Washington Update Presented by:

1. Washington UpdatePresented by:

2. 2013 Fiscal Year Budget • President Obama released his 2013 fiscal year budget on February 13, 2012. • At a time when the administration is facing enormous pressure to cut federal spending, the president’s plan would increase funding to the Department of Education by 2.5 percent. • The proposal would increase the maximum Pell Grant by $85. • Provide $8 billion over three years for job training at community colleges • Extend the American Opportunity Tax Credit, which is set to expire at the end of this fiscal year • Forestall, for a year, a scheduled increase in the interest rate for federally subsidized student loans

3. 2013 Fiscal Year Budget • Maintain the 2012 funding levels for the TRIO and GEAR UP programs for college readiness and the Supplemental Educational Opportunity Grant. • Create a $1 billion “Race to the Top” program for higher education • The proposal also includes a more controversial plan to expand and remake the Perkins Loan program, rewarding institutions that rein in tuition and produce good student outcomes. • While many colleges would welcome the additional aid, some worry that tying federal aid to college costs and student outcomes could drive down quality and disproportionately harm institutions that serve large numbers of at-risk students.

4. 2013 Fiscal Year Budget • In June, the Senate Appropriations Committee approved its education spending bill, which would increase the maximum Pell Grant by $85 and give $100 million more in funds to the National Institutes of Health. • Most other student aid and work force programs would receive flat financing in the legislation. • The bill includes an amendment that would restore eligibility for federal financial aid to students without high-school diplomas or GEDs who have passed an “ability to benefit” test. Congress ended aid to such students last year in a spending bill for the 2012 fiscal year, as part of a plan to shield the Pell program from cuts.

5. 2013 Fiscal Year Budget • The House Labor-HHS-Education Appropriations Subcommittee approved its FY 2013 funding bill in July. • The legislation would cut $1.1 billion out of the Education Department's budget but largely preserve funds for higher education programs. • Similar to the Senate version of the budget measure, the legislation would increase the maximum Pell Grant award by $85, to $5,635. • It would not, however, restore “Ability to Benefit” eligibility for students in career pathway programs, nor does it limit the Pell Grant “cost of attendance” for 100 percent online students, as in the Senate bill.

6. 2013 Fiscal Year Budget • The House bill would preserve current funding levels for the National Institutes of Health and campus-based aid programs. • The bill also contains a provision that would prohibit the Education Department from enforcing its controversial gainful employment and program integrity regulations. • The education budget is part of a larger appropriations bill that also includes health care, making a vote on the bill contentious. • The House education budget and its Senate counterpart serve as a framework.

7. Budget Sequestration • After months of intense debate, Congress approved legislation on January 1, 2013 night to delay sequestration – planned mandatory spending cuts, of nearly $1.2 trillion, scheduled to begin on January 2. • The Senate approved the American Taxpayer Relief Act of 2012 by a vote of 89 to 8. • The House passed the measure by a vote of 257 to 167. • The measure increases tax rates from 35 percent to 39.6 percent for individuals earning at least $400,000 and couples earning at least $450,000. • It extends the American Opportunity Tax Credit, a partially refundable $2,500 tax credit for college tuition, for five years.

8. Budget Sequestration • The bill also makes permanent other tax provisions with implications for higher education, including the student loan interest deduction and tax preferences for Coverdell savings accounts. • Unless Congress reaches a deal to cut $6 billion from the federal budget, sequestration will now go into effect on March 1, 2013. • Under that process, most aspects of federal spending relating to higher education would face reductions of either 8.2 percent (for discretionary programs) or 7.6 percent (for mandatory programs), including appropriations to the federal work-study program, the Supplemental Educational Opportunity Grant, the National Institutes of Health and the National Science Foundation.

9. 113th Congress • The 113th U.S. Congress convened on January 3, 2013. • The House Committee on Education and the Workforce gains three new Republican members – Susan Brooks and Luke Messer, both of Indiana, and Richard Hudson of North Carolina. • The Senate Health, Education, Labor, and Pensions Committee will also add three newly-elected Democratic members to their ranks: Senators-elect Tammy Baldwin of Wisconsin, Christopher Murphy of Connecticut, and Elizabeth Warren of Massachusetts.

