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President to President
Molly Corbett Broad's weekly email newsletter to higher education leaders.

President to President: Cost Estimate Puts Senate Student Loan Deal in Doubt

July 8-12, 2013 ~ Vol. 14, No. 22

  • Cost Estimate Puts Senate Student Loan Deal in Doubt
  • Senate Appropriations Committee Approves FY 2014 Labor-HHS-Education Spending Bill
  • House Hearing Looks at Improving Higher Education Through Innovation
  • IN BRIEF: Health Care Employer Mandate Delayed for One Year; Obama Administration Issues Guidance for Developing Campus Emergency Operations Plans; Archive of ACE Fisher v. UT Webinar Now Available; NACUA, ACE to Hold Fisher Webinar July 19

It was another week of unpredictable twists and turns as Congress—more precisely, the Senate—sought to find a way to reverse the increase in interest rates on federal subsidized student loans that took effect July 1. There was considerable activity, but as of late Thursday night, there was no agreement about how to proceed.

To recap, the interest rate charged to students who take out federal subsidized student loans increased from 3.4 percent to 6.8 percent July 1. (Interest rates on unsubsidized Stafford loans and PLUS loans did not change and remain at 6.8 and 7.9 percent, respectively.)

The House passed legislation in the spring that would have changed the way student loan interest rates are set. Under the terms of the House bill, the rate on student loans would be tied to federal borrowing costs and would be based on the yield of 10-year Treasury notes rather than set through a political process. Therefore, rates on subsidized and unsubsidized Stafford loans would be 4.31 percent and PLUS loans would be 6.31 percent, based on pre-June 1 Treasury note rates. The rates would change annually throughout the life of the loans, although they would be capped from rising above 8.5 percent and 10.5 percent, respectively.

The Senate, however, was gridlocked over competing proposals. The plan by the Democratic leadership would extend the current interest rates for at least one more year. An alternative proposal, authored by Sens. Alexander (R-TN), Manchin (D-WV), Burr (R-NC), King (I-Maine) and Coburn (R-OK), would have moved to a variable rate, like the House bill. The problem was that neither plan could attract the 60 votes needed to proceed to a final vote.

The Senate voted on the Democratic proposal Wednesday, and once again, it fell short of the required 60 votes. No vote was taken on the Alexander-Burr-Manchin-King-Coburn plan.

At this point, both sides engaged in a series of last-ditch negotiations to find a compromise. After extensive discussions, they hammered out a plan based on the Alexander, et. al. approach that added a cap on interest rates which seemed acceptable to all negotiators.

Word quickly spread Thursday that a tentative deal had been reached, but the good news proved premature: Late Thursday night, the Congressional Budget Office (CBO) estimated the proposed agreement would actually cost the federal government $22 billion over the next decade. Because any new plan has to be cost-neutral, the CBO ruling marks the end for this bill.

The good news is that serious negotiations have begun in the Senate, and a general framework appears to have been agreed upon. But ultimately, despite a great deal of effort, we are no closer to a solution this week than we were two weeks ago.

The Senate Appropriations Committee yesterday approved a $164.3 billion FY 2014 spending bill for Labor, Health and Human Services, and Education, a measure that contains modest increases for some postsecondary programs. Unfortunately, while most of the funding levels in the bill represent increases over FY 2013, they remain below the levels for FY 2012, which preceded the across-the-board cuts imposed by sequestration earlier this year.

Under the bill, the total maximum Pell Grant award would rise $140 to $5,785. TRIO programs, which help low-income, first-generation college students prepare for and succeed in postsecondary education, would increase by $53.9 million over FY 2013 levels to $850 million, while Federal Work-Study funding would increase by $50 million to $1.025 billion. On the research side, funding at the National Institutes of Health would increase by $307 million to $31 billion.

The other significant news stemming from the bill is $250 million in funding for the Obama administration’s Race to the Top program for higher education. Modeled on an identically named program for K-12, the higher education Race to the Top program (first proposed by President Obama in his 2012 State of the Union address) would provide a pool of funding that states would compete for, with the secretary of education making awards based on criteria not subject to congressional approval. However, the K-12 program has been unpopular with some, and House Republicans are unlikely to allow this money to be included in the bill.

Because of the controversies that surround the Labor, Health and Human Services funding bill, it’s unclear when or even if the full Senate will consider it. Further complicating matters is that the House has taken no action at all on its version of the bill. 

The House Education and the Workforce Committee held a hearing Tuesday on “Improving Higher Education Through Innovation,” the latest in a series of panels the committee has scheduled to prepare for reauthorizing the Higher Education Act, which expires at the end of 2013.

Members from both sides of the aisle expressed interest in competency-based learning, prior learning assessment and innovations in online coursework, including massive open online courses, or MOOCs. The continued relevance of the credit hour standard was also discussed.

To read witness testimony or view a webcast of the hearing, see the committee’s website. You also might be interested to read ACE Senior Vice President Terry Hartle’s recent column in The Presidency, “Higher Education Has Changed. Will the Higher Education Act?"

IN BRIEF

The Internal Revenue Service (IRS) on Wednesday issued guidance on last week’s announcement from the Obama administration that it will provide an additional year before the Affordable Care Act mandatory employer and insurer reporting requirements begin. The IRS says the delay in implementation (which now will be fully effective in 2015) will provide additional time for input from employers in an effort to simplify reporting requirements and to provide employers, insurers and other providers time to adapt their health coverage and reporting systems. However, once the information reporting rules have been issued (possibly later this summer) employers are encouraged to begin voluntarily complying at that point with reporting requirements.

The Obama administration has released a report and guidance on Developing High-Quality Emergency Operations Plans for Institutions of Higher Education. The guide includes four sections: principles of campus emergency management planning; processes for developing and implementing higher education emergency operations plans with community partners; the content of higher education emergency operations plans; and a look at specific issues such as the Clery Act, information sharing, international students, campus law enforcement and “active shooter” situations. The report recommends that teams responsible for campus emergency operations plans use the document to guide their efforts.

Lastly this week, thanks to all of you who participated in Wednesday’s webinar on the Supreme Court’s decision in Fisher v. University of Texas at Austin and how it might impact your campus. An archive of the event, which was free for ACE members, is now available on our website. Please let your staff know that ACE also is co-sponsoring a webinar July 19 with the National Association for College and University Attorneys (NACUA) on the Fisher decision. For more information and to register for that event, see the NACUA website.

Molly Corbett Broad
President of ACE