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

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! 2

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 3

Consolidated Appropriations Act of 2014 Signed into law January 17 th 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% 4

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 5

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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 TypeRate FormulaProjected Rate ( )* Cap Stafford Undergrad Sub. and Unsub. T percent4.75 percent8.25 percent Stafford Graduate Unsub. T percent6.30 percent9.50 percent PLUS Loans (Grad and Parent) T percent7.30 percent10.50 percent *Assumption: 10-year T-Bill rate = 2.70 percent

Fiscal Year 2014 Outlays 8

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 9

College Board – Trends Report

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? 12

CriteriaIncome- Based RepaymentIncome -Contingent Repayment Pay As You Earn Eligible Loans FFELP & Direct LoansDirect Loans New Borrower Requirement Not applicableNot ApplicableMust 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 ÷ 12 Minimum monthly payment = $0 Lesser of: 20% of Discretionary Income ÷ 12 OR 12-year standard payment x Income Percentage Factor published by Dept. of Ed Minimum monthly payment = $0 10% of Discretionary Income ÷ 12 Minimum monthly payment = $0 Temporary Interest Subsidy Yes (first 3 years)Not applicableYes (first 3 years) Payments Required for Forgiveness 25 years 20 Years Interest Capitalization YesYes, up to maximum of 10% of loan balance at beginning of repayment 13

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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 15

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 16

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? 17

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 18

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 19

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 20

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! 21

What’s Next? Make Some Noise! Thank you! Questions/Comments? Comments??? 22