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Washington Update James P. Bergeron, President NCHER Fall Legal Meeting October 3, 2019

Stay informed about the current state of Congress and the Administration, including key updates, upcoming events, and policy forecasts. Get insights on the latest developments in higher education, student loans, and financial services.

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Washington Update James P. Bergeron, President NCHER Fall Legal Meeting October 3, 2019

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  1. Washington Update James P. Bergeron, President NCHER Fall Legal Meeting October 3, 2019

  2. Current Landscape - Congress U.S. House of Representatives has 235 Democrats and 199 Republicans Dominating force: 90-member Progressive Caucus and 67-member freshman class Republicans have limited power – no surprise that 17 Republicans have announced their retirements so far

  3. Current Landscape - Congress U.S. Senate has 53 Republicans and 47 Democrats (including “Independents”) While Republicans lack votes to block filibuster by Democrats, they control the schedule – “where House bills go to die” In 2020: 22 Rep seats up and 12 Dem seats up, reverse of 2018

  4. House Democrats: Most of 2019 has been dominated by investigations into the actions of the Trump Administration. Many committees continue to hold weekly oversight hearings. • Senate Republicans: Leader McConnell has said the chamber will devote most of its effort to confirming judges and executive branch nominees Current Landscape - Congress Congress is in the midst of its annual end-of-summer work period. But they have little to show for their efforts. To date, the 116th Congress has only passed 56 laws. With the approaching Thanksgiving and Christmas holidays, both House and Senate will be in session for only 28 days

  5. Current Landscape - Administration Trump Administration is largely done with its first term – looking at its past accomplishments and upcoming opportunities with an eye to the upcoming election Next Dem debate on Oct 15-16; Iowa caucus on February 3 At ED, of the 16 major positions, 10 have been confirmed by the Senate; still no nominee for Under Secretary. FSA is seeing a great deal of turnover for an agency in the midst of massive procurements (new COO – third in three years). Under Director Kraninger, CFPB continues to staff up – because it can.

  6. Policy Forecast – Big Picture There is more consensus on higher education policy than many observers and the press let on: Increasing disclosures for federal student loan borrowers (i.e. annual loan counseling, annual debt disclosure and potential earnings, quarterly statements from federal student loan servicers, etc.) Modifications to financial aid award letters (renamed college financing plan) so that borrowers are more aware of packaging grant and loans, without PLUS Loans Streamlining student loan repayment plans

  7. Policy Forecast – Big Picture But the major issues getting attention are supported by Democrats but opposed by Republicans (hard to see agreement until political system shifts):  Federal-state partnership (code word: free college) – Dems split on whether it applies to both community colleges and four-year public institutions Refinancing of student loans – Dems split on best use of limited federal funding; $60 billion cost if both fed and private loans Massive cancellation of student loans - Dems split on whether to forgive loans for everyone or focus on other proposals; even split on income cap

  8. Policy Forecast - Administration ED has focused its main attention on improving the experiences that borrowers have with Federal Student Aid through its Next Generation Financial Services Environment: Development of mobile FAFSA Interaction with the IRS for quicker processing of financial information “Modernize its technical and operational architecture, in a manner that provides flexibility to expand and support other financial services. In addition to improving the overall customer experience, it will improve operational flexibility, enhance cost and operational efficiency, and generate better outcomes for customers and taxpayers.”

  9. Policy Forecast - Administration FSA has three active solicitations: Enhanced Processing Solution, which includes an information technology platform for existing customers Optimal Processing Solution, which includes an information technology platform for new customers Business Process Operations for both existing and new customers that will be awarded once the Enhanced Processing Solution has been awarded. The new solicitation is expected to encompass multiple awards in order to comply with the FY 2019 Department of Defense and Labor, Health and Human Services, and Education Appropriations Act. The new solicitation specifies that it will support efficient and effective operations across the entire life cycle of student financing (from application to origination and disbursements, to processing and servicing and pay-off or default). The Enhanced Processing Solution (Solution) will serve as the student financing servicing environment for FSA’s existing customers. Solution will provide full “life of the loan” servicing: servicing loans for customer accounts of all statuses, including those that are in default. Solution will rapidly migrate existing loans from current servicers, through loan migration (maintaining dynamic and complete customer historical data) while minimizing customer disruption, per target milestones 2 and 3 (Section C.3.5). Solution will also deploy advanced capabilities to provide customers with a world-class experience, improve automation (i.e., reduce manual processing) and system flexibility, and reduce operational complexity and inefficiency for FSA.

