Tag Archives: Financial aid policy

New Financial Reform Law Affects Higher Education

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At the end of July the Wall Street Reform and Consumer Protection Act was signed into law. The law impacts higher education in many ways.

The law creates a new Consumer Financial Protection Bureau (CFPB) that specifically has jurisdiction over any person or entity that offers “private education loans”. The CFPB will be a part of the Federal Reserve System  and has the power to issue and enforce regulations to protect consumers from abuses. The jurisdiction of the CFPB also covers entities that offer “private education loans”.

In addition, the law creates a Private Education Loan Ombudsman in the CFPB to resolve private education loan borrowers’ complaints. The Ombudsman is authorized to collaborate with the U.S. Department of Education, institutions, lenders, loan servicers, and guaranty agencies to resolve complaints.

The law also directs the Federal Reserve to  issue rules by April 21, 2011 to ensure that debit card interchange fees charged to debit-card-accepting merchants are reasonable and proportional to the cost of processing those transactions. This is a big benefit to university and college bookstores.

Finally, the law prohibits card networks from keeping any merchant, including universities, from setting minimum transaction amounts for credit card payments. However, the minimum transaction cannot be greater than $10. The card network also cannot prohibit any institution of higher education or federal agency from setting maximum transaction amounts or prevent any merchants from offering discounts for certain forms of payment.

Financial Aid May Get Bump from Lottery

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A  new marketing campaign promoting Washington’s Lottery as a source of funding for higher education financial aid programs is expected in the coming months.

At the direction of the 2010 Legislature, Washington’s Lottery can now be used to partly fund the State Need Grant, State Work Study, Washington Scholars, the Washington Award for Vocational Excellence (WAVE), and other programs.

The HECB is working with Washington’s Lottery to communicate this news statewide. Senate Bill 6409, prime-sponsored by Senator Jim Kastama, established a Lottery-funded Opportunity Pathways account, from which funds can be directed to student financial aid and early learning programs.

In the current Fiscal Year 2011, about 65 percent ($73.5 million) of Lottery dollars in the Opportunity Pathways account will be used to help fund the State Need Grant program, and 35 percent ($40 million) will support early learning programs.

Other funding for these programs will come from the General Fund. Lottery proceeds that previously contributed to K-12 construction projects will continue to be funded at $102 million under the General Fund.

General Fund appropriations for financial aid were reduced significantly in the 2011 supplemental budget. It is hoped that greater awareness about the Lottery’s contribution to higher education scholarships and financial aid will spur increased public support, reducing the need for General Fund appropriations.

Senate Committee Moves Veterans’ Education Legislation

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Yesterday the U.S. Senate Veterans’ Affairs Committee approved S. 3447 to expand benefits in the Post-9/11 GI Bill.

The bill would increase the number of people who could receive benefits and expand the list of programs/training for which veterans could use the aid.

In addition, the bill changes how allowances for textbooks and housing are calculated and provides in-state tuition/fees at public colleges or up to $20,000 adjusted annually and based on the national average cost.

In the U.S. House similar legislation is scheduled to be considered on September 16.

U.S. Senate Committee Passes Education Spending Bill

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Yesterday the full U.S. Senate Appropriations Committee approved a $169.6 billion appropriations bill for FY11 funding for the Department of Labor, Health and Human Services, and Education.

The bill as passed by the Senate Committee maintains a level discretionary funding base for the Federal Pell Grant program of $4,860. This amount combined with a mandatory add-on from the Healthcare and Education Reconciliation Act provides a maximum award of $5,550 in the 2011-12 year.

The bill passed out of Committee, however, did not include the $5.7 billion to fill an estimated Pell Grant shortfall in the 2011-12 year.  Senate Democrats on the committee stated that addressing the shortfall will have to wait until the bill is either considered by the full Senate or during conference committee with the House.

In addition, the bill maintains level funding for the majority of other student aid programs. This includes Federal Supplemental Educational Opportunity Grants, Federal Work-Study, and Leveraging Educational Assistance Partnerships.

Finally, funding for TRIO would increase by $15 million and Perkins cancellations would receive no funding.

The bill now goes to the full Senate for consideration.

Compromise Veterans’ Education Bill to be Introduced

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Late this week, a compromise veterans’ education bill is expected to be introduced in the U.S. House of Representatives.

Sponsored by Rep. Minnick (D-ID), the bill is an agreement between major veterans’ service organizations and the Veterans Affairs Department on ways to fix, improve or otherwise modify the benefits program that was launched in August 2009.

The changes proposed in the bill would not take effect until 2011.

  • Tuition and fee calculations will be simplified so that Veterans Affairs will pay full tuition and full fees for any eligible veteran who is a full-time student at a public college or university. Tuition and fees at private institutions would be capped at $20,000 a year per student.
  • Active-duty service members and spouses of active-duty members using transferred benefits would become eligible for the $1,000 book allowance that already goes to other student veterans using the Post-9/11 GI Bill.
  • Living stipends would be available to people taking distance learning classes without the current requirement that they must take at least one classroom course to qualify.
  • Service members transferring GI Bill benefits to a spouse or children would include the right to transfer any so-called “kickers” that increase payments so that family members could use the money.
  • For National Guard and reserve members, the bill gives credit for full-time active service in the Active Guard and Reserve program and time mobilized for natural disasters toward earning benefits, service that currently does not count.
  • On-the-job training and apprenticeships programs could be covered .

Many of the provisions in the compromise bill are similar to provisions in S. 3447.  Senate Bill 3447 is being refined and is expected to be brought to a vote in the Senate Veterans’ Affairs Committee in early August.

