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President to President

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

President to President, October 24-28, 2011

Vol. 12. No. 39

  • President Obama Announces Plan for Student Loan Debt
  • College Board Releases Annual Reports on Tuition, Student Aid
  • House Subcommittee Holds Direct Loan Hearing
  • IN BRIEF: Charitable Giving Testimony; ED Announces Negotiated Rulemaking; House Approves Bill to Repeal 3 Percent Withholding; Community Service Honor Roll; Virtual Seminar on Sexual Misconduct and Risk Management; Protect Student Aid

This week's major higher education news focused on student financial aid and college costs, most significantly President Obama's announced plan to expand income-based loan repayment for current students and allow students to consolidate existing loans.

While we are still evaluating the plan, it appears to be a welcome if somewhat modest attempt to assist some current students and certain borrowers already in repayment. The plan has two major elements:

First, it would allow an earlier implementation of the income-based repayment (IBR) program. Created by the Bush administration in 2007, IBR enables graduates with high debt levels relative to their incomes to cap their monthly federal student loan bills. Current law allows borrowers to limit their loan payments to 15 percent of their discretionary income and forgives all remaining debt after 25 years. Last year, the president proposed and Congress enacted a plan to lower IBR loan payments to 10 percent of income and forgive the balance of debt after 20 years of payments. This change is set to go into effect for all new borrowers after 2014. The president's new Pay as You Earn proposal would move the start date to 2012.

Second, the administration is also proposing to offer students who have both government-backed direct loans and bank-based Federal Family Education Loans a half-a-percentage point interest rate reduction if they consolidate into the Direct Loan Program. While Congress ended the bank-based system for distributing federal loans in 2010, some $400 billion in debt is still outstanding on loans issued through the program. The administration estimates that 5.8 million students who have at least one bank-issued loan and one direct loan will qualify for the benefit. The Education Department (ED) will reach out to students about this option early in 2012.

ED published a notice today in the Federal Register that it will use the negotiated rulemaking process to address detailed questions about how the president's plan will be implemented. Nominations to serve on the committee must be received on or before Nov. 28, 2011.

In a coinciding announcement this week, ED said it is working with the new Consumer Financial Protection Bureau (CFPB) on initiatives to make students better informed about college financing decisions. It has released an online tool to give borrowers information about IBR, deferments, and other alternate payment programs and is planning to launch "Know Before You Owe," a program to give consumers a "financial aid shopping sheet" to compare the costs and risks of loans before students enroll. CFPB is soliciting feedback on how to make this resource better.

On the same day as the president's student debt announcement, the College Board released its annual reports, Trends in College Pricing and Trends in Student Aid, which found tuition and fees continuing to rise on campuses around the country, most significantly at public institutions dealing with sharp declines in state funding.

Average tuition and fees for in-state residents at public four-year institutions rose by 8.3 percent from last year to $8,244, while the average for out-of-state residents at public institutions rose by 5.7 percent to $20,770. Average tuition and fees rose by 4.5 percent at private nonprofit institutions to $28,500, by 3.2 percent at for-profit institutions to $14,487, and by 8.7 percent at community colleges to $2,963.

However, according to the reports, average net tuition and fees actually dropped in almost all sectors from last year due to grant aid and federal education tax credits and deductions, which illustrates how serious congressional cuts to federal student aid programs and higher education tax provisions would be.

Interestingly, California's 2011-12 tuition and fee increases of 21 percent at public four-year universities and 37 percent at public two-year colleges raised the national averages markedly. The increase for the public four-year sector was 7.0 percent excluding California, and 8.3 percent including it. The increase for public two-year institutions was 7.4 percent excluding California, and 8.7 percent including it. (See The Los Angeles Times for more on this point.)

By way of explaining the increase, the report notes that between 2007-08 and 2010-11, state appropriations for higher education have dropped by 18 percent per full-time student—the largest three-year decline in the 30-year period covered in the report. These numbers clearly demonstrate how common it has become for state legislatures to dip into the pockets of students and families to balance state budgets, leaving public institutions between a rock and a hard place.

The House Subcommittee on Higher Education and Workforce Training this week heard testimony on how the transition in federal student loans to 100 percent direct lending has progressed since Congress mandated the change in 2010.

As might be expected, a range of pictures emerged from Education Department officials, student aid administrators and Republicans and Democrats on the subcommittee. The consensus from the campus administrators seemed to be that while the initial move to the federal Direct Loan Program created some challenges, no students were denied access to loans during the switch.

Subcommittee Chair Virginia Foxx (R-NC) said the federal government had failed to protect borrowers' personal and financial information, citing a security breach that occurred earlier this month. The lapse, which occurred while the department was transitioning to a new website, lasted about seven minutes and affected as many as 5,000 borrowers. James Runcie, chief operating officer for the Office of Federal Student Aid, said the department took the website down for 48 hours to fix the problem and offered credit monitoring to affected students. He also described several steps the department took to ease the transition to direct lending, including hiring an officer responsible for customer advocacy, financial literacy and consumer protection, and for providing incentives for servicers to reduce student loan defaults.


Along with a group of six other higher education associations, we submitted testimony this week for the record to the Senate Finance Committee for its Oct. 18 hearing, Tax Reform Options: Incentives for Charitable Giving. Our testimony echoed the other nonprofit leaders on the panel, who spoke out against any plan to limit tax deductions for charitable contributions. President Obama has long proposed a new cap on the amount people can deduct from their taxes for large charitable donations as a way to reduce the deficit. Click here to read our remarks.

The Education Department this week announced plans to establish a negotiated rulemaking committee for the Teacher Preparation and TEACH Grant Programs, in addition to the student loan committee mentioned above. The department is requesting nominations for individual negotiators who represent key stakeholder constituencies. Nominations for the Teacher Preparation and TEACH Grant committee must be received on or before Nov. 25, 2011.

The House voted 405-16 yesterday to repeal a measure requiring federal, state and local governments to withhold 3 percent of payments to government contractors, including colleges and universities, starting in 2013. In a separate 262-157 vote, the House agreed to offset the repeal's cost by altering the 2010 health care law to include the nontaxable portion of Social Security benefits in the definition of income used to calculate eligibility for government health care programs. The vote sends the legislation to the Senate, where lawmakers are still debating how to offset the $11 billion the repeal would cost the Treasury in forgone revenue over 10 years.

Colleges and universities can now apply for the President's Higher Education Community Service Honor Roll, a national recognition program that promotes the civic mission of American colleges and universities. The Corporation for National and Community Service will announce the 2012 recipients Monday, March 12, during the morning plenary session at ACE's 94th Annual Meeting in Los Angeles, CA. The application deadline is Dec. 9, 2011.

The National Association of College and University Attorneys and ACE will present a virtual seminar Nov. 3 to discuss the Enterprise Risk Management (ERM) approach to addressing the risk of sexual misconduct on campus. Speakers will provide registrants with sample checklists and policies and a preview of an ERM software tool under development that is tailored to the issues of campus sexual assault. For more information and to register, click here.

Finally this week, as I wrote to you Monday, the Student Aid Alliance has launched a campaign to try to protect student aid programs from additional cuts in any new deficit-reduction package. As of noon today, the Alliance's Student Aid Campaign has received more than 17,000 signatories to a statement to be sent to the Joint Select Committee on Deficit Reduction expressing strong support for sustaining the national investment in federal student aid. There is no official deadline to sign on, but the Alliance hopes to deliver the statement to the committee with a strong list of supporters by early November. If you have not yet signed the statement, please take a minute to do so.

Molly Corbett Broad
President of ACE