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Obama administration announces plan to expand Pell Grant program

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The Obama administration has introduced a plan to bring back year-round Pell Grants and to create a $300 bonus for Pell recipients taking at least 15 credits a semester. Both elements of the plan are designed to incentivize students to graduate faster and accrue less debt in school. The plan would cost $2 billion over the next