Washington Update NCHELP/EFC Student Loan Legal Meeting

1. Washington UpdateNCHELP/EFC Student Loan Legal Meeting August 6, 2012 Shelly Repp, NCHELP & Vince Sampson, EFC

2. Agenda • Fiscal Cliff • Appropriations • Department of Education Initiatives • Consumer Financial Protection Bureau Initiatives • Alternative loans • Key tax issues • Dodd Frank • Election

3. Fiscal Cliff – Expiring Provisions • Programs expiring on December 31, 2012 • 2001 and 2003 tax cuts • Temporary measures to “boost economy” • 2% reduction in payroll tax • Extended unemployment insurance • Medicare “doc fix” (postponing provider cuts)

4. Fiscal Cliff - Sequestration • January 2, 2013 Sequester Triggers • Spending cuts • $948B over 9 years ($109.3B/year) • Split evenly between defense and non-defense • Sequestration Transparency Act • Administration required to provide plan for implementing sequestration within 30 days of enactment • Not yet signed by the President

5. FY 2013 Appropriations • Senate using $1.047 trillion ceiling set by Budget Control Act • House using $1.027 trillion ceiling in “Ryan budget” • None of the twelve appropriations bills has been enacted • Leader Reid and Speaker Boehner last week announced agreement on a 6-month continuing resolution that will avoid a potential government shutdown until well after the election. • Considered after August recess • Based on Budget Control Act ceiling

6. FY 2013 Labor-HHS-Education Appropriations • Senate Appropriations Committee approved bill • $68.5B for ED • Fully funds Pell Grant at increased maximum ($5,635) • Limits length of eligibility for Subsidized Stafford loans to 150% of published program length • Cuts guaranty agency retention on rehabilitation loans • Federal assistance funds cannot be used for recruiting or marketing • For Pell, cost of education for distance education students is limited to tuition, fees and books

7. FY 2013 Labor-HHS-Education Appropriations • House Appropriations Subcommittee approved bill • $67B (estimate) for ED • Fully funds Pell Grant at increased maximum ($5635) • No guaranty agency cut • No funds to be used for implementing gainful employment, state authorization or credit hour regulations

8. 3.4% Interest Rate • 3.4% interest rate for Subsidized Stafford loans • Extended through June 30, 2013 • CBO scored cost of lower rate at $6.0B • Cost “paid for” by: • Limiting length of eligibility for Subsidized Stafford loans to 150% of published program length • Increasing PBGC insurance premiums and allowing corporations to reduce their pension expenses, thus increasing taxes • Passed as part of Temporary Surface Transportation Extension Act

9. Department of Education Initiatives • Not-For-Profit Servicing • Policy prohibiting two entities that share common ownership, management or control from receiving more than on 100K allocation • Requirement to prepare, maintain and test a Continuation of Mission Critical Services Plan • Fully operational within 72 hours of disaster • VFA’s

10. Department of Education Initiatives • Special consolidation • Expired June 30, 2012 • $14B in funded loans from 485K borrowers • Rulemaking • Status of program integrity rules • 2012 neg reg • Changes to ICR (Pay-As-You-Earn) • IBR changes • Temporary permanent disability • Others • Reasonable and affordable standard for rehabilitation • Plan to convene neg reg to prevent fraud; focus on distance education use of prepaid and debit cards to disburse aid • Final “shopping sheet”

11. Consumer Financial Protection Bureau Initiatives • Shopping sheet • Supervision of larger participants for consumer financial services • Consumer complaints • Enforcement

12. Alternative Loans • Impacts of CFPB private loan report • Differentiation among loan products • Know Before You Owe bills introduced in House and Senate • Return of bankruptcy discharge? • Student debt a proxy for for-profit school issues

13. Key Tax Issues • AMT holiday • Bipartisan bill introduced, H.R. 6180, would permanently repeal AMT for PABs • Discussed as part of tax extenders package • 150(d) • Bipartisan bill introduced, H.R. 6280, would access tax-exempt financing for alternative student loans

14. Dodd-Frank • House continues passing “refining” bills; No Senate appetite for change • Muni Market report released by SEC • 15 recommendations but no repeal of Tower • Key rulemakings left undone; SEC removed target dates for key rule affecting student lenders, including: • Section 941: Adopt rules (jointly with others) regarding risk retention by securitizers of asset-backed securities, and implementing the exemption of qualified residential mortgages from this prohibition.” • Section 942: Adopt rules requiring each issuer of an ABS to disclose, for each tranche or class of security, information regarding the assets backing that security.” • Section 975: Adopt permanent rules for the registration of municipal advisors.” • Section 979: Establish and staff Office of Municipal Securities • Volker rule due soon; effect on liquidity remains to be seen

15. Elections • Presidential • Still close • Battleground states are key- Arizona, Colorado, Florida, Indiana, Iowa, Michigan, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Pennsylvania, Virginia, and Wisconsin • Huge money game • Romney/RNC June 2012 = $106 million; Obama reelect $35 • Projection of $700 million total for TV ADS • Senate • 10 toss-ups – HI, MO, MT, NM, ND, VA, WI, ME, MA, NV • Could be as important as Presidential because of agenda and committee control • Dodd-Frank reforms • Republican victories could portend budget scoring reform