Tag Archives: federal

Obama Administration Lays Out Aggressive Postsecondary Education Agenda

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In mid-August President Obama began a short bus tour beginning in New York to talk about college affordability and his plans for addressing access and affordability across the country.

The plan would highlight policy changes in three major areas:

  • Pay for Performance by tying financial aid to college performance, starting with publishing new college ratings before the 2015 year; challenging states to fund public colleges based on performance; and holding students and institutions receiving student aid responsible for making progress toward a degree.
  • Promoting Innovation and Competition to challenge colleges to offer students a greater range of affordable, high-quality options than they do today; give consumers clear, transparent information on college performance to help them make the decisions that work best for them; and encourage innovation by stripping away unnecessary regulations.
  • Ensuring that Student Debt Remains Affordable to help ensure borrowers can afford their federal student loan debt by allowing all borrowers to cap their payments at 10 percent of their monthly income; and reach out to struggling borrowers to ensure they are aware of the flexible options available to help them to repay their debt.

The first major step in implementing this plan will be issuance of new college ratings by 2015. The U.S. Department of Education will develop a new ratings system, to be displayed on institution’s federal scorecards, to help students compare the value offered by colleges and encourage colleges to improve. The ratings will be developed through public hearings around the country to gather input and will be based on such measures as:

  • Access, such as percentage of students receiving Pell Grants;
  • Affordability, such as average tuition, scholarships, and loan debt; and
  • Outcomes, such as graduation and transfer rates, graduate earnings, and advanced degrees of college graduates.

Between 2014 and 2018 the Department will refine these measures and seek legislation using this new rating system to transform the way federal aid is awarded to institutions once the ratings are developed. The goal will be to tie federal student aid funding to institutions to the rankings by 2018.

In addition the plan identifies a number of other policy proposals to work towards greater access and affordability for students. Among these proposals is a Race to the Top for Higher Education to spur state higher education reforms and reshape the federal-state partnership by ensuring that states maintain funding for public higher education. The promotion of innovation and competition by awarding credits based on learning and not seat time, using technology to redesign courses and for student services, and recognize prior learning and promote dual enrollment. Finally efforts will include proposals to ensure student debt is affordable by making borrowers eligible for the Pay as You Earn program.

President Signs Student Loan Interst Rates

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In early August President Obama signed into law legislation to reduce interest rates on all new student loans this year and over the lifetime of a student’s loans.

The bipartisan plan allows borrowers to benefit from the low interest rates currently available in the marketplace and guarantees borrowers are able to lock-in rates over the life of their loans. Fixed rates will be determined each year by market conditions.

Student Loan Interest Bill Passes House Heads to President’s Desk

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This week the U.S. House of Representatives passed student loan interest rate legislation. The bill now heads to the President who is expected to sign it into law.

The legislation will tie interest rates on federal student loans to the market and, at least in the short term, forestall hefty increases that were to hit new borrowers beginning this fall.

The legislation passed the House of Representatives by a wide margin (392-31, with 10 abstentions) after originating in the Senate, which approved it last week. The measure, when signed by President Obama, will reset interest rates on federally guaranteed loans each July based on the previous May’s auction of 10-year Treasury bills. Undergraduate loans — those that are federally subsidized as well as those that are not — would be set at the Treasury rate plus 2.05 percentage points, while loans for graduate students would be set at 3.6 points above the Treasury rate, and loans for parents at 4.6 percentage points over the T-bill rate. The maximum rate would be capped at 8.25 percent for undergraduate loans, 9.5 percent for graduate student loans, and 10.5 percent for parent loans.

 

U.S. Senate Passes Student Loan Legislation

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Yesterday the  U.S. Senate approved legislation to link interest rates on student loans to the market, which would cut rates in the short term but potentially allow them to rise significantly within a few years.

The vote was 81 to 18.  All but one of the Senate’s “no” votes were from Democrats, Republican Mike Lee of Utah was the one “no” from his party. Many of the Democrats voted for an alternative pushed by Sens. Elizabeth Warren and Jack Reed and another proposal that would have sunsetted the proposal before rates were likely to spike.

But with supportive statements issued within minutes of the Senate vote by leading House Republicans  and Rep. George Miller, the senior Democrat on the House education panel, the measure seems sure to pass the House. The White House signaled President Obama’s support early Wednesday, virtually ensuring that it will become law.