The House Veterans’ Affairs Committee, which will receive the compromise bill, has scheduled a hearing on veterans’ education benefits on September 16.

U.S. Senate Committee Takes Action on FY11 Appropriations Bill

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Yesterday, the U.S. Senate Appropriations Subcommittee on Labor, Health and Humans Services, Education, and Related Agencies approved a $169.6 billion FY11 appropriations bill. 

The bill would seek to maintain a level appropriated base for the Federal Pell Grant program of $4,860. That amount, combined with a mandatory add-on from the Healthcare and Education Reconciliation Act (HCERA), would provide a maximum Pell Grant of $5,550 in the 2011-12 year. However, the Senate appropriation markup did not include $5.7 billion to plug an estimated Pell Grant shortfall in the 2011-12 year. The House version did include the $5.7 billion.

In addition to Pell appropriations, the spending bill would maintain level funding for the majority of the other student aid programs. The Federal Supplemental Educational Opportunity Grants (FSEOG) program, the Federal Work-Study (FWS), program, and the Leveraging Educational Assistance Partnerships (LEAP) program in fiscal year (FY) 2011 would all be level funded under the appropriations bill. TRIO would be increased by $15 million under the bill and Perkins cancellations would receive no funding.

The full appropriations committee is expected to take up the bill this Thursday.

U.S. Senate Committee Considers Veterans’ Benefits

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The U.S. Senate Committee on Veterans’ Affairs held another hearing on legislation that would streamline benefits for veterans under the Post-9/11 GI Bill.

S. 3447 would revamp the benefit formula that has been in place since the Post-9/11 GI Bill took effect last year. The bill, as currently written, would establish a new national cap on benefits for private colleges – both for- and non-profit.

The new cap would be derived from the average tuition and fees of all private and public baccalaureate institutions across the nation, instead of the maximum benefit on the highest tuition of any public program in a given state. 

Many higher education officials are supportive of the concept of setting a national standard of benefits and agree with the goal of erasing inequities between states. However, there is concern that the currrent discussion regarding a cap would result inveterans at private institutions receiving less funding in nearly 25 states. Language for the bill is still being hammered out.

In addition, the bill would make small changes with regards to funding for undergraduate education at public institutions and extend benefits to more members of the National Guard and Active Guard Reserve.  This could potentially lead to coverage for an additional 30,000 whom were not covered by the original law.

Finally, the bill extends housing allowances to students taking courses purely online. Though the current GI Bill provides no allowance to students taking on distance education courses, the legislation under consideration would provide those students with 50 percent of the allowance given to residential students.

Senate Passes Financial Legislation That Will Benefit Students

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Yesterday, the U.S. Senate passed sweeping financial reform. The bill will lower the fees colleges pay when students use debit and credit cards and increase oversight of private student loans.

Restoring American Financial Stability Act of 2010 creates the Consumer Financial Protection Bureau in the Federal Reserve that will have authority over most consumer lending including private student loans. In addition, the bill creates an ombudsman position to oversee private student loans.

The bill also requires the Federal Reserve to set “reasonable and proportional” fees for transactions involving debit cards issued by banks with assets of more than $10 billion.  This will provide great benefit to campus bookstores nationwide.

The President is expected to sign the bill soon.

Federal Health Care and Education Reconciliationo Act Takes Effect

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On July 1, the federal Health Care and Education Reconciliation Act took effect.

As of this date several changes go into effect that will directly impact students and higher education institutions in the coming academic year and for many years to come.

  • The bank-based Federal Family Education Loan Act was eliminated and replaced with the Direct Loan Program for all federal student loans.
  • The maximum federal Pell Grant award for the 2010-11 academic year will increase to $5,550, an $800 increase since 2009. The increase is based on the cost savings provided by transitioning to the Direct Loan Program.
  • Pell Grant award increases are now tied to the Consumper Price Index (CPI).
  • Eligibility for the Income-Based Repayment Plan was expanded.
  • The interest rate on new subsidized student loans fell from 5.6% to 4.5%

Mixed Bag for Student Financial Aid

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Washington students received a mixed message with regard to financial aid this week.

On Monday it was reported at the state level that more Washington college students who qualify for state grants based on financial need are being denied.At the federal level, it was noted int he media that students are expected to experience bigger and better grants.

According to Washington’s Higher Education Coordinating Board (HECB) more than 15,000 students who qualify for the state’s largest financial aid program, the State Need Grant, did not receive a grant this year. This is three times the number in previous academic years. The reason there is more demand than there are funds.

At the federal level the story appears to be much less gloomy. An estimated 8.4 million students, approximately 617,000 more than last year, are expected to receive federal Pell Grants in the 2010-11 academic year. In addition, the average student will likely see an increase in the size of their Pell Grant, approximately $220 more.

In addition to the increase in both the size and number of available Pell Grants, eligible students will have access to other grants. On July 1, the federal government will launch the Iraq and Afghanistan Service Grant, which awards $5,500 to any college student whose parent or guardian died while serving in the armed forces in Iraq or Afghanistanafter 9-11.

Finally, the federal government will continue to award Academic Competitiveness Grants of $750 to freshman and $1,300 to Sophomores who qualify for Pell Grants and get good grades in rigorous courses. SMART grants will also continue with a payout of $4,000 to upperclassmen who qualify for Pell Grants and have earned at least B averages while majoring in science, math, or in-demand languages.

Though this appears to be good news on the surface, funding reductions to higher education institutions nationwide will likely limit the improvements to the Pell Grant and other financial aid programs as tuition increases and states find themselves with large funding gaps in state scholarship and grant programs.