Washington News Brief

By Sharon H. Bob, Ph.D., Higher Education Specialist, Powers Pyles Sutter and Verville, PC

House and Senate Democrats introduce bills to end 90/10 loophole

On Oct. 31, 2017, Senators Dick Durbin (D-IL), Jack Reed (D-RI), Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Tom Carper (D-DE), and Chris Murphy (D-CT), and Congressman Steve Cohen (D-TN) introduced S. 2013 and H.R. 4181, both titled, Protecting Our Students and Taxpayers (POST) Act, which would prohibit proprietary colleges and universities from receiving more than 85 percent of their revenue from the federal government and change the calculation of federal revenue to include all federal funds, including the Department of Veterans Affairs’ GI Bill and Department of Defense’s Tuition Assistance program. According to Senator Durbin: “Money from the GI Bill and Department of Defense Tuition Assistance programs aren’t counted as federal revenue, which leaves billions in taxpayer dollars virtually unregulated. As a result, these companies can receive an unlimited amount of revenue from federal taxpayers while still complying with the law by aggressively targeting veterans and service members. We can’t let this invitation to exploit our veterans to continue.”

A copy of the Senator’s press release is found at: https://www.durbin.senate.gov/newsroom/press-releases/durbin-cohen-colleagues-congress-should-end-loophole-that-encourages-for-profit-colleges-to-target-veterans-and-service-members

Senate Democrats reintroduce risk-sharing bill

On Oct. 26, 2017, Senators Jack Reed (D-RI), Dick Durbin (D-IL), Christopher Murphy (D-CT), and Elizabeth Warren (D-MA) introduced S. 2018, the Protect Student Borrowers Act, which provides for institutional risk-sharing in the federal student loan programs. A similar bill was introduced last year. S. 2018 would require institutions with certain cohort default rates to remit a portion of their federal funds to a risk-sharing account held at the U.S. Department of Treasury. Only institutions that have one-third or more of their students borrow would be included in the risk-sharing requirements based on their cohort default rate. The institution’s risk-sharing payments would be required when the default rate rises.

The bill would also authorize the Secretary of Education to enter into contracts or cooperative agreements for statewide or institutionally-based programs for prevention of federal student loan delinquency and default at those institutions with high default rates. This year’s bill modifies the threshold that certain institutions have to meet in order to be subject to the requirements outlined in the bill.

A copy of the press release is found at: https://www.murphy.senate.gov/newsroom/press-releases/murphy-senators-introduce-bill-to-protect-student-borrowers-hold-colleges-and-universities-accountable

Congressmen Cleaver and Bishop request the GAO to investigate the management of federal student loans

On Nov. 2, 2017, Congressmen Emanuel Cleaver (D-MO) and Sanford Bishop (D-GA) sent a letter to Gene Dodaro, Comptroller General of the U.S. Government Accountability Office (GAO), requesting the GAO to investigate whether the Department of Education is improving its management of the companies it hires to service federal student loans. The congressmen said that they are concerned over the “deluge of documented complaints” about student loan servicers. The letter said that the scope of the GAO investigation should include billing and collection practices, communication methods, transfer methods between servicers, policies between servicers and collectors, and assignment into and or assistance with income-based repayment plans, and loan forgiveness programs.

A copy of the press release is found at: http://lstribune.net/opinion/cleaver-and-bishop-call-for-gao-investigation.htm

VA implements the bipartisan expansion of the GI Bill benefits legislation

On Nov. 3, 2017, the Department of Veterans Affairs (VA) announced that it is implementing the bipartisan expansion of the GI Bill educational benefits that was enacted into law on Aug. 16, 2017. The President signed into law the Harry W. Colmery Veterans Educational Assistance Act (P.L. 115-48) (the “Forever GI Bill”), which allows more veterans to use the GI Bill and more time to use it. Some of the changes made by the law include removing the 15-year time limitation to use Post-9/11 GI Bill benefits for veterans who left active duty on or after Jan. 1, 2013 and restoring benefits to veterans affected by school closures.

The VA announcement, which describes the new provisions, is found at: https://www.benefits.va.gov/GIBILL/ForeverGIBill.asp

DeSantis reintroduces bill on expanding accreditation

On Nov. 7, 2017, Congressman Ron DeSantis (R-FL) reintroduced a bill that would allow states to develop a parallel accrediting system. H.R. 4274, the Higher Education Reform and Opportunity (HERO) Act, a bill to amend the Higher Education Act of 1965, would provide accreditation reform, would require institutions of higher education to publish information regarding student success, would provide for fiscal accountability, and would provide for school accountability for student loans. The bill would allow individual states to develop their own systems of accrediting institutions, curricula, apprenticeships, programs, and individual courses. Students in all accredited programs would be eligible to receive student loans. The legislation would include disclosure requirements for employment of graduates, as well as a “risk sharing” measure on defaulted student loans.

