Transcript ISFAA Spring Conerence April 16, 2013 Indianapolis, Indiana

ISFAA Spring Conference
Indianapolis, Indiana
April 16, 2013
JOE RUSSO
RETIRED DIRECTOR OF STUDENT
FINANCIAL STRATEGIES
UNIVERSITY OF NOTRE DAME
Questions: what if we were given a tabula rasa ?
 What would the ideal student aid future look like?
 What measures would we use to measure its success?
 What principles and values would guide such an
effort?
What goals would we envision?
 Access: simple & efficient
 Affordability: transparent & encouraging
 Accountability: responsible, measurable, with
performance-based incentives
What constraints would we realistically face?
 Limited budgets, other demands & priorities
 Will never have enough resources to meet full need
of all
 The challenge: spread resources to all or target to
neediest first
 Expectation for full cooperation among all players
 Increasing focus on outcomes: preparation,
retention, graduation, success
What basic essentials would be needed?
 Partnership among all: reasonable level of
cooperation
 Partners include: student, family, government,
community, employers, private organizations
 Understanding that both the individual & society
benefit from a better educated/trained citizenry
 Appreciation of education as an investment not just a
commodity
What special opportunities do we face?
 Next Reauthorization
 Conclusions offered in new studies: College Board,
NASFAA, Gates
 A leadership role for being competitive in a new
world economy
What is the current image of college costs
& student aid?
 As viewed by consumers, policymakers, the media
 Complex, confusing, daunting, discouraging
 Rising costs, high levels of debt, no jobs, questions
about value
 Little black box, constant change
 Institutional practices & well-intentioned
government regulations to protect consumer
 Myriad of reports with common themes: dramatic
need to consolidate & simplify
So how do we proceed?
 Back-to-the-future
 Re-instate "look-up" tables to produce a "Federal Index"
(aka EFC) rounded to nearest hundred
 Taxpayer authorizes IRS to provide limited data to ED
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AGI, number of exemptions, social security numbers of college
aspirants
Data from non tax filers to be secured same as it is now
 ED generates Federal Index (FI) & notifies each
applicant of their eligibility for a federal Pell Grant

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Amount of grant awarded in increments of $100
Awards are gradually reduced by $100 using FI from maximum
amount for zero FI until funds are exhausted
 States & institutions use the FI for their decisions

Or adjust it (+/-), using other factors or data, if desired, as currently
practiced
What about other federal tax benefits?
 Target federal tax benefits for higher education costs
to families below certain income levels

e.g., median income for households with parents aged between
40 – 60 for tax credits/deductions

e.g., restrict federal tax consideration for 529 plans to family
incomes below $250,000
What about campus-based programs?
 Phase out campus-based SEOG & Perkins Loans
 Redirect college work-study funding to institutions
with proven performance & expand student
eligibility
 Provide an institutional administrative allowance
based upon its measures of performance
What are the intended consequences ?
 Elimination of the need for an annual FAFSA
 Creation of millions of dollars of savings currently
needed for FAFSA processing by ED
 Major reduction of incomplete FAFSAs (750,000
incomplete never returned last year)
 Substantial reduction in need for verification of data
and the institutional & government costs involved
What about the largest federal student aid
program: Stafford Loans ?
 Option one:
 Eliminate current policy for federal need using
COA - FI = eligibility
 Replace eligibility for subsidy determination by using FI up to
certain income level until funding runs out
 Option two:
 Eliminate in-school subsidies for all students
 Redirect subsidies to "back-end" of process: the repayment
period
Revised Income Contingent Loan Repayment
 Require all borrowers to annually pass a financial
literacy test prior to distribution administered by
each institution
 Questions would include examining borrower's full
understanding on estimated monthly payment
 Information used would include estimates of total
borrowing as well as payment as percentage of
monthly income
 Institutional administrative allowance would be
based upon a measure of school's performance
How would repayments be processed?
 IRS manages billing & collection process thru payroll
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deduction
Interest accrues during school and deferment periods as well
as during repayment; cap total interest
Amount of monthly payment driven by a percentage (e.g., 9%)
of annual income
No payment due until annual income exceeds certain
threshold (e.g., $20,000)
Deferments for further full-time schooling and permanent,
long-term hardship
Cancellation provisions for full-time public service (ask what
you can do for your country) & for death
Loan balance remaining after certain number of years (e.g.,
25) is cancelled
What are the outcomes ?
 Access: simple, efficient, with no significant impact
on enrollment behavior or on neediest students
 Affordability: predictable & encouraging; helps
with public service career options, fosters planning &
saving
 Accountability: provides for more responsible
borrowing & creates incentives for institutions to
perform
What are remaining issues ?
 Major changes
 Phase-out challenges
 Self-supporting students
 PLUS Loans
 Graduate/professional students
 Non tax filers
 Tax loopholes
 Institutional matching for Pell
 Other