Federal Legislative Update and COHEAO Perspectives COHEAO Annual Conference Arlington, Virginia

1. Federal Legislative Update and COHEAO Perspectives COHEAO Annual Conference Arlington, Virginia January 28, 2013 Harrison M. Wadsworth III Executive Director Coalition of Higher Education Assistance Organizations Principal, Washington Partners, LLC Hwadsworth@wpllc.net 202-289-3910

2. Presidential Inauguration 2013

3. The 113th Congress House Senate* • 232 Republicans • 200 Democrats • Vacancy in Illinois filled Feb. 26 – Safe D; Vacancy in SC: Safe R Vacancy in MO: R • Previous Congress at its end: • 241 Republicans • 190 Democrats • 4 Vacancies • 55 Democrats* • 45 Republicans • Current Congress: • 53 Democrats • 47 Republicans * Dems now and next year include two independents who caucus with D’s

4. Senate HELP Committee • Health, Education, Labor & Pensions Com. New Democrats: Tammy Baldwin (WI) Chris Murphy (CT) Elizabeth Warren (MA)

5. Senate HELP Committee • Health, Education, Labor & Pensions Com. New Republican: Tim Scott (SC)

6. Senate HELP Committee Leadership • Health, Education, Labor & Pensions Com. • Tom Harkin (D-IA) Still Chairman, Still Chairs Appropriations Subcommittee on Labor, HHS, Education • New Ranking Republican… replaces Lamar Alexander (R-TN) Mike Enzi (R-WY)

7. House Education & Workforce Leadership: No changes Chairman Kline (R-MN) Ranking Dem. Miller (CA) Higher Ed Subcommittee Ranking Dem. Hinojosa (TX) Higher Ed Subcommittee Chairwoman Foxx (R-NC)

8. 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

9. Subcommittee on Higher Education and Workforce Training

10. Elections: Some Perkins Champions Do Well (on a Bipartisan Basis) • Rep. Cathy McMorris Rodgers (R-WA) now GOP Conference Chair • Rep. Tim Bishop (D-NY) won and remains leading voice among House Dems • Rep. Jaime Herrera-Beutler(R-WA) gets Appropriations Committee post

11. The Fiscal Cliff: Some Key Players

12. Stepping Back From the Fiscal Cliff Massive tax increase averted, saving economy from recession and stock market from depression

13. Oops One tax increase went through for all who work: FICA up 25% + other increases for people making over $250K

14. For Those Who Prefer to Pay Less Tax Made Permanent (or at least until Congress changes them again): • Lower “Bush” marginal federal income tax rates for vast majority of taxpayers • Expanded Coverdell Education Savings Accounts • Exclusion for employer-provided educational assistance • Student loan interest deduction • The exclusion from income of amounts received under certain scholarship programs • Tax-exempt private activity bonds for qualified education facilities

15. More Happy Tax News… The following provisions were temporarily extended: • The American Opportunity Tax Credit (5 year extension) • The above-the-line deduction for qualified tuition related expenses. (2 years: 2012 and 2013) • The deduction for certain expenses of elementary and secondary school teachers. (2 years: 2012 and 2013) • Tax credit for research and experimentation expenses. (2 years: 2012 and 2013)

17. “Sequestration” Plus Spending Caps • Budget Control Act of 2011 set in law discretionary spending caps for 10 years (FY ‘12-FY ’21) • Supercommittee failure triggered sequestration unless the law is changed. • $1.176 trillion in automatic cuts between FY 13-21. (Cuts reduced $24 billion in 1/1/13 deal) • 50% from defense, 50% from nondefense programs. • FY 13 cuts now start on March 1, 2013. • Education cuts start July 2013.

18. Sequestration for 2013 Still Major Education Cuts • 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 in first year only. • Loan origination fees up 5.1% to 1.05% for Stafford and 4.2% for PLUS • Cuts to SEOG, GEARUP, TRIO, Work Study • Cuts to NIH, NSF, NEH, DOE, other research • FY 14-21 – lowers discretionary caps instead of across the board cuts • Squeezes education $$; Pell no longer exempt.

19. FY 13 Education Appropriations Report • Senate Appropriations FY 13 Labor-HHS-ED bill, S. 3295, reported on 6/14: • Modest increase in ED = $408 million (+0.6%) • Most programs frozen; few increases (Title I, Promise Neighborhoods, STEM, IDEA, ) • House Appropriations Subcommittee reported bill on 7/18: • Cuts ED by $1.1 billion (-1.6%); eliminates RTTT, SIG, I3, but increases IDEA by $500 million. • Nothing Passed However – 6 Month CR ends March 27– then what???

20. Get Ready for Shutdown 2013

21. Reality Check • Congressional Republicans strategically retreated on taxes (not very far) and for now on the debt ceiling (it is a loser of a political issue – just ask Newt Gingrich) • Spending is the target! • “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.

