In a budget deal reached last week, conferees raised approximately $5 billion in savings from two provisions affecting federal student loan programs:
The agreement would require guaranty agencies to lower the amount that they charge borrowers, from 18.5 percent to 16 percent, for rehabilitating defaulted loans in the Federal Family Education Loan program. It would also require the agencies to return 100 percent of the federal default reinsurance payment, beginning on July 1, 2014.
The agreement would eliminate a special mandatory funding carve-out for nonprofit student loan servicers, which work with borrowers on loan consolidation and repayment plans, and would require that they be paid with discretionary dollars.
While many in the higher education community have applauded the deal, primarily because it staves off harmful sequester cuts to education programs and research funding, uncertainty around the future of the Labor-HHS-Education appropriations bill remains. Additionally, the measure still needs the blessing of the Senate, which is scheduled to consider the agreement Tuesday, December 17.
Health Care Reform and Its Impact on Education
On Wednesday, December 11, Republican leaders of the House Education and the Workforce Committee sent a letter seeking feedback from education stakeholders, including institutions of higher education, about how the Patient Protection and Affordable Care Act is affecting the quality of education in classrooms and college campuses across the country. Specifically, committee members are interested to know whether the law has led to higher or lower costs, whether certain employees are seeing their hours increased or decreased, whether educational services are being expanded or cut, and any other unexpected challenges. Stakeholders can submit their stories online at www.edworkforce.house.gov/YourStory or email their comments to TellYourStory@mail.house.gov.
Wednesday, December 18: The Senate Health, Education, Labor and Pensions Committee will vote on the nomination of James Shelton III to serve as Deputy Secretary of Education.
Gainful Employment Regulations
The U.S. Department of Education held its final negotiated rulemaking committee meeting on gainful employment regulations last Friday, December 13, but negotiators failed to agree on draft regulatory language. Prior to the meeting, the Department released an overview of the proposed gainful employment rule that would evaluate programs based on the school’s debt-to-income ratios and cohort default rates as opposed to repayment rates. A program would be considered as failing under the new regulation if its graduates’ loan payments comprise more than 30 percent of their discretionary income or 12 percent of their total income. In addition, programs with a cohort default rate of more than 3 consecutive years would fail. It is estimated that the new regulation would affect 11,735 programs with an estimated 1,496 programs that would fail under the new rule, about 13 percent of total programs.
Last week, 31 House Democrats wrote a letter to Education Secretary Arne Duncan in support of the gainful employment rulemaking process and to urge the Department to quickly issue a final regulation. Despite the lack of agreement, the Department can write the final rule on its own, and is expected to release it in early 2014.
Rulemaking for Federal Student Aid Programs
In November, the U.S. Department of Education announced its intent to establish a negotiated rulemaking committee to prepare regulations on program integrity in federal student aid. The committee will include representatives of organizations that would be significantly affected by such regulations that will focus on issues related to Title IV Federal Student Aid programs, state authorization, clock to credit hour conversion and other topics. Nominations for the committee are due this Friday, December 20.
Employment and Training Administration Nomination
Last week, President Barack Obama nominated Portia Wu to be the next Assistant Secretary for the Employment and Training Administration (ETA) at the Department of Labor. Wu currently works for the White House Domestic Policy Council as a special assistant to President Obama. Once confirmed by the Senate, Wu will head up the ETA, which administers many of the Workforce Investment Act programs, including job training and worker dislocation programs.