  10. Policy Forecast - Administration Even with a divided Congress and legislative gridlock, the Trump Administration wants to play a role in reauthorization of the Higher Education Act (Ivanka Trump’s office, along with Domestic Policy Council) President’s past budgets have proposed fewer programs (eliminated SEOG, PSLF, and subsidized loans, merged TRIO and GEARUP and sent to states, etc.), expanded Pell Grants to short-term programs, and consolidated student loan repayment plans

  11. Policy Forecast - Administration White House released principles for reauthorization that included capping Parent and Grad PLUS, providing more financial aid counseling, and expanding the College Scorecard to include program-level data earnings and outcome data The Department of Education is currently focused on finalizing its rewrite of accreditation reform rules, promoting income-share agreements, reforming Federal Work-Study, and revising its College Financing Plan Still no action on last year’s request to revise the procedures for discharging student loans in bankruptcy

  12. Policy Forecast - Administration The Consumer Financial Protection Bureau has continued to carry out many of the changes put forth by former Acting Director (and current White House Chief of Staff) Mulvaney: Folded the Office of Students and Young Consumers into the Office of Financial Education Ended MOU with ED on sharing of information Issued a series of Requests for Information on many aspects of its operations, including consumer complaint database and consumer education But Director Kraninger is slowly putting her stamp on the Bureau’s operations: Just hired new “Private Student Loan Ombudsman” Moving forward with new approach to consumer complaint database Issued NPRM on debt collection practices; 9,900 comments received so will take time to review comments and issue final rule

  13. Policy Forecast - House • House Education and Labor Committee is in the process of reauthorizing the Higher Education Act. But its going to take time - the committee is 25 percent larger than in the 115th Congress and 26 of its 50 members are new to the committee. • Committee Democrats are currently drafting a comprehensive bill that will be released the week of October 14; may pass committee and the House, but will not be signed into law because of disagreements between Republicans and Democrats. The FUTURE Act is the only active legislative vehicle this year. • Common themes: Democrats think the federal government should play a major role in promoting equity and pushing “free college”/ Republicans think the feds and spending are the problem

  14. Policy Forecast - House • In July 2018, Committee Democrats introduced H.R. 6543, the Aim Higher Act, which will serve as the base for this year’s bill: • Increases funding for Pell Grants • Maintains campus-based aid programs, including Perkins Loans • Eliminates origination fees and allows borrowers to refinance their federal student loans • Creates a federal-state partnership to encourage free college programs – limited to community colleges for now • Directs the Department to create a Common Manual to improve student loan servicing and “maintains state authority to protect consumers”

  15. Policy Forecast - House • House Financial Services Committee has taken a significant interest in student loan-related issues since January. On September 10th, the Committee held hearing titled, “A $1.5 Trillion Crisis: Protecting Student Borrowers and Holding Student Loan Servicers Accountable.” • Common themes: Democrats argued that students are being scammed by servicers (some lump in lenders as well); Republicans argued the federal government provides loans to students without the ability to repay • Earlier this year, the committee held a hearing on improving credit reporting and passed H.R. 3621, the Student Borrower Credit Improvement Act to remove both the delinquency and default record if a private education loan borrower successfully completes a rehabilitation program, as developed by the CFPB. Vote 33-25.

  16. Policy Forecast - House • Six bills that will be marked up in the House Financial Services Committee in the next few weeks: • Student Loan Servicing Reform and Consumer Protection Act amends the Truth in Lending Act (TILA) to help struggling student borrowers by (1) requiring servicers to provide accurate repayment options and resources and (2) setting minimum industry standards for all student loan transactions. Similar to state-level laws. • Fair Credit Reporting for Student Loans Act requires the CFPB to establish standards for reporting credit information about borrowers’ student loans • H.R. 2833, the CFPB Student Loan Integrity and Transparency Act would require information sharing on student loan data between the Bureau’s Student Loan Ombudsman and the Department of Education

  17. Policy Forecast - House • Private Loan Disability Discharge Act would amend TILA to include a required discharge of private student loans in the event a borrower becomes permanently disabled. Cosigners would also be discharged of their obligation in the event of a borrower’s permanent disability • Ensuring Fair Legal Recourse for Private Student Loan Borrowers Act would amend TILA to prohibit pre-dispute arbitration clauses and class action bans for private student loans • Know Before You Owe Private Education Loan Act would amend TILA to require schools to counsel students before they sign on to private education loan debt and inform them of any unused federal student aid eligibility. The bill would also require the prospective borrower’s school to confirm the student’s enrollment status, cost of attendance, and estimated federal financial aid assistance before the private student loan can be made.

