NCHER Winter Legal Meeting Washington Update    NCHER Winter Legal Meeting March 24, 2017

Impact of Recent Election Washington, DC – and the country at large – is still digesting the recent election and many experts are still recovering after “measuring the drapes” This isn’t entirely new – Republicans typically move away from the Washington-centric mentality (Bush selected Cabinet secretaries while leaning on a fence post in TX) and reemphasize certain priority areas But no one knows – including the President’s own party – how and whether the new Trump Administration will be able to build a “governing coalition” over the next four years

Impact of Recent Election Major jockeying by various players on who makes federal policy: Ryan says Congress Trump says Administration McConnell says…it depends…and that’s what will really happen…

Impact of Recent Election U.S. House has 237 Republicans and 193 Democrats, with 5 vacancies (Pompeo, Price, Mulvaney, Zinke, and Becerra) Speaker Ryan and his leadership team can lose 21 Republicans on any vote and still carry the day (40-member Freedom Caucus) Before 2018, watch the special elections. First one is April 18 for Rep. Price’s seat

Impact of Recent Election U.S. Senate has 52 Republicans and 48 Democrats (including “Independents”) Majority Leader McConnell can lose just 2 Republicans on any vote (demonstrated by ED Secretary Betsy DeVos’ confirmation) but needs to pick up 8 Democrats to still carry the day In 2018: 25 Dem seats up and 9 Rep seats up including Alabama

Impact of Recent Election Trump Administration has been in office for 63 days – 100 day mark is April 29, 2017 Like previous Administrations, the White House is attempting to drive the policy agenda, based on campaign promises (DPC under Bush and Obama) Also controlling/slowing-down the hiring process for federal agencies (Stroup nominated and confirmed mid-2002). Currently, ED has Secretary, some Special Assistants to the Secretary, and benchmark teams, but little else.

Impact of Recent Election Like previous Administrations, lack of policy knowledge and staff has resulted in early missteps since proposals have not been properly vetted and coordinated Unlike previous, current Administration is not bound by conventional wisdom (Cabinet selections weren’t chosen to please constituency; media isn’t invited to certain events; etc.)

Current Policy Landscape Current Republican party has largely been born out of the “Tea Party” movement – highly conservative, bordering on libertarian. Acted as minority party. Largely able to get their agenda through the House and (to a certain degree) the Senate. But never able to get bills signed into law With unified Republican control, the party has a major opportunity to reshape the nation’s policy agenda. But quickly finding out that there are major challenges – including their President.

Current Policy Landscape Early 2017 U.S. House - Repealing Obama-era regulations, FY 2017 budget reconciliation/healthcare reform Senate – Confirmations of Cabinet, Supreme Court nomination, clearing what the House passes

Current Policy Landscape Mid-2017 Healthcare reform (cont.), FY 2017 appropriations, begin FY 2018 budget and approps, debt ceiling, sub-Cabinet (Senate)

Current Policy Landscape Late-2017 FY 2018 budget reconciliation/ tax reform (and student loans?), FY 2018 approprs, infrastructure package, Higher Education Act (?) At some point, members will run out of “band-with” to cast hard votes

Current Policy Landscape Major interest from Congress, Administration, think-tanks, trade associations, consumer groups, etc. for higher education reform Growing consensus on the main problems and challenges with the higher education system “How do you promote college access AND completion?” “How do you improve institutional quality and hold institutions accountable?” “How do you make college more affordable?” “How do you get the private sector back into student lending?”

Current Policy Landscape But no consensus on the role of the federal government to provide solutions to address these challenges Higher education, including financing, is a high-profile issue More players in higher education policy than in past (ED, CFPB, Treasury, consumer groups, etc.)

Current Policy Landscape – House HEA Reauthorization Process Completed hearing process in the 113th and 114th Congress, held total of 15 hearings But new Chairs, new Ranking Members, and new members have re-started the hearing process (last Tuesday’s hearing on financial aid simplification) Introducing a series of narrowly-tailored, bipartisan bills (more transparency, more loan counseling, simplifying the FAFSA, etc.) But one comprehensive bill coming later – and it won’t be bipartisan Wildcard: Will Republicans own Direct Lending? Where is the Trump Administration on higher education?

Current Policy Landscape – Senate HEA Reauthorization Process Largely completed hearing process in the 114th Congress With same Chair, Ranking Member, and members, likely to be a few hearings but not a lot Likely to resurrect its 2015-2016 process to break into various groups focused on financial aid, deregulation, sexual assault, etc. Republicans are focused on simplification and deregulation, including turning the Task Force on Higher Education Regulation recommendations (i.e. preferred lender list requirements) into legislation, and risk-sharing Democrats have their own wish-lists, Murray to address homeless children, Gillebrand to address campus safety, etc. Wildcard: Will Democrats, including Sen. Elizabeth Warren, fight or work together?