10. 113th Congress • The leadership of the House and Senate education committees will remain very much the same, though. • John Kline (R-MN) will return as chairman of the House education and workforce committee, while Virginia Foxx (R-NC) will remain chairwoman of the subcommittee on higher education. • Additionally, Senator Tom Harkin (D-IA) will remain chairman of the Senate Committee on Health, Education, Labor and Pensions in the next Congress, according to his announcement last month.

11. 2014 Elections • Sen. Harkin recently announced on Saturday that he would not seek reelection in 2014. • He has been a strong advocate for increased spending on student aid programs and a frequent critic of for-profit higher education, backing tougher regulation of the sector. • The race to succeed Sen. Harkin is likely to be one of the most competitive Congressional contests next year and key to either party's chances of controlling the chamber. • Democrats now hold a 55-seat majority. • Republicans need to gain six seats to retake the majority.

12. Affirmative Action Case • The U.S Supreme Court heard oral arguments in the affirmative action case, Fisher v. University of Texas at Austin (No. 11-345), in October. • The case will allow the court to reconsider the race-conscious admissions policies that it had ruled constitutional in 2003, before its composition significantly changed. • Texas has prevailed in lower courts, with the U.S. Court of Appeals for the Fifth Circuit upholding the admissions policies of the chief undergraduate program at the University of Texas at Austin. • The Supreme Court is expected to issue a decision regarding the case in Spring 2013.

13. Affirmative Action Case • The plaintiff, the rejected Texas applicant who filed the lawsuit now before the court, argues that UT is exceeding the right granted by the 2003 decision. Since the university has attracted diverse students with a race-neutral approach – admitting those in the top 10 percent of their high school classes – UT should not be permitted to consider race. • The institution asserts that some level of success in one diversity strategy does not preclude a university from adopting other strategies to enhance diversity. • AACRAO joined the College Board and the National School Boards Association to a file an amicus brief with the court in support of the UT admission policy promoting a diverse student body.

14. Executive Order 13607 • President Obama signed an executive order in late April 2012 that seeks to protect veterans and service members and their families from aggressive and deceptive recruiting by institutions seeking their military benefits. • The order is designed to provide students with educational and financial information to make informed decisions. • It outlines a set of requirements – the “Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses and Other Family Members” – for schools to disclose cost and quality information to prospective military students, eschew “deceptive recruiting practices” and “provide high-quality academic and student support services.”

15. Executive Order 13607 • It will require government agencies to develop improved service member- and veteran-specific student outcome measures and create a centralized complaint system for students receiving veterans’ educational benefits. • Schools with overly aggressive or unscrupulous recruiting practices will be barred from military bases, blocking access to prospective students. • In addition, the government will begin the process to trademark the term “GI Bill” in an attempt to crack down on schools and programs that deceptively use the term to enroll veterans. • On May 16, 2012, the Economic Opportunity Subcommittee of the House Committee on Veterans’ Affairs held a hearing to discuss President Obama’s executive order.

16. Executive Order 13607 • Representatives from several higher education associations testified citing their concerns about the order’s implementation and its potential impact on veterans and institutions. • BarmakNassiriantestified on behalf of AACRAO, praising the executive order as necessary government oversight, but arguing that it did not go far enough to curtail bad practices. • He drew attention to a few key issues including the need to establish more significant safeguards to prevent waste, fraud and abuse; to amend the 90/10 rule to require that participating institutions derive at least a modest 20 percent portion of their annual revenues from non-federal sources; and to improve gatekeeping measures.

17. Executive Order 13607 • In early June, the VA sent letters to colleges encouraging them to adopt the guidelines for recruiting veterans. • The letter stated that any college that does not respond by June 30 risks not being listed on the agency’s website as having agreed to comply with the “Principles of Excellence.” • Later in the month, the U.S. Departments of Defense (DoD), Veterans Affairs (VA), and Education in conjunction with the new Consumer Financial Protection Bureau and the Federal Trade Commission hosted a set of webinars on the order. • The webinars provided an overview of the executive order, but did not offer much more detail on the “Principles of Excellence.”

