Changing Political Landscape

1. Changing Political Landscape KASFAAApril 12, 2007 Blake Tanner Chief Operating Officer KHEAA/KHESLC

2. As Student Aid Professionals how do we keep up with the “Changing Political Landscape”? Since 1998 the Higher Education Act has functioned under four Continuing Resolutions extending it rather than reauthorizing the Act. We have now entered the age of “sound bites” and “constituent interests.” Fasten your seat belts! Key observers and contributors of information: • State Association Meetings/Publications (KASFAA) • Regional Association Meetings/Publications (SASFAA) • National Association Meetings/Publications (NASFAA) • National Council of Higher Education Loan Programs (NCHELP) • Education Finance Council (EFC) • Consumer Bankers Association (CBA) • IFAP (USDE Administration) • American Council on Education (ACE) • Congressional Hearings (C-Span) • National Association for College Admission Counseling (NACAC) • Accrediting Agency Reports • Committee on Education and Labor requests input from stakeholders of ideas for reauthorization of the Higher Education Act • Negotiated Rule Making Process • The Evening News • GEN-07-01 Borrower Choice of FFEL Lender (March 30, 2007) For today’s latest. . . Go to the Internet! But for a few moments, let’s start with the Commission on Education appointed by the Secretary of Education.

3. *A Report of the Commission Appointed by Secretary of Education Margaret Spellings Goals of the Commission: Deliberate and delve into a series of findings across four key areas (with regard to our education system): • Access • Affordability • Quality • Accountability *U.S. Department of Education, A Test of Leadership: Charting the Future of Higher Education (September 2006)

4. Commission’s Findings Regarding Cost and Affordability Average from 1995 to 2005 • Tuition and fees at private 4-year colleges/universities rose 36%. • Average tuition and fees rose 51% at 4-year public colleges and 30.1% at community colleges. • State funding decreased. • Institutions are spending more in administrative costs/Student Services

5. Commission’s Findings Regarding Financial Aid • Federal, State, institutional, private programs are confusing, duplicative. • FAFSA is too complex. • Definitive information about aid awards is not available until senior year in high school – too late for proper planning. • Unmet need among lowest income families (income less than $34,000) grew by 80% from 1990-2004 at 4-year institutions. • Median debt levels at 4-year public institutions - $15,500 for graduates. Median debt levels at 4-year private institutions - $19,400 for graduates. • Public opinion . . . Debt is too high and rising too fast.

6. Commission’s Recommendations on Financial Aid • Federal, State and institutions should significantly increase need-based student aid. • Replace FAFSA with simpler form. • Provide early estimates of likely aid available – as soon as the 8th grade. • Address needs of transfer students and part-time students. • Consolidate grant programs to increase purchasing power of Pell.

7. 110th Congress: New Leadership House of Representatives • Nancy Pelosi (D CA) Speaker of the House • George Miller (D CA) Chairman Committee on Education and Labor Senate • Harry Reid (D NV) Majority Leader • Edward Kennedy (D MA) Chairman Committee on Health, Education, Labor and Pensions What are the early issues? The Congress has a “full plate”! • Elections in 2008 • Legislation must be dealt with to keep the government functioning • President’s FY08 Budget • Will the 110th Congress reauthorize HEA? Revamp FFEL? • War in Iraq • Health care issues • Illegal aliens

8. Senate Hearing: “Higher Education, Higher Cost and Higher Debt: Paying for College in the Future” (Feb.16, 2007) Testimony regarding Student Loan industry: • “FFEL program has become the tail that wags the dog.” • “There is a great deal of waste, abuse and mismanagement in the FFEL Program.” • FDSL is less costly to the Government. • Debt for college is “good” debt, but must be contained/reduced. • Competition was not addressed as a “good thing”. • Borrower benefits were not addressed. • Rising college costs cannot be blamed on too much Federal Aid available since program maximum awards have been stagnant for many years. FFEL & Pell will increase in 2007-08 school year.

