work experience .”  “We must give students more information on the costs and benefits of the student loans they're taking out.” • • Student Right to Know Before You Go Act -- Rubio – Wyden (D, OR) A rare issue of agreement?

President’s FY 2014 Budget Request

• • Submitted (Finally) on April 10 th Includes $1.8 Trillion in Budget Savings Over 10 Years  Reduces overall domestic spending    Replaces sequester cuts with targeted cuts Controversial proposals on Social Security and Medicare Projects $744 billion deficit for FY 2014

President’s FY 2014 Budget Request: Student Aid

• • • • Pell Grants   The Budget proposes to support the Pell Grant maximum award at: • • $5,645 for the 2013-14 award year $5,785 for the 2014-15 award year Funding for Pell Grants would exceed $35 billion for FY 2014 SEOG is proposed to be level funded at $735 million FWS is proposed to be increased by $150 million to $1.13 billion TRIO and GEAR UP are proposed for level funding

President’s FY 2014 Budget Request: Student Loans

  Proposed Permanent Fix for the Student Loan Interest Rate • The variable rate formula would be applied to new loans, which would retain the rate for the life of the loan • The rate would be reset annually to determine the rate applicable to new loans • The formula for the variable interest rate would be, the sum of the rate of the 10-year Treasury Note (currently approximately 1.75 percent) plus: – 0.93 percent for Stafford loans – – 2.93 percent for Unsubsidized Stafford Loans 3.93 percent for PLUS loans (including GradPLUS) • There is no cap on the interest rate calculated using these formulae • Interest rate cap on Consolidation Loans would be removed “Pay as You Earn” Repayment Plan Made Available to All Borrowers as of July 1, 2014

President’s FY 2014 Budget Request: Student Aid – Play it Again…

• Last Year’s Players Are Back   Revamp Perkins Loans and convert to Unsubsidized Stafford Loans Revise Campus Based allocation formula to reward schools with relatively low net tuitions and demonstrated success in educating disadvantaged students   Converting TEACH Grants to Presidential Teaching Fellows Race to the Top College Affordability and Completion Challenge Grants to States

It’s Still Spring Training for Reauthorization

• • • Potential Schedule    House may start hearings this Spring Senate may request community proposals this year Legislation unlikely to come together until 2014 • Members may introduce bills to get in the reauthorization queue • Now is the time to float ideas RADD Reports     Reimagining Aid Design and Delivery Funded by Bill and Melinda Gates Foundation “Blue sky” papers 14 reports issued Rethinking Pell Grants Study Group

RADD Batting Leaders

• • • • • • • • Stabilize or Increase Funding for Pell Tie Funds to Enrollment or Graduation Metrics Focus and Simplify Tax Credits Automatic IBR Enrollment Provide Consumers with Information Regarding Return on Investment Eliminate Interest Subsidies Increase Flexibility in Awarding Pell Streamline the FAFSA Source: NASFAA

RADD’s Reauthorization Teammates

• • • • • • • College Cost Student Debt Future of the Perkins Program Gainful Employment Rules Disclosure/Transparency for Schools  “Skin in the game” Private Loans Program Simplification

Scouting Report

• • • • Interest RateFix      Rates on

new

Subsidized Stafford loans for

undergraduates

set to rise to 6.8% as of July 1 Long- or short-term solution?

Changes for Unsub and PLUS?

Fixed or variable rates?

President’s proposal kick starts debate Know Before You Owe Act  Other borrower relief proposals Congressional Involvement In Shopping Sheet Grand Bargain(s)?

NO CLOWN QUESTIONS!