  18. Policy Forecast - Senate • U.S. Senate Health, Education, Labor, and Pensions Committee has a full plate with healthcare and nominations, in addition to reauthorization of the Higher Education Act • In February, Chairman Alexander and Ranking Member Murray began meeting to work out a bipartisan agreement; after six months, the agreement never materialized. No new negotiations since Memorial Day. • Last week, Chairman Alexander indicated that he would like to put together a narrow bill that includes several Republican and Democratic priorities and move that through the Senate in the next few weeks

  19. Policy Forecast - Senate With Chairman Alexander’s retirement, HEA is his legacy Republicans are focused on FAFSA simplification and deregulation Democrats have their own wish-lists centered on cracking-down on certain colleges in an effort to increase accountability, and address campus safety

  20. Policy Forecast - Approps Consolidated Appropriations Act, 2018 – Prohibited the Department from moving forward on the federal servicing procurement unless it includes the participation of multiple servicers and they manage “a unique portfolio of borrower accounts and the full life-cycle of loans from disbursement to pay-off.” Modified the Public Service Loan Forgiveness Program to assist borrowers enrolled in ineligible repayment plans. Consolidated Appropriations Act, 2019 – Report language directing the Small Business Administration to provide subcontracting credit for ED’s Title IV program contracts to small businesses and state and nonprofit organizations Consolidated Appropriations Act, 2017 – Reinstated Year-Round Pell Grants. Required the Department of Education to allow all of its federal student loan servicers to offer consolidation loans. Required the Department of Education to put in place a plan under which it will give credit for subcontracting with small businesses, including state-based nonprofit organizations with expertise in assisting borrowers.

  21. Policy Forecast - Approps House version of FY 2020 Labor, HHS, Education Appropriations Act (Passed May 8, 2019) Provides $75.9 billion for the Department of Education, $4.4 billion above the FY 2019 enacted level and $11.9 billion above the President’s budget request Sets the maximum Pell Grant award at $6,345, an increase of $150 over 2019 level Provides $1 billion for Federal Supplemental Educational Opportunity Grants, an increase of $188 million above the 2019 enacted level, and $1.4 billion for Federal Work Study, an increase of $304 million above the 2019 enacted level and $934 million above the President’s request Includes a one-year extension of Account Maintenance Fees paid to guaranty agencies Includes legislative language enacted in 2019 requiring the Secretary of Education to allocate new borrower accounts to student loan servicers on the basis of their past performance but added language that the servicers be in compliance with federal and state law. Includes language expanding the Public Service Loan Forgiveness Program Includes report language expressing concern about refinancing of federal loans

  22. Outside of the Trump Administration and Congress, there are states, think-tanks, and consumer groups interested in higher education reform • States are passing legislation to create Student Loan Ombudsman offices and license federal and private student loan servicers (new application fees that will be passed on to lenders, new and specific disclosures for borrowers, prohibitions on certain actions – state-level UDAAP violations, new requirements on payment allocations, notifications, and loan transfers, and a private right of action to enforce the law’s provisions. About 15 states have laws on the books, each with their own requirements. • States are also passing legislation to provide annual disclosures to students on their student loan debt, beginning college promise programs, debating refinancing programs for certain professionals, etc Policy Forecast – States, Etc.

  23. Student loans and student debt remain hot topics on the Presidential campaign trail – trying to leverage student support and energy Most Democratic Presidential candidates have come out in support of the concept of free college – entry point to becoming a serious candidate Issues to Watch in 2019-2020 But there continues to be a lot of back-and-forth between the candidates on student loan forgiveness For example, moderate Democrats say that the party should focus on cracking down on prop schools and increasing Pell Grants The agenda will be set by the party nominee, starting sometime in April/May 2020 Even if Warren/Sanders are elected in Nov 2020, their proposals are unlikely to get enacted – budget rules, Senate filibuster, partisan environment, etc

  24. Issues to Watch in 2019-2020 How far can the House/Senate go in reauthorizing the Higher Education Act? How far can the House Financial Services Committee go in passing its reform bills? Everything is a warm-up to 2021… What will the final version of the Next Generation Financial Services Environment look like? What are the Administration’s other priorities going into 2020? How many states will pass student loan servicing licensing laws over the next year?

  25. Issues to Watch in 2019-2020 And, how will the Presidential candidates influence the political and policy process?

  26. So, What Does it All Mean? The policy and political environments are somewhat unclear right now and there may be major accidents and detours on the horizon…patience is key.

  27. Snapshot of Student Aid Source: The College Board, Trends in Student Aid 2018, Table 1.

  28. Snapshot of Annual Loan Borrowing Source: The College Board, Trends in Student Aid 2018, Figure 9B.

  29. Snapshot of Overall Student Loan Debt Source: The College Board, Trends in Student Aid 2018, Figure 11.

  30. Snapshot of Loan Repayment Source: The College Board, Trends in Student Aid 2018, Figure 14A.

  31. Thank you! Any Questions?

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