22. Aren’t We Forgetting Something???

23. Pell/Student Aid Cuts Already Enacted Eliminated the interest subsidy for graduate student loans and for the six-month grace period for undergrads for two years; Limited to 150% of program length the period an undergrad can receive a subsidized Stafford loan; Eliminated summer Pell and reduced to 12 the number of semesters a student can receive a grant; Eliminated ATB and made it more difficult for some low-income students to automatically qualify for the maximum Pell grant; and Cut eligibility for the minimum award.

24. Pell/Student Aid Cuts Enacted College students have contributed $4.6 billion out of their pockets to deficit reduction. 145,000 students have lost their Pell grant.Pell grants faces a $6-8 billion shortfall in FY 2014. Maintaining Subsidized Stafford interest rates also costs roughly $6 billion per year

25. Student Aid and the Future • Is remaining Stafford Loan subsidy for undergrads soon to be an “offset?” • Are fixed interest rates done? • Back to the future: variable rates? • Pell shortfall and doubling of subsidized Stafford interest rates loom soon • How to pay for it? • Mini-reauthorization in 2013?

26. College Cost: Bipartisan Concern • “College Price Increases out of control” • “Student Loan debt burden excessive” • Debt “bubble?” • Whose fault is it? • Something must be done! • Colleges Are Targeted for “something”

27. College Prices and Costs • 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 • Risk sharing by colleges • Obama will push already announced initiatives, including campus-based program changes • But…Congress needs to go along for anything big to happen

28. President’s Plan: Use Campus Based Programs to Control College Costs • “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.” • Proposal: new “Unsubsidized Perkins Loan” program now with up to $8.5 billion in loan volume (was $8 bil). • Current Perkins volume is about $1 billion a year. • Like previous proposals, ED would originate and service Perkins Loans, which would look the same to students as Unsubsidized Stafford Loans: • Congress: Not the least bit interested • Using “Fair Value Accounting” it costs the government $7.2 billion over 10 years – Republicans favor FVA

29. Value of Traditional Education Questioned Like Never Before

30. Ongoing Student Loan/Higher Education Consumer Issues to Monitor in the 113th • HEA—will it happen? Mini Reauth in 2013? • CFPB, particularly interaction with ED • Shopping sheet • DL servicers? • Re-fi market? • Private loan servicing standards? • Federal loans? (tug of war with ED?) • Loan repayment and federal loan servicing • Is IBR a panacea? • Complexity an ongoing issue • PLUS Loans

31. The Perkins Picture 2012: • No funds appropriated for Perkins in FY2012 because President didn’t ask for them AND Pell Grant shortfall sucked up too much cash • BUT: the Perkins Loan Program continues at least through FY 2015, and the Department advises that schools should make as many loans as possible • Can Transfer Funds from Work Study

32. Moving Beyond Perkins: Some More Key COHEAO Issues • Consumer Financial Protection Bureau • Bankruptcy Law Changes • Private Loan Issues/CFPB • Telephone Consumer Protection Act • Coalition Continues – maybe next year for action on autodialing to cell phone restrictions • Financial Literacy • Other AR issues

33. CFPB • CFPB here to stay, all agree • Leadership in Question • Date departing on January 31, Cordray may return to Ohio to run for Gov. • Elizabeth Warren on Senate Banking and HELP Committees • For student loans, interaction with Direct Loans something to monitor • More on CFPB later in Conference

34. Bankruptcy Law Proposals • 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! • Calls for dropping undue hardship requirement for private loans only • Government loans would remain non-dischargeable including from any “government units”

35. Telephone Consumer Protection Act • Joint reform effort thwarted when 49 state AGs opposed bi-partisan Terry-Towns bill allowing more calls to cell phones. • Primary reason:  pre-emption, telemarketing • 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 • Action will most likely happen next year (hopefully).  

36. COHEAO Goals • Federal Perkins Loan Program • Restore Cancellation Appropriation • Advocate for Perkins Capital Contribution • HEA Reauthorization – proposals in 2013 • Negotiated Rulemaking - 2013 • Financial Aid Fraud • Regulatory changes related to Campus issued Bank Cards • Analysis of Campus-Based Program Regulations – Update and Streamline

37. COHEAO Goals • Financial Literacy • Collect and share best practices in developing financial literacy programs on campus • Monitor activities related to financial literacy legislation or oversight • COHEAO Financial Literacy Webinar – coming soon!

38. COHEAO Goals • Accounts Receivable Act as a forum for discussion and sharing of best practices on issues related to: • Collection Regulations on Campus Debt • TILA – as related to Tuition Payment Plans • Institutional Loans (disclosure requirements) • TCPA – (predictive dialers used for collection on campus A/R and institutional loans) • Bankruptcy (private loans/impact) • VA/Military Issues

39. COHEAO Goals • Consumer Financial Protection Bureau • Continue to stay engaged with the Bureau • Be recognized as a key representative on issues related to A/R, loan disclosures, and collection agencies • Respond to requests and inquiries by the CFPB • Monitor activities and educate COHEAO membership on CFPB related legislation and practices as it impacts their activities

40. COHEAO Goals • Telephone Consumer Protection Act • Monitor legislative action • Participate with the TCPA Alliance to facilitate legislative change • Work with other National Organizations such as NACUBO to recommend solutions • Assert ourselves – with your help!

41. Bye for Now!