18. Executive Order 13607 • In late June, a group of higher education associations sent a letter to the Secretaries of Education, Defense and Veterans Affairs and the Director of the Consumer Financial Protection Bureau seeking clarification on what they expect colleges to do to comply with President Obama’s April executive order on military education. • The letter stated that while the groups support the goals of the administration's “Principles of Excellence,” they are concerned that the practical meaning of the principles is unclear. • On Friday, June 29, the VA extended its deadline for responses to commit to the principles to August 1, 2012.

19. Executive Order 13607 • The Education Department, working alongside the DoD and VA, released a Dear Colleague Letter on July 13 to provide guidance on the “Principles of Excellence.” • The Q&A document provides an explanation of the requirements for institutional compliance within these areas: • standardized cost form • federal aid information • aggressive and fraudulent recruiting/state authorization • accreditation • readmission • refund • individual education plans • academic and financial counseling point(s) of contact.

20. Executive Order 13607 • The issued guidance does elucidate some previous concerns in the areas of accreditation and readmission, but other requirements remain unclear, particularly with regard to standardized cost forms, refunds, and individual education plans. • On July 24, 2012, the Education Department and the Consumer Financial Protection Bureau unveiled their final version of the “Financial Aid Shopping Sheet,” a standardized financial aid award letter that includes the cost of attendance; state, federal and institutional grants and scholarships; the net price after scholarships; and loan options. • It also includes a school’s six-year graduation and default rates, and the average monthly payment for a typical student who takes out loans.

21. DoD MOU • In December 2012, the Department of Defense (DoD) released an updated version of its Memorandum of Understanding (MOU) for participation in the Tuition Assistance (TA) program. • The original agreement proved controversial because some of its academic and administrative requirements conflicted with well-established policies of many colleges and universities. • The revised MOU does ameliorate some of the previous concerns raised by the higher education community. • The updated document also incorporates additional requirements, including a number of provisions outlined in President Obama's April 2012 executive order and the associated “Principles of Excellence.”

22. DoD MOU • Under the new agreement, Servicemembers Opportunity Colleges (SOC) member institutions must adhere to the SOC Consortium Principles and Criteria and the Military Student Bill of Rights. • SOC schools must also provide processes to determine credit awards and learning acquired for specialized military training and occupational experience; and recognize and use the ACE Guide to the Evaluation of Educational Experiences in the Armed Services. • The updated language does not expand the requirements to mandate prior learning credit, but does urge SOC institutions to utilize the available guidance when applicable to a service member’s degree program.

23. DoD MOU • Institutions that are not members of SOC must adhere to requirements aimed at similar objectives, but retain greater flexibility in the awarding of institutional credit and the establishment of academic residency requirements. • All educational institutions will be required to provide an evaluated educational plan for a service member's degree program, among other things. • Although all of the required information is typically captured and demonstrated through an institution’s degree audit report, some institutions have been told that the process does not satisfy the requirement.

24. DoD MOU • Moving forward, we ask that institutions provide feedback on this and other issues that arise and will continue to push for guidance and clarification during the implementation process. • Overall, AACRAO is pleased with the revised agreement. • While there are still a few issues that could pose a problem for certain institutions, we recommend that institutions wishing to participate in the DoD’sTA program sign on to the updated MOU before the March 1, 2013 deadline. • After that date, schools without a signed agreement will not be eligible to enroll service members under the TA program. • Additionally, we recommend that institutions that have already signed on to the original MOU re-sign the revised version.

25. DoD MOU • Separate from the recently revised MOU, the DoD will issue another iteration of the agreement in Spring or Summer 2013. • The 2013 MOU is expected to incorporate additional requirements outlined in the “Principles of Excellence.” • For example, schools will need to provide students with a personalized, standardized form with costs, financial aid and outcome measures; and have a refund policy that is aligned with the refund of unearned student aid rules applicable to federal student aid, among other things. • Institutions will be required to resign this version of the agreement to participate in the TA program. • AACRAO will alert the membership when the notice for the 2013 MOU is published in the Federal Register.

