The Inside Track on Federal Loan Issues - PowerPoint PPT Presentation

1 / 42
About This Presentation

The Inside Track on Federal Loan Issues


The Stimulus Package and the President's 2010 Budget Proposal ... Economic Stimulus. Strengthen Economy/Create Jobs. Cabinet Confirmation Hearings. Tax Relief ... – PowerPoint PPT presentation

Number of Views:57
Avg rating:3.0/5.0
Slides: 43
Provided by: Christoph520
Learn more at:


Transcript and Presenter's Notes

Title: The Inside Track on Federal Loan Issues

The Inside Track on Federal Loan Issues
  • Tami Sato, Southern CA College of Optometry
  • Vicki Shipley, National Council of Higher
    Education Loan Programs (NCHELP)
  • WASFAA April 2009

  • The New Congress and New Administration
  • The Stimulus Package and the Presidents 2010
    Budget Proposal
  • Possible new public policies and impact on higher
  • A New Student Loan Program for America
  • 2009 Negotiated Rulemaking

By The Numbers
  • Number of students seeking postsecondary
    education and training will increase by two
    million by 2013 then level off
  • Recessionary economy has resulted in increases
    and shifts in enrollment
  • State postsecondary education and training costs
    continue to rise as governors respond to
    difficult economic choices

By The Numbers
  • Federal and state grant and scholarship funding
    will continue to lose purchasing power
  • Less available home equity and higher financing
    costs will prevent families from using this
    payment method as a convenient resource
  • Market constriction has severely limited access,
    and will continue to limit availability, of
    private loans

The Gap we must Overcome
  • The Advisory Committee on Student Financial
    Assistance changes their prediction that between
    1.7 and 3.2 million low- and moderate-income
    college-qualified students will not attain a
    bachelors degree within the decade due to
    financial barriers

New Congress - 111th
  • Senate
  • Was 51 Democrats 49 Republicans
  • Now 56 Democrats - 41 Republicans
  • Plus 1 Independent and 1 Independent Democrat
  • Minnesota race will be determined by courts
  • House
  • Was 236 Democrats -198 Republicans
  • One vacancy
  • Now 254 Democrats 178 Republicans
  • Three vacancies

New Department of Education
  • Arne Duncan -- Secretary of Education
  • Martha Kanter Nominee for Under Secretary
  • Carmel Martin -- Assistant Secretary for
    Planning, Evaluation and Policy Development
  • Marshall Smith Special Assistant
  • Robert Shireman Special Assistant
  • Dan Madzelan Acting Assistant Secretary

President Obamas Priorities
  • Economic Stimulus
  • Strengthen Economy/Create Jobs
  • Cabinet Confirmation Hearings
  • Tax Relief
  • Alternative Minimum Tax
  • College Tax Credit
  • Labor Workforce Development
  • Protecting 401Ks
  • FY2010 Budget Priorities

Priorities In Congress
  • Healthcare Reform
  • Stem Cell Research
  • Prescription Drugs
  • Immigration Reform
  • Mexico City Policy
  • Regulatory Reform
  • No Child Left Behind Reauthorization
  • Omnibus Energy Bill
  • Intelligence Authorization
  • FISA (Foreign Intelligence Surveillance Act)
  • Defense Authorization
  • Torture/water boarding
  • Columbian Free Trade Agreement
  • Vietnam Free Trade Agreement
  • Fast Track
  • Federal Aviation Administration Authorization
  • Cuba
  • Net neutrality
  • Broadband expansion
  • Patent Reform
  • Intellectual property protection
  • Alternative Minimum Tax

American Recovery and Reinvestment Act
  • Helping Students and Families
  • Research Funding
  • Infrastructure
  • Job Training
  • State Fiscal Relief

American Recovery and Reinvestment Act
  • Recovery Program Plans by May 1st for each
  • Additional Transparency
  • to provide weekly and monthly
    financial reporting on stimulus spending

American Recovery and Reinvestment Act
  • Helping Students Families
  • Increase Pell Grants
  • 5,350 in 2009
  • 5,550 in 2010
  • 7 million recipients
  • Increase Work-Study
  • 200 million over two years

American Recovery and Reinvestment Act
  • Helping Students and Families
  • American Opportunity Tax Credit
  • Temporarily replaces Hope Tax Credit
  • 2,500 credit for four years
  • Covers tuition fess, books and course materials
  • Partially refundable

American Recovery and Reinvestment Act
  • State Fiscal Relief
  • State Stabilization Fund
  • 48.3 billion to be distributed via population
  • 39.5 billion to education (K-12 and public
  • 8.8 billion to governors
  • State application
  • Maintenance of Effort required

New Public Policy Directions?
  • Increased regulation
  • Twenty-four new reporting categories and 100 new
    reporting requirements
  • More stringent oversight
  • IRS has requested intimate funding information
    from 400 colleges 42 pages of questions and
    nine pages of instructions
  • Greater transparency
  • Executive compensation
  • The government as partner

