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Washington Update

Washington Update. Scott E. Miller PHEAA smiller1@pheaa.org April 2010. So, It's Come At Last. At Last It's Come. The Day I Knew Would Come At Last Has Come, At Last. What Happened? The New SAFRA President’s Budget Proposal What Could Be Next?. So, What is There to Talk About?.

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Washington Update

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  1. Washington Update Scott E. Miller PHEAA smiller1@pheaa.org April 2010 So, It's Come At Last. At Last It's Come. The Day I Knew WouldCome At Last Has Come, At Last.

  2. What Happened? The New SAFRA President’s Budget Proposal What Could Be Next? So, What is There to Talk About?

  3. 86 Days From April 6th Until July 1, 2010 12 Weeks 2,064 hours 123,840 minutes 7,430,400 seconds Isn’t July 1, 2010 Soon? • 91 Days From April 1st Until July 1, 2010 • 13 Weeks • 2,184 hours • 131,040 minutes • 7,862,400 seconds

  4. Do You Remember SAFRA? • Student Aid and Fiscal Responsibility Act • Passed House of Representatives on September 17, 2009 (253 – 171) • Never Considered By the Senate HELP Committee • Meets Budget Reconciliation Instruction • Net savings more than $1 Billion

  5. What the Heck is Budget Reconciliation? • Authorized By the Congressional Budget Resolution • 2010 Resolution authorized reconciliation for Education and Health Care • Reconciliation “instruction” expires when new Budget Resolution is passed • Not Subject to Filibuster • Limited Time for Debate • Provisions Must Affect “Mandatory Spending” By: • Decreasing (e.g., spending cuts) or • Increasing (e.g., tax cuts) • “Byrd Rule” excludes extraneous measures • Resolution and Spending “Baseline” Must Apply to Whole Bill • Senate Can Consider Only One Reconciliation Bill Per Budget Resolution

  6. The Process • Patient Protection and Affordable Care Act (H.R. 3590) • Senate passed with 60 votes on Christmas Eve • House passed on March 21st (219 – 212) • President Obama signed into law on March 23rd • Health Care And Education Affordability Reconciliation Act of 2010 (H.R. 4872) • Reconciliation Bill includes revisions to H.R. 3590 and modified SAFRA • House passed on March 21st (220 – 211) • Senate passed amended version on March 25th • “Ping-ponged” back for House approval on March 25th

  7. What Was In SAFRA? • 100% Direct Lending as of 7/1/10 • Revamped Perkins Loan Program • “Guaranteed” Increases in Pell Grant Maximum – CPI + 1% • FAFSA Simplification • College Access & Completion Innovation Funds • Funding for Community Colleges, HBCUs, Early Childhood Education, and Other Items • Approx. $8 billion for “Deficit Reduction”

  8. The “Old” SAFRA Eliminate FFEL as of 7/1/10 Increase Administrative Funding for Direct Lending Allow Non-Profit Agencies to Service Direct Loans $50m for DL Transition Increase Pell Max. by CPI+1 Cut Interest Rates for Subsidized Undergrads Revamp Perkins Program FAFSA Simplification (e.g.., Eliminate Assets) College Access Completion & Innovation Funds Increase College Access Challenge Grant Funding Grants to Community Colleges HBCU & HSI Funding SEOG for Veterans Early Learning Challenge Grants $8b Towards Deficit Reduction The “New” SAFRA Eliminate FFEL as of 7/1/10 Increase Administrative Funding for Direct Lending Allow Non-Profit Agencies to Service Direct Loans $50m for DL Transition Increase Pell Max. by CPI Limited In-School Consolidation Lower IBR Payments for New Borrowers in 2014 Increase College Access Challenge Grant Funding HBCU & HSI Funding Funding of Job Training Programs for Community Colleges $10b Towards Deficit Reduction $9b To Increase Savings in Health Care Bill What’s Old is New Again…

  9. How Did SAFRA Become“SAFRA Lite”? • CBO Scores Shift to 100% Direct Lending • FY 2010 Baseline: $81b over 10 years • FY 2011 Baseline: $61b over 10 years • SAFRA Pell Funding • FY 2010 Baseline: $37b over 10 years • FY 2011 Baseline: $68b over 10 years • Pell Grant Entitlement • CBO FY 2011 Baseline: $197b over 10 years • Can Use Only One Baseline In a Reconciliation Bill

  10. So What Changed? • $37b for Pell Doesn’t Go as Far as it Used To (i.e., “last year”) • Items That Didn’t Make the Cut: • Perkins Overhaul • Cutting Interest Rates • FAFSA Simplification • ECASLA Extension • Funding beyond 2010 for DL transition costs • Private Loan Debt Swap • Reconsolidation

  11. Some Specifics… • No Alternative to Direct Lending for Loans First Disbursed On Or After July 1, 2010 • Pell Grant Maximum • $5,550 for 2010-11, 2011-12, 2012-13 • Beginning in 2013, increases at rate of Consumer Price Index (CPI) • Provision prohibiting decrease in Pell maximum deleted due to Byrd Rule • Estimate of $5,900 Pell Grant for 2019-20 • Down from original estimate of $6,900 • Increased demand, larger shortfall caused cut

  12. Saturday Night Pell Fever… • Increase in Maximum EFC Eligible for Pell • Was, 95% of “appropriated amount” • $4,816 for 2010-11 • Now, 95% of “maximum award” • $5,273 for 2010-11 • Expected to reduce minimum Pell award • Currently $976 (2009-2010) • ED will set 2010-11 minimum “this week” • More students eligible for ACG, SMART & SEOG

  13. More Specifics… • In-School Consolidation • Student must have at least TWO of: • ECASLA Loan • Direct Loan • FFELP Loan • Available 7/1/10 – 6/30/11 • College Access Challenge Grant • Funds flow to Governors • Not intended to cover default aversion, training, assistance to schools, financial literacy, etc.

  14. And, More Specifics • $50 Billion for DL Transition Assistance • “The Secretary shall provide institutions of higher education participating, or seeking to participate, in the [Direct] loan programs…technical assistance in establishing and administering such programs.” • Only for FY 2010 • Language scaled back • Income Based Repayment Plans • Payments may be as low as 10% of borrower’s AGI • Forgiveness of remaining balance after 20 years • Effective for NEW BORROWERS as of 7/1/14 • Non-Profit Servicers • Not assured to receive all loans in their state • Must meet qualifications established by Secretary • 100,000 loan minimum • Allocations based on same performance criteria as used for TIVAS servicers • No new servicers admitted after 2014

  15. What Did the President’s FY 2011 Budget Propose? • Released February 1, 2010 • Endorses SAFRA & 7/1/10 Date for 100% DL • Proposes Full Entitlement Status for Pell • Allows ACG & SMART to Expire as of 7/1/11 • Moves Perkins Changes to 7/1/11 • Enhances Income Based Repayment Program • 10% vs 15% of discretionary income • Forgiveness after 20 years vs 25 years • Freezes Funding For Other Student Aid Programs

  16. Is There Anything Else? • Private Loan Certification • Borrower self-certification form in place • NASFAA lobbying for FAA certification • Private Loan Debt Swap • Allow conversion of SOME private loans to direct consolidation loans • Could require FAAs to retrieve COA & other aid data from past years • Limited group of borrowers get relief • Split Loans/Split Billing • Multiple programs – FFELP, ECASLA, DL • Treasury rules result in multiple payments for borrowers • Reconsolidation

  17. Is There Still Time to Be Heard? • Be Specific • Be Current • Propose Solutions • Stay in Contact

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