Tag Archives: Financial aid policy

Update on Obama Administration’s College Rating System

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More and more details are emerging from D.C. about the college rating system that the Obama Administration has made a primary focus of their higher education policy agenda.

In August President Obama issued an agenda focused on affordability and access to higher education. The President’s plan included paying for performance, promoting innovation and competition, and ensuring that student debt remains limited. The President directed the U.S. Department of Education to develop a rating system as part of his agenda to better inform students and encourage higher education institutions to improve.

The intention of the system is to compare colleges with similar missions and identify those that do the most to help students from disadvantaged backgrounds and those improving their performance. The goal being that the rating system would direct where future federal funds would go.

As part of the development of the system the Department is asking for the best ideas and creative thinking around three primary themes:

  • College access, such as the percentage of students receiving Pell Grants;
  • College affordability, such as average tuition, scholarships, and loan debt; and
  • Outcomes, such as students’ graduation and transfer rates, graduate earnings, and advanced degrees of college graduates

To facilitate feedback in mid-September the Department began a series of nationwide public discussions with student advocates and leaders. It is the intention of the Department in the coming months to travel across the country to host open forums, roundtable discussions, and town halls to gather suggestions. The public is encouraged to send suggestions as well via collegefeedback@ed.gov

 

 

 

 

The Impact to Higher Education if the Government Shuts Down

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Those in the other Washington and higher education experts believe that if the federal government shuts down the impact to higher education will be modest.  That is in the short-term.

The federal government may shutdown on October 1 if Congress does not agree to a stopgap spending measure to keep the government going. It is unclear on October 1 what federal programs related to higher education would be impacted. Last week the White House directed federal agencies including the U.S. Department of Education to update their plans for operation during a government shutdown. The documents have yet to be released.

Looking back at the last close call in 2011, the Education Department estimated that it would furlough almost all of its staff and would rely on a limited number of people on a limited basis if the shutdown was prolonged longer than a week. At this time the Department said that the administration of federal student aid programs would largely be unaffected at least for the first week. A shutdown beyond a week would have a more severe impact on financial aid.

Beyond the potential shutdown next week, higher education is looking ahead to the multiple federal fiscal fights likely this fall. Even if the shutdown does not occur Congress is expected to pass a stopgap measure. This will be a temporary fix and will leave in place the sequester cuts to campus-based financial aid programs and scientific research.  Making the problem further complex are the looming negotiations over the debt ceiling – October 17. If the federal government were to run out of money higher education is concerned about the impact on federal student aid and research funding.

Movement in Washington D.C. on Higher Education

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Last week marked some movement for higher education in Washington D.C.

Higher Education Act

The U.S. Senate committee on education formally began the process to reauthorize the Higher Education Act. The Higher Education Act is the primary federal legislation which governs federal student aid and higher education.

Senator Harkin – Chairman of the Committee – identified his plan for reauthorization. The Committee will hold a total of twelve hearings – eleven more to come – focused on fact-finding over the next several months with the intention of producing draft legislation by early 2014.

On Thursday of last week the Committee held the first of the twelve hearings. The hearing focused on the complex system oversight for higher education in the United States which consists of regulations from the U.S. Department of Education, state regulators, and accrediting bodies.

The plan to produce draft legislation by early 2014 is optimistic given that it took five years longer to complete the last reauthorization in 2008. In addition Senator Alexander – the senior Republican on the Committee – has asked staff to consider drafting a new Act from the beginning potentially complicating the proposed timeline.

U.S. Department of Education Begins Process for Additional Accountability for Institutions

Last week the Department announced it had begun the process for gathering feedback and input on how to develop metrics for the institutional rating system announced by the Obama Administration earlier this year.

The Department is expected to produce a draft rating system by mid-2014 with a final version out by December of the same year. The long-term goal is to develop a rating system by the 2015 academic year and persuade Congress to link that system to federal student aid dollars by 2018.

The head of the Department – Arne Duncan- provided a small preview into what the rating system may look like.  Duncan promised that the system would take a holistic approach to judging institutions on areas of access, affordability and student performance. With the broad goal being to determine “how many students at an institution graduate, at a reasonable cost, without a lot of debt, and get a job that enables them to support themselves and their families.”

Potential metrics that may be considered include the percentage of students receiving Pell grants, the average amount of tuition, scholarships and loan debt; graduation and transfer rates; the salaries of graduates; and the extent to which graduates pursue advanced degrees.

Duncan also shared that the Department will begin with metrics that have data that already exists.

The Department has already begun the feedback process meeting with student advocacy groups last week which kick-off what the Department refers to as a series of discussions with higher education stakeholders in the coming year.

New Leader at the U.S. Department of Education

Late last week the U.S. Department of Education announced that Jamienne Studley will join the Department as a deputy under secretary of education.

Studley will oversee the Department’s second-term higher education agenda.  She is expected to focus on a range of issues including accreditation and college pricing and play a key role in the Obama Administration’s proposed rating system.

Studley is the former president of Skidmore College and a one-time Education Department general counsel. She comes to the Department from Public Advocates Inc a consumer law and advocacy group. She has served since 2010 on the National Advisory Committee on Institutional Quality and Integrity which advises the education secretary on accreditation issues.

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.

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.