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

President to President: Senate Stalls on Student Loan Interest Rate Bill in Advance of July 1 Deadline

June 28-24, 2013 ~ Vol. 14, No. 21

  • Senate Stalls on Student Loan Interest Rate Bill in Advance of July 1 Deadline
  • U.S. Supreme Court Rules in Fisher and Other Higher Ed Cases
  • Senate Approves Historic Immigration Measure

This week began on a high note, with three encouraging rulings from the U.S. Supreme Court, and is ending on an uncertain one, as the Senate remains at an impasse on the interest rate for student loans, which is scheduled to double Monday. In between was very welcome news on the Senate’s comprehensive immigration reform bill, which was approved Thursday with wide bipartisan support.

With the July 1 deadline looming, Congress as of this writing has been unable to move legislation to prevent a hike in the interest rate on federally subsidized student loans from 3.4 percent to 6.8 percent.

On Thursday, Sens. Lamar Alexander (R-TN), Joe Manchin (D-WV), Richard Burr (R-NC), Angus King (I-Maine) and Tom Coburn (R-OK) formally introduced the proposal they’ve been negotiating for the past week. The bill draws on concepts introduced by Republicans and the White House, including tying interest rates to the financial markets. As with the measure the House approved in May, the Senate bill would tie interest rates to the 10-year Treasury note and allow the rates to fluctuate. Unlike the House bill, the Senate measure would not cap how high rates could rise. The Senate bill features a rate structure comparable to a fixed home mortgage, where rates vary year-to-year but once a loan is taken out the rate is locked in. But in the House bill, rates would vary annually throughout the life of each loan, as would repayment amounts. The Senate bill also would differentiate between undergraduate and graduate Stafford loans for the first time in the history of the program, with graduate students paying a higher interest rate (approximately 5.21 percent for graduate students in the first year, compared to 3.66 percent for undergraduates).

Democratic leadership in the Senate continues to favor a short-term extension of the current rate, so chances that the bipartisan bill will be brought to a vote before Monday’s deadline appeared increasingly slim as of late Thursday. Senate Majority Leader Harry Reid (D-NV) and Sen. Tom Harkin (D-IA) have raised the possibility of holding a vote after the July 4th recess to retroactively adjust the rates if a compromise can be reached. The soonest this could happen is the week of July 8. At this point, the outlook for legislation is unclear.

In a week of landmark decisions, the U.S. Supreme Court Monday issued its ruling in Fisher v. University of Texas at Austin (UT), which concerns the constitutionality of UT’s admissions policy. The court also handed down rulings on two employment-related cases we have been monitoring.

The court’s ruling in Fisher preserved the principle that universities may consider racial and ethnic diversity as one factor among many in a carefully crafted admissions policy. But because it found that the lower court (the U.S. Court of Appeals for the 5th Circuit) failed to use the appropriate “strict scrutiny” test in evaluating UT’s policy, it sent the case back to the Court of Appeals for reconsideration. The decision was 7-to-1. (Justice Kagan recused herself from the case.)

We are deeply gratified that the court agrees with the higher education community that the unique educational benefits flowing from a diverse student body are a compelling government interest. But as I wrote to you Monday, the ruling is complex, and colleges and universities will have work to do. Please encourage your staff to register for our July 10 webinar (free for ACE members) for a detailed discussion of how you can work within the parameters laid out by the court to continue to provide the optimal learning environment for your students.

Also Monday, the court issued two 5-4 employment law rulings that have major implications for claims brought under Title VII of the Civil Rights Act of 1964. ACE filed amicus briefs in both cases on behalf of the universities involved and both decisions represent clear victories.

In Vance v. Ball State University, the court held that an employee is a "supervisor" for purposes of automatic liability under Title VII only if he or she is empowered by the employer to take tangible employment actions against the victim. In so ruling, the court narrowed and clarified the definition of "supervisor" and rejected the Equal Employment Opportunity Commission's broad definition of supervisor. In University of Texas Southwestern Medical Center v. Nassar, the court held that for Title VII retaliation claims, a plaintiff must prove the retaliation was the determining factor in the employment action rather than just one of many motivations.

While we can claim victory in both cases, the 5-4 decisions show that the court is still deeply divided on these issues. We will be monitoring whether Congress takes any legislative action in response to these rulings.

The Senate yesterday voted 68-32 to approve a historic plan to overhaul the nation’s immigration system which contains a number of provisions we strongly supported, notably a DREAM Act for students.

Passage of the Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 (S. 744) was secured earlier in the week after an agreement on a border security amendment and an estimate by the Congressional Budget Office that the measure would reduce the deficit by $197 billion over 10 years paved the way for more Republican support.

On behalf of the higher education community, I sent a letter to the Senate Wednesday offering our full support for the measure. The centerpiece of the bill is a 13-year path to citizenship for many of the 11 million people now in the country without legal status. This path would be expedited for DREAM Act students, young people brought illegally to the United States as children.

The version of the DREAM Act included in the measure removes the age cap for eligibility, repeals the current federal law that limits states' options to provide in-state tuition to undocumented students and allows these students to qualify for federal loans and work-study. The bill also increases the number of H1-B visas for highly skilled workers and reforms the green card system so that STEM graduates have an easier time securing permission to stay in the United States post-graduation.

However, the legislation’s fate in the House currently is not promising. Speaker John Boehner (R-OH) has assured House Republicans that the House will not simply take up and pass the Senate bill. House Republicans plan to meet after the July 4th break to discuss immigration, after which GOP leaders could bring to the floor a series of individual bills the House Judiciary Committee has been approving along party lines.

Molly Corbett Broad
President of ACE