9. Senate Inquiries into “Incentives” offered by Lenders in 2006 • Directed IG to look into lender/school relationships. • Questioned USDE enforcement of inducements regulations. • Private/Alternative loan arrangements (outside of USDE regulations applicable to FFEL) has “kindled the flame”. • Debate between supporters of FDSL and FFEL is in full bloom. • Questioned reasons for FDSL school users switching to FFEL. . . . Why? Were student interests given a priority?

10. Proposed Administration’s FY 08 Budget Request (Released Feb. 5) • Robbing Peter to pay Pell? • Increase Pell maximum Awards. • Cut FFEL expenditures to find funds for Pell. • Eliminate expenditures for SEOG and LEAP (formerly SSIG) which provides matching funds for CAP grants in KY and other states. • Recalls Federal share of Perkins Loans. • Bottom Line: Shifting of funds between programs – NO NEW FUNDS FOR STUDENT AID!

11. Revised Continuing Appropriations Bill(P.L. 110.5) Increased Maximum Federal Pell Grant Award for 2007-08 AY • Increases Pell maximum to $4,310 - $260 over previous maximum. • Payment Schedule published. • EFC now goes to $4,110 for Pell eligibility. • Subsequent removal of “tuition sensitivity” clause when Pell awards exceeded defined COA.

12. News and Views for all of Higher Education Inside Higher Education Article: “The Elephant in the Student Aid Office” • Improving Student Preparation and Persistence and addressing non-academic barriers. • Expanding college access to low-income and minority students. • Increase purchasing power/value of Pell Grants. • Encourage higher ed to find ways to control growth of costs. • Higher Ed: Provide accurate costs (net price) after aid. • Lack of means – test in awarding of over 50% of institutional grants • American Council on Education (ACE) and other similar organizations never once lay a portion of responsibility for helping lower income students at the doorstep of the higher education institutions (Letter in support of Spellings Commission).

13. House and Senate Proposals under Consideration • College Student Relief Act (H.R. 5) • Student Debt Relief Act 2007 (S.359) . . . Incorporates major points of Star Act (H.R. 1425 and S. 754) • The Student Loan Sunshine Act (S.486) • Student Borrower Bill of Rights Act (S.511) • Pell Grant Equity Act (H.R. 990) • Request from Committee on Education and Labor for input for Reauthorization of HEA (letter dated March 8, 2007 to stakeholders)

14. College Student Relief Act (H.R. 5) • Provides interest rate reduction. • Halves interest for subsidized Stafford Loans for undergraduates over 5-year period (present rate 6.8%). • Effective on Loans offered on or after July 1, 2007 through December 31, 2011. • Rate reduction reverts back to 6.8% on January 1, 2012.

15. Student Debt Relief Act (S. 359) • Reduces interest rates – same as H.R. 5 but sunsets on June 30, 2012 (not December 31, 2011) • Increase Pell maximum beginning in 2007-2008 AY at $5,100 and incrementally increases annually up to $6,300 for 2011-12 AY • Gives colleges incentives to offer loans to students under FDSL. By using FDSL, colleges would be rewarded with 50% of savings generated over a five year period as an addition to Pell Grant awards at that school • Speeds up reduction of FDSL origination fee to reach zero by July 1, 2010 (same as FFEL) • Reinstates in-school consolidation and allows re-consolidation • Reduces Lender insurance from 97% to 95% (July 1, 2007) • Repeal EP July 1, 2007 • Reduce GA collection retention from 23% to 20% by October 1, 2007 (defaulted repayments) • Incrementally replaces GA retention to an anticipated 16% by October 1, 2010

16. Student Loan Sunshine Act of 2007 (S.486) Comments and Press Release attributed to the Co-sponsor of the Act, Senator Edward Kennedy: “Protect students and parents from exploitation by private lenders and lenders who offer gifts to colleges as a way to secure loan business.” Responds to “aggressive and highly questionable tactics some lenders are using to market private loans and court colleges and universities to offer such loans to their students.”

