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TRANSCRIPT
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Legislation and Student Financial Assistance: The Latest on What is
Happening in DC
PDG National College and University Bursars & SFS Conference
Orlando, Florida April 22, 2013
Harrison M. Wadsworth III Executive Director Coalition of Higher Education Assistance Organizations Principal, Washington Partners, LLC [email protected] 202-289-3910
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Presidential Inauguration 2013
3 But In the Tree…
The 113th Congress
House
• 231 Republicans
• 200 Democrats • Vacancies probably yield
234-201
• Previous Congress at its end: • 241 Republicans
• 190 Democrats
• 4 Vacancies
Senate*
• 54 Democrats*
• 45 Republicans One Vacancy: Mass. (Kerry seat)
• Previous Congress: • 53 Democrats
• 47 Republicans
* Dems include two independents who caucus with D’s
Senate HELP Committee
o Health, Education, Labor & Pensions Com.
New Democrats: Tammy Baldwin (WI)
Chris Murphy (CT)
Elizabeth Warren (MA)
Senate HELP Committee
o Health, Education, Labor & Pensions Com. New Republican: Tim Scott (SC)
Senate HELP Committee Leadership
o Health, Education, Labor & Pensions Com. • Tom Harkin (D-IA) Chairman, Also Chairs
Appropriations Subcommittee on Labor, HHS, Education
o New Ranking Republican: Lamar Alexander
7 Lamar Alexander (R-TN) Mike Enzi (R-WY) replaced
House Education & Workforce Committee Leadership
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Chairman Kline (R-MN)
Higher Ed Subcommittee
Chairwoman Foxx (R-NC)
Ranking Dem. Miller (CA)
Higher Ed Subcommittee
Ranking Dem. Hinojosa (TX)
Ed and Workforce New Members
Republicans
Matt Salmon, AZ Susan Brooks, IN
Richard Hudson, NC Luke Messer, IN
Joe Courtney, CT Brett Guthrie, KY Democrats
Jared Polis, CO Gregorio Sablan, MI
John Yarmuth, KY Frederica Wilson, FL
Suzanne Bonamici, OR Marcia Fudge, OH
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Subcommittee on Higher Education and Workforce Training
Republicans Democrats
Virginia Foxx, North Carolina
(Chairwoman)
Thomas E. Petri, Wisconsin
Howard P. “Buck” McKeon,
California
Glenn Thompson, Pennsylvania
Tim Walberg, Michigan
Matt Salmon, Arizona
Brett Guthrie, Kentucky
Lou Barletta, Pennsylvania
Joseph J. Heck, Nevada
Susan W. Brooks, Indiana
Richard Hudson, North Carolina
Luke Messer, Indiana
Rubén Hinojosa, Texas
(Ranking Member)
John F. Tierney,
Massachusetts
Timothy H. Bishop, New York
John Yarmuth, Kentucky
Suzanne Bonamici, Oregon
Carolyn McCarthy, New York
Rush Holt, New Jersey
Susan A. Davis, California
David Loebsack, Iowa
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Subcommittee on Financial Institutions and Consumer Credit – Fin. Serv. Com.
Republicans Democrats
Shelley Moore Capito, WV, Chairman
Spencer Bachus, Alabama
Gary G. Miller, California
Patrick T. McHenry, North Carolina
John Campbell, California
Kevin McCarthy, California
Stevan Pearce, New Mexico
Bill Posey, Florida
Michael G. Fitzpatrick, Pennsylvania
Lynn A. Westmoreland, Georgia
Blaine Luetkemeyer, Missouri
Sean P. Duffy, Wisconsin
Marlin A. Stutzman, Indiana
Robert Pittenger, North Carolina
Garland “Andy” Barr, Kentucky
Tom Cotton, Arkansas
Jeb Hensarling, Texas, ex officio
Gregory W. Meeks, New York, Ranking
Member
Carolyn B. Maloney, New York
Melvin L. Watt, North Carolina
Rubén Hinojosa, Texas
Carolyn McCarthy, New York
David Scott, Georgia
Al Green, Texas
Keith Ellison, Minnesota
Nydia M. Velázquez, New York
Stephen F. Lynch, Mass.
