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Reauthorization for GP – What Are The Issues?
Tami Sato - Marshall B. Ketchum University (MBKU)
Vicki Shipley - National Council of Higher Education Resources (NCHER)
WASFAA Annual Conference
April 14, 2014
2
Agenda – Let’s Talk!
Reauthorization 2008 – Then and Now Reauthorization 2014(?) – Lay of the Land For GP - It’s All About Loans Reauthorization Themes Reauthorization 2014(?) – What’s on Your
Wish List? UG Issue, Possible GP Issue Other Things to Watch What’s Next? Make Some Noise!
3
Then and Now
State higher-education spending $80b to $71b
Average tuition/fees at 4-yr publics - $6.8k to $8.6K
Number of questions on paper FAFSA – 98 to 102
Consumers have more information Lawmakers and families questioning value
of a college degree
Source: Center for the Study of Education Policy, College Board
4
Consolidated Appropriations Act of 2014
Signed into law January 17th
FY 2014 Appropriations Maximum Pell Grant for AY 2014/15 = $5,730
$85 increase Increase in recipients from 9.1 million to 9.3
million Direct Loan Origination Fee Increases
Remain in Place Loans first disbursed on/after 12/1/2013
Stafford 1.072% PLUS 4.288%
5
Consolidated Appropriations Act of 2014
FWS: $974,728,000 $49,133,000 increase $2 million below pre-sequester level
SEOG: $733,130,000 $36,955,000 increase $1.5 million below pre-sequester level
Student Loan Interest Rates
Bipartisan Student Loan Certainty Act of 2013 Interest Rate Determined Based on Final Auction of 10-year U.S Treasury Bills prior to June 1
Loan Type Rate Formula Projected Rate (2014-15)*
Cap
Stafford Undergrad Sub. and Unsub.
T + 2.05 percent 4.75 percent 8.25 percent
Stafford Graduate Unsub.
T + 3.60 percent 6.30 percent 9.50 percent
PLUS Loans (Grad and Parent)
T + 4.60 percent 7.30 percent 10.50 percent
*Assumption: 10-year T-Bill rate = 2.70 percent
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President’s FFY 2015 Budget Proposal - New Stuff
Pay As You Earn (PAYE) Repayment Plan Proposal to make all FFELP and Direct Loan borrowers eligible For new borrowers on or after 7/1/2015, PAYE would be the only
income-driven repayment option Modify PAYE formula to eliminate unintended benefits for high
income, high balance borrowers
Proposal to limit Public Service Loan Forgiveness to $57,500 (aggregate limit for independent undergraduates) “…protect against institutional practices that may further increase
student indebtedness” Establish 25-year forgiveness for amounts above $57,500 Counting only payments made via an income-driven repayment
plan towards PSLF
Proposal to make All loan forgiveness amounts exempt from taxation
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For GP – It’s All About Loans Is reform needed of the Income-Driven
Repayment (IDR) plans? Should IDR be automatic?
Keep Perkins for GP (only subsidized loan left)?
Should DL unsubsidized go to COA limit? Why are DL interest rates higher for
graduate students? If student loans make a profit for the
government – where should the profits go?
Criteria Income- Based Repayment Income -Contingent Repayment Pay As You Earn
Eligible Loans FFELP & Direct Loans Direct Loans Direct Loans
New Borrower Requirement
Not applicable Not Applicable Must be new borrower to qualify
Discretionary Income
Adjusted Gross Income (AGI) minus 150% of applicable Poverty Line
Adjusted Gross Income (AGI) minus 100% of applicable Poverty Line
Adjusted Gross Income (AGI) minus 150% of applicable Poverty Line
Income Derived Payment
15% of Discretionary Income ÷ 12Minimum monthly payment = $0
Lesser of:20% of Discretionary Income ÷ 12OR12-year standard payment x Income Percentage Factor published by Dept. of EdMinimum monthly payment = $0
10% of Discretionary Income ÷ 12Minimum monthly payment = $0
Temporary Interest Subsidy
Yes (first 3 years) Not applicable Yes (first 3 years)
Payments Required for Forgiveness
25 years 25 years 20 Years
Interest Capitalization
Yes Yes, up to maximum of 10% of loan balance at beginning of repayment
Yes, up to maximum of 10% of loan balance at beginning of repayment
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Reauthorization of the Higher Education Act – Timeframes?
Hearings still underway in House and Senate Senate accepting public input on current
hearing topics Possible release of DRAFT bills this year? Legislative action is unlikely, but not impossible
Possibility House Education and the Workforce Committee could consider a bill
Maybe 2015? 2016? 2017?.... Process is complicated by pending retirements of
Sen. Tom Harkin & Rep. George Miller Rep. John Kline is technically term-limited
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Reauthorization Themes
Simplify - One loan program/one grant program Funding tied to cost reduction/success Automatic Income-Based Repayment Accountability and transparency Reining in abuses in student loan system Simplify - One tax credit Streamline FASFA/apply through tax return Better consumer information – more disclosures Interest rates may, again, be on the table Serving “contemporary” students Student loan servicing Institutional risk sharing on student loans
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What’s On Your Wish List?
Maintain campus-based programs? Restore students’ eligibility for
subsidized loans? Retain tax-free treatment for cancelled
or forgiven loans? Exclude graduate schools from R2T4? Consumer information – restrict to
undergrads or allow flexibility in tailoring?
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UG Issues, Possible GP Issue
Added fields in COD for 150% Rule Net Pricing Calculator extended to GP
schools? Shopping Sheet Mandatory? College Rating Plan Gainful Employment NPRM –
Expanded disclosures
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Other Things to Watch
Negotiated Rulemaking Campus Crime Changes Program Integrity (additional issues on
fraud, debit cards, disbursements, state authorization, GP PLUS adverse credit)
Telephone Consumer Protection Act Gaps in student and borrower services President’s College Rating System
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Student Loan Borrower Bill of Rights Act
Introduced by Senators Durbin, Warren and Boxer
Aims to reform disclosure and servicing standards for both federal and private student loans
To ensure student loan borrowers understand the full range of repayment options available to them
Would grant the CFPB authority to regulate Title IV loans
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Reform Needed?
Telephone Consumer Protection Act (TCPA)
Income Driven Repayment Plans (e.g. Income-Based Repayment - IBR)
Student and borrower services What’s on your list? Make some noise!