NASFAA ’ s Update: Inside the Beltway

1. NASFAA’s Update: Inside the Beltway 1

2. Agenda • Washington Political Climate • Federal Budget Update • President Obama’s College Affordability Plan • Interest Rates • Cohort Default Rates • Reauthorization • Negotiated Rulemaking • NASFAA Proactive Policy

3. Washington Political Climate

4. Washington Political Climate • Partisanship, Brinkmanship, and “Blame Game” • Deficit Reduction • Budget Politics Dictating Policy • Compromise = Bad word

5. Budget 101 What *should* happen: • President delivers Budget Request to Congress • House and Senate draft Budget Resolution • 12 Appropriations Subcommittees draft bills • All should be completed by Oct. 1 (beginning of new fiscal year)

6. What Congress Thinks of Budget 101

7. Budget Update—Federal Spending

8. Budget Update—Gov’t Shutdown • Government shutdown—result of Congress failing to pass a spending bill for fiscal year (FY) 2014 by Oct. 1 • Spending bill got caught up in larger partisan battles • Congress reached agreement at 11th hour on 10/16 • Opens federal government through January 15th • Extends debt ceiling through Feb 7 • Creates Budget Conference to address “longer-term” spending

9. Budget Update—Sequestration • Sequestration is a 10-year process • Implemented 3/1/2013, Year 1 impact: • 5 % across-the-board cut to FSEOG, FWS, TRIO, GEAR UP • 6 % across-the-board cut to TEACH Grant • Increase in Direct Loan origination fees • Pell Grant was protected • Years 2-10 cuts will be achieved through lower spending caps

10. Budget Update—Sequestration • Year 2 Impact (beginning Oct. 1, 2013): • Mandatory Programs • TEACH Grants—must be reduced by 7.2 percent (up from 6 percent) • Iraq-Afghanistan Service Grant—reduced by 7.2 percent (down from 10 percent) • Origination fees (loans disbursed on or after Dec. 1) • Direct Sub & Unsub: 1.072 % • PLUS (Grad and Parent): 4.288% • Discretionary Programs: Unknown until FY 2014 appropriations are complete

11. Budget Update—Sequestration What’s next? • Unless Congress passes a law to stop sequestration it will remain in effect • No appetite on the Hill to repeal sequestration, but willingness to consider replacing

12. Budget Update—FY 14 Predictions • It is likely that FY 2014 (award year 2014-15) will ultimately be funded by a year-long continuing resolution (CR) • In this case, the student aid programs would likely see the same exact cuts they experienced in FY 2013 (award year 2013-14). Pell would also likely be protected.

13. President Obama’s College Affordability Plan • Plan announced in late August • Three part: • Paying for performance • Promoting innovation and completion • Ensuring that student debt remains affordable • Key Feature: • Prior to 2015 award year, develop a “college ratings system” that would “compare colleges with similar backgrounds as well as colleges that are improving their performance.” ED would be directed to involve key stakeholders in developing the metrics and to include measures related to access, affordability and outcomes • The intent is that by 2018 an institution’s rating would be used to determine the amount of student aid they receive

14. President Obama’s College Affordability Plan • Other features of plan: • “Race to the Top” for higher ed • Reward colleges with a Pell “bonus” • Strengthen Satisfactory Academic Progress (SAP) • Encourage innovation in learning models (MOOCS, Prior Learning Assessment, Competency-based Learning) • Make all borrowers eligible for Pay As You Earn (PAYE) & launch a campaign to raise awareness about eligibility and enrollment

15. President Obama’s College Affordability Plan • Odds of Implementation: Some features of the president’s plan would require congressional action, while others would not • No Congressional Action Needed: • Development of “ratings list” • Campaign to enroll more students into PAYE • Congressional Action Needed: • Coupling a school’s rating to student aid eligibility • The parts of the proposal that would require new funding or make changes to current programs

16. Student Loan Interest Rates • Signed into law early August • Interest rates tied to market-rates (T-bill plus add-ons) • Variable-fixed • Impacts all borrowers. New rates: • Undergrad (sub and unsub) loans: 3.86% • Graduate unsub: 5.41% • PLUS: 6.41% • Caps included in law: 8.25; 9.5; 10.5

17. Cohort Default Rates • Two year average rate rose from 9.1 to 10% • Public: 9.6% • Private not-for-profit: 5.2% • For-profit: 13.6% • Community College: 15% • Three year average rate rose from 13.4 to 14.7% • Public: 13% • Private not-for-profit: 8.2% • For-profit: 21.8% • Community College 20.9%

18. Reauthorization • Higher Education Act reauthorization *should* occur in 2014; but that is very unlikely • The process will definitely start, but there may not be a final bill • NASFAA’s Reauthorization Task Force submitted recommendations to House and Senate Ed Committees • Predictions about reauthorization? • Likely will occur piecemeal and not in full for at least another couple of years • Major subjects for debate are likely to be: student loans, innovative learning models (MOOCs, Prior-Learning Assessment, Competency-based Learning), consumer information

19. Negotiated Rulemaking: Gainful Employment • September, 2013: first negotiating session • Ongoing: negotiators continue conversations within topical sub-groups • October 21-23: second (and last) negotiating session • Prediction: no consensus • Because of master calendar requirements, earliest possible effective date is July 1, 2015 • Second negotiating session postponed, new dates: Nov. 18-20

20. 150 Percent Sub Loan Limitation Moving Ahead for Progress in the 21st Century Act (MAP-21), aka “Highway Bill” • Enacted July 6, 2012 • Extended the 3.4% interest rate for subsidized loans until July 1, 2013 • Established a time limit for subsidized loan eligibility for new borrowers on or after July 1, 2013 • Waived master calendar and negotiated rulemaking requirements

21. 150 Percent Sub Loan Limitation Interim Final Rules • Published May 16, 2013 • Comment period until July 1, 2013

22. Why is Proactive Policy Important?

23. NASFAA Proactive Policy • Task Force on Student Loan Indebtedness • Reimagining Aid Design & Delivery • Task Force on Award Notification and Consumer Information & related consumer testing • Consumer Testing of Award Letters • Advocacy PipelineUpdating Ethical Principles and Code of Conduct • White Paper on Regulatory Burden • Advocacy Pipeline

24. Advocacy and YOU • You are each in a great position to advocate! • Visit our Facebook Page for updates on student aid! • Visit our website: www.nasfaa.org/advocacy • Get students involved!

25. Questions?