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VASFAA Legislative update

VASFAA Legislative update. Vice President, Government Affairs and Services. Scott Buchanan. 5/21/2012. The most important number. 168. November 6, 2012. The 2 nd most important number. Major Political Issues. Jobs and the economy College costs and student loans Debt and the deficit

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VASFAA Legislative update

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  1. VASFAA Legislative update Vice President, Government Affairs and Services Scott Buchanan 5/21/2012

  2. The most important number 168

  3. November 6, 2012

  4. The 2nd most important number

  5. Major Political Issues • Jobs and the economy • College costs and student loans • Debt and the deficit • Investment in higher education

  6. America’s Investment in Higher Education is Sizable and Growing +236% Sources: College Board, 2011 Trends in Student Aid, McKinsey & Company

  7. 85% of All Loans Outstanding are Federal Student Loans

  8. PLUS Programs Growing at Double Digit Rates

  9. Administration Expects to Originate $119 Billion New Loans in 2013Forecasts that $21 Billion Will Default Source: Budget of the U.S. Government, Fiscal 2013; Federal Credit Supplement, and Appendix

  10. Budget Challenges

  11. College Degree Greatly Enhances Likelihood of Employment for Young Adults Source: Bureau of Labor Statistics. Current Population Survey, March 2012

  12. Debt Ceiling and Deficit Politics • Changing the debate • Increasing spending to reducing debt • Last year recommendations from fiscal commissions generally ignored and President’s 2012 budget had no deficit reduction • Since then massive $2 trillion reduction package • Not all spending the same • Discretionary spending—i.e. annual appropriations—easier to target • Pell Grants protected so far…but at the expense of other higher education programs

  13. Budget Control Act of 2011

  14. Budget Control Act Requires $43B Cut from Discretionary in 2012

  15. Will Cuts Come From Entitlements?

  16. Sequester if Congress Takes no Action… • Reductions in fiscal discretionary limits from fiscal 2013 to 2021, could by up to $100 billion a year • 50% of the cuts from the Department of Defense • 48% of the cuts from all other non-defense programs (not listed below) • 2% of the cuts from Medicare • The sequester cannot touch the following programs (from the Balanced Budget and Emergency Deficit Control Act of 1985 as amended): • Pell Grants • Social Security • The Postal Service • Class Act (Voluntary long-term health care benefits created in ObamaCare) • Most unemployment benefits, veterans benefits and low income payments • All "emergency designations“, "unanticipated circumstances,” disaster relief • Not exempt: • Department of Education, administrative money and other higher ed • Special rule for student loans, origination fees increased by sequester percentage

  17. Pell in the Past • 2011 Full Year Continuing Resolution • Additional $5B in appropriations (equivalent to $50B over 10 years) • End Summer Pell Grants • Reducing program costs by $35B over 10 years • $8.8B in mandatory Pell savings added to appropriations • Budget Control Act • Added $17B in 2012 and 2013 to Pell from savings due to elimination of grad students’ in-school interest

  18. Pell Grants Need $77 Billion to Maintain Current Grant Levels Source: CongressionalBudget Office, March 2012 Baseline Projections for the Student Loan and Pell Grant Programs

  19. Pell in the Future • Costs of Pell continue to rise • Costs of higher education rise beyond even unfunded Pell Maximum • Tough and painful choices are evidenced by House and Senate appropriations: • House – Reduce cost of Pell by more effectively targeting the neediest with more constraints • Senate – Increase investment in Pell by reducing other education subsidies like interest subsidy while in grace • The deficits could make these choices even tougher

  20. The Interest Rate • Interest rate was always scheduled to return to 6.8% • Both federal loan rates are arbitrary • Rate, Pell, and IBR share the same problem • No impact to students seeking jobs today • All say they want it, but disagree on how to pay for it

  21. Legislative and Public Policy Realities • Looming election will cripple Congress • Clock is ticking • Past legislative gimmicks have come home to roost • Impossible to be able to spend enough • Overeducated and underskilled • Lack of proper market forces means resistance to correction • Occupy vs. “Entitlements for the Entitled”

  22. Key Issues Impacting Schools • Pell Grants: What’s the right approach? • Loan subsidies: Coming or going? Or neither? • Spending cuts: What programs may be on the chopping block? What needs to be protected? • Defaults on the Rise: What will be Washington reaction and enrollment impacts? • American family reaction to economy: How will changes in savings, borrowing, cost decisions impact your campus?

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