Impact for Schools
  • Increasing demand for student aid
  • FAFSA simplification (from 120 questions to less
    than 30)
  • Former Education Secretary Spellings estimated
    that 8 million additional students are eligible
    but not applying
  • This year 800,000 more students applied for aid
    than last year
  • Increasing institutional costs in postsecondary
  • Significant increases in bond financing costs
  • Level funding for federal and state grant
  • Economists predict 1 trillion annual deficit for
    each of the next three years
  • Thirteen states forced to reduce enacted budgets
    in fiscal 2008

Budget Basics
  • Congress controls the purse!
  • Budget committees formulate a budget resolution
  • Reconciliation instructions are optional
  • Reconciliation protects budget measures from
    parliamentary hurdles such as filibusters to
    ensure timely completion
  • Reconciliation instructions lead to the
    development of legislative changes to programs
    under the jurisdiction of the authorizing

Budget Process The Role of Congress
  • Budget Bills
  • House Bill
  • Includes reconciliation instructions to Education
    and Labor Committee to reduce budget by 1 B
  • Senate Bill
  • Does not include similar reconciliation
  • Includes amendment by Senator Lamar Alexander
  • to maximize higher education access and
    affordability by ensuring that institutions of
    higher education and their students are able to
    continue to participate in a competitive student
    loan program, in order to maintain a
    comprehensive choice of student loan products and

Budget Process Citizen Impact on Congress
  • Senator Alexanders Amendment was due to him
    hearing from constituents
  • Letters to the Senator from school groups
  • Expressions of concern to other members of
    Congress over the past few weeks
  • 1,000 phone calls
  • 1,200 faxes
  • 4,000 e-mails
  • Consumer Bankers Association electronic petition
  • 6,000 signers

House Budget Committee Report Language
  • The Committee urges the Committee on
    Education and Labor to review options for the
    student loan program that will maintain a role
    for FFELP lenders in the student loan program,
    and to look to ways to achieve savings that
    capitalize on current infrastructure and minimize
    the disruption to students and the employees of
    FFELP lenders who currently serve 75 percent of
    loans at American colleges, universities, and
    community colleges.

Budget Process After Spring Recess
  • The Budget Bills
  • Bills proceeds to a conference committee
  • Committee must merge House and Senate versions
  • Primarily done by staff over Spring recess
  • Currently, it appears that the reconciliation
    instructions will be included and the Alexander
    Amendment will be omitted
  • Both pieces are still in play constituent
    lobbying may play a factor
  • Committee report will be considered by both House
    and Senate and then bill goes to the President
    for signature

Presidents 2010 Budget Proposal
  • Loan Proposals
  • Due to turmoil in the financial markets, the
    Presidents budget requests that Congress end the
    entitlements for financial institutions that lend
    to students by eliminating the FFEL Program by
  • Makes campus-based aid more widely available
    through a modernization of the Perkins Loan

Presidents 2010 Budget Proposal
  • Pell Grants
  • Supports a 5,550 maximum Pell Grant award in the
    2010-2011 school year
  • Indexes Pell Grants to the Consumer Price Index
    plus 1 percent in an effort to address inflation
    and put the program on sure footing
  • Makes the Pell Grant program mandatory to ensure
    consistent stream of funding
  • College Completion Access
  • Makes the 2,500 American Opportunity Tax Credit
  • Create a new five-year, 2.5 billion Access and
    Incentive Fund to support efforts to help
    low-income students succeed and graduate from
  • Includes an evaluation component to ensure best
  • Triples number of graduate fellowships in science
    to spur innovation 

CBO Budget Projections
  • Cost to make Pell an entitlement - 116B over 5
    years and 293 over 10 years
  • Elimination of FFELP will save 47B over 5 years
    and 94B over 10 years (Obamas budget predicted
    24B over 5 years and 48B over 10 years)
  • CBO estimates that the Presidents budget
    proposals will add 4.8 trillion to the baseline
    deficits over the 2010-19 time period
  • If proposals enacted 2009 deficit would be 1.8
    trillion and 2010 would be 1.4 trillion

Obama Vows Budget Fight For His Priorities
  • With the magnitude of the challenges we face
    right now, what we need in Washington are not
    more political tactics we need more good ideas.
    We dont need more point-scoring we need more
  • Obama challenged his critics to offer
    constructive, alternative solutions.
  • Source CQ Today 3/17/09

NASFAAs One Loan Program Model
  • Combine positive features of three federal loan
  • Not DL, Not FFELP, Not PSL
  • Fixed interest rate
  • Single point of contact
  • Multiple funding sources (including Education
    Finance Bonds)
  • Servicing with bidding contracts