26. Military Students and Veterans • On January 10, 2013, President Obama signed into law the Improving Transparency of Education Opportunities for Veterans Act of 2012. • The bill tasks the U.S. Department of Education with collecting more thorough information on colleges so that veterans will be able to make a more informed decision about their higher education. • Further, the bill outlines measures aimed at preventing aggressive, monetarily-incentivized recruitment of veterans. • This bill prevents colleges from offering payment for recruiting a veteran, and bars schools that do so from receiving G.I. Bill payments.

27. Military Students and Veterans • U.S. Department of Veterans Affairs (VA) officials announced in December 2012 that the agency secured a registered trademark for the term ‘GI Bill’ as part of a yearlong effort to crack down on misuse and misrepresentation of veterans’ education benefits. • Schools providing appropriate information about GI Bill benefits should not worry about running afoul of the trademark. • VA officials plan to develop a “terms of use” guideline for outside agency use of the phrase in coming months.

28. Obama’s Deportation Policy • President Obama announced on June 15, 2012 that the Department of Homeland Security would no longer deport young people who came to the country through no fault of their own, provided that they enroll in school or join the military. • The new policy applies to undocumented immigrants under the age of 30 who entered the country before they turned 16, who have not committed a significant crime, and who meet certain other requirements. These individuals will be eligible for renewable two-year deferments of any action that could lead to deportation. They will also be able to apply for a work permit. • The action falls far short of the federal Development, Relief and Education for Alien Minors (DREAM) Act, which would provide a path to citizenship for such students.

29. Federal Immigration Reform • In late January 2013, a bipartisan group of senators announced a sweeping immigration reform plan that would ease the path to citizenship for undocumented students and would allow some foreign graduates to remain in the country to work. • The deal calls for increased enforcement: undocumented immigrants would be required to pay fines and back taxes, pass a background check and wait longer for green cards than legal immigrants do in order to gain permanent residency or citizenship. • The deal would also expedite citizenship for undocumented immigrants brought to the U.S. as children, and would make it easier for foreign citizens earning an advanced degree in science, technology, engineering or mathematics to get visas and green cards so they can stay in the country.

30. Federal Immigration Reform • President Obama outlined his own plan for comprehensive immigration reform in a speech shortly after the senators’ proposal was announced. • The president’s framework echoes a number of the measures set forth in the Senate deal, but differs in that expedited citizenship for undocumented immigrants brought to the U.S. by their parents would be limited to those individuals who are in college or have served in the military for at least two years – a proposal that mimics the federal DREAM Act. • Obama urged Congress to act on immigration soon and not get “bogged down in an endless debate.”

31. HEA Reauthorization • With the Higher Education Act set to expire in 2013, Congress is poised to begin considering its reauthorization. • Although it is uncertain whether legislators will act during the current term, we anticipate that a number of issues affecting our members will be addressed during the process, including: • State Longitudinal Data Systems (SLDS) and the accompanying student privacy concerns • Updated metrics for the “gainful employment” rule • State authorization for distance education programs • Pell Grant eligibility and funding • Federal definition of a credit hour • and stricter enforcement within the accreditation process, among other things

32. Private Student Loans • Senators Dick Durbin (D-IL), Tom Harkin (D-IA) and Al Franken (D-MN) reintroduced two pieces of legislation in January 2013 aimed at tackling private student loan debt. • The Know Before You Owe Private Student Loan Act (S. 113) would require school certification of all private education loans and quarterly updates to borrowers on their loans, including accrued but unpaid interest and capitalized interest. • It would require schools to inform students of any untapped federal loan eligibility before certifying a private loan, the impact of a private loan on their eligibility for other forms of financial aid, their right to accept, reject or cancel a private loan as allowed under current law, and, the terms and conditions of federal and private student loans.

33. Private Student Loans • The bill is identical to the version considered in the 2012 congressional session. • The Fairness for Struggling Students Act (S. 114) would restore a pre-2005 provision in the bankruptcy code to allow for discharge of privately-issued student loans – like other forms of private debt, including credit cards – in bankruptcy. • Because private loans carry fewer consumer protections than federal loans do, borrowers have none of the last-resort options available to those with federal student loans. • This bill is also identical to its 2012 iteration.

