Student Loan Update

Midwest Association of Student Financial Aid Administrators October 20, 2009

Brett Lief, PresidentNational Council of Higher Education Loan Programs

One Slide Presentation

Eligible Students

College Costs

Institutional Aid

State Aid

Private Loans

Home Equity Loans

Students

Payment Options

Costs

FFEL as we knew it in 2006 is gone. It will not return.The question is, “What will student loans look like in the future?”

Building a Foundation

Investigations by NY Attorney General Andrew Cuomo

Back-to-Back Budget ReconciliationsThe Deficit Reduction Act of 2005 and the

College Cost Reduction and Access Act of 2007 reallocated approximately $40 billion to increase Pell and other student aid funding

Deficit Reduction Act Increased loan limitsNew grant programsCreated College Access Initiative

College Cost Reduction & Access Act Increased Pell Grant maximum to $5,400

over five years, e.g. cost of $11.4 billionFinancial markets disruptions interrupt all

types of credit availability

Building a Foundation

The Results

All recent increases in federal student aid occurred without one new dollar

What does the Future Hold?

Greater reliance on federal funds Federal goals could become school and state

unfunded mandates FAFSA simplification Federal Direct Perkins Loans

Federal priorities impacting school and state priorities Academic progress/graduation rates Stimulus package fund usage

Implementation of the “Golden Rule” Those who have the gold, rule!

What does the Future Hold?

Are schools on their own?Who/what will fill the service vacuum? Is navy blue the only color?

Will schools receive the support they need to serve their students?

Will transitions go smoothly?Are schools ready for the unexpected?

Are schools on their own?A Year of FFELP Services

$60 billion in defaults averted in FY 08 10,000 financial aid/college nights Over 1.4 million students and parents participated

in financial aid/college nights Over 26,0000 secondary school counselors trained 14 million brochures published -- in multiple languages 6 million phone call and email contacts 62,000 financial aid administrators trained and 5,400

technical assistance visits

NCHELP Survey, October 2009

Schools Speak Up

“How concerned are you about transitioning July 1, 2010?” 68% of schools responded that they are “very concerned” or

“extremely concerned” 8.0% are “not concerned at all”

“What sort of impact do you anticipate loan program transition costs to have on your budget?” 47% responded that the anticipated transition would have a

“significant” or “severe” impact on their budget 41% estimate that their staffing levels will be greater using the direct

loan program Best transition timeframe

24% - July 1, 2010 51% - July 1, 2011 25% - July 1, 2012

Schools Speak Up

National Association of Student Financial Aid Administrators

National Association of State Treasurers Group letter from current and former presidents of

national, regional and state student financial aid associations

Letter from Former President’s of Historically Black Colleges

President, United Negro College Fund College Auditor Letter, The Wesley Peachtree

Group Arkansas Association of Student Financial Aid

Administrators California Association of Student Financial Aid

Administrators California Community Colleges Student Financial

Aid Administrators Association Kansas Association of Student Financial Aid

Administrators Kentucky Association of Student Financial Aid

Administrators Louisiana Association of Student Financial Aid

Administrators Mississippi Association of Student Financial Aid

Administrators Missouri Association of Student Financial Aid

Personnel

Montana Association of Student Financial Aid Administrators

North Carolina Association of Student Financial Aid Administrators

New York State Financial Aid Administrators Association

North Dakota Association of Financial Aid Administrators

Pennsylvania Association of Student Financial Aid Administrators (two letters)

Rhode Island Association of Student Financial Aid Administrators

Southern Association of Student Financial Aid Association

Tennessee Association of Student Financial Aid Administrators

Texas Association of Student Financial Aid Administrators

Virginia Association of Student Financial Aid Administrators

Western Association of Student Financial Aid Administrators

Wisconsin Association of Student Financial Aid Administrators

Vermont Higher Education Council Vermont Commission on Higher Education Funding

Are schools ready for the unexpected?

Program Integrity Topics for Negotiated Rulemaking Satisfactory academic progress Monitoring grade point averages Incentive compensation Gainful employment in a recognized occupation Definition of a high school diploma for purposes of eligibility

for federal student aid Misrepresentation of information provided to students and

prospective students Retaking coursework Institutions required to take attendance for purposes of Title

IV Funds requirements

The Legislative Process

House Higher Education Priorities –Student Aid and Fiscal Responsibility Act

Student Aid and Fiscal Responsibility Act CBO “savings” of $87 billion 100% federal Treasury funding of student loans by July 1,

2010 No changes in loan amounts Subsidized Stafford Loans variable rate after 7/1/2013

T-Bill + 2.5%, capped at 6.8% Revamping the Perkins Program Mandatory Funds for Pell Grants FAFSA Simplification Funding for Community Colleges and other items Approx. $10 billion for “deficit reduction”

Passed 253 to 171 on September 18th

House Higher Education Priorities –College Access & Completion Innovation Funds

Three Funds:College Access Challenge GrantState Innovation Completion Grants Innovation in College Access and

Completion National ActivitiesFocus is on Access & RetentionStates are Primary Recipients

Schools & Non-Profits could have direct access to some funds

Senate Higher Education Priorities

HELP Committee Set to “Mark-Up”Senate Floor Consideration is NextReconciliation or Regular Order?

50 votes or 60 votes?Significant Floor Amendments?Reconciliation?

A Legislative Proposal Not Yet Considered

Proposal that Saves and Preserves School Choice and Services

Allows schools to choose a service provider, including loans originated as Direct Loans

Eliminates all differences in loan terms and conditions between FFEL and Direct loans on new loans

Allows for continued origination of loans by private non-profit lenders, albeit with required sale to ED

Proposal that Saves and Preserves School Choice and Services

Expands borrower assistance and advocacy through guarantors—includes default aversion and financial literacy

Requires servicer risk-sharing of 3 percent on loans that default during first four years of repayment

Sets aside 1/3 of college access and completion fund to support non-profits, guarantors and state agencies on financial literacy and similar outreach efforts

Proposal that Saves and Preserves School Choice and Services

Benefits:Equals the mandatory savings in the official

budget score for H.R. 3221 falls short over 10 years when discretionary

spending associated with loans is consideredEliminates school transition riskLeaves much of current servicer

infrastructure in place

Proposal that Saves and Preserves School Choice and Services

The Goal is to Preserve:Choice and competitionServices demanded by students and

schools35,000 jobs that support a successful

student loan experience

"Okay, you've convinced me. Now go out there and bring pressure on me."  

President Franklin D. Roosevelt

(In response to a business delegation)

Questions