Obama Administration Creates Student Aid Enforcement Unit

This week the U.S. Department of Education is creating a Student Aid Enforcement Unit to respond to allegations of illegal actions by institutions of higher education.  Robert Kaye, one of the nation’s top enforcement attorneys, will lead the unit.

The unit will collaborate with, and incorporate evidence gathered in investigations by, partner state and federal agencies in building cases against institutions.  The unit will also collaborate with the Office of Federal Student Aid’s (FSA) Program Compliance Unit regarding evidence which may impact ongoing program compliance reviews.  Finally, the unit will utilize a broad set of interventions and tools, including subpoena authority, document demands, and interrogatories and interviews, to enforce against violations of federal law.

Obama Announces New U.S. Department of Education Secretary

Last week, President Obama nominated John B. King Jr. to lead the U.S. Department of Education. King most recently served as Acting Secretary after the departure of Arne Duncan.

The child of New York City educators, King was orphaned at age 12.  He has a strong connection to public education, citing his public school teachers with guiding him forward on a path that led to degrees from Harvard, Yale and Columbia.  In his work, King founded a high-achieving charter school in Boston, and in 2011 became the first African American and Puerto Rican to serve as the New York state education commissioner.

During his time as State Education Commissioner he oversaw the challenging implementation of Common Core and a teacher evaluation system tied to new tests on the Common Core standards.

King joined the Obama Administration in 2015 as a Senior Advisor and was delegated duties of deputy secretary of education. He was identified as Duncan’s successor in October.

 

 

President Obama Releases Final Budget Proposal

This week President Obama released his last budget proposal, a blueprint for the 2017 fiscal year (FY).

Overall the $4.1 trillion budget for federal fiscal year 2017 has a strong higher education focus. The proposal would increase spending on most programs to support basic research, strengthen the Pell Grant program, reinvest in the Perkins Loan Program and fund the Administration’s plan for free community college and a new technical training fund.

Though the proposal is expected to gain little traction on the hill with a Republican-controlled Congress, the President’s proposal would:

  • Develop “America’s College Promise,” a 10-year, $60.8 billion proposal to make two-years of community college free for “responsible” students. The proposal, designed to be a federal-state partnership, would have the federal government cover three quarters of the average cost of community college, with states expected to contribute the remaining amount of outstanding tuition. New to this year’s budget, and to match the legislation introduced in Congress, America’s College Promise would also provide grants to four-year HBCUs and MSIs to offer students up to two years at zero or significantly reduced tuition.
  • Create a College Opportunity Bonus program that would provide $5.7 billion over 10 years to schools that enroll and graduate low-income students on time. Funds would be given directly to the institution to expand need-based aid, enhance student support, or employ other best practices to help low-income students succeed. The total annual bonus amount an institution could receive would be calculated based on the number of on-time Pell graduates at the institution multiplied by a tiered bonus amount: $1,000 at four-year schools; $700 at two-year schools; and $350 for less-than-two-year schools. The school’s cohort default rate and graduation rate would also be considered in determining eligibility.
  • Dramatically reduce the number of questions on the Free Application for Federal Student Aid (FAFSA) by eliminating questions related to “assets, non-IRS untaxed income, non-IRS income exclusions, and other income adjustments.” “Non-IRS” income and exclusions refers to data elements that cannot be verified using the IRS Data Retrieval Tool (DRT). The questions being targeted for elimination are those considered to be confusing for students and families. To guard against any Pell award decreases, these changes are offset by a reduction of $600 to Expected Family Contributions (EFC). The budget does not further explain the rationale or operational details of the $600 EFC decrease.
  • Decrease the percentage of funds at proprietary institutions that can come from the federal government to 85 percent, thereby returning the 90/10 calculation to the original 85/15 ratio. Department of Defense tuition assistance and GI Bill Benefits would be counted as federal funds.
  • Develop a new $30 million HBCU and MSI Innovation for Completion fund to encourage these institutions to support evidence-based strategies aimed at increasing completion.
  • Maintain discretionary Pell Grant funding at current levels, which would lead to a maximum Pell Grant of $5,935 for award year 2017-18. This amount takes into the account the scheduled Consumer Price Index (CPI) increase in mandatory funds. In addition:
  • Pell for Accelerated Completion (Year-Round Pell): Limited to 150 percent of a student’s regular Pell Grant award, an additional semester of eligibility will be awarded to students who have already completed 24 credits.
  • On-Track Pell Bonus: Students who enroll in 15 or more credits per semester would be eligible for an additional $300 award per year, split evenly to $150 per semester.
  • Second Chance Pell: Individuals incarcerated in federal or state penal institutions would be eligible for Pell Grant funds.
  • In order to “encourage students to complete their studies on time,” the president’s budget proposes to modify the satisfactory academic progress (SAP) requirements. Specific details are absent from the proposal.
  • The proposal would prevent additional Pell disbursements to “recipients who repeatedly enroll and obtain aid but do not earn any academic credits.”
  • Move Iraq and Afghanistan Service Grants to the Pell Grant Program to avoid further award reductions as a result of sequestration and ensure that eligible students receive the full, non-sequestered Pell Grant award for which they are eligible.
  • Extend the automatic inflationary increase to the maximum Pell Grant award, which expires at the end of the 17-18 award year.

For colleges and universities, the budget level funds both the FSEOG and FWS programs at the FY16 amount and revises the allocation formulas to direct dollars toward institutions that enroll and graduate higher numbers of Pell-eligible students and “offer affordable and quality education and training such that graduates can obtain employment and repay their educational debt.” In addition, the proposal makes Perkins Loans unsubsidized with the same interest rate as the Unsubsidized Stafford Loan and expands the program from its current $1 billion funding level to $8.5 billion. Schools would continue to have some awarding discretion, though the federal government would take over origination and servicing. Federal government revenues from origination fees and interest rates would be redirected into student aid.

The proposal also addresses student loan debt.  Under this proposal the Revised Pay as You Earn repayment plan, or “REPAYE,” would become the only income-driven repayment plan for borrowers who originate their first loan on or after July 1, 2017.  The president proposes to consolidate TEACH Grants and the other teacher loan forgiveness programs into a single loan forgiveness program with a cap of $25,000 beginning in 2021.  In addition, the proposal would provide $13.6 million to create and expand a “Student Aid Enforcement Unit” to protect students and taxpayers by investigating “bad actors” in higher education. The proposal would also allow the Department of Education to obtain from the IRS the addresses of borrowers who are delinquent in repaying their loans.

Finally, the proposal would make a series of changes to higher education tax provisions including eliminating the lifetime learning credit; expanding the American Opportunity Tax Credit (AOTC) to five years, and index expense limits and the refundable amount to inflation; repealing the current student loan interest deduction (SLID) for new borrowers and excluding Pell Grants from gross income and all loans forgiven or discharged by ED from gross income.