A copy of the press release is found at: https://desantis.house.gov/press-releases?ID=E79FA0FE-A9A0-44BD-BAB1-425C796058E6

Senators introduce bipartisan legislation to help students make smarter decisions in financing higher education

On Nov. 7, 2017, Senators Mark Warner (D-VA), Dean Heller (R-NV), Tim Kaine (D-VA), and Cory Gardner (R-CO) introduced a bipartisan bill to help students make smarter decisions in the financing of their higher education. S. 2081, the Empowering Students Through Enhanced Financial Counseling Act, would:

• Ensure borrowers, students and parents, who participate in the federal loan program receive interactive counseling each year;
• Provide awareness about the financial obligations students and parents are accumulating by requiring borrowers to consent each year before receiving loans;
• Inform low-income students about the terms and conditions of the Pell Grant program through annual counseling; and
• Direct the Secretary of Education to maintain and disseminate a consumer-tested online counseling tool for annual loan counseling, exit counseling, and annual Pell Grant counseling.

A copy of a summary of S. 2081 is found at: https://www.scribd.com/document/363682849/Empowering-Students-Through-Enhanced-Financial-Counseling-Act-Final-One-Pager

Department releases names of negotiators for negotiated rulemaking for gainful employment rules

On Nov. 10, 2017, the Department released the names of the individuals it has chosen to participate in the negotiated rulemaking for the gainful employment rules. The first session is scheduled to be held Dec. 4-7, 2017, and is scheduled to end on March 15, 2018.

For more information about negotiated rulemaking, go to: https://www2.ed.gov/policy/highered/reg/hearulemaking/2017/index.html

Department publishes agenda and issue papers for neg reg session on borrower defense to repayment rules

The Department of Education published the agenda and a number of issue papers prior to the negotiated rulemaking session on the borrower defense to repayment rule that begins Nov. 13-15, 2017. The issues include:

• Whether to establish a Federal standard for determining if a borrower can establish a defense to the repayment of a loan based on an act or omission of an institution;
• Developing a regulatory framework for the process of submitting and evaluating a borrower defense to repayment claim;
• Financial responsibility and administrative capability;
• Pre-dispute arbitration agreements, class action waivers, and internal dispute processes;
• Closed school discharge;
• False certification;
• Guaranty agency collection fees;
• Whether to calculate a borrower’s subsidized usage period and interest accrual, if applicable, when the borrower receives a loan discharge for which he/she has not received all or part of the educational benefit of the loan; and
• Financial Accounting Standards Board (FASB) Accounting Standards Update and the financial responsibility standards.

A copy of the agenda and the issue papers are found at: https://www2.ed.gov/policy/highered/reg/hearulemaking/2017/borrowerdefense.html

Senate Democrats release report detailing how students were defrauded by predatory colleges

On Nov. 14, 2017, Senators Elizabeth Warren (D-MA), Dick Durbin (D-IL), and 14 other Senate Democrats released a report titled, “Insult to Injury: How the DeVos Department of Education is Failing Defrauded Students.” The Senators sent the report to Secretary of Education Betsy DeVos and urged her to read the stories of defrauded borrowers and to respond to the recommendations. The report’s findings include the fact that since the collapse of Corinthian Colleges through July 7, 2017, 96,944 borrowers have submitted borrower defense to repayment claims to the Department of Education and since the Trump Administration took office, zero borrower defense applications have been approved.

The report offers nine recommendations including to immediately provide full discharges to the remaining students with borrower defense claim approved prior to Jan. 20, 2017 who have yet to receive relief and immediately begin processing borrower defense claims in order to reduce the current backlog of claims. The Department should also commit to providing full relief for future claims and to halt collection activity on defaulted borrowers with pending borrower defense claims and all defaulted Corinthian borrowers.

