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

President to President: Senate Reaches Bipartisan Deal on Student Loan Interest Rates

July 15-19, 2013 ~ Vol. 14, No. 23

  • Senate Reaches Bipartisan Deal on Student Loan Interest Rates
  • ACE, Higher Ed Groups Thank House Members for Introducing Higher Education Regulatory Relief Bill
  • Campuses Encouraged to Weigh In on Tax Reform
  • ACE Writes Treasury on Health Care Reform Law and Student Employment
  • House, Senate Committees Approve FY 2014 Commerce-Justice-Science Funding Bills

The Senate appears once again to have reached a deal on student loan interest rates. The new deal encompasses all student loans and was prompted by the doubling of rates on subsidized Stafford loans to 6.8 percent July 1. After last week’s compromise plan was jettisoned at the last minute due to a $22 billion cost estimate, this latest agreement appeared as of Thursday evening to be on its way to a full Senate floor vote Tuesday.

Under the new compromise plan, interest rates on both subsidized and unsubsidized undergraduate Stafford loans would be tied to the 10-year Treasury rate with an add-on of 2.05 percent. Rates on these loans would be set at the time the loan is taken out, fixed for the duration of the loan, and capped at 8.25 percent to guard against future increases in market rates. The plan takes a similar approach to Stafford loans for graduate students, which would have a 3.6 percent add-on and a cap of 9.5 percent, and PLUS loans, which would have a 4.6 percent add-on and a 10.5 percent cap. The bill would generate $715 million in savings, which would be used for deficit reduction.

I issued a statement yesterday offering our full support for the bill and urging the Senate to pass it swiftly. As our students begin to finalize their loans for the fall semester, we are extremely pleased this issue is coming to a resolution.

After the Senate vote, it is likely that the House will move quickly to vote on the Senate bill, though the exact path forward is still to be determined. I will update you next week, hopefully with news of the final measure.

ACE and a group of higher education associations and accrediting organizations sent a letter July 17 to three House members thanking them for introducing the Supporting Academic Freedom Through Regulatory Relief Act (H.R. 2637). The bill would repeal three Education Department (ED) regulations we believe are complex, confusing and burdensome, and that have raised challenging compliance issues for institutions.

The regulations in question include gainful employment, state authorization and the definition of credit hour, which all have been extremely problematic since ED finalized them in 2011. Most recently, the department announced in May that it would delay implementation of the state authorization regulation after questions arose about whether state authorization processes in certain states met the federal regulation’s requirements.

H.R. 2637 was introduced by Reps. Virginia Foxx (R-NC), chair of the House Education and the Workforce’s Subcommittee on Higher Education and Workforce Training; John Kline (R-MN), chair of the full committee; and Alcee Hastings (D-FL). The committee has not yet indicated when the bill will be considered.

Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) last month proposed a “blank-slate” approach as a legislative starting point for tax reform and called on Senate colleagues to provide proposals to revise and improve the tax code.

Please consider contacting your senators to ensure they are aware of the impact tax reform could hold for higher education and express these concerns to the committee. ACE and the Association of American Universities have prepared a document that can help you in your discussions. These talking points outline the tax provisions that are particularly important to campuses, including education tax credits and deductions for individuals, charitable giving incentives, employee educational assistance and tax-exempt bond financing.

Senators have until the upcoming August recess to submit their proposals, so please plan your communications with this deadline in mind.

We wrote to the Treasury Department this week to follow up on a recent meeting we had with officials there about the treatment of student campus employment under proposed regulations for the Affordable Care Act (ACA), President Obama’s signature health care reform law.

The proposed rules deal with employer-shared responsibility for employee health insurance coverage. We are deeply concerned that the final regulations will inadvertently impose a burden on the budgets of colleges and universities that will have a negative impact on working students. In our letter, sent on behalf of eight other higher education associations, we outline how the department could write the final regulations to ensure campuses can continue to employ these students while still meeting the goals of the ACA to ensure broad access to sufficient, affordable health insurance coverage.

In federal funding news, both chambers advanced their respective versions of the FY 2014 Commerce-Justice-Science (CJS) spending bill this week.

In the House, the full Appropriations Committee approved its bill on a voice vote Wednesday. It provides $7 billion for the National Science Foundation (NSF), which represents a cut of $259 million from what Congress approved in FY 2013. The Senate Appropriations Committee approved its bill on Thursday, setting NSF funding at $7.4 billion, or roughly $190 million above Congress’ FY 2013 allocation.

Because of the significant differences between the House and the Senate over this and other FY 2014 spending bills, it seems unlikely the chambers will be able to reconcile many of the measures. In all likelihood, funding decisions for most of the federal agencies for the fiscal year that begins Oct. 1 will get caught up in the negotiations over the extension of the federal debt ceiling, which most likely will take place in December.

Molly Corbett Broad
President of ACE