Washington Update

1. Washington Update The Wide World of Political Sport Scott E. Miller Director of Federal Relations Pennsylvania Higher Education Assistance Agency smiller1@pheaa.org April 2013

2. Covering the Bases • The New Congressional Lineup • Sequestration Takes the Field • Spending In the On Deck Circle • The Commissioner’s (aka the President’s) Message • Scouting Reports

3. The New Congressional Lineup • White House: Unchanged • Leadership in Congress: Unchanged • House of Representatives • Republican majority shrinks a bit • 233 R’s, 201 D’s (1 vacancy) • Senate • Democrat majority expands a bit • 55 D’s, 45 R’s (both Independents caucusing with D’s) • One Change in Education Leadership • Sen. Lamar Alexander (R, TN) succeeds Sen. Mike Enzi (R, WY) as Ranking Republican on HELP Committee • HELP Chairman, Sen. Tom Harkin (D, IA), has announced his intent to retire at end of this Congress

4. Sequestration Takes the Field • New Year’s Day Deal Delayed Implementation for Two Months • Sequester pushed back for two months • $24 billion cost for delay • Offset by: • $12 billion in increased revenue (Roth IRA conversions) • $12 billion in unspecified domestic spending cuts • Sequestration percentages reduced • From 8.2% to 5.1% for discretionary spending • From 7.6% to 5.3% for mandatory spending

5. Sequestration 101 • Leftover from 2011 Budget Deal • “Super Committee” failed to agree on deficit reductions • Threat of Sequestration, especially for Defense programs, was supposed to force a deal • Sequestration, Generally, Means Across-the-Board Cuts • Some programs are exempt from sequestration or have special rules • Pell Grant Program is exempt for first year • Direct Loan origination fees increase, but loan amounts and interest rates remain unchanged • Social Security and Medicare exempt

6. Sequestration: Swing and a Miss • President Obama Signs Executive Order Implementing Sequester at 8:31 pm on March 1st • Sequester Immediately Went Into Effect • OMB provides guidance for federal agencies • ED releases announcement on student aid impacts • Subsequent announcements published • Other government agencies issue similar statements • Some “public” impacts: • No White House Tours • No “flyovers” on Opening Day • Blue Angels grounded

7. Sequestration Impacts • Based on Current Percentages: • Direct Loan fees increase as of March 1? July 1? • Stafford: 1.051% • PLUS: 4.204% • SEOG cut by $37 million • FWS cut by $49 million • GearUp and TRIO cut by $58 million • Federal Agencies Absorb Reductions in Administrative Budgets • Layoffs, furloughs being considered • Reductions in payments to contractors possible • System upgrades, enhancements could be delayed • Training and travel budgets could be cut • If Left in Place, Sequester Reduces Spending Levels for Next 8 Fiscal Years

8. Due Up: The Debt Ceiling • Debt Ceiling = $16.394 Trillion • No Budget, No Pay Act • Approved in January • Suspends enforcement of the debt ceiling until May, but really August • “…the debt limit does not apply for the period from February 4, 2013 through May 18, 2013.” (U.S. Department of the Treasury) • No offsetting budget cuts or revenues • Required Senate & House to Pass Budget Resolutions • If Budget Resolutions are not passed, pay is withheld for Representatives and Senators • Pay is released at end of 2014 • Senate had not passed a Budget Resolution since 2009 • Does not require House & Senate to agree on a final Budget Resolution • Both Chambers Adopt Budget Resolutions Prior to Spring Recess • August Deadline Looms

9. Now Batting: FY 2013 Appropriations • Currently Operating Under a Continuing Resolution Through September 30, 2013 • Maintains funding at 2012 levels, generally • Full year extension incorporates sequestration cuts • Threat of a Government Shutdown Was Not Used as Leverage for a Larger Deal

10. On Deck: FY 2014 Appropriations • No Action Thus Far • Budget Resolutions Set the Stage • House and Senate Resolutions are Trillions Apart • A Larger Deal Could Impact Funding Levels • Good News on Pell • $9 billion shortfall has morphed into a $7 billion projected surplus • Don’t Be Surprised to See Another CR

11. Will There Be A World Series Budget Deal? • Budget Speed Dating • President Hosting Dinners & Lunches in DC • Speaker Boehner calls it a “hopeful sign” • Need to Define Parameters • What’s on the table? • What’s not in bounds? • Lower the level of rhetoric • Can a Starting Team Be Identified? • Bipartisan cooperation will be needed • Who will be the coaches? • House and Senate Budget Blueprints Are Likely Not the Starting Line • President’s Budget may or may not be DOA

