Legislative and Department of Education Update Spring 2013 Lori S. Hartung Regional Sales Manager

1. Legislative and Department of Education Update Spring 2013 Lori S. Hartung Regional Sales Manager Todd, Bremer & Lawson, Inc. P.O. Box 36788 Rock Hill, SC 29732-0512 800.849.6669 lori.hartung@tbandl.com

2. The 113th Congress House Senate* 54 Democrats* 45 Republicans One vacancy: (MA, Kerry seat) Current Congress: 53 Democrats 47 Republicans * Dems now and next year include two independents who caucus with D’s • 231 Republicans • 200 Democrats • Vacancy probably yield 234-201 • Previous Congress at its end: • 241 Republicans • 190 Democrats • 4 Vacancies

3. 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)

4. 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)

5. 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

6. The Fiscal Cliff: Some Key Players

7. Stepping Back From the Fiscal Cliff Massive tax increase averted, saving economy from recession and stock market from depression Oops… One tax increase went through for all who work: FICA up 25% + other increases for people making over $250K

8. 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

9. 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)

10. Budget Control Act of 2011 set in law discretionary spending caps for 10 years (FY ‘12-FY ’21) Supercommittee failure triggered sequestration as of 3/1/13. $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. “Sequestration” Happened

11. 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. Sequestration for 2013 Still Major Education Cuts

12. Senate Appropriations Bills passed 3/21/13. % months and 21 days after start of FY 2013. Education funding frozen at 2012 levels, minus sequestration cuts Small very targeted exceptions: political science research funding transferred to NSF Military tuition assistance funds mostly restored Process was bi-partisan and done before the 3/27/13 continuing resolution deadline. Gives hope to less rancor FY 13 Education Appropriations Report

13. No Shutdown, Back to Work! • Next deadline: expiration of the suspension of the debt ceiling in May • Leads to possible crisis in late June or early July.

14. Aren’t We Forgetting Something???

15. 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. Pell/Student Aid Cuts Already Enacted

16. College students have contributed $4.6 billion out of their pockets to deficit reduction. 145,000 students have lost their Pell grant. Maintaining Subsidized Stafford interest rates also costs roughly $6 billion per year The one year extension expires in July 2013 Pell/Student Aid Cuts Enacted

17. 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?

18. 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”

19. 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

20. 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

21. Value of Traditional Education Questioned Like Never Before

22. 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: underwriting issues Too lax or too tough? Ongoing Student Loan/Higher Education Consumer Issues to Monitor in the 113th

23. Perkins Funding Picture 2013 • No funds appropriated for Perkins in FY2013 because President didn’t ask for them. • BUT: the Perkins Loan Program continues to operate at least through FY 2015, and the Department advises that schools should make as many loans as possible!

24. COHEAO Report: Perkins In the Future • Priority for advocacy this year: restore funding for loan cancellations • FY 2014 appropriations legislation still pending • Importantly: Predicted Pell Grant funding shortfall not expected until 2015. • Funds remain tight, but now is the time to make good on the obligation to fund cancellations. • No divisions in higher ed community on this

25. COHEAO Goals 2013 • Federal Perkins Loan Program • Restore Cancellation Appropriation • Advocate for Perkins Capital Contribution • HEA Reauthorization – Work begun on proposals for Congress. Contact COHEAO if interested in participating: hwadsworth@wpllc.net • Negotiated Rulemaking 2013 – Dates not set • Financial Aid Fraud • Regulatory changes related to Campus issued Bank Cards • Analysis of Campus-Based Program Regulations – Update and Streamline

26. COHEAO Goals • Consumer Financial Protection Bureau: • Stay engaged, responding to requests for meetings, submitting comments on proposals • Represent schools on issues related to A/R, disclosures and collections • Monitor activities and educate COHEAO membership on CFPB regulations and practices • Financial Literacy • Collect and share best practices in developing financial literacy programs on campus • Monitor activities related to financial literacy legislation or oversight

27. COHEAO Goals • Accounts Receivable Act as a forum for discussion and sharing of best practices, and advocate where appropriate on issues related to: • Collection Regulations on Campus Debt • Truth In Lending Act– as related to Tuition Payment Plans and non-federal, campus-based loans. • Telephone Consumer Protection Act changes – (permit ethical use of predictive dialers for collection on campus A/R and institutional loans) • Bankruptcy (private loans/impact) • VA/Military Issues

28. What You Can Do • Join COHEAO: costs are low for institutional members • Conference, webinar discounts offset dues • Ability to help develop COHEAO positions, advocacy, regulatory responses • Weigh in: support the Perkins Program • Message: cost effective financing for students and taxpayers over the long term; don’t squander it for short-term goals, even Pell Grants. • Information on COHEAO activities, including position papers, available at www.coheao.org. • Help educate Congress—share your stories

29. 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

30. 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 • Everyone needs to have their policies and procedures in order.

31. 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”

32. 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).  

33. Tax Reform • Major re-write of federal tax code for first time since 1986 being discussed • Issues facing Higher Ed” • Charitable donation deduction cut? • Tax exempt bonds, limited use? • Tax credits for tuition, employers etc… • Student loan interest deduction • Role of non-profits in politics

34. Regulatory Activity • Negotiated Rulemaking in 2012 • NPRM was published 7/17/12 • Closing date for public comment was 8/16/12 • Over 2,800 comments submitted • Final Regs published on 11/1/12 • Effective date 7/1/13

35. Final Regulations • Pay as You Earn • Implemented under ICR regulations in Direct Loan Program • Borrower must show partial financial hardship • Interest is capitalized • 10% cap on annual payments of discretionary income • Loan forgiveness after 20 years repayment

36. Final Regulations • Total and Permanent Disability • Revised regulations to provide for direct application to ED for TPD discharge • Allows for “borrower representative” to receive all TPD notifications • Allows qualifications based on disability notice award for SSA disability benefits • The disability notice must state that the SSA will review the borrower’s eligibility once every 5-7 years

37. Final Regulations – part 2 • Loan Rehabilitation – definition of one-time payment • 20 days after borrower due date. • Allows assignment of Perkins loan without SS# • If loan was made before ?????

38. Final Regulations – part 2 • Perkins Loan Deferment & Cancellation • Incorporates Grad Fellowship deferment eligibility criteria from FFEL regs • Addresses cancellation progression for borrowers switching cancellation categories • Removes debt-to-income economic hardship deferment category • Allow break in cancellation service due to FMLA condition

39. Dept of ED Initiatives • Shopping Sheet – Model Financial Aid Award Letter • ED and CFPB partnered to promote transparency in student financial disclosures • http://collegecost.ed.gov/shopping_sheet.pdf • Secretary Duncan published an open letter to College/University presidents asking them to voluntary adopt the shopping sheet.

40. Dept of ED Initiatives • Financial Awareness Counseling Tool • On-line tool to help students manage loan debt • Brings transparency to process debt management • Provides students with 5 interactive tutorials covering topics from managing a budget to avoid default • Provides borrowers access to individual loan history • Accessed through StudentLoans.gov

41. Dear Colleague Letters • New Perkins Promissory Notes • MPN on IFAP at DCL GEN-12-19 • eMPN on IFAP at DCL GEN-12-23 • State Authorization Regulations • DCL GEN-13-04 • Regaining Title IV Eligibility • DCL GEN-13-02 • Fin Aid Shopping Sheet • DCL-GEN-13-05

42. Questions???