Michael E. Capuano, Mass.
Patrick Murphy, Florida
John K. Delaney, Maryland
Denny Heck, Washington
Maxine Waters, California, ex officio
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Elections: Some Perkins Champions Did 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-Butler (R-WA) gets Appropriations Committee
post
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The Federal
Budget Debate:
Some Key Players
Stepping Back From the Fiscal Cliff
Massive tax increase averted, saving economy from recession and stock market from depression
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Oops
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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 16
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)
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“Sequestration” Happened
o Budget Control Act of 2011 set in law discretionary spending caps for 10 years (FY ‘12-FY ’21)
o Supercommittee (remember that?) 2011 failure triggered sequestration as of March 1, 2013 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 Most education cuts start July 2013. 20
Sequestration for 2013 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 through AY13-14. • Loan origination fees up 5.1% to 1.051% for
new Stafford, 4.204% for PLUS as of 3/1 • Cuts to SEOG, GEARUP, TRIO, Work Study • Cuts to NIH, NSF, NEH, DOE, other research
but NSF cuts partially restored o FY 14-21 – lowers discretionary caps instead of across the board cuts
• Squeezes education $$; Pell no longer exempt.
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FY 13 Education Appropriations Report
o Final Appropriations Bills Passed March 21, 5 months, 21 days after start of Fiscal Year 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 March 27 deadline giving some hope for less rancor
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Back to Work!
o Next Deadline: Expiration of the suspension of the debt ceiling in May leads to possible crisis in late June or July.
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Reality Check
o Congressional Republicans strategically retreated on taxes (not very far) and punted on the debt ceiling (it is a loser of a political issue – just ask Newt Gingrich)
o “We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.” — --Ronald Reagan, March 28, 1982, and since
paraphrased numerous times by Republican leaders.
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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.
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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 at 3.4% also costs roughly $6 billion per year
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The Perkins Picture 2012-13:
o No funds appropriated for Perkins in because President didn’t ask for them, Pell Grant shortfall sucked up too much cash AND all programs level funded in ‘13.
o BUT: the Perkins Loan Program continues at least through FY 2015, and the Department advises that schools should make as many loans as possible
o Can Transfer Funds from Work Study
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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 Doubling of subsidized Stafford interest rates looms
o How to pay for it?
o Mini-reauthorization of HEA coming?
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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”
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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
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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
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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
• Shopping sheet • Direct Loan servicer RFI – tug of war with ED? • Re-fi market? • Private loan servicing standards? • Troubled loan RFI
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?
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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
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Ed Negotiated Rulemaking?
o Negotiated Rulemaking - 2013
• Financial Aid Fraud
• Regulatory changes related to Campus issued Bank Cards
• US PIRG report criticizes card fees
• Democrats active in this area
• Analysis of Campus-Based Program Regulations – Update and Streamline
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CFPB
o CFPB here to stay, all agree
• More focus on institutional loans later
o Leadership in Question
• Deputy Director Date departed January 31, Cordray may return to Ohio to run for Gov.
• Senate unlikely to confirm him
o Elizabeth Warren on Senate Banking and HELP Committees
o Constant stream of initiatives
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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 Bills call for dropping undue hardship requirement for private loans only
o Government loans would remain non-dischargeable including from any “government units” 38
Telephone Consumer Protection Act
o Joint 2012 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).
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Tax Reform: Lofty Goal with HE Issues
o Major re-write of federal tax code for first time since 1986 being discussed
Issues affecting higher education:
o Charitable donation deduction -- cut?
o Tax exempt bonds: limit use?
o Tax credits for tuition, employers etc. (very hard to use to offset Pell Grants)
o Student loan interest deduction
o Role of non-profits in politics
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Will they reach it?
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