A copy of the report is found at: https://www.warren.senate.gov/files/documents/2017_11_Warren_Durbin_Borrower_Defense_Report.pdf

House bill would require non-completers to repay Pell Grants

On Nov. 15, 2017, H.R. 4414, the Pell for Performance Act, was introduced by Representatives Francis Rooney (R-FL) and Ralph Norman (R-SC), and would require low-income students who do not finish their programs in a certain amount of time to repay their Pell Grants. Higher education representatives are condemning this bill that had been introduced last Congress, but did not move out of the House Subcommittee on Higher Education. Representative Rooney issued a statement indicating that the bill is intended to motivate students to graduate within six years. “This act will focus efforts of both colleges and students to complete their degrees in a timely manner as well as bring forth more bang for the taxpayer’s buck.”

A copy of Congressman Rooney’s press release is found at: https://francisrooney.house.gov/news/documentsingle.aspx?DocumentID=273

Bipartisan bill would expand PSLF eligibility to borrowers

On Nov. 15, 2017, a bipartisan bill was introduced in the House by Representatives Brendan Boyle (D-PA), Ryan Costello (R-PA), John Sarbanes (D-MD), and Brian Fitzgerald (R-PA), and seeks to ensure that borrowers who chose a repayment plan that would not otherwise qualify them for Public Service Loan Forgiveness (PSLF) would still be eligible for loan forgiveness. H.R. 4399, To expand the monthly payments that may be eligible for public service loan forgiveness, would extend PSLF eligibility to borrowers who have already made loan payments up to 10 years toward making the 120 on-time payments, but may have been unaware that the payment plan in which they enrolled was not sanctioned for public service loan forgiveness. The companion bill, S. 2136, was introduced by Senators Sheldon Whitehouse (D-RI) and Tim Kaine (D-VA).

If the borrower’s payments under a non-qualifying plan do not meet the comparable payment criteria, he/she could request an extended review of his/her repayment history to determine whether any monthly payment made under a non-qualifying plan is no less than the amount that would have been required, based on the borrower’s income in that year, under an income-based repayment plan or an income-contingent repayment plan. The Department would have to perform this analysis for every payment made under the non-qualifying plan and count all payments that successfully meet the comparison towards the 120 total payments.

Director of CFPB steps down

On Nov. 15, 2017, Director of the Consumer Financial Protection Bureau (CFPB) Richard Cordray announced that he is resigning from the Bureau at the end of November. Mr. Cordray was appointed the first Director of the CFPB when it was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many speculate that Mr. Cordray plans to run for Governor of Ohio where he previously served as Attorney General from 2009-2011. Mr. Cordray has been under attack by the Republicans because of his aggressive approach to regulating the mortgage, credit card, debt collection, and other industries, such as for-profit colleges and an accrediting agency, under the CFPB’s largely undefined jurisdiction.

On Nov. 13, 2017, Acting Undersecretary of Education James Manning responded to Senator Patty Murray’s (D-WA) concerns regarding the Department’s decision to discontinue two Memoranda of Understanding (MOUs) with the CFPB. Mr. Manning said in his letter that the Department’s mission of serving students and borrowers has been undermined by CFPB’s failure to direct complaints regarding Federal student loans to the Department. The CFPB’s actions have “made it more difficult for the Department to address borrower-specific issues through servicing of their loans.” Mr. Manning wrote the failure of the CFPB to provide the complaints to the Department “has led to unnecessary confusion for borrowers when they hear conflicting guidance regarding their loans, the rules governing the programs, and their rights and responsibilities.”

A copy of the letter from Senator Murray is found at: https://www.brown.senate.gov/newsroom/press/release/brown-murray-lead-senate-house-members-calling-on-secretary-devos-to-reverse-rollback-of-student-loan-borrower-protections

A copy of Mr. Manning’s letter is found at: https://www.help.senate.gov/imo/media/doc/ED%20to%20PM%2011-13-17%20re%20CFPB%20MOUs.pdf

Senate Finance Committee approves Republican tax plan

On Nov. 16, 2017, the Senate Finance Committee approved the Republican tax reform legislation, the Tax Cuts and Jobs Act (TCJA), by a vote of 14-12. It will now move to the Senate floor for consideration. On Nov. 9, 2017, the House Ways and Means Committee passed H.R. 1, the Tax Cuts and Jobs Act. While there are similarities between the Senate and the House bill, there are a number of differences. The Senate bill as compared to the House bill:

• Cuts the corporate tax rate from 35 percent to 20 percent in 2019, not 2018, as it would in the House bill.
• Keeps seven individual income tax brackets – a 12 percent bracket would replace the current 15 percent, while the top rate would be cut slightly from 39.6 percent to 38.5 percent. The House plan reduces the number of tax brackets to three.
• Doubles the standard deduction to $12,000 for individuals and $24,000 for married couples.
• Instead of having companies “depreciate” investments by deducting them over several years, companies would be able to immediately expense all their investments.
• Fully repeals the deduction for state and local taxes, while the House bill keeps a deduction for property, but not income, taxes.
• Keeps the cap for home mortgage deductions at $1 million, while the House bill lowers the cap to $500,000.
• Maintains the deduction for interest payments on student loans, though the House bill eliminates the provision.

