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Spring 2012 Legislative & Federal Perkins Loan Update

Spring 2012 Legislative & Federal Perkins Loan Update. Agenda. COHEAO Budget Grassroots Congress Regulatory Update Perkins Loan Issues Ed Resources. COHEAO Announcements. NEW MEMBERS WANTED! Tell your Friends and Colleagues to join. Membership is needed now more than ever.

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Spring 2012 Legislative & Federal Perkins Loan Update

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  1. Spring 2012 Legislative & Federal Perkins Loan Update

  2. Agenda • COHEAO • Budget • Grassroots • Congress • Regulatory Update • Perkins Loan Issues • Ed Resources

  3. COHEAO Announcements • NEW MEMBERS WANTED! • Tell your Friends and Colleagues to join. Membership is needed now more than ever. • Discounts for Teleconferences, Webinars, Annual, Mid-Year Conferences • Mid-Year Conference: July 29 – July 31, 2012 • Cleveland, OH

  4. What is COHEAO Doing? • Working to support the continuation of the Perkins Loan Program and to fund it • Educate policy makers on the student benefits of Perkins • Setting up state calls to Congress members • Many other issues COHEAO is involved: • A/R issues, privacy, tax reporting, FDCPA. TILA, TCPA, Private Student Loans (institutional loans), CFPB • Financial Literacy

  5. 3.4% Loans in Congress • $6 billion cost for a one year extension • Agreement on keeping rate. Disagreement on how to pay for it.

  6. 3.4% Loans in Congress • Bills from Rep. Biggert, Sen. Alexander, Sen. Reid, Rep. Miller,Sen. Brown. Offsets: • GOP = “war on women’s health” (Public Health Fund) • Democrats = “raising taxes on ‘job creators’ in middle of recession” (S-Corporation) • Brown = Does it really work? Politics? (Improper Payments)

  7. 3.4% Loans-What does it mean in the End? • A deal is highly likely, two questions remain: • What ultimately will be the offset? • Will it happen by July 1st? • Average borrower will save $6-$8 per month. Max is $12-$15 per month. ($1,000 over life of loan)

  8. 3.4% Loans-What does it mean in the End? • Benefit will only apply to loans made from 7/1/12 thru 6/30/13 • This is Elevating the Issue • People looking at college cost/student debt heading into HEA. • Scrutiny not limited to Proprietary Schools.

  9. Why we may not have a deal before July 1st & Why $6 per Month is Such a Big Deal

  10. 3.4% Debate & Perkins Loans • Perkins is in desperate need of Cancellation $$$ • Major debate is student loans & policy makers are searching for offsets • $6 Billion needed, Perkins owed $259 Million, so why not $6.25 Billion?

  11. FY 2013 Budget Overview • President’s budget is a series of proposals only. • Congressional action needed to put into effect • “President proposes, the Congress disposes” • 2.5% increase to increase Higher Ed spending to $69.8 billion. • $1.7 billion more than enacted 2012 levels

  12. FY 2013 Budget Overview • Maximum Pell Grant at $5,635, an $85 increase thru the 2014-15 academic year. • Increase from SAFRA funding • $120.8 billion in new Direct loans available in 2012 • including 1 year extension of 3.4% rate • Seeks to make the American Opportunity Tax Credit (AOTC) permanent.

  13. Campaign Issue: College Costs • Administration highlighting cost of college • State of the Union “putting colleges on notice” • Full PR campaign launched with allies in “consumer groups”, blogs, other media, CFPB • Adopting a stance like Rep. Buck McKeon Republicans in 2004. • Campus based aid funding tied to prices

  14. Budget: Campus Based Programs to Control College Costs • Proposal to “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.”

  15. Budget: Campus Based Programs to Control College Costs • For the $10 billion proposed in campus-based aid: • The proposal would replace the historical allocation formula with a new formula that bases a college’s allocation on whether the college reduces net tuition prices, restrains tuition growth and enrolls and graduates relatively higher number of Pell Grant eligible students.

  16. Proposal: “Unsubsidized Perkins” • Creates a new “Unsubsidized Perkins Loan” program with up to $8.5 billion in loan volume. • Current Perkins volume is about $1 billion a year

  17. Proposal: “Unsubsidized Perkins” • Like Previous proposals, ED would originate and service. Loans look the same as Unsubsidized Direct • 6.8% fixed interest rate • Same cancellation options (greatly reduced) • Direct Loan servicing contractors would add this to their billing and collections contract. • Contracts call for de minimums servicing • Financial Literacy not included

  18. FY 2013: Current Perkins would Continue • Current Perkins Loan Program proposed to continue in FY 2013 • Therefore, proposal calls for 2 programs in the next fiscal year. • HEA reauthorization process in 2013-14 would decide what to do. • Funds requested to purchase Perkins servicing system, apparently for assigned loans

  19. Issues to Federal Budget Accounting • House backs “fair value accounting” method of scoring the cost of federal loan programs • Risk is considered in this method • Direct Loans are estimated to cost more • The “Unsub Perkins Loan” proposal would: • Under “1990 Credit Reform Act” rules save the government $4.298 billion over 10 years • Under “Fair Value” accounting, it costs $3.577 billion over 10 years.

  20. Perkins Funding Picture 2012 • No $ appropriated for Perkins in FY 2012 because President didn’t ask for them, and Pell Grant shortfall used lots of $$. • BUT: Perkins Loan Program continues to operate at least through FY 2015, and the Department advises schools to make as many loans as possible.

  21. Perkins in the Future • Priority for advocacy this year: • Restore funding for cancellation reimbursement • To date $259 million in unpaid cancellations • Late in 2012: Start preparing for HEA Reauthorization • COHEAO has PTF to work on this • Recommendations?

