Washington Update: Bridging the Political Gaps

1. Washington Update:Bridging the Political Gaps Scott E. Miller PHEAA smiller1@pheaa.org October 13, 2010

2. Today’s Road Trip… • 2010 Highlights • Congress in Hiatus • Federal Deficit Looms Large • Issues in Play • What Lies Ahead

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. The Pell Funding Gap:($13-$14 billion per year) Source: Robert Moran AASCU

10. 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))

11. 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?

12. 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”

13. 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

14. 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

15. 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”

16. 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