Agenda • COHEAO • Budget • Grassroots • Congress • Regulatory Update • Perkins Loan Issues • Ed Resources
COHEAO Announcements • NEW MEMBERS WANTED! • Tell your Friends and Colleagues to join. Membership is needed now more than ever. • Discounts for Teleconferences, Webinars, Annual, Mid-Year Conferences • Mid-Year Conference: July 29 – July 31, 2012 • Cleveland, OH
What is COHEAO Doing? • Working to support the continuation of the Perkins Loan Program and to fund it • Educate policy makers on the student benefits of Perkins • Setting up state calls to Congress members • Many other issues COHEAO is involved: • A/R issues, privacy, tax reporting, FDCPA. TILA, TCPA, Private Student Loans (institutional loans), CFPB • Financial Literacy
3.4% Loans in Congress • $6 billion cost for a one year extension • Agreement on keeping rate. Disagreement on how to pay for it.
3.4% Loans in Congress • Bills from Rep. Biggert, Sen. Alexander, Sen. Reid, Rep. Miller,Sen. Brown. Offsets: • GOP = “war on women’s health” (Public Health Fund) • Democrats = “raising taxes on ‘job creators’ in middle of recession” (S-Corporation) • Brown = Does it really work? Politics? (Improper Payments)
3.4% Loans-What does it mean in the End? • A deal is highly likely, two questions remain: • What ultimately will be the offset? • Will it happen by July 1st? • Average borrower will save $6-$8 per month. Max is $12-$15 per month. ($1,000 over life of loan)
3.4% Loans-What does it mean in the End? • Benefit will only apply to loans made from 7/1/12 thru 6/30/13 • This is Elevating the Issue • People looking at college cost/student debt heading into HEA. • Scrutiny not limited to Proprietary Schools.
Why we may not have a deal before July 1st & Why $6 per Month is Such a Big Deal
3.4% Debate & Perkins Loans • Perkins is in desperate need of Cancellation $$$ • Major debate is student loans & policy makers are searching for offsets • $6 Billion needed, Perkins owed $259 Million, so why not $6.25 Billion?
FY 2013 Budget Overview • President’s budget is a series of proposals only. • Congressional action needed to put into effect • “President proposes, the Congress disposes” • 2.5% increase to increase Higher Ed spending to $69.8 billion. • $1.7 billion more than enacted 2012 levels
FY 2013 Budget Overview • Maximum Pell Grant at $5,635, an $85 increase thru the 2014-15 academic year. • Increase from SAFRA funding • $120.8 billion in new Direct loans available in 2012 • including 1 year extension of 3.4% rate • Seeks to make the American Opportunity Tax Credit (AOTC) permanent.
Campaign Issue: College Costs • Administration highlighting cost of college • State of the Union “putting colleges on notice” • Full PR campaign launched with allies in “consumer groups”, blogs, other media, CFPB • Adopting a stance like Rep. Buck McKeon Republicans in 2004. • Campus based aid funding tied to prices
Budget: Campus Based Programs to Control College Costs • Proposal to “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.”
Budget: Campus Based Programs to Control College Costs • For the $10 billion proposed in campus-based aid: • The proposal would replace the historical allocation formula with a new formula that bases a college’s allocation on whether the college reduces net tuition prices, restrains tuition growth and enrolls and graduates relatively higher number of Pell Grant eligible students.
Proposal: “Unsubsidized Perkins” • Creates a new “Unsubsidized Perkins Loan” program with up to $8.5 billion in loan volume. • Current Perkins volume is about $1 billion a year
Proposal: “Unsubsidized Perkins” • Like Previous proposals, ED would originate and service. Loans look the same as Unsubsidized Direct • 6.8% fixed interest rate • Same cancellation options (greatly reduced) • Direct Loan servicing contractors would add this to their billing and collections contract. • Contracts call for de minimums servicing • Financial Literacy not included
FY 2013: Current Perkins would Continue • Current Perkins Loan Program proposed to continue in FY 2013 • Therefore, proposal calls for 2 programs in the next fiscal year. • HEA reauthorization process in 2013-14 would decide what to do. • Funds requested to purchase Perkins servicing system, apparently for assigned loans
Issues to Federal Budget Accounting • House backs “fair value accounting” method of scoring the cost of federal loan programs • Risk is considered in this method • Direct Loans are estimated to cost more • The “Unsub Perkins Loan” proposal would: • Under “1990 Credit Reform Act” rules save the government $4.298 billion over 10 years • Under “Fair Value” accounting, it costs $3.577 billion over 10 years.
Perkins Funding Picture 2012 • No $ appropriated for Perkins in FY 2012 because President didn’t ask for them, and Pell Grant shortfall used lots of $$. • BUT: Perkins Loan Program continues to operate at least through FY 2015, and the Department advises schools to make as many loans as possible.
Perkins in the Future • Priority for advocacy this year: • Restore funding for cancellation reimbursement • To date $259 million in unpaid cancellations • Late in 2012: Start preparing for HEA Reauthorization • COHEAO has PTF to work on this • Recommendations?
