James P. Bergeron, President Washington Update James P. Bergeron, President    NCHER Legal Meeting April 13, 2018

Current Landscape

Current Landscape - Administration Trump Administration has been in office for almost15 months…but it is still under-staffed. At ED, of the 15 major positions, 5 have been confirmed by Senate, including Secretary Betsy DeVos, and 6 have been nominated to date (Traditional one-year turnover had little effect since already no Deputy Secretary, no Under Secretary, no Assistant Secretary for Postsecondary Education, no General Counsel). Unconventional President and scandals plaguing recruitment and retention efforts? Probably. Overworked employees are spending most of their time reversing final rules put forth by the Obama Administration (ED - borrower defense to repayment, gainful employment, more on the way; CFPB - request for information on consumer database, enforcement, etc.).

Current Landscape - Congress Congress just returned from its Easter/Passover recess – longest 2-week break so far. As of next week, the House will be in session for only 48 legislative days before the month-long August break, and only 20 days in September and October. The Senate will be in session for a few more days but not much - its an election year! Spring/Summer Agenda: Pass bills that minimize divisions within the parties and drive up turnout for the November election, and confirm as many judges as possible. Reps: Reinforce tax reform and other accomplishments Dems: Keep Trump, front and center, and talk up failures on healthcare/guns Everything else has been pushed off until the lame duck (budget/approps) or to next year.

Policy Forecast

Policy Forecast Like Bush and Obama, the Trump Administration is quickly becoming another avenue for higher education reform. ED delayed all pending regulations, announced that it would revise borrower defense to repayment and gainful employment rules (while addressing guaranty agency collection cost issue), and is conducting comprehensive review of all rules in order to reduce the federal role. Sec. DeVos has made clear that she supports risk-sharing and life-long learning initiatives; White House released its priorities for HEA reauthorization. OMB wants fewer programs (President’s budget eliminated SEOG, PSLF, and subsidized loans, merged TRIO and GEARUP and sent to states, and continues to eliminate Account Maintenance Fees).

Policy Forecast The Department has focused its main attention on improving the experiences that borrowers have with Federal Student Aid and its Next Generation Financial Services Environment: Development of mobile FAFSA. Interaction with IRS for quicker processing of financial information. “Create world-class, mobile-first, mobile-complete, omni-channel engagement capabilities and a state-of-the-art technical infrastructure” – borrower experience mirrors American Express, Discover, etc. ED released a notice seeking public input on dischargeability of student loans in bankruptcy – deadline of May 21.

Policy Forecast U.S. House Education and the Workforce Committee largely completed the hearing process in the 113th and 114th Congress, held 15 hearings. But new Chairs (Foxx/Guthrie), new Ranking Members (Scott/Davis), and 12 new members caused them to hold a few additional hearings last year - March-May held hearings on financial aid simplification, accreditation reform, etc. Committee is more partisan than ever – Republicans think the feds and spending are the problem and pushing for “one loan, one grant” program; Democrats think they are the solution and pushing “free college.” In the past - introduced and passed a series of narrowly-tailored, bipartisan bills centered around transparency, more loan counseling, simplifying the FAFSA, etc.

Policy Forecast In December 2017, Committee introduced/passed H.R. 4508, the PROSPER Act: Consolidates multiple grant (SEOG), loan (subsidized and Perkins Loans), and repayment programs into a new “Federal ONE Loan Program.” Expands federal aid to short-term programs. Repeals the 90-10 rule and includes other provisions favorable to proprietary schools. Repeals Public Service Loan Forgiveness and restructures loan forgiveness timeline for Income Based Repayment.

Policy Forecast

Policy Forecast NCHER sent a letter to the committee supporting certain provisions: Revising preferred lender list restrictions. Allowing defaulted borrowers to rehabilitate their loans twice. Providing authority to financial aid administrators to lower annual and aggregate student loan limits. Promoting financial literacy through enhanced counseling. Providing Direct Loan borrowers with additional disclosures. Extending the authority for Account Maintenance Fees paid to GAs until 2024. Improving student loan servicing. Ensuring federal law and contractual requirements preempt state and local rules impacting federal student loan servicing and collections. Capping the amount that parents can borrower under the PLUS program.