12. State of the Union • President Delivered the SOTU on February 12, 2013 • “…skyrocketing costs price too many young people out of a higher education or saddle them with unsustainable debt.” • Reprise of proposal to base some Campus Based funding on relative cost of institution and success in educating disadvantaged students? • “The College Scorecard provides a snapshot about an institution’s cost and value to help families make smart decisions about where to enroll.” • New Scorecard released on February 13th • Republican Response – Sen. Marco Rubio (R, FL) • “We need student aid that does not discriminate against programs that non-traditional students rely on – like online courses, or degree programs that give you credit for work experience.” • “We must give students more information on the costs and benefits of the student loans they're taking out.” • Student Right to Know Before You Go Act -- Rubio – Wyden (D, OR) • A rare issue of agreement?

13. President’s FY 2014 Budget Request • Submitted (Finally) on April 10th • Includes $1.8 Trillion in Budget Savings Over 10 Years • Reduces overall domestic spending • Replaces sequester cuts with targeted cuts • Controversial proposals on Social Security and Medicare • Projects $744 billion deficit for FY 2014

14. President’s FY 2014 Budget Request: Student Aid • Pell Grants • The Budget proposes to support the Pell Grant maximum award at: • $5,645 for the 2013-14 award year • $5,785 for the 2014-15 award year • Funding for Pell Grants would exceed $35 billion for FY 2014 • SEOG is proposed to be level funded at $735 million • FWS is proposed to be increased by $150 million to $1.13 billion • TRIO and GEAR UP are proposed for level funding

15. President’s FY 2014 Budget Request: Student Loans • Proposed Permanent Fix for the Student Loan Interest Rate • The variable rate formula would be applied to new loans, which would retain the rate for the life of the loan • The rate would be reset annually to determine the rate applicable to new loans • The formula for the variable interest rate would be, the sum of the rate of the 10-year Treasury Note (currently approximately 1.75 percent) plus: • 0.93 percent for Stafford loans • 2.93 percent for Unsubsidized Stafford Loans • 3.93 percent for PLUS loans (including GradPLUS) • There is no cap on the interest rate calculated using these formulae • Interest rate cap on Consolidation Loans would be removed • “Pay as You Earn” Repayment Plan Made Available to All Borrowers as of July 1, 2014

16. President’s FY 2014 Budget Request: Student Aid – Play it Again… • Last Year’s Players Are Back • Revamp Perkins Loans and convert to Unsubsidized Stafford Loans • Revise Campus Based allocation formula to reward schools with relatively low net tuitions and demonstrated success in educating disadvantaged students • Converting TEACH Grants to Presidential Teaching Fellows • Race to the Top College Affordability and Completion Challenge Grants to States

17. It’s Still Spring Training for Reauthorization • Potential Schedule • House may start hearings this Spring • Senate may request community proposals this year • Legislation unlikely to come together until 2014 • Members may introduce bills to get in the reauthorization queue • Now is the time to float ideas • RADD Reports • Reimagining Aid Design and Delivery • Funded by Bill and Melinda Gates Foundation • “Blue sky” papers • 14 reports issued • Rethinking Pell Grants Study Group

18. RADD Batting Leaders • Stabilize or Increase Funding for Pell • Tie Funds to Enrollment or Graduation Metrics • Focus and Simplify Tax Credits • Automatic IBR Enrollment • Provide Consumers with Information Regarding Return on Investment • Eliminate Interest Subsidies • Increase Flexibility in Awarding Pell • Streamline the FAFSA Source: NASFAA

19. RADD’s Reauthorization Teammates • College Cost • Student Debt • Future of the Perkins Program • Gainful Employment Rules • Disclosure/Transparency for Schools • “Skin in the game” • Private Loans • Program Simplification

20. Scouting Report • Interest RateFix • Rates on new Subsidized Stafford loans for undergraduates set to rise to 6.8% as of July 1 • Long- or short-term solution? • Changes for Unsub and PLUS? • Fixed or variable rates? • President’s proposal kick starts debate • Know Before You Owe Act • Other borrower relief proposals • Congressional Involvement In Shopping Sheet • Grand Bargain(s)?

21. No CLOWNQUESTIONS!