Current Landscape of Congress: Split Congress and Legislative Priorities

1. Washington Update James P. Bergeron, President NCHER Spring Legal Meeting April 12, 2019

2. Current Landscape

3. Current Landscape - Overview The November election produced a new Democratic majority in the U.S. House of Representatives, while Republicans increased their majority in the U.S. Senate. This is the first split Congress since the 113th (2013–2015), and the first Republican Senate/Democrat House split since the 99th (1985–1987). This Congress is considered to be the most diverse ever elected, and the youngest in the past three cycles.

4. Current Landscape - House U.S. House of Representatives has 235 Democrats and 197 Republicans, with 3 vacancies (NC-9 in dispute, Rep. Marino resigned in Jan, and Rep. Jones passed away). Speaker Pelosi and her leadership team can lose 17 Democrats on any vote and still carry the day (the 90-member Progressive Caucus has replaced the 40-member Freedom Caucus as the “problem-child”). 67 member “freshman class” – also ideologically diverse since they primarily represent the suburbs. Like any minority party, Republicans find themselves with limited power and ability to influence the political process.

5. Current Landscape - House The Democratic House was elected to investigate the actions of the Trump Administration, not necessarily to enact major legislative priorities. In fact, many committees are holding weekly oversight hearings. While many of the committee chairs have been in office for 3 decades and want to govern and pass legislation, none have run a committee in the past: Appropriations Committee – Chair Nita Lowey (NY) - 1988 Budget Committee – Chair John Yarmuth (KY) - 2006 Education and Labor Committee – Chair Bobby Scott (VA) - 1992 Energy and Commerce Committee – Chair Frank Pallone (NJ) - 1988 Financial Services Committee – Chair Maxine Waters (CA) - 1990 Oversight and Reform – Chair Elijah Cummings (MD) - 1996 Ways and Means Committee – Chair Richard Neal (MA) - 1988 Lucky for them, the first few months of the 116th Congress was dominated by the Speaker and the new majority asserting their control as a co-equal branch of government (shutdown of the federal government, when the President could give the State of the Union, etc.)

6. Current Landscape - Senate U.S. Senate has 53 Republicans and 47 Democrats (including “Independents”) Majority Leader McConnell can lose 4 Republicans on any vote but needs to pick up 7 Democrats to break a legislative filibuster In 2020: 22 Rep seats up and 12 Dem seats up (races in toss up or likely category: Jones in AL, McSally in AZ, Gardner in CO, Collins in ME, Smith in MN, Shaheen in NH, and Tillis in NC)

7. Current Landscape - Senate The Republican Senate is largely similar to that of the 115th Congress. There are only two new chairs of committees of interest to NCHER – Finance Chair Orrin Hatch retired, and Commerce Chair Thune became Majority Whip: Appropriations Committee – Chair Richard Shelby (AL) Banking, Housing, and Urban Affairs Committee – Chair Mike Crapo (ID) Budget Committee – Chair Mike Enzi (WY) Commerce, Science, and Transportation Committee – Chair Roger Wicker (MS) Finance Committee – Chair Chuck Grassley (IA) Health, Education, Labor, and Pensions Committee – Chair Lamar Alexander (TN) – Retiring in December 2020 Homeland Security and Governmental Affairs Committee – Chair Ron Johnson (WI) With a divided Congress, Leader McConnell has said the chamber will devote most of its effort on confirming judges and executive branch nominees. He also has been willing to relinquish the title of “kingmaker,” to Trump and Pelosi.

8. House Democrats: Keep up the fight and investigations of the President, pivot to progressive legislative agenda, put heat on Senate Republicans to expose divisions with the Prez. • Senate Republicans: Confirm, confirm, confirm – made easier with new rules. To date, 2 Supreme Court Justices, 37 Appellate Judges (with 5 more pending), and 56 District Judges (with 67 pending). If time allows, subject Dem Presidential candidates to difficult votes. Current Landscape - Congress Congress just adjourned for its annual two-week Easter Recess – the longest break that either the House or Senate will get outside of the month-long August recess or the Christmas break. When both chambers return in late April, they will be in session for most of May, June, and July, which is usually reserved for budget/appropriations.