Grassroots Efforts • We must work to fund and extend the Perkins Loan program • COHEAO is working on new ideas to preserve the program • Support Appropriations • Support Perkins • See www.coheao.org for details • Stay In Touch with your Congressional Representatives
Current Grassroots • COHEAO Spark announced 5/29/2012 • Call to Action • Contact your Senators and Representatives in support of Perkins Appropriations • Requesting Perkins Cancellation Reimbursement • www.coheao.org
Bankruptcy Law Proposals • Current Law: all education loans as defined by tax law are not dischargeable in bankruptcy except when there is undue hardship • House, Senate bills call for dischargeability of private loans only. • No exception for school, non-profit • Government Loans would remain non-dischargeable. • Including any “government units” (state schools)
The Politics of it all… • Election this November… • Little expected to pass by Congress except the must-do bills. • Anything the House will pass the Senate won’t and vise versa • 30 jobs bills passed House, stalled in Senate • House struggling with a Budget, Senate not bothering.
What does this mean? • Election outcomes will affect attitudes towards funding of student aid. • Politics of college costs, student debt important! • Deficit reduction theme likely to continue regardless.
Armageddon during Lame Duck? • Debt ceiling will need to be increased in combination with spending cuts via Congressional reviews (scalpel) or sequestration (chop ax) • Sequester of $1.2 Trillion over 10 years set to begin January 2013 – cuts almost everything but Social Security, Medicare • Congress wants to avoid sequester. R’s on Defense and D’s on Domestic Programs
Armageddon during Lame Duck? • Host of tax cuts set to expire • Bush Tax Cuts of 2001 & 2003 • 90% of these cuts have strong bipartisan support • Additional cuts from ARRA (American Recovery and Reinvestment Act) to expire. • R’s love to bash the Obama stimulus, but are very supportive of the law’s tax cuts.
Department of Ed Initiatives • Federal Register Announcement • Upcoming Negotiated Rulemaking • Published May 1st, 2012 • Issues: to prevent fraud and ensure proper use of Title IV funds. • Regulate the use of debit card and other banking mechanisms for disbursing Federal Student Aid Funds..
Department of ED Initiatives • Federal Register Announcement • Comments on proposed Perkins MPN • Published May 15, 2012 • Persons are encouraged to submit comments on or before July 16, 2012
Department of ED Initiatives • Special Direct Consolidation Loans • Jan 2012 thru June 30, 2012 • Borrowers with one loan held by Depart (FFEL or DL) and at lease one commercially held FFEL loan • Goal: to help borrowers manage debt by ensuring all fed loans serviced by same servicers
Department of ED Initiatives • Pay as you Earn Student Loan Repayment Plan • New borrowers in 2008 who receive a loan in 2012 are eligible • Revised ICR plan to cap annual payments at 10% of discretionary income and reduce max repayment to 20 years • Balance after 20 years cancelled
Department of ED Initiatives • Two Factor Authentication • A security process all users must utilize to access Federal Student Aid System • Something you know: User ID and Password • Something you have: Token with a one-time password. • Tokens to handed out in phases • NC, NJ, NY, SC Phase 2
Regulatory Update • Negotiated Rulemaking Site: • http://www2.ed.gov/policy/highered/reg/hearulemaking/2011/loans.html • Federal Register Notice published 10/26/11 and 10/28/11 announcing decision to establish NegReg
Regulatory Update • Two teams : • Teacher Prep Issue • January 18-20, 2012 • February 27-29, 2012 • April 3-5, 2012 • Student Loan Issues • January 9-13, 2012 • February 13-17, 2012 • March 26-30, 2012
Regulatory Update • Student Loan Issues: • Changes to ICR program – implementation of “Pay as you Earn” • Changes to IBR plan • FFEL Repayment Disclosures • Forbearance issues • Minimum Loan Period for Transfer Students in non-Term Programs
Regulatory Update • Loan Repayment issues • Repeal of unnecessary FFEL regulations • Modification of Direct Loan Regulations • Total and Perm Disability issues • Title IV Closed School District • Satisfactory Enrollment Status Reporting • Perkins Loan issues • FFEL Admin Wage Garnishment
Perkins Loan Issues • FSA still concerned Perkins schools are not making loans • Expectation is schools should make loans or liquidate from the program • FSA monitoring and contacting schools as necessary • Monitoring excess cash and asking school to return it. • Schools are taking Admin Cost Allowance without advancing funds.
Perkins Loan Issues • Department is enforcing Cohort Default Rate Penalties • 674.5(a)(2) over 50% for three years ineligible to be in Perkins Loan Program • Department making individual contact to affected schools • 17 schools identified
Ed Resources • FP-12-01 Subject: Loan Verification Certificate for Special Direct Consolidation Loans • GEN-12-05 Subject: Corrections to GEN-11-19 (revised Loan Discharge Application) • GEN-12-04 Subject: Federal Loan Issues • Interest change in Direct Sub Loans • Continued eligibility of dependent undergrad
Ed Resources • GEN-12-2 Subject: Employment Cert for Public Service Loan Forgiveness • P-12-01 Subject: 2012-2013 Federal Pell Grant Disbursement Schedules
Questions? Lori Hartung Todd, Bremer & Lawson, Inc. lori.hartung@TBandL.com Mobile: 1-803-371-2394 Toll Free: 1-800-849-6669