  22. Grassroots Efforts • We must work to fund and extend the Perkins Loan program • COHEAO is working on new ideas to preserve the program • Support Appropriations • Support Perkins • See www.coheao.org for details • Stay In Touch with your Congressional Representatives

  23. Current Grassroots • COHEAO Spark announced 5/29/2012 • Call to Action • Contact your Senators and Representatives in support of Perkins Appropriations • Requesting Perkins Cancellation Reimbursement • www.coheao.org

  24. Bankruptcy Law Proposals • Current Law: all education loans as defined by tax law are not dischargeable in bankruptcy except when there is undue hardship • House, Senate bills call for dischargeability of private loans only. • No exception for school, non-profit • Government Loans would remain non-dischargeable. • Including any “government units” (state schools)

  25. The Politics of it all… • Election this November… • Little expected to pass by Congress except the must-do bills. • Anything the House will pass the Senate won’t and vise versa • 30 jobs bills passed House, stalled in Senate • House struggling with a Budget, Senate not bothering.

  26. What does this mean? • Election outcomes will affect attitudes towards funding of student aid. • Politics of college costs, student debt important! • Deficit reduction theme likely to continue regardless.

  27. Congress After Election?

  28. Armageddon during Lame Duck? • Debt ceiling will need to be increased in combination with spending cuts via Congressional reviews (scalpel) or sequestration (chop ax) • Sequester of $1.2 Trillion over 10 years set to begin January 2013 – cuts almost everything but Social Security, Medicare • Congress wants to avoid sequester. R’s on Defense and D’s on Domestic Programs

  29. Armageddon during Lame Duck? • Host of tax cuts set to expire • Bush Tax Cuts of 2001 & 2003 • 90% of these cuts have strong bipartisan support • Additional cuts from ARRA (American Recovery and Reinvestment Act) to expire. • R’s love to bash the Obama stimulus, but are very supportive of the law’s tax cuts.

  30. Congress in Nov. & Dec. Likely Outcome?

  31. Department of Ed Initiatives • Federal Register Announcement • Upcoming Negotiated Rulemaking • Published May 1st, 2012 • Issues: to prevent fraud and ensure proper use of Title IV funds. • Regulate the use of debit card and other banking mechanisms for disbursing Federal Student Aid Funds..

  32. Department of ED Initiatives • Federal Register Announcement • Comments on proposed Perkins MPN • Published May 15, 2012 • Persons are encouraged to submit comments on or before July 16, 2012

  33. Department of ED Initiatives • Special Direct Consolidation Loans • Jan 2012 thru June 30, 2012 • Borrowers with one loan held by Depart (FFEL or DL) and at lease one commercially held FFEL loan • Goal: to help borrowers manage debt by ensuring all fed loans serviced by same servicers

  34. Department of ED Initiatives • Pay as you Earn Student Loan Repayment Plan • New borrowers in 2008 who receive a loan in 2012 are eligible • Revised ICR plan to cap annual payments at 10% of discretionary income and reduce max repayment to 20 years • Balance after 20 years cancelled

  35. Department of ED Initiatives • Two Factor Authentication • A security process all users must utilize to access Federal Student Aid System • Something you know: User ID and Password • Something you have: Token with a one-time password. • Tokens to handed out in phases • NC, NJ, NY, SC Phase 2

  36. Regulatory Update • Negotiated Rulemaking Site: • http://www2.ed.gov/policy/highered/reg/hearulemaking/2011/loans.html • Federal Register Notice published 10/26/11 and 10/28/11 announcing decision to establish NegReg

  37. Regulatory Update • Two teams : • Teacher Prep Issue • January 18-20, 2012 • February 27-29, 2012 • April 3-5, 2012 • Student Loan Issues • January 9-13, 2012 • February 13-17, 2012 • March 26-30, 2012

  38. Regulatory Update • Student Loan Issues: • Changes to ICR program – implementation of “Pay as you Earn” • Changes to IBR plan • FFEL Repayment Disclosures • Forbearance issues • Minimum Loan Period for Transfer Students in non-Term Programs

  39. Regulatory Update • Loan Repayment issues • Repeal of unnecessary FFEL regulations • Modification of Direct Loan Regulations • Total and Perm Disability issues • Title IV Closed School District • Satisfactory Enrollment Status Reporting • Perkins Loan issues • FFEL Admin Wage Garnishment

  40. Perkins Loan Issues • FSA still concerned Perkins schools are not making loans • Expectation is schools should make loans or liquidate from the program • FSA monitoring and contacting schools as necessary • Monitoring excess cash and asking school to return it. • Schools are taking Admin Cost Allowance without advancing funds.

  41. Perkins Loan Issues • Department is enforcing Cohort Default Rate Penalties • 674.5(a)(2) over 50% for three years ineligible to be in Perkins Loan Program • Department making individual contact to affected schools • 17 schools identified

  42. Ed Resources • FP-12-01 Subject: Loan Verification Certificate for Special Direct Consolidation Loans • GEN-12-05 Subject: Corrections to GEN-11-19 (revised Loan Discharge Application) • GEN-12-04 Subject: Federal Loan Issues • Interest change in Direct Sub Loans • Continued eligibility of dependent undergrad

  43. Ed Resources • GEN-12-2 Subject: Employment Cert for Public Service Loan Forgiveness • P-12-01 Subject: 2012-2013 Federal Pell Grant Disbursement Schedules

  44. Questions? Lori Hartung Todd, Bremer & Lawson, Inc. lori.hartung@TBandL.com Mobile: 1-803-371-2394 Toll Free: 1-800-849-6669

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