9. Current Landscape - Administration Trump Administration is more than half way through its term – looking at its past accomplishments and upcoming opportunities with an eye to the upcoming election (first Dem debate on June 26; Iowa caucus on February 3). At ED, of the 15 major positions, 9 have been confirmed by the Senate; 2 nominated by the White House, including Assistant Secretary for Postsecondary Education; and no nominee for Under Secretary or General Counsel. FSA is seeing a great deal of turnover for an agency in the midst of massive procurements (new COO and proposal to restructure Executive Comm). The Trump Administration continues to suffer defeat in federal court when it comes to reversing final rules put forth by the Obama Administration, but scored a big win when the negotiated rulemaking panel on accreditation and innovation recently reached consensus. This has raised the spirits of Secretary DeVos’ team.

10. Policy Forecast

11. 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.” In January 2019, FSA announced that it was cancelling Components C (Future State Core Platform), D (Transitional Core Processing and Related Support Activities), and E and F (Business Process Operations) in response to a motion filed in the U.S. Court of Federal Claims to put forth corrective action in a case involving a consolidated bid protest. ,  

12. Policy Forecast - Administration In conjunction with the cancellation notice, FSA released three new solicitations: Enhanced Servicing Solution, which includes an information technology platform for existing customers. To date, there have been five amendments to the solicitation; March 19 amendment eliminated the objectives around Optional Transitional Business Process Operations and the March 26 amendment eliminated references to the environment being “world-class.” Optimal Processing Solution, which includes an information technology platform for new customers. Business Process Operations Solution for both existing and new customers that will be awarded once the Enhanced Servicing 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). Several collection agencies and servicers have filed a new round of consolidated protests with the U.S. Court of Federal Claims, citing concerns with bundling servicing and collections and other complaints; the judge has scheduled a hearing for Tuesday, April 16, 2019. 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.

13. Policy Forecast - Administration The Department cancelled its long-time unrestricted procurement for debt collection services, choosing to use the existing small business contracts to handle work on the defaulted federal student loan portfolio. Court filing stated that the new “high-touch” strategy under NextGen has resulted in a “substantial change” to FSA’s current needs. The Administrative Record released by FSA stated that its private collection agencies failed to communicate effectively with borrowers and that they did not meet industry standards (though state laws prohibit numerous calls) and the collection rate by the small businesses surpassed that of the unrestricted contracts (though it seems to include metrics under the Treasury Offset Program). Judge originally issued injunction halting the Department’s decision, has recently suggested that he is not convinced by the administrative record, and has urged FSA to create a fourth solicitation for debt collection services.

14. Policy Forecast - Administration Even with a divided Congress and legislative gridlock, the Trump Administration wants to play a role in the 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. 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.

15. Policy Forecast - Administration The Consumer Financial Protection Bureau, under new Director Kathy Kraninger, has continued to carry out many of the changes put forth by former Acting Director (and current White House Chief of Staff) Mick Mulvaney. His direction was to move away from “pushing the envelope,” representing a dramatic shift in the regulatory environment. Plans to prioritize a proposed rule on debt collection. Folded the Office of Students and Young Consumers into the Office of Financial Education, staff transferred to other offices. Removed student loan servicing standards from Unified Agenda, following ending of MOU with ED on sharing of information. Actions caused Ombudsman to resign Issued a series of Requests for Information on many aspects of its operations, including consumer complaint database and consumer education.

16. Policy Forecast - House • U.S. House Education and Labor Committee, under Chairman Scott, has formally begun a new process to reauthorize the Higher Education Act. The committee is 25 percent larger than in the 115th Congress (28Ds and 22Rs) and 26 of its 50 members are new to the committee. New Chair (Scott), New Ranking Member (Foxx), New Subcommittee Chair (Davis), and New Subcommittee Ranking Member (Smucker replacing Guthrie). • The committee is currently in the process of holding five “bipartisan” hearings (03-13-19 hearing on college costs and 04-03-19 hearing on accountability; rest are expected to take place this spring) • Chairman Scott has talked about the importance of passing a comprehensive package, instead of narrowly-tailored bipartisan bills centered around transparency, simplification, etc. He has also talked about the importance of bipartisan negotiations with using the Aim Higher Act as the base. • Same dynamic as before so can anything get done – 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 and pushing for “one loan, one grant.”

17. Policy Forecast - House Democratic Priorities – “non-negotiables”  New accountability structure for poor performing schools – similar to gainful employment metric  Reform to 90-10 rule Additional federal and state resources (free college) Refinancing of federal/private student loans

18. Policy Forecast - House • In July 2018, Committee Democrats introduced H.R. 6543, the Aim Higher Act: • Increases funding for Pell Grants. • Maintains campus-based aid programs, including Perkins Loans and SEOG. • Eliminates origination fees and allows borrowers to refinance their federal student loans. • Creates a federal-state partnership to encourage free college programs. • Repeals the “student unit record” ban and improves available postsecondary data. • Tasks the Department to conduct Title IV compliance checks instead of accreditors. • Changes the 90-10 rule and maintains gainful employment requirements. • Directs the Department to create a Common Manual to improve student loan servicing and “maintains state authority to protect consumers.”