34. Private Student Loans • AACRAO, along with a broad coalition of other higher education and consumer protection groups, signed on in support of both measures. • The House version of the bankruptcy bill, the Private Student Loan Bankruptcy Fairness Act of 2011, is expected to be reintroduced in February. • In addition to the recently introduced legislation, Consumer Financial Protection Bureau (CFPB) issued a set of procedures that the agency will use to examine whether private student loan providers are in compliance with federal banking regulations.

35. Private Student Loans • The Student Lending Examination Procedures provides guidance to CFPB agents conducting compliance audits of certain financial institutions that issue educational loans. • Under the procedures, regulators will evaluate each lender to ensure that they are providing borrowers with accurate account information, making appropriate disclosures, handling borrower inquiries and complaints, and using accurate, non-discriminatory advertising or marketing. • The guidance mentions servicing issues for borrowers trying to enroll in federal programs that allow borrowers to make income-based repayments, as well as laws governing lending to active-duty members of the military.

36. Student Loan Interest Rate • On June 29, 2012, Congress passed a bipartisan agreement for a two-year reauthorization of highway, public transit and other surface transportation programs that included an extension of current student loan rates. • The bill funded a one year extension of the current interest rate on new subsidized Stafford loans to undergraduate students by increasing the premiums on federal pension insurance and putting a six-year limit on how long the government will pay the interest on the loans while students are still in school. • The measure prevented the interest rate from doubling, from 3.4 percent to 6.8 percent, on July 1, 2012. • We face the same issue moving forward as the interest rate faces the same increase on July 1, 2013.

37. New Rules on Federal Student Aid • New rules enacted by the U.S. Department of Education will ease the recognition and application process for student loan forgiveness for borrowers who become disabled. • The changes made in the Federal Perkins Loan Program, Federal Family Education Loan Program, and the William D. Ford Federal Direct Loan Program will recognize certain Social Security Administration (SSA) disability findings as a basis for loan forgiveness, specifically the SSA designation “Medical Improvement Not Expected.” • Previously, borrowers had to undergo two separate reviews conducted by the Department to determine their eligibility; a system that is “erratic, duplicative, and dysfunctional.”

38. New Rules on Federal Student Aid • The new rules, which take effect on July 1, 2013, will also improve communication with applicants to better explain denials and create a new role for lawyers and family members of disabled borrowers who wish to serve as their representatives. • A tide of public comments precipitated these changes in department policy. • An investigation made last year by ProPublica and the Chronicle highlighted the systemic problems in discharging student loans for those with TPD, or “Total and Permanent Disability.” • The investigation gained the attention of federal lawmakers and prompted the Education Department to issue a Notice of Proposed Rule Making to enhance this process on July 17, 2012.

39. Program Integrity • On February 28, 2012, the House of Representatives approved a measure to overturn a pair of the Education Department's controversial program integrity rules. • The Protecting Academic Freedom in Higher Education Act (H.R. 2117) would repeal the federal definition of a credit hour and end the federal requirement that colleges comply with state authorization laws in every state in which they operate. • The Obama administration opposes the proposed legislation, arguing that the regulations are needed to protect students and to prevent credit inflation that could result in the over-awarding of federal student aid. • AACRAO did not support the proposed bill.

40. In the Courts • In early June, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit largely upheld the U.S. Education Department’s controversial program integrity regulations. • The Association of Private Sector College and Universities (APSCU), filed a federal lawsuit in January 2011 challenging three of the rules issued by the department in October 2010 – • one that bars incentive compensation for recruiters, • another that allows states greater authority over distance education programs, • and a third that tightens restrictions on what recruiters can tell prospective applicants.

41. In the Courts • In the summer of 2012, a federal judge sided with the department on its incentive compensation and misrepresentation rules, but threw out the “state authorization” requirement. Both APSCU and the Education Department appealed the decision. • The June ruling backed the lower court's decision. • The appellate court struck down a portion of the “state authorization” rule, agreeing that colleges had not been given enough time to review it. • The ruling also orders the department to revise regulations barring misrepresentation in college recruiting and to justify its decision to limit the commissions colleges pay student recruiters based on student completion.

