Legislative and Regulatory Impact on Technology Standards

1
Legislative and Regulatory Impact on Technology
Standards

• Panel Discussion April 24, 2007

2
Introductions

• Kathleen Smith
• Wanda Hall

3
Overview

• What are the Politics?
• Background on Pending Legislation
• Negotiated Rulemaking
• Panel Discussion
• Questions and Answers

4
What are the Politics?

• New Congress
• New Leadership
• Senate Harry Reid (D-NV), Richard Durbin (D-IL)
• House Nancy Pelosi (D-CA), Steny Hoyer (D-MD)
• New Committee Chairmen
• Senate Edward Kennedy (D-MA)
• House George Miller (D-CA)
• Pending Presidential Election

5
2007 Higher Education Proposals

• College Student Relief Act H.R. 5
• Student Debt Relief Act S. 359
• Student Loan Sunshine Act H.R. 890 S. 486
• Borrower Bill of Rights S. 511
• STAR Act H.R. 1010 S. 572
• The Pell Grant Equity Act H.R. 990

6
2007 Higher Education Proposals

• College Student Relief Act - H.R. 5 introduced by
  Education and Labor Committee Chairman George
  Miller (D-CA)
• Approved by a vote of 356-71 Jan. 17th
• Permanent cuts for a temporary benefit
• Offset Details
• Reduce lender insurance from 97 percent to 95
  percent
• Eliminate the Exceptional Performer program
• Incrementally reduce the guarantee agency
  collection retention rate to 16 percent (actual
  rate to be determined through regulation)
• Double the lender-paid origination fee on all
  loans from 0.5 percent to 1 percent
• Reduce lender yield by 10 basis points for those
  large lenders holding the top 90 percent of
  student loan volume and
• Increase from 1.05 to 1.30 percent the interest
  payment rebate fee paid on consolidation loans
  for holders with 90 percent or more of total
  principal and accrued unpaid interest in
  consolidation loans.

7
2007 Higher Education Proposals

• The Student Debt Relief Act (S. 359) Kennedy
• Would give colleges new incentives to offer
  loans to students through the Direct Loan
  program. (STAR Act)
• Cuts interest rates on new Subsidized Stafford in
  half.
• Expands ICR, forgives loans after 10 years for
  public-sector employees.
• Expands and modifies higher education tax
  provisions.
• Allows for in-school consolidation and
  re-consolidation.
• Makes 458 account mandatory.

8
2007 Higher Education Proposals

• STAR Act Bills Petri (HR 1010) and Kennedy (S
  572)
• Require the Secretary of Education to carry out a
  Student Aid Reward Program to encourage
  institutions of higher education (IHEs) to
  participate in the Title IV student loan program
  that is most cost-effective for taxpayers.
• Requires the Secretary provide IHEs participating
  in the most cost-effective loan program a Student
  Aid Reward Payment.
• Requires IHEs receiving reward payments to
  provide loans under such loan program for a
  period of five years, beginning on the date the
  first payment is made.
• Requires funds awarded to IHES to be used, where
  appropriate, to supplement students Pell Grant
  awards. Also permits funds to be used to award
  need-based grants to lower- and middle-income
  graduate students.
• Requires the Secretary to encourage all IHEs to
  participate in the Student Aid Reward Program.

9
2007 Higher Education Proposals

• Borrower Bill of Rights (S. 511) Clinton
• Requires certain information to be provided
• Five Months After Ceasing to Be Enrolled at Least
  Half Time
• During Delinquency
• During Default
• During the Transfer of a Loan to a New Servicer
• During Consolidation ( During Consolidation with
  a Private Loan)
• Allows for loan reconsolidation

10
2007 Higher Education Proposals

• Student Loan Sunshine Act (H.R. 890/S. 486)
  Miller/Kennedy
• Require lenders in one or more educational loan
  arrangements to submit to the Secretary an annual
  report in addition to other disclosure
  requirements under federal law.
• Forbid lenders from providing a private
  educational loan to a student or parent until the
  institution has informed the student or parent of
  their remaining options for borrowing under Title
  IV.
• Forbid institutions to brand private education
  loans with the schools name, emblem, mascot or
  logo.
• Ban lenders from offering gifts worth more than
  10 to college employees, including travel,
  lodging, entertainment, and in-kind services that
  lenders provide to college financial aid offices.

11
2007 Higher Education Proposals

• HR 990 The Pell Grant Equity Act (Miller/McKeon
  passed House)
• Eliminate the tuition sensitivity requirement of
  the Pell Grant program for the 2007-2008 academic
  year.
• Reduce, as a cost offset, guaranty agency default
  collection payments from 23 percent to 22 percent
  beginning October 1, 2007 and ending September
  30, 2008.

12
Department of Ed

• Presidents Budget proposes major changes and
  cuts to FFELP (18.8 billion over 5 years)
• Reduce SAP on all loans by 50 bp
• Reduce default insurance from 97 to 95 EP
  falls from 99 to 97
• Reduce account maintenance fees paid to guaranty
  agencies by conversion to a unit-cost system
• Reduce guaranty agency default collection
  payments from 23 to 16
• Increase consolidation loan lender-paid fee from
  0.5 to 1
• Other loan proposals
• Increase 3rd and 4th year loan limits from 5,500
  to 7,500 and increases aggregate limit from
  23,000 to 30,500
• Equalize FFEL and DL PLUS rate at 8.3

13
Department of Ed (cont.)

• Negotiated Rulemaking
• http//www.ed.gov/policy/highered/reg/hearulemakin
  g/2007/nr.html
• Four Teams
• Loans
• General Provisions
• ACG/SMART Grants
• Accreditation
• Sessions for Loans team began in December and
  continued in February and March
• Fourth and final session to be held April 18-20
• Department to draft a Notice of Proposed
  Rulemaking (NPRM)
• 60-day public comment period
• Final publication on or before Nov. 1, 2007
• Effective July 1, 2008

14
Neg Reg

• Contentious Issues Abound
• Preferred Lender lists
• Borrower choice to be protected
• Is a number of lenders on the list the answer?
• Is Department enforcing current law?
• Definition of illegal inducements for loan
  applications
• Should there be a list of allowable activities
• Rebuttable Presumptions
• Other institution/lender relationships at risk?
• Borrower benefits must be protected
• Is the Department enforcing current law?
• Electronic record retention
• Department wants all disbursement records
• Forgiveness for crime of identity theft
• Department insisting crime must be proven

15
Other Issues

• Media implications of improper relationships
  among schools and lenders
• AG in New York and Minnesota seeking information
• Senator Kennedy and Representative Miller seeking
  information
• Impact on issues under negotiation and under
  review for Congressional Action

16
Panel Discussion and Q and A

• Many legislative proposal contained within the
  Negotiated Rulemaking Process
• A discussion of those issues, problems, potential
  outcomes and concerns