1. Legislative and Department of Education Update Spring 2013 Lori S. Hartung Regional Sales Manager Todd, Bremer & Lawson, Inc. P.O. Box 36788 Rock Hill, SC 29732-0512 800.849.6669 lori.hartung@tbandl.com

2. The 113 th Congress House 231 Republicans 200 Democrats Vacancy probably yield 234-201 Previous Congress at its end: 241 Republicans 190 Democrats 4 Vacancies Senate* 55 Democrats* 45 Republicans One vacancy: (MA, Kerry seat) Current Congress: 53 Democrats 47 Republicans * Dems now and next year include two independents who caucus with D’s

3. Senate HELP Committee Leadership o Health, Education, Labor & Pensions Com. Tom Harkin (D-IA) Still Chairman, Still Chairs Appropriations Subcommittee on Labor, HHS, Education o New Ranking Republican… 3 Lamar Alexander (R-TN)Mike Enzi (R-WY) replaces

4. House Education & Workforce Leadership: No changes 4 Chairman Kline (R-MN) Higher Ed Subcommittee Chairwoman Foxx (R-NC) Ranking Dem. Miller (CA) Higher Ed Subcommittee Ranking Dem. Hinojosa (TX)

5. Elections: Some Perkins Champions Do Well (on a Bipartisan Basis) o Rep. Cathy McMorris Rodgers (R-WA) now GOP Conference Chair o Rep. Tim Bishop (D-NY) won and remains leading voice among House Dems o Rep. Jaime Herrera-Beutler (R-WA) gets Appropriations Committee post

6. Stepping Back From the Fiscal Cliff Massive tax increase averted, saving economy from recession and stock market from depression Oops… One tax increase went through for all who work: FICA up 25% + other increases for people making over $250K

7. For Those Who Prefer to Pay Less Tax Made Permanent (or at least until Congress changes them again): o Lower “Bush” marginal federal income tax rates for vast majority of taxpayers o Expanded Coverdell Education Savings Accounts o Exclusion for employer-provided educational assistance o Student loan interest deduction o The exclusion from income of amounts received under certain scholarship programs o Tax-exempt private activity bonds for qualified education facilities

8. More Happy Tax News… The following provisions were temporarily extended: o The American Opportunity Tax Credit (5 year extension) o The above-the-line deduction for qualified tuition related expenses. (2 years: 2012 and 2013) o The deduction for certain expenses of elementary and secondary school teachers. (2 years: 2012 and 2013) o Tax credit for research and experimentation expenses. (2 years: 2012 and 2013)

9. “Sequestration” Happened o Budget Control Act of 2011 set in law discretionary spending caps for 10 years (FY ‘12- FY ’21) o Supercommittee failure triggered sequestration as of 3/1/13. o $1.176 trillion in automatic cuts between FY 13-21. (Cuts reduced $24 billion in 1/1/13 deal) o 50% from defense, 50% from nondefense programs. o FY 13 cuts now start on March 1, 2013. o Education cuts start July 2013.

10. Sequestration for 2013 Still Major Education Cuts o FY 13 = fixed percentage across-the-board cuts. “Cliff” deal of 1/1/13 reduced 2013 cuts to $83 billion – 5.1% for discretionary Pell grants exempt in first year only. Loan origination fees up 5.1% to 1.05% for Stafford and 4.2% for PLUS Cuts to SEOG, GEARUP, TRIO, Work Study Cuts to NIH, NSF, NEH, DOE, other research o FY 14-21 – lowers discretionary caps instead of across the board cuts Squeezes education $$; Pell no longer exempt.

11. FY 13 Education Appropriations Report o Senate Appropriations Bills passed 3/21/13. 5 months and 21 days after start of FY 2013. o Education funding frozen at 2012 levels, minus sequestration cuts Small very targeted exceptions: political science research funding transferred to NSF o Military tuition assistance funds mostly restored o Process was bi-partisan and done before the 3/27/13 continuing resolution deadline. Gives hope to less rancor

12. Perkins Funding Picture 2013 o No funds appropriated for Perkins in FY2013 because President didn’t ask for them. o BUT: the Perkins Loan Program continues to operate at least through FY 2015, and the Department advises that schools should make as many loans as possible!

