The National Association of Student Financial Aid Administrators © NASFAA NASFAA’s Update: Inside the Beltway

© NASFAA 2013 Agenda Washington Political Climate Federal Budget Update President Obama’s College Affordability Plan Interest Rates Cohort Default Rates Reauthorization Negotiated Rulemaking NASFAA Proactive Policy 2

© NASFAA 2013 Washington Political Climate 3

© NASFAA 2013 Washington Political Climate Partisanship, Brinkmanship, and “Blame Game” Deficit Reduction Budget Politics Dictating Policy Compromise = Bad word 4

© NASFAA 2013 Budget 101 What *should* happen: President delivers Budget Request to Congress House and Senate draft Budget Resolution 12 Appropriations Subcommittees draft bills All should be completed by Oct. 1 (beginning of new fiscal year) 5

© NASFAA 2013 What Congress Thinks of Budget 101 6

© NASFAA 2013 Budget Update—Federal Spending 7

© NASFAA 2013 Budget Update—Gov’t Shutdown Government shutdown—result of Congress failing to pass a spending bill for fiscal year (FY) 2014 by Oct. 1 Spending bill got caught up in larger partisan battles Congress reached agreement at 11 th hour on 10/16 – Opens federal government through January 15 th – Extends debt ceiling through Feb 7 – Creates Budget Conference to address “longer-term” spending 8

© NASFAA 2013 Budget Update—Sequestration Sequestration is a 10-year process Implemented 3/1/2013, Year 1 impact: – 5 % across-the-board cut to FSEOG, FWS, TRIO, GEAR UP – 6 % across-the-board cut to TEACH Grant – Increase in Direct Loan origination fees – Pell Grant was protected Years 2-10 cuts will be achieved through lower spending caps 9

© NASFAA 2013 Budget Update—Sequestration Year 2 Impact (beginning Oct. 1, 2013): – Mandatory Programs TEACH Grants—must be reduced by 7.2 percent (up from 6 percent) Iraq-Afghanistan Service Grant—reduced by 7.2 percent (down from 10 percent) Origination fees (loans disbursed on or after Dec. 1) – Direct Sub & Unsub: % – PLUS (Grad and Parent): 4.288% – Discretionary Programs: Unknown until FY 2014 appropriations are complete 10

© NASFAA 2013 Budget Update—Sequestration What’s next? Unless Congress passes a law to stop sequestration it will remain in effect No appetite on the Hill to repeal sequestration, but willingness to consider replacing 11

© NASFAA 2013 Budget Update—FY 14 Predictions It is likely that FY 2014 (award year ) will ultimately be funded by a year-long continuing resolution (CR) In this case, the student aid programs would likely see the same exact cuts they experienced in FY 2013 (award year ). Pell would also likely be protected. 12

© NASFAA 2013 President Obama’s College Affordability Plan Plan announced in late August Three part: – Paying for performance – Promoting innovation and completion – Ensuring that student debt remains affordable Key Feature: – Prior to 2015 award year, develop a “college ratings system” that would “compare colleges with similar backgrounds as well as colleges that are improving their performance.” ED would be directed to involve key stakeholders in developing the metrics and to include measures related to access, affordability and outcomes – The intent is that by 2018 an institution’s rating would be used to determine the amount of student aid they receive 13

© NASFAA 2013 President Obama’s College Affordability Plan Other features of plan: – “Race to the Top” for higher ed – Reward colleges with a Pell “bonus” – Strengthen Satisfactory Academic Progress (SAP) – Encourage innovation in learning models (MOOCS, Prior Learning Assessment, Competency-based Learning) – Make all borrowers eligible for Pay As You Earn (PAYE) & launch a campaign to raise awareness about eligibility and enrollment 14

© NASFAA 2013 President Obama’s College Affordability Plan Odds of Implementation: Some features of the president’s plan would require congressional action, while others would not No Congressional Action Needed: – Development of “ratings list” – Campaign to enroll more students into PAYE Congressional Action Needed: – Coupling a school’s rating to student aid eligibility – The parts of the proposal that would require new funding or make changes to current programs 15

© NASFAA 2013 Student Loan Interest Rates Signed into law early August Interest rates tied to market-rates (T-bill plus add-ons) Variable-fixed Impacts all borrowers. New rates: – Undergrad (sub and unsub) loans: 3.86% – Graduate unsub: 5.41% – PLUS: 6.41% Caps included in law: 8.25; 9.5;

© NASFAA 2013 Cohort Default Rates Two year average rate rose from 9.1 to 10% – Public: 9.6% – Private not-for-profit: 5.2% – For-profit: 13.6% – Community College: 15% Three year average rate rose from 13.4 to 14.7% – Public: 13% – Private not-for-profit: 8.2% – For-profit: 21.8% – Community College 20.9% 17

© NASFAA 2013 Reauthorization Higher Education Act reauthorization *should* occur in 2014; but that is very unlikely – The process will definitely start, but there may not be a final bill NASFAA’s Reauthorization Task Force submitted recommendations to House and Senate Ed Committees Predictions about reauthorization? – Likely will occur piecemeal and not in full for at least another couple of years – Major subjects for debate are likely to be: student loans, innovative learning models (MOOCs, Prior-Learning Assessment, Competency- based Learning), consumer information 18

© NASFAA 2013 Negotiated Rulemaking: Gainful Employment September, 2013: first negotiating session Ongoing: negotiators continue conversations within topical sub-groups October 21-23: second (and last) negotiating session Prediction: no consensus Because of master calendar requirements, earliest possible effective date is July 1, 2015 Second negotiating session postponed, new dates: Nov

© NASFAA Percent Sub Loan Limitation Moving Ahead for Progress in the 21 st Century Act (MAP-21), aka “Highway Bill” Enacted July 6, 2012 Extended the 3.4% interest rate for subsidized loans until July 1, 2013 Established a time limit for subsidized loan eligibility for new borrowers on or after July 1, 2013 Waived master calendar and negotiated rulemaking requirements 20

© NASFAA Percent Sub Loan Limitation Interim Final Rules Published May 16, 2013 Comment period until July 1,

© NASFAA Why is Proactive Policy Important?

© NASFAA 2013 NASFAA Proactive Policy Task Force on Student Loan Indebtedness Reimagining Aid Design & Delivery Task Force on Award Notification and Consumer Information & related consumer testing Consumer Testing of Award Letters Advocacy PipelineUpdating Ethical Principles and Code of Conduct White Paper on Regulatory Burden Advocacy Pipeline 23

© NASFAA 2013 Advocacy and YOU You are each in a great position to advocate! Visit our Facebook Page for updates on student aid! Visit our website: Get students involved! 24

© NASFAA 2013 Questions? 25