Under the legislation, student loan rates would reset each July based on the previous May’s auction of 10-year Treasury bills. Undergraduate loans — those that are federally subsidized as well as those that are not — would be set at the Treasury rate plus 2.05 percentage points, while loans for graduate students would be set at 3.6 points above the Treasury rate, and loans for parents at 4.6 percentage points over the T-bill rate. The maximum rate would be capped at 8.25 percent for undergraduate loans, 9.5 percent for graduate student loans, and 10.5 percent for parent loans.

Because the Treasury rate is low now, the rate on undergraduate loans in the 2014 fiscal year would be 3.86 percent (5.41 percent for graduate students, and 6.41 percent for parents) — well below the 6.8 percent rate that took effect July 1.

Obama to Launch New Aggressive Reform Agenda for Higher Education

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Yesterday in a speech at Knox College in Illinois, President Obama promised to unveil a plan to promote significant reform in higher education. The crux of the plan seems to focus on controlling what colleges charge students.

“[I]n the coming months, I will lay out an aggressive strategy to shake up the system, tackle rising costs, and improve value for middle-class students and their families. It is critical that we make sure that college is affordable for every single American who’s willing to work for it,” said Obama.

“Families and taxpayers can’t just keep paying more and more and more into an undisciplined system where costs just keep on going up and up and up. We’ll never have enough loan money, we’ll never have enough grant money, to keep up with costs that are going up 5, 6, 7 percent a year. We’ve got to get more out of what we pay for,” Obama said.

“Now, some colleges are testing new approaches to shorten the path to a degree, or blending teaching with online learning to help students master material and earn credits in less time.  In some states, they’re testing new ways to fund college based not just on how many students enroll, but how many of them graduate, how well did they do,” he said. “And in the coming months, I will lay out an aggressive strategy to shake up the system, tackle rising costs, and improve value for middle-class students and their families.  It is critical that we make sure that college is affordable for every single American who’s willing to work for it.”

The Latest from D.C.

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In the last two days of this week progress appeared to slow down on two critical fronts in the U.S. Senate.

First, the tentative bipartisan agreement reached earlier this week with regard to student loan interest rates was significantly weakened after the Congressional Budget Office estimated the agreement’s costs at $22 billion over the next decade. The higher-than-expected cost estimate, which would make the loans unprofitable for the government, threatens the deal.

Second, the full U.S. Senate appropriations committee passed a 2014 spending bill that largely mirrored the funding levels for education proposed by the subcommittee earlier this week.  The largest difference in the bill that was passed out of the full committee was a reduction in the funds allocated to the Race to the Top program for college affordability. The bill passed out of committee reduces the funding levels from $400 million to $150 million.
Funding for other education and research programs stayed the same in the full committee’s version of the bill. The bill allocates $850 million for the TRIO programs, which help low-income, first-generation college students prepare for postsecondary education.  Under the bill, the total maximum Pell Grant would rise by $140 to $5,785.

Bipartisan Senate Agreement on Student Loans Reached

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This week the debate on student loan interest rates experienced a step forward. A bipartisan group of senators reached a deal on a long-term change to interest rates for all new federal student loans.

This agreement comes after interest rates on some loans doubled last week. Federally subsidized student loans increased to 6.8 percent from 3.4 percent

The agreement would tie the interest rate on new student loans to market conditions. Rates, based on the yield on 10-year Treasury bills, would vary from year to year, but be fixed over the life of the loan. Rates would be capped so they couldn’t rise indefinitely if interest rates spike: undergraduate loans would be capped at 8.25 percent, and graduate loans at 9.25 percent. Finally, the compromise would be retroactive, so students taking out loans after July 1 would get the new interest rate.

Final details on the interest rate are awaiting a score from the Congressional Budget Office this week. But the bipartisan group agreed that all undergraduate loans would be set at the 10-year Treasury yield plus 1.8 percentage points. For graduate loans, the rate would be the 10-year yield plus 3.4 percent; for Parent PLUS loans, the 10-year yield plus 4.5 percent.

If rates were based on Wednesday’s Treasury yield, undergraduate loans issued today would have an interest rate of 4.5 percent; graduate loans, 6.1 percent; and PLUS loans, 7.2 percent. All are lower than the rates for those loans under current law.

Setting a single rate for all undergraduate loans means that subsidized loans, which go to students determined to have financial need, would no longer have lower rates than unsubsidized loans, which are available to all undergraduates regardless of need. From 2007 until last week, subsidized loans had lower interest rates. The rate for unsubsidized loans has been 6.8 percent.