19. Policy Forecast - House • In December 2017, Committee introduced/passed H.R. 4508, the PROSPER Act: • Consolidates multiple grant (SEOG), loan (subsidized and Perkins Loans), and repayment programs into a new “Federal ONE Loan Program.” • Expands federal aid to short-term programs. • Repeals the 90-10 rule and includes other provisions favorable to proprietary schools. • Repeals Public Service Loan Forgiveness and restructures loan forgiveness timeline for Income Based Repayment.

20. Policy Forecast - Senate • U.S. Senate Health, Education, Labor, and Pensions Committee is largely the same from the 115th Congress. Full plate with healthcare and nominations. • Same Chair (Alexander) and same Ranking Member (Murray). Only three new members – Sen. Hatch retired and replaced by Sen. Romney; Sen. Young left the committee, replaced by Sen. Braun; and Sen. Bennett left the committee, replaced by Sen. Rosen. • The committee largely completed the hearing process in the 114th and 115th Congress, but held 03-12-19 hearing on financial aid simplification, 04-02-19 hearing on sexual assault, and 04-10-19 hearing on accountability in order to further lay the groundwork on reauthorization. • During the hearings, Chairman Alexander continued to lay out his priorities for reauthorization while Ranking Member Murray criticized the actions of Secretary DeVos on higher education (lack of claims processed under borrower defense to repayment rules; attempt to change federal rules on accreditation without protecting students; etc.)

21. Policy Forecast - Senate With Chairman Alexander’s retirement, HEA is his legacy. Though past confirmation fights and other areas have strained the Alexander/Murray relationship, it looks like it has been repaired and that bipartisan negotiations are taking place. Republicans are focused on FAFSA simplification and deregulation. Chairman Alexander gave a speech to the American Enterprise Institute where he laid out his support for automatic payroll withholding to pay federal student loans, enrolling all borrowers in an income-based repayment plan, and moving to an institutional-level repayment metric. Democrats have their own wish-lists. Ranking Member Murray gave a competing speech to the Center for American Progress where she laid out the need to increase access to Pell Grants, crack-down on certain colleges in an effort to increase accountability, and address campus safety.

22. Policy Forecast - Approps With the HEA reauthorization process taking longer than anticipated, budget and appropriations continue to drive federal higher education policy: Bipartisan Budget Act of 2015 - Amended TCPA to authorize the use of predictive dialer technology to collect a debt owed/guaranteed by the United States. Consolidated Appropriations Act, 2016 - Allocated loan volume to federal student loan servicers on performance and capacity. Amended the Higher Education Act to increase from 95 to 100 percent reinsurance payments on default claims paid by guaranty agencies to lenders. Amended the Higher Education Act to extend authority for Account Maintenance Fees. Further Continuing and Security Assistance Appropriations Act, 2017 – Amended the Higher Education Act to extend authority for Account Maintenance Fees.

23. 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. Bipartisan Budget Act, 2018 – Two-year budget agreement that increased discretionary spending for education and extended Account Maintenance Fees until September 30, 2018.

24. States are passing legislation to create Student Loan Ombudsmen and license federal and private student loan servicers (new fees, disclosures, prohibitions, etc.), provide annual disclosures to students on their student loan debt, beginning college promise programs, debating refinancing programs for certain professionals, etc. • Growing consensus on the main problems and challenges with the higher education system: • “How do you promote a highly-educated workforce focused on college access AND completion?” • “How do you improve institutional quality?” • “How do you make college more affordable?” • Outside of the Trump Administration and Congress, there are states, think-tanks, trade associations, and consumer groups interested in higher education reform. Policy Forecast – States, Etc.

25. Issues to Watch in 2019 How far can Congress go in reauthorizing the Higher Education Act? What will the final version of the Next Generation Financial Services Environment look like? What are some of the new elements that will be included in the new rules on borrower defense to repayment, gainful employment, and debt collection (CFPB) Will the FCC finally move forward with its final rules on TCPA – after the courts have ruled?

26. Issues to Watch in 2019 And more importantly, how will the Presidential candidates influence the process?

27. Thank you! Any Questions?