House Democrats introduce bill to simplify the FAFSA

On Nov. 16, 2017, Representatives Lisa Blunt Rochester (D-DE), Bobby Scott (D-VA), Susan Davis (D-CA), Gregorio Kilili Camacho Sablan (D-NMI) and Ami Bera (D-CA) introduced H.R. 4416, the Simple Free Application for Federal Student Aid (FAFSA) Act of 2017, a bill that would remove barriers for students seeking federal financial aid by reducing the complexity and length of the FAFSA and increasing support for vulnerable populations. The bill would:

• Create three pathways based on the complexity of a student’s finances;
• Allow very low-income students and families to qualify for a full Pell Grant;
• Increase support for working students;
• Require the FAFSA to be filed only one time;
• Permit use of income data from the previous year;
• Allow DREAMers to afford college;
• Reinstate Pell Grant eligibility for students with drug-related offenses; and
• Create a standardized financial aid award letter.

Department restores Pell Grants to students whose schools have closed

On Nov. 17, 2017, it was reported in The Chronicle of Higher Education that almost 300,000 students who used Pell Grants to attend now closed colleges have had their eligibility for Pell Grants restored by the Department of Education. It was reported that the Department recently advised Senator Patty Murray (D-WA) that it had restored Pell Grant eligibility for 288,969 students who had attended 841 institutions that closed from 2001 to 2016. In a letter of Oct. 6, 2016, Senator Murray had urged the Secretary to use the Department’s authority to restore Pell Grant eligibility for those who attended closed colleges, such as Corinthian Colleges and ITT Technical Institutes.

The letter from Senator Murray is found at: https://www.help.senate.gov/ranking/newsroom/press/higher-ed-sen-murray-urges-dept-of-education-to-use-authority-to-restore-pell-grant-eligibility-to-students-impacted-by-closures-of-itt-tech-and-corinthian-colleges

Democratic Senators urge VA and Department of Defense to protect Ashford students

On Nov. 21, 2017, nine Democratic Senators sent letters to the Departments of Veterans Affairs and Defense urging them to protect veterans and service members currently enrolled at Ashford University because it may lose VA eligibility within 60 days if it fails to obtain approval from the California State Approving Agency. The letter noted that Ashford University advised the Security and Exchange Commission in a public filing on Nov. 15, 2017 that it will be voluntarily suspending new GI Bill enrollments.

A copy of the letter to Secretary of Veterans Affairs is found at: https://www.durbin.senate.gov/imo/media/doc/Ashford%20VA%2011.21.17.pdf

Senate HELP Committee holds hearing on simplifying the FAFSA

On Nov. 28, 2017, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on proposals to simplify the Free Application for Federal Student Aid (FAFSA) in conjunction with plans to begin reauthorization of the Higher Education Act (HEA). The HELP Committee members and witnesses discussed the necessity of the many questions on the FAFSA and examined how the FAFSA in its current form is a barrier to student access to federal aid for higher education, particularly in the case of homeless, minority, or otherwise underrepresented groups. The hearing discussed potential solutions to these issues, including how to make students aware of their Pell eligibility and Expected Family Contribution (EFC) earlier so that they can use the information when exploring higher education options.

Senate HELP Chairman Lamar Alexander (R-TN) said that marking up the HEA is the “first order of business after the first of the year.” Ranking Member of the HELP Committee Patty Murray (D-WA) noted that reauthorization should address additional issues such as the rising cost of college, the rising student loan debt, accountability for schools and programs, barriers to access for working families, students of color, and first-generation students, and creating a safe environment on campus.

SHARON H. BOB PH.D., Higher Education Specialist on Policy and Regulation, is a member of the Education Group at the Washington, DC law firm of Powers Pyles Sutter & Verville, PC. Dr. Bob advises all sectors of higher education regarding strategic issues pertaining to their participation in the federal student financial assistance programs, accreditation, licensure, education tax benefits, and related regulatory matters.