If the plan passes the Senate, the House of Representatives is likely to follow suit. A vote on the measure has not yet been scheduled.

Developments from the Other Washington

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This week in the other Washington higher education was on the mind of policymakers.

In the U.S. House, the Committee on Education and the Workforce held a hearing on innovation in higher education. Among the topics of most interest to members was the area of competency-based education and prior learning assessment.  Speakers included representatives from the Council on Adult and Experiential Learning, StraighterLine, the University System of Maryland, and Western Governors University.

On the other side of the Capitol, the U.S. Senate Appropriations Subcommittee on Labor Health and Human Services and Education approved a FY14 appropriations bill.

Among the major investments in the bill are funds to support a “Race to the Top” program focusing on college affordability and  a significant increase in funding for the National Institutes of Health.

The bill sets discretionary spending at $164.3 billion. This includes $400 million to support the Obama administration’s “Race to the Top” initiative.  The funding for the program will be an incentive for states to reduce college costs and improve academic outcomes. The subcommittee would also allocate $850 million for the TRIO programs, which help low-income, first generation college students prepare for and succeed in postsecondary education.  Finally, the bill would increase the total maximum Pell Grant by $140 to $5,785.

The House has not yet introduced its version of the appropriations bill. It is considered unlikely that the two bills will be reconciled and passed. The full appropriations committee will meet later this week.

Student Loan Interest Rates Will Increase on Monday

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Congress headed home this evening for the Fourth of July recess without implementing legislation to prevent an increase in the interest rate on federally subsidized students loans. As a result, interest rates will double for students on Monday from 3.4% to 6.8% on new subsidized Stafford loans.

Over the last year, Congress has been working on efforts to prevent what will now take place on Monday.

The Obama administration and Congressional Republicans supported a long-term change to how interest rates are determined for all federal student loans. Those plans differed in the particulars, but both would have tied interest rates to market rates, allowing them to rise without a cap as interest rates go up in the broader economy. Congressional Democrats pushed for a one- or two-year extension of the current 3.4 percent interest rate for subsidized student loans, arguing that the issue should be settled when Congress debates broader higher education legislation in the coming years.

It appeared earlier this week that a bipartisan compromise proposal might be the way to go. However the proposal could not garner sufficient bipartisan support in the Senate and its fate in the House remained uncertain.

Whether students will actually pay the new rate is unclear. On Thursday, Senator Tom Harkin, the Iowa Democrat who chairs the education committee, said that he wanted a one-year fix that would apply retroactively. Since the federal government is the lender for all new student loans, Congress could adjust interest rates after the fact. But where the money will come to pay for the extension, which last year cost $6 billion, is an open question.

The Other Washington Continues Work on Student Loan Interest Rates

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The U.S. Senate is reported to be near a bipartisan compromise regarding student loan interest rates, but it is unclear if the Senate and the U.S. House will be able to find common ground before July 1.

On Monday, the interest rate will increase from 3.4% to 6.8% for federally subsidized Stafford loans without legislative action.

After a year of work on finding a solution and several proposals from both chambers, both parties, and the President it appears there may be emerging a compromise in the Senate. A proposal is circulating that would establish market-based interest rates that split the difference between the Administration’s plan and an earlier proposal put forth by Senate Republicans.

The proposal  would base interest rates on the 10-year Treasury note: undergraduate Stafford loans would have an interest rate of the 10-year Treasury rate plus 1.9 percentage points. Based on Tuesday’s 10-year Treasury note, that would lead to undergraduate loans with an interest rate of about 4.5 percent. Graduate and parent PLUS loans would have higher rates. Rates would vary from year to year for new loans, but remain fixed over the life of the loan.

The House Republican plan is based on similar principles, but would reset the interest rate each year for existing loans based on market conditions — a truly variable rate.

Senator Tom Harkin, the Iowa Democrat who chairs the Senate Committee on Health, Education, Labor and Pensions, was said to be a major hurdle. Harkin is now circulating a market-based proposal of his own. Harkin’s plan would include an interest rate cap — said to be a deal-breaker for Senate Republicans.

The question is whether House Republicans would support the bill. House Republicans have so far been unwilling to support legislation that increases the deficit within the five-year window — the reason their interest rate bill included a variable rate for student loans that resets each year.

If a Senate compromise can’t get enough support to pass the House before the July 1 deadline, Congress could also reach a retroactive compromise that affects loans the Education Department has already made.