Policy Forecast U.S. Senate largely completed the hearing process in the 114th Congress, but held “a hearing a week” in January and February 2018 on financial aid simplification, accountability, innovation, and affordability in order to further lay the groundwork on HEA reauthorization. During the hearings, Chairman Alexander and Ranking Member Murray argued about the treatment of Secretary DeVos, implementation of the elementary and secondary act, and other non-higher education issues – impacting bipartisan negotiations. Committee remains non-partisan, but confirmation fights and other areas have strained the Alexander and Murray relationship. Republicans are focused on simplification and deregulation, including turning the Task Force on Higher Education Regulation recommendations into legislation, and risk-sharing. Democrats have their own wish-lists, Murray to address homeless children, Gillibrand to address campus safety, Warren to allow borrowers to refinance their federal loans and wrap-in private loans, etc.

Policy Forecast With the HEA reauthorization process taking longer than anticipated, budget and appropriations continue to drive federal higher education policy: Bipartisan Budget Act of 2015 - Amended TCPA to authorize the use of predictive dialer technology to collect a debt owed/guaranteed by the United States. Consolidated Appropriations Act, 2016 - Allocated loan volume to federal student loan servicers on performance and capacity. Amended the Higher Education Act to increase from 95 to 100 percent reinsurance payments on default claims paid by guaranty agencies to lenders. Amended the Higher Education Act to extend authority for Account Maintenance Fees. Further Continuing and Security Assistance Appropriations Act, 2017 – Amended the Higher Education Act to extend authority for Account Maintenance Fees.

Policy Forecast Consolidated Appropriations Act, 2017 – Reinstated Year-Round Pell Grants. Required the Department of Education to allow all of its federal student loan servicers to offer consolidation loans. Required 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. Bipartisan Budget Act, 2018 – Two-year budget agreement that increased discretionary spending for education and extended Account Maintenance Fees until September 30, 2018. Consolidated Appropriations Act, 2018 – Prohibited the Department from moving forward on the federal student loan servicing procurement unless it includes the participation of multiple servicers and they manage “a unique portfolio of borrower accounts and the full life-cycle of loans from disbursement to pay-off.” Allowed institutions of higher education to share financial information with scholarship organizations. Modified the Public Service Loan Forgiveness Program to assist borrowers enrolled in ineligible repayment plans. Incorporated “Children of Fallen Heroes Scholarship Act.” Exempted two colleges from the penalties of cohort default rates.

Policy Forecast Outside of the Trump Administration and Congress, there are several think-tanks, trade associations, and consumer groups interested in higher education reform. States are also passing legislation to create Student Loan Ombudsmen and license federal and private student loan servicers (new fees, disclosures, prohibitions, etc.). Growing consensus on the main problems and challenges with the higher education system: “How do you promote a highly-educated workforce focused on college access AND completion?” “How do you improve institutional quality and hold institutions accountable?” “How do you make college more affordable?”

Policy Forecast But there continues to be no consensus on the role of the federal government to provide solutions to address these challenges. Higher education, including financing, continues to be a high-profile issue. More players in higher education policy than in past (ED, CFPB, Treasury, states, consumer groups, etc.). Federal Student Aid/federal financial aid system envisions limited role for states. Younger and inexperienced House and Senate members and staff responsible for policy development, many with student loans.

Policy Forecast With many moving parts, can consensus be achieved? Accreditation reform Automatic payroll deduction Borrower defenses to repayment Campus-based aid programs 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

Snapshot of Financial Aid Source: College Board

Election Outlook

Election Outlook Key Questions Going Into November 2018 Can Democrats defend all of their vulnerable seats and pick up a few seats to claim a majority in the Senate? Can Democrats pick up the House with a lack-luster agenda or will gerrymandering save Republicans? Will the President’s low approval ratings drag down his party, similar to historical projections? Can Democrats pick up a significant number of Governor seats in the 36 states that have elections?

Election Outlook - Senate RCP: Democrats – 44/ Toss-Up – 7 / Republicans - 49

Aftermath of the Nov Election - Senate If the chamber flips, same Democratic and Republican leadership –Schumer/Durbin and McConnell/Cornyn Same narrow majority on the floor and in committee – 51-49/52-48 either way New Committee Chairs (Murray at HELP and Sanders at Budget) New Ranking Members (Alexander or Enzi at HELP? Shelby at Appropriations) What does this mean for reauthorization of the Higher Education Act? What priorities will be on the table?

Election Outlook - House Republicans - 204 Toss-Up - 30

Aftermath of the Nov Election - House If Republicans lose the majority, Speaker Ryan is likely to step down to be replaced by McCarthy or Scalise. No Changes to Democratic leadership House Education and the Workforce Committee Chair changes hands House Appropriations Committee Chair changes hands either way; Rep. Frelinghuysen retiring, Reps. Aderholt, Granger, Cole, etc. are running What does this mean for H.R. 4508, the PROSPER Act and reauthorization of the Higher Education Act?

Thank you! Any Questions?