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 ConferenceApril 14, 2014

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Agenda – Let’s Talk! 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 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 Signed into law January 17th

FY 2014 Appropriations Maximum Pell Grant for AY 2014/15 = $5,730

$85 increase Increase in recipients from 9.1 million to 9.3 million

Direct Loan Origination Fee Increases Remain in Place Loans first disbursed on/after 12/1/2013

Stafford 1.072% PLUS 4.288%

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Consolidated Appropriations Act of 2014 FWS: $974,728,000

$49,133,000 increase $2 million below pre-sequester level

SEOG: $733,130,000 $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 (Grad and Parent)

T + 4.60 percent 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

Pay As You Earn (PAYE) Repayment Plan 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 Proposal to limit Public Service Loan Forgiveness to

$57,500 (aggregate limit for independent undergraduates) “…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

College Board – Trends Report

College Board – Trends Report

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For GP – It’s All About Loans 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?

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 ÷ 12Minimum monthly payment = $0

Lesser of:20% of Discretionary Income ÷ 12OR12-year standard payment x Income Percentage Factor published by Dept. of EdMinimum monthly payment = $0

10% of Discretionary Income ÷ 12Minimum 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? 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

Possibility House Education and the Workforce Committee could consider a bill

Maybe 2015? 2016? 2017?.... 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 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? 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 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 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 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? 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???