Washington News Brief

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

Senator Warren unveils details of plan to cancel student loan debt

On July 23, 2019, Senator Elizabeth Warren (D-MA) and House Majority Whip James E. Clyburn (D-SC) released a bill, called the Student Loan Debt Relief Act, which would cancel a significant amount of student loan debt for the majority of borrowers. The proposal would cancel up to $50,000 in student debt for borrowers with a household income of $100,000 or less, cancel some amount of student debt for borrowers with a household income of between $100,001 and $250,000 and provide no loan forgiveness for borrowers earning $250,000 or more.

A copy of Senator Warren’s press release is found at: https://www.warren.senate.gov/newsroom/press-releases/senator-warren-house-majority-whip-clyburn-introduce-legislation-to-cancel-student-loan-debt-for-millions-of-americans

Senator Lee and Representative Rooney introduce the Higher Education Reform and Opportunity (HERO) Act

On July 31, 2019, Senator Mike Lee (R-UT) and Representative Francis Rooney (R-FL) introduced S.2339/H.R.4098, the Higher Education Reform and Opportunity (HERO) Act, which would promote alternatives to four-year college, cap federal student loans, and hold colleges and universities accountable for student success. According to the press release, the bill:

• Allows states to accredit innovative non-traditional programs like online courses, apprenticeships, or vocational schools;
• Caps undergraduate student loans at $30,000 with a 15-year repayment rate;
• Caps graduate student loans at $40,000 with a 25-year repayment rate;
• Introduces reporting measures on whether students graduate on time, how burdened by debt students are after graduating, and the success rate for graduates in a particular major at obtaining jobs that enable them to repay their loans; and
• Requires that institutions repay 10 percent of the student default amount (minus the Federal unemployment rate).

A copy of the press release is found at: https://francisrooney.house.gov/news/documentsingle.aspx?DocumentID=2524

Senator Hassan and nine other Senators send letter to Secretary of Education and Commissioner of IRS expressing concern about the impact of changes to the 1040 tax form on financial aid applicants

On Aug. 2, 2019, Senator Maggie Hassan (D-NH) and nine other Senators sent a letter to Secretary of Education Betsy DeVos and Commissioner of the Internal Revenue Service (IRS) Charles P. Rettig requesting that the Department of Education take specific steps to ensure that financial aid applicants who misreport tax information on the FAFSA due to changes made to the 1040 tax form will not be subject to additional reporting requirements. The Senators noted in their letter that following the passage of the 2017 tax law (P.L. 115-97), the Department of the Treasury shortened the core 1040 tax form in an attempt to create a tax filing “postcard.” In 2018, the Treasury Department truncated the 1040 tax form by moving certain tax information to six separate, equally complicated schedules. “During this process, Treasury did not consider how its changes to the 1040 would impact the IRS Data Retrieval Tool (DRT).” As a result, the DRT will no longer import certain tax information into the FAFSA during the financial aid cycle beginning October 2019 (2020-2021 award year).

The letter stated that the Department of Education’s proposed solution is complex and involves asking students and parents whether they filed a Schedule I with their 2018 tax return. The Department’s solution will “likely result in the submission of incomplete and inaccurate information regarding some applicants’ financial aid eligibility.” The letter pointed out that “this new self-reporting requirement may disrupt federal financial aid for applicants who would otherwise satisfy the FAFSA’s ‘Simplified Needs Test.’” The Senators urged the Department of Education and the IRS to work collaboratively to fix the problems created by the IRS changes to the 1040 tax form and allow all relevant tax information to be transferred through the DRT.

A copy of the letter is found at: https://cdn.ymaws.com/www.ncher.us/resource/resmgr/db_alt/08-19_Letter_to_DeVos_from_S.pdf

FSA releases quarterly updates to application, disbursement, and portfolio reports

On Aug. 7, 2019, Federal Student Aid (FSA) released its quarterly updates to the quarterly application, disbursement and portfolio reports on the FSA Data Center. Some of the key findings include:

• The outstanding federal student loan portfolio is $1.48 trillion. The Direct Loan portfolio represents 81 percent of the outstanding loan portfolio.
• As of March 31, 2019, 18.2 million FAFSA forms were submitted for the 2018-2019 application year, representing a 2.3 percent decrease compared to the same time period in the prior application cycle. During the first quarter of the 2019-2020 application cycle, about 10 million applications were submitted, a 4.1 percent decrease from the same time period in the prior year.
• Enrollment in income-driven repayment (IDR) plans has continued to increase. As of March 31, 2019, more than 7.5 million borrowers were enrolled in IDR plans, representing a nine-percent increase from March 31, 2018.
• In the second quarter of FY 2019, FSA received about 22,000 new borrower defense applications. To date, almost 48,000 have been approved, resulting in almost $535 million in discharges. According to the electronic announcement, the total amount discharged and the number of approved and denied applications in the March 31, 2019 report has not changed as a result of ongoing litigation and the prioritization of the implementation of the 2016 final regulations.

