Washington Update:

Bridging the Political Gaps

Scott E. MillerPHEAA

smiller1@pheaa.orgOctober 13, 2010

Today’s Road Trip…

• 2010 Highlights• Congress in Hiatus• Federal Deficit Looms Large• Issues in Play• What Lies Ahead

2010 Was Interesting

• SAFRA Signed Into Law on March 30, 2010 The long battle was over ED and community move into implementation mode

• FAA’s Successfully Meet Challenge of Rapid Transition to DL All eligible students receive loan funds ED returns bulk of $50 million transition fund

• In-school Consolidation Window Open Until June 30, 2011

• College Access Challenge Grant Doubles

DL Issues Going Forward

• Time to Look in Rear View Mirror How was DL transition experience? What could have been done better? What can be done to prepare for DL reconciliation?

• Comments, Concerns, Suggestions Must Be Communicated to ED & Congress

• Split Borrowers ED resolving DL/ECASLA splits Additional servicers coming soon

• PLUS Loan Approvals About twice as many denials under FFELP vs. FDLP Implications of parents over-borrowing

• Training Needs and Formats

Congress Punts on Appropriations

• No Appropriations Bills Passed By 9/30• Continuing Resolution Approved Through

December 3rd

Congress returns for lame duck sessions in November & December

• CR Reduces Federal Spending By $8.2 Billion • No Funding For Pell Grant Shortfall

The Federal Deficit is Daunting

• Federal Deficit for FY 2010: $1.265 trillion• Federal Debt as of 10/1/10: $13.5 trillion• Deficit/Debt are Beginning to Drive Policy

Supplemental Appropriations for military funding passed in August

Most “extraneous” items stripped from bill Bipartisan insistence on Pay-As-You-Go Funding for teachers inserted at the end Funding to close Pell Grant shortfall among casualties

Will the Deficit Be Addressed?

• National Commission on Fiscal Responsibility and Reform 18 members appointed by White House & Congress

Alan Simpson (former Senator from Wyoming) Erskine Bowles (former COS for President Clinton, President

of University of North Carolina) Final report due December 1, 2010 Recommend long- and medium-term measures to

achieve fiscal stability and balance budget by 2015 Address growth of entitlement spending Recommendations are non-binding

Pell Grant Shortfall

• Currently $5.5 Billion Appropriations are insufficient to fully fund Pell Growth in demand not properly projected “Mandatory” funds provided in SAFRA assume

adequate appropriations 2011-12 maximum of $5,550 is presumed safe 2012-13 outlook

Shortfall continues to grow Appropriations likely to stay stagnant Growth in Pell appropriations will need to come from other

programs Fewer sources of mandatory funds

The Pell Funding Gap:($13-$14 billion per year)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

$30.5 $30.9 $30.8 $31.2 $31.7 $32.2 $32.7 $33.2 $33.8 $34.5

$17.7 $17.8 $18.0 $18.2 $18.5 $18.8 $19.2 $19.5 $19.8 $20.2

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

Pell Funding Gap ScenarioSAFRA assumed vs. projected appropriations levels

(in billions)

Projected appropriation level Funding level needed to meet $4,860 in SAFRA

Source:Robert Moran

AASCU

Other Issues in Congress

• Private Student Loans Bankruptcy dischargeability

H.R. 5043, Rep. Steve Cohen (D, TN) Approved on 9/15/10 by House Judiciary Subcommittee on

Commercial and Administrative Law Not expected to make it to House floor, but….

Christopher Bryski Student Loan Protection Act (H.R. 5458, Rep. John Adler (R, NJ))

Require private loan lenders and schools that provide student loan counseling for federal loans to discuss the benefits of advanced directives with the signers and cosigners of student loans

Federal & private loan borrowers must be advised of consequences of death & disability on their loan debt

Lenders must assure cosigners understand all responsibilities, including availability of credit insurance

Private loan debt swap (Sen. Sherod Brown (D, OH))

Issues on the Horizon

• 3-Year Cohort Default Rate Projections are that some rates will double or more 2012 & 2013: both 2-year and 3-year rates calculated

-- sanctions based only on 2-year rate 2013: sanctions based on 3-year CDR begin

• Perkins Loans Will the program expire? Will revolving funds be recalled? Will ED’s proposal to create “Direct Perkins

Loans” be re-tooled?

Gainful Employment Regulations

• A Hot Topic• Secretary of Education & Administration Going

All Out Public relations campaign in full swing For-profit colleges fighting back

• Recent ED Announcement Chronicle of Higher Education: “Education Dept. to

Delay Issuing ‘Gainful Employment’ Rules Opposed by For-Profit Colleges”

Secretary of Education’s Press Release: “Department on Track to Implement Gainful Employment Regulations; New Schedule Provides Additional Time to Consider Extensive Public Input”

Continuing Focus on For-Profit Schools

• Senate HELP Committee Hearings Undercover investigations Sen. Harkin promises more to come Republicans boycott Senate 9/30 hearing Congress could weigh in to stall ED

regulations Investigations, regulations could extend to

non-profit schools

November 2nd Will Be Interesting

• Tidal Wave or Just a High Tide? Will Republicans capture the House? By how much will the Democrat’s Senate majority

shrink?

• What to Expect? Fewer moderate members Even more gridlock Senate gains more power Focus on deficit reduction Oversight hearings 2012 campaign begins November 3rd

Looking Ahead to January

• New Committee Chairs? Rep. John Kline (R, MN)? Rep. Brett Guthrie (R, KY)?

• New Members, New Staff New opportunities to introduce yourselves,

your school, and your issues Need to educate before you can “ask”

The Future Looks Challenging

• Student Aid Could Face Funding Obstacles Across the board cuts are “easy way out” Domestic spending priorities battling each other

• Need to Make the Case for Student Aid Cannot take support for granted Key supporters may not be around to help

Sen. Specter (R/D, PA) Rep. Obey (D, WI)

• Reminiscent of 1980’s New supporters were cultivated New arguments were honed Student aid enjoyed two decades of uninterrupted support You can’t get to the other side without

paying the toll