Current Policy Landscape With many moving parts, can consensus be achieved? Accreditation reform Automatic payroll deduction Borrower defenses to repayment Capping Grad/Parent PLUS Competency-based education Debt-free college Federal-state partnership Federal student data system Financial education/literacy Gainful employment for all schools Income share agreements One loan, one grant program “Pell-Well” concept Private loan regulation Public service loan forgiveness Repayment rates v. default rates Risk-sharing proposals Sexual abuse protections Simplifying repayment plans Student loan servicing changes Teacher preparation improvements Year-Round Pell Grants 90-10 and other prop school issues

Current Policy Landscape – Action is Still with Budget and Appropriations Bipartisan Budget Act of 2015 - Amended TCPA to authorize the use of predictive dialer technology to collect a debt owed to or guaranteed by the United States Consolidated Appropriations Act, 2016 - Amended the Higher Education Act to increase from 95 to 100 percent reinsurance payments on default claims paid by guaranty agencies to lenders Consolidated Appropriations Act, 2016 - Amended the Higher Education Act to extend authority for Account Maintenance Fees Consolidated Appropriations Act, 2016 - Allocated loan volume to federal student loan servicers on performance and capacity Further Continuing and Security Assistance Appropriations Act, 2017 – Amended the Higher Education Act to extend authority for Account Maintenance Fees House Labor/HHS/ED Appropriations Act, 2017 - Require the Department of Education to put in place a plan under which it will give credit for subcontracting with small businesses, including state-based nonprofit organizations with expertise in assisting borrowers

Current Policy Landscape – Action is Still with Budget and Appropriations House Labor/HHS/ED Appropriations Act, 2017 - Require the Department of Education to put in place a plan for how it intends to implement the third-party servicer requirements Senate Labor/HHS/ED Appropriations Act, 2017 - Require the Department of Education to allow all of its federal student loan servicers to offer consolidation loans But the Administration is quickly becoming another avenue for NCHER members to accomplish their priorities…. Withdrawal of Dear Colleague Letter on collection costs

Promoting Tax-Exempt Financing (non-HEA) Preserve tax-exempt financing of education loans in any tax reform package Support H.R. 480, the “Student Loan Opportunity Act” to update Section 150(d) Repeal the Alternative Minimum Tax Clarify IRS guidance on refunding bonds

Leveraging Technology to Help Struggling Borrowers (non-HEA) Oppose the HANG UP Act to repeal the recent changes to the Telephone Consumer Protection Act Urge the Federal Communications Commission to reconsider its final rules and strike a more appropriate balance between protecting and helping borrowers

Reducing Burdensome Federal Regulations Repeal the preferred lender list restrictions Rescind the Dear Colleague Letter on collection costs (Done) Allow state grant agencies to have access to the school list order

Expanding Access to Loan Rehabilitation Allow defaulted borrowers to rehab their student loans more than once – w/ conditions? Allow access to the National Directory of New Hires and the National Student Loan Data System so servicers and guaranty agencies can provide counseling and repayment options to borrowers

Streamlining Repayment and Preventing Overborrowing Streamline the myriad of repayment plans to help students and family borrowers Improve the annual recertification process for borrowers in Income-Driven repayment plans Simplify the FAFSA to reduce the number of questions and length of time required to complete the form

Streamlining Repayment and Preventing Overborrowing Provide authority to financial aid administrators to low annual and aggregate loan limits Consider capping the amount parents can borrow under the PLUS program

Helping Students Make Smart Postsecondary Decisions Provide pre-college, in-school, and post-college financial education and debt management services to students, borrowers, and families Strengthen existing entrance and exit counseling Promote the use of 529 plans

Providing an Orderly Wind-Down of the Federal Guaranteed Program Authorize the payment of Account Maintenance Fees through 2026 Provide just-in-time reinsurance payments Remove the 45% cap on recoveries through Federal Consolidation Loans

Providing an Orderly Wind-Down of the Federal Guaranteed Program Develop a specific process for those guaranty agencies interested in relinquishing their FFELP portfolios, and the criteria and process the Department will use when selecting successor agencies

Promoting Better Loan Servicing Review the current procurement to identify necessary changes to the policies and approaches that will improve federal student loan servicing Promote the use of state and nonprofit organizations with expertise in helping borrowers

Promoting Better Loan Servicing Ensure there are common performance metrics across all servicers Ensure federal law and contractual requirements preempt state and local rules that impact federal student loan servicing

Promoting the Availability of Private Loans Mandate that borrowers receive accurate disclosures of the costs of their loans Permit private lenders to remove the default record upon the rehabilitation of a private loan

Leveraging Private Sector Participation in the Federal Program Require federal agencies to use Fair-Value Accounting when measuring the true costs of federal credit programs Enhance the role of private capital and local expertise – led by state and nonprofit lenders, holders, servicers, and collectors – in financing the cost of college and administering education loans

Thank you! Any Questions?