17. S. 486 Specifics • Require Lenders participating in one or more educational loan programs to submit an annual report in addition to other disclosure requirements under Federal Law, date and period of time for offering a program, terms under each program related to marketing, recommending, endorsing and use of the loans, details of agreements between Lender and Purchaser and summary of any direct or indirect benefits paid to any party. • Forbids Lenders from making “private” educational loans until institution has informed borrower of options under Title IV Loans, and information on private loans (alternative loans) must be “distinct” and separate from Title IV Loans. • Require USDE Secretary of Education to prepare a “model format” on the “adequacy” of information to be presented to borrowers (students and/or parents) with regard to educational loans (private or Title IV). • Impose a fee of no less than $25,000 on institutions or Lenders found in violation of these requirements. Lenders may have L, S and T imposed. • Require GAO to conduct a study on gifts and/or inducements from Lenders to institutions to gain Loan business and whether students are provided competitive comparisons of Lender terms, interest rates, etc. • Require institutions maintaining a preferred Lender list to disclose comparative terms for each, 3 lenders or more (who are not affiliates of each other) and establish a process that lenders are placed on the basis of benefits provided to borrowers.

18. S. 486 Specifics (cont.) • Ban lenders from offering gifts worth more than $10 to college employees (includes travel, lodging, entertainment and in-kind services that lenders provide to college financial aid offices • Amend the Truth in Lending Act to include private loans • Requires creditors for loan amounts equal to or more than $1,000 to notify educational institutions. Institutions will notify borrower to what extent the amount exceeds COA after consideration of Federal and State grant and loans that the student has or is eligible to receive

19. Borrower Bill of Rights (S.511) Provides student borrowers with “basic” rights, including the right to “timely” information about their loans and the right to make “fair and reasonable” loan payments. • Improves information flow from the “holder of Loans” to the borrower. • Improves “lender verification certificates” (LVC’s) processing requirements for consolidation loans. . . FFEL/FDSL, more timely. • Allows re-consolidation under FDSL • Requires communication with borrower – 5 months after ceasing to be enrolled at least half-time. • Improves requirement for “information” provided during delinquency periods and during default.

20. To complicate matters even more, we have issues raised and negative comments about Lenders and college administration of student aid implying “a presumption of guilt or wrong-doing by both parties if involved with “preferred lender list” for students to consider the FFEL program. Undocumented negative comments/actions and unorthodox business practices are implied. • My Rich Uncle – statements on web site and in media • Princeton Review – printed an assumption of a Lender for all institutions listed. • Attorney General, NY – letters to several Lenders and suit filed against one Lender • Attorney General, MN – letter to MN colleges warning of potential wrong-doing in student loans • Senator Kennedy’s letter to 16 top volume Lenders • Congressman Miller – letter to several Lenders requesting copies of responses to similar request from Senator Kennedy • CBS News

21. One Man’s Opinion . . . • Best news this week? House and Senate took last week off for the Easter recess! The House continues their recess this week also! • Washington leadership appears to be shifting from “concern-mode” to a “panic-mode” . . . Will we get good legislation out of this? • Major FFEL changes on the way? • Patch-work legislation will not fix access to higher education for our neediest students. • Costs for higher education will not decrease. Our best hope is that costs will “stabilize” at or near CPI • NEW funds are essential for need-based student aid; not shifting of funds from one program to another. • Positive points under consideration: Systematic annual increases in Pell (already approved for FY 2007-08), simplification of FAFSA, proposed data exchange between IRS and USDE, FAFSA4caster (improved web services: USDE) • Does reauthorization of Higher Education Act appear on the horizon?

22. What Action Can We Take? • At KHEAA, we are distributing informational letters to Legislators about our programs and numbers of students receiving state aid in their home district • Letters and visits to the Kentucky Congressional delegation in Washington • Letters to School Superintendents • Letters to all Kentucky College Presidents this Spring • Communication from the Student Aid Office to your President and others describing the many positive points of your operation • Letters to State Legislators and Congressional delegation supporting those programs that serve your students well • Do you want Teddy Kennedy and Attorney Generals in NY, MN, and MO the only voice describing our profession? • It’s time that all of us take a stand. • Do we need to re-visit our Statement of Ethical Standards and Mission Statement as an Association?