42. Other Regulatory Developments • The Department of Education announced on July 27 that it will no longer enforce its “state authorization” rule. • The announcement, tucked away on the third page of a five-page attachment to a Dear Colleague Letter, is a major reversal of one of the most sweeping and controversial portions of the Education Department's program integrity rules. • In the letter, the agency stated that colleges will still need permission to operate in their home states and will continue to be responsible for complying with all state distance education laws.

43. Gainful Employment • On June 30, 2012 a federal judge vacated several provisions of the controversial “gainful employment” rule, one day before the new regulations were set to take effect. • The regulations, issued last year by the Education Department, aim to curb abuse and waste in aid programs and expand federal oversight of for-profit institutions. • The decision, by Judge Rudolph Contreras of the U.S. District Court for the District of Columbia, largely upheld the department’s legal right to craft new regulations aimed at ensuring that vocational programs prepare students for “gainful employment,” saying that the agency had “set out to address a serious policy problem, regulating pursuant to a reasonable interpretation of its statutory authority.”

44. Gainful Employment • The ruling also supports many aspects of the department’s decision making process, rejecting assertions made in a 2011 lawsuit by the Association of Private Sector Colleges and Universities (APSCU), a lobbying group for the for-profit higher education sector. APSCU argued that the agency had overstepped its bounds in regulating in this area and had chosen arbitrary accountability measures. • Judge Contreras found, however, that the Education Department had failed to provide sufficient evidence to justify the third standard: its requirement that at least 35 percent of a program’s former students repay their federal student loans. • The judge rejected the rule’s other debt measures, which compare program graduates’ debt to their earnings.

45. Gainful Employment • Judge Contreras also vacated two other provisions that rely in part on the debt-repayment measure: one that requires institutions seeking to offer a new vocational program to get prior approval from the department, and one that requires institutions to provide data to the department for calculating the debt measures. • On July 31, 2012, the Education Department filed a motion requesting a federal court to reinstate some reporting requirements of the “gainful employment” rule. • The motion filed by the department argues that court incorrectly threw out the reporting aspect of the rule, based on a “misunderstanding” of the complexities of the regulations and how the debt measures are calculated.

46. FERPA Changes • The Department of Education released its final FERPA rule on December 2, 2012, dramatically altering the privacy act to ease the creation of state databases to track academic progress. • On April 8, 2011, the department issued a Notice of Proposed Rulemaking (NPRM) to amend the privacy act. AACRAO submitted formal comments in opposition to the proposed regulations, arguing that the changes would erode student privacy in several ways. • While some minor changes were made to the original language proposed in the NPRM, most of the association’s fundamental objections to the amendments were not adequately addressed.

47. FERPA Changes • The regulations were effective January 3, 2012, with the exception that State and local education agencies (and specified Federal agencies) with written agreements in place prior to January 3, must comply with the existing requirement to use written agreements to designate any authorized representatives, other than employees, only upon any renewal of or amendment to the written agreement with such authorized representative. • AACRAO hosted a live webinar discussing the FERPA regulation changes. The archived webinar is now available to all members and can be accessed at http://webinar.aacrao.org/ferpa_03_22/

48. FERPA Notice Addendum • AACRAO contracted with a prominent D.C. law firm to produce additional language for institutions to use as part of their annual FERPA Notice. • The association recommends the following text as a compliance addition to institutional privacy disclosures: • As of January 3, 2012, the U.S. Department of Education's FERPA regulations expand the circumstances under which your education records and personally identifiable information (PII) contained in such records — including your Social Security Number, grades, or other private information — may be accessed without your consent.

49. FERPA Notice Addendum • First, the U.S. Comptroller General, the U.S. Attorney General, the U.S. Secretary of Education, or state and local education authorities (“Federal and State Authorities”) may allow access to your records and PII without your consent to any third party designated by a Federal or State Authority to evaluate a federal- or state-supported education program. The evaluation may relate to any program that is “principally engaged in the provision of education,” such as early childhood education and job training, as well as any program that is administered by an education agency or institution.

50. FERPA Notice Addendum • Second, Federal and State Authorities may allow access to your education records and PII without your consent to researchers performing certain types of studies, in certain cases even when we object to or do not request such research. • Federal and State Authorities must obtain certain use-restriction and data security promises from the entities that they authorize to receive your PII, but the Authorities need not maintain direct control over such entities.