Design Principles - A Student Loan Program for
  • Stabilize funding and encourage continued
    competition and choice for students, families and
  • Standardized borrower terms
  • Student/borrower advocacy for the life of the
  • Comprehensive school services

A New Student Loan Program for America
  • Increasing Access to Postsecondary Education
  • Ensuring Program Integrity and Providing
    Technical Assistance
  • Simplifying Student Loan Delivery
  • Developing A Sustainable Student Loan Program for
    the Future

A New Student Loan Program for America
  • Expands student-focused counseling, financial
    literacy and delinquency and default prevention
    services to all individuals receiving federal
    loans regardless of the source of the loan funds
  • Streamlines the application process and utilizes
    a single, cost-efficient loan delivery and
    federal financial aid system

A New Student Loan Program for America
  • Preserves competition that will spur innovation
    and lower-cost loan products
  • Preserves the historic postsecondary partnership
    between the federal government and state-based
  • Saves the federal government billions of dollars
    in debt financing while saving thousands of jobs
    at a time of national economic distress

Discussion DRAFT
House Technical Correction Legislation (HR 1777)
  • Postpones PLUS loan auctions
  • Guaranty agencies able to sell rehabilitation
    loans to the Department of Education
  • Remove GI Bill benefits from consideration for
    campus-based aid and subsidized loans
  • Clarifies that guaranty agencies and lenders may
    conduct entrance and exit counseling on campus

Legislative and Regulatory Timeline
ECASLA extension signed into law 10/7/08
HEOA signed into law 8/14/08
HERA signed into law 2/8/06
CCRAA signed into law 9/27/07
ECASLA signed into law 5/7/08
GEN-08-12 published 12/31/08
Interim final regulations published 8/9/06
Final regulations published 11/1/06 effective
Final regulations published 11/1/07 effective
CCRAA NPRM published 7/1/08
Neg reg public hearings announced 8/19/08
CCRAA Final regulations published 10/23/08
effective 7/1/09
2009 Negotiated Rulemaking
  • December 31, 2008 Federal Register notice
  • Five teams will cover the following topics
  • Team I Loans Lender/General Loan Issues
  • Team II Loans School-based Loan Issues
  • Team III Accreditation
  • Team IV Discretionary Grants
  • Team V General and Non-Loan Programmatic Issues
  • Final rules by November 1, 2009, with
    implementation no later than July 1, 2010

Neg Reg Team 1 Agenda
  • Determining Borrower Eligibility for In-School
  • Borrower Notification When the Transfer, Sale, or
    Assignment of a Loan Results in a Change in the
    Party to Whom Payments Must be Sent
  • Lender and Guaranty Agency Prohibited Inducements
  • Lender Forbearance and Borrower Contact
  • Applicability of the Servicemembers Civil Relief
    Act to FFEL and Direct Loan Borrowers and related
    FFEL Lender Special Allowance Payment Calculations

Neg Reg Team 1 Agenda (cont)
  • Guaranty Agency Notifications to Borrowers in
    Default Financial and Economic Literacy for
    Rehabilitated Borrowers
  • PLUS Loan Deferments and Interest Capitalization
  • Consolidation Loan Borrower Eligibility and
    Applicant Disclosures
  • Consumer Credit Reporting After Loan
    Rehabilitation Eligibility for Loan
  • FFEL and Direct Loan Teacher Loan Forgiveness

Neg RegTeam 1 Agenda (cont.)
  • Required Education Loan Borrower Disclosures by
    FFEL Lenders
  • Consumer Education Information Provided by
    Guaranty Agencies
  • New Audit Requirement for FFEL School Lenders and
    Eligible Lender Trustees (ELTs) Originating FFEL
    Loans for an Institution or School-Affiliated
  • Loan Discharges Based on Total and Permanent
  • Required Education Loan Borrower Disclosures by

Neg RegTeam II Agenda
  • Program Participation Agreement (PPA) Code of
  • Disclosures of Reimbursements for Service on
    Advisory Boards
  • PPA Private Education Loan Certification
  • Information and Dissemination Activities
  • Exit Counseling
  • PPA Preferred Lender Lists
  • Required Disclosures for Covered Entities

Neg Reg Team II Agenda cont
  • Cohort Default Rate Calculation, Institutional
    Eligibility, and Default Prevention Plans
  • Entrance Counseling
  • Direct Loan Borrower Disclosures
  • Mandatory Assignment of Defaulted Loans
  • Expansion of Teacher, Head Start, and Law
    Enforcement Cancellation Categories
  • Addition of New Public Service Cancellation
  • Military Service Cancellation

Estimated changes in CDRs
Type of School Default Rate
Source New America Foundation
  • Never give in, never give in, never, never,
    never, never--in nothing, great or small, large
    or petty--never give in except to convictions of
    honor and good sense.
  • Author Winston Churchill

Write a Comment
User Comments (0)