A copy of the electronic announcement of the release of the quarterly update is found at: https://ifap.ed.gov/eannouncements/080719FSAPostsNewReportsToFSADataCenter.html

Representative Donna Shalala introduces Student Loan Disclosure Transparency Act

On Aug. 7, 2019, Representative Donna Shalala (D-FL) introduced a bipartisan bill, the Student Loan Disclosure Transparency Act, H.R.4193, which would increase the frequency with which students are provided federal loan disclosures and add a number of items to the existing list of what servicers must disclose. Co-sponsors include Matt Gaetz (R-FL), Chris Stewart (R-UT), Ben McAdams (D-UT), Jaime Herrera Beutler (R-WA), and Abigail Spanberger (D-VA). Representative Shalala said: “The standards of disclosure that apply to other consumer loans should also apply to the very first consumer loan most people take – the student loan. Americans now owe over $1.6 trillion in student debt with the average borrower owing more than $38,000. We ought to encourage responsible practices among young people early as they embark on their lives. Our current student loan disclosures are unnecessarily long, difficult to read, and fail to inform borrowers of their payment obligations upon graduation. The goal is to give student borrowers the necessary tools and information they need to manage financial aid and personal finances while in school.”

A copy of the press release is found: https://shalala.house.gov/news/documentsingle.aspx?DocumentID=2016

President signs Memorandum to automatically forgive federal student loan debt for totally and permanently disabled veterans

On Aug. 21, 2019, President Donald Trump signed a Presidential Memorandum that will significantly streamline the process to discharge federal student loan debt for totally and permanently disabled veterans. Last year, Secretary of Education Betsy DeVos and Acting Veterans Affairs Secretary Robert Wilkie announced that their agencies would begin identifying and reaching out to veterans who may qualify for the benefit. Since that time, more than 22,000 borrowers have received a total of $650 million in loan forgiveness. In May, attorneys general for 51 states and territories wrote to the Secretary to say that the process remained inadequate since veterans were required to affirmatively seek loan discharge, which created insurmountable obstacles for many veterans.

Under the new process, veterans will receive loan forgiveness automatically unless they choose to opt out within 60 days of notification of their eligibility. Veterans may elect to decline loan relief because of the potential tax liability in their states or because receiving a loan discharge could make it more difficult to take out federal student loans in the future. Congress eliminated federal tax liability for loan forgiveness for veterans last year.

Secretary DeVos said: “Supporting and caring for those who have sacrificed much in service to our country is a priority for President Trump and the entire Administration. I appreciate the President’s strong leadership on this issue and his willingness to provide much-needed student loan relief.”

The President’s Memorandum is found at: https://www.whitehouse.gov/presidential-actions/presidential-memorandum-discharging-federal-student-loan-debt-totally-permanently-disabled-veterans/

The Secretary’s press release is found at: https://www.ed.gov/news/press-releases/trump-administration-automatically-forgive-federal-student-loan-debt-totally-and-permanently-disabled-veterans

A White House fact sheet is found at: https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-working-tirelessly-provide-benefits-services-brave-veterans-deserve/

Takano and Shalala introduce bill to reissue gainful employment rule

On Aug. 23, 2019, House Veterans Affairs Committee Chairman Mark Takano (D-CA) and House Education and Labor Committee Member Donna Shalala (D-FL) introduced H.R.4206, the Student and Taxpayer Protection Act, which would require the Department of Education to reissue the gainful employment rule.

Chairman Takano said: “The Department of Education’s primary responsibility is to protect students and taxpayers, but under the Trump administration, it has abandoned this duty by prioritizing the interests and bottom-lines of predatory for-profit institutions. Failure by the Department to put students first requires Congress to step in and ensure that every student has access to a quality and affordable education and to hold predatory for-profit institutions accountable for taking advantage of students and providing them with low-quality instruction.”

A copy of the press release is available at: https://takano.house.gov/newsroom/press-releases/rep-takano-and-rep-shalala-introduce-the-student-and-taxpayer-protection-act-to-reinstate-gainful-employment-rule

CFPB announces appointment of Robert Cameron to serve as next ombudsman

The Consumer Financial Protection Bureau (CFPB) announced the appointment of Robert Cameron to serve as the next Private Education Loan Ombudsman. According to the press release, Mr. Cameron previously was responsible for litigation, compliance, and risk mitigation efforts at the Pennsylvania Higher Education Assistance Agency (PHEAA). Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the ombudsman is responsible for receiving, reviewing, and attempting to resolve complaints from private student loan borrowers. Mr. Cameron replaced Seth Frotman, who resigned in protest over certain actions taken by former Acting Director Mick Mulvaney.

The press release is found at: https://www.consumerfinance.gov/about-us/newsroom/cfpb-appoints-private-education-loan-ombudsman/

On Aug. 22, 2019, Senator Elizabeth Warren (D-MA) sent a letter to CFPB and Treasury expressing her concerns about the appointment of Robert Cameron. Senator Warren criticized the appointment and stated that Mr. Cameron’s past job as head of compliance for PHEAA presents a conflict of interest that will impede his ability to serve as an advocate to borrowers.

A copy of the Senator’s letter is found at: https://www.warren.senate.gov/imo/media/doc/2019.08.22%20Letter%20to%20CFPB%20re-%20Student%20Loan%20Ombudsman%20Appointment.pdf

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.