13. Deficit Reduction and Fin Aid o College students have contributed $4.6 billion out of their pockets to deficit reduction. o 145,000 students have lost their Pell grant. o Maintaining Subsidized Stafford interest rates also costs roughly $6 billion per year The one year extension expires in July 2013 13

14. No Shutdown, Back to Work! o Next deadline: expiration of the suspension of the debt ceiling in May Next deadline set by H.R.325 “The No Budget, No Pay Act” Extended the debt ceiling until May 18 th. Leads to possible crisis in late June or early July. Default on obligations will not occur until June or July

15. FY 14 Congressional ED Budget Report o Dueling visions from House & Senate o Rep. House concerned with too many subsidies causing tuition inflation. o Dem. Senate concerned with inability of Subsidies (state and fed) to keep up with cost of college

16. FY 14 Presidential Budget o Delivered 2 months and 10 days late o Much of the same 10 billion in campus based aid programs SEOG, FWS, Perkins Funds directed to institutions succeeding in enrolling and graduating students who are Pell eligible & keep tuition down. Interest rate more market driven with fixed variable rates.

17. Student Aid and the Future o Is remaining Stafford Loan subsidy for undergrads soon to be an “offset?” o Are fixed interest rates done? o Back to the future: variable rates? o Pell shortfall and doubling of subsidized Stafford interest rates loom soon o How to pay for it? o Mini-reauthorization in 2013?

18. College Cost: Bipartisan Concern o “College Price Increases out of control” o “Student Loan debt burden excessive” Debt “bubble?” Whose fault is it? Something must be done! o Colleges Are Targeted for “something”

19. College Prices and Costs o Obama campaign highlighted cost of college Full PR campaign launched with allies in consumer groups, blogs, other media, CFPB Promised to halve the rate of HE price increases o Risk sharing by colleges o Obama will push already announced initiatives, including campus-based program changes o But…Congress needs to go along for anything big to happen

20. President’s Plan: Use Campus Based Programs to Control College Costs o “Address rising college tuition costs” by "rewarding colleges and universities that act responsibly in setting tuition, providing the best value, and serving needy students well.” o Proposal: new “Unsubsidized Perkins Loan” program now with up to $8.5 billion in loan volume (was $8 bil). o Current Perkins volume is about $1 billion a year. o Like previous proposals, ED would originate and service Perkins Loans, which would look the same to students as Unsubsidized Stafford Loans: o Congress: Not the least bit interested o Using “Fair Value Accounting” it costs the government $7.2 billion over 10 years – Republicans favor FVA

21. Introduced Legislation o Smarter Solutions for Students Act (H.R. 1911) Introduced by Rep. Kline (MN-D) and Rep. Foxx (NC- R) Move federal student loans to market based interest rate. (exception Perkins) o Improving Postsecondary Education Data for Students Act (H.R. 1949) Introduced by Rep. Messer (IN-R) Help Congress understand what students want & need without overburdening Institutions.

22. Student Loan Statistics Average student loan debt varies widely across states. Wyoming has the least, followed by the Dakotas, Nebraska, and Oklahoma. The highest averages occur mainly in California and on the East Coast.

23. Student Loan Statistics Student loan delinquency rates vary widely across states. With a few exceptions (e.g., the Midwestern states of Michigan and Indiana), northern states have lower delinquency rates than southern states.

24. Student Loan Statistics Approximately 2/3 of student loan balances are owed by people under 40, while nearly 1/3 are owed by people 40 and older.

25. Student Loan Statistics Approximately 60 % of past due student loan balances are owed by people under 40 and about 40% by people 40 and older.

26. Value of Traditional Education Questioned Like Never Before

27. Ongoing Student Loan/Higher Education Consumer Issues to Monitor in the 113 th o HEA—will it happen? Mini Reauth in 2013? o CFPB, particularly interaction with ED Shopping sheet DL servicers? Re-fi market? Private loan servicing standards? Federal loans? (tug of war with ED?) o Loan repayment and federal loan servicing Is IBR a panacea? Complexity an ongoing issue o PLUS Loans: underwriting issues Too lax or too tough?

28. COHEAO Report: Perkins In the Future o Priority for advocacy this year: restore funding for loan cancellations FY 2014 appropriations legislation still pending Importantly: Predicted Pell Grant funding shortfall not expected until 2015. Funds remain tight, but now is the time to make good on the obligation to fund cancellations. No divisions in higher ed community on this

29. COHEAO Goals 2013 o Federal Perkins Loan Program Restore Cancellation Appropriation Advocate for Perkins Capital Contribution HEA Reauthorization – Work begun on proposals for Congress. Contact COHEAO if interested in participating: hwadsworth@wpllc.net o Negotiated Rulemaking 2013 – Dates not set Financial Aid Fraud Regulatory changes related to Campus issued Bank Cards Analysis of Campus-Based Program Regulations – Update and Streamline

30. COHEAO Goals o Consumer Financial Protection Bureau: Stay engaged, responding to requests for meetings, submitting comments on proposals Represent schools on issues related to A/R, disclosures and collections Monitor activities and educate COHEAO membership on CFPB regulations and practices o Financial Literacy Collect and share best practices in developing financial literacy programs on campus Monitor activities related to financial literacy legislation or oversight

31. COHEAO Goals o Accounts Receivable Act as a forum for discussion and sharing of best practices, and advocate where appropriate on issues related to: Collection Regulations on Campus Debt Truth In Lending Act– as related to Tuition Payment Plans and non-federal, campus-based loans. Telephone Consumer Protection Act changes – (permit ethical use of predictive dialers for collection on campus A/R and institutional loans) Bankruptcy (private loans/impact) VA/Military Issues

32. What You Can Do o Join COHEAO: costs are low for institutional members Conference, webinar discounts offset dues Ability to help develop COHEAO positions, advocacy, regulatory responses o Weigh in: support the Perkins Program Message: cost effective financing for students and taxpayers over the long term; don’t squander it for short-term goals, even Pell Grants. o Information on COHEAO activities, including position papers, available at www.coheao.org.www.coheao.org o Help educate Congress—share your stories

33. Moving Beyond Perkins: Some More Key COHEAO Issues o Consumer Financial Protection Bureau o Bankruptcy Law Changes o Private Loan Issues/CFPB o Telephone Consumer Protection Act Coalition Continues – maybe next year for action on autodialing to cell phone restrictions o Financial Literacy o Other AR issues

34. CFPB o CFPB here to stay, all agree o Leadership in Question Date departing on January 31, Cordray may return to Ohio to run for Gov. o Elizabeth Warren on Senate Banking and HELP Committees o For student loans, interaction with Direct Loans something to monitor o Everyone needs to have their policies and procedures in order.

35. Bankruptcy Law Proposals o Current law: all education loans as defined by tax law are dischargeable in bankruptcy when there is undue hardship to debtor or dependents Recent study: very few try to discharge, thinking it’s impossible, but it’s not! o Calls for dropping undue hardship requirement for private loans only o Government loans would remain non- dischargeable including from any “government units”

36. Telephone Consumer Protection Act o Joint reform effort thwarted when 49 state AGs opposed bi-partisan Terry-Towns bill allowing more calls to cell phones. Primary reason: pre-emption, telemarketing o Alliance for Mobile Information: New coalition led by US Chamber of Commerce to continue the reform effort to permit use of auto-dialers to call cell phones o Action will most likely happen next year (hopefully).

37. Tax Reform o Major re-write of federal tax code for first time since 1986 being discussed o Issues facing Higher Ed” Charitable donation deduction cut? Tax exempt bonds, limited use? Tax credits for tuition, employers etc… Student loan interest deduction Role of non-profits in politics

38. Regulatory Activity o Negotiated Rulemaking in 2012 NPRM was published 7/17/12 Closing date for public comment was 8/16/12 Over 2,800 comments submitted Final Regs published on 11/1/12 Effective date 7/1/13

39. Final Regulations o Pay as You Earn Implemented under ICR regulations in Direct Loan Program Borrower must show partial financial hardship Interest is capitalized 10% cap on annual payments of discretionary income Loan forgiveness after 20 years repayment

40. Final Regulations o Total and Permanent Disability Revised regulations to provide for direct application to ED for TPD discharge Allows for “borrower representative” to receive all TPD notifications Allows qualifications based on disability notice award for SSA disability benefits The disability notice must state that the SSA will review the borrower’s eligibility once every 5-7 years

41. Final Regulations – part 2 o Loan Rehabilitation – definition of one-time payment 20 days after borrower due date. o Allows assignment of Perkins loan without SS# If loan was made before ?????

42. Final Regulations – part 2 o Perkins Loan Deferment & Cancellation Incorporates Grad Fellowship deferment eligibility criteria from FFEL regs Addresses cancellation progression for borrowers switching cancellation categories Removes debt-to-income economic hardship deferment category Allow break in cancellation service due to FMLA condition

43. Dept of ED Initiatives o Shopping Sheet – Model Financial Aid Award Letter ED and CFPB partnered to promote transparency in student financial disclosures http://collegecost.ed.gov/shopping_sheet.pdf Secretary Duncan published an open letter to College/University presidents asking them to voluntary adopt the shopping sheet.

44. Dept of ED Initiatives o Financial Awareness Counseling Tool On-line tool to help students manage loan debt Brings transparency to process debt management Provides students with 5 interactive tutorials covering topics from managing a budget to avoid default Provides borrowers access to individual loan history Accessed through StudentLoans.gov

45. Dear Colleague Letters o New Perkins Promissory Notes MPN on IFAP at DCL GEN-12-19 eMPN on IFAP at DCL GEN-12-23 o Fin Aid Shopping Sheet DCL-GEN-13-05 o Assignment/Liquidation Procedures Electronic Announcement 4/19/13 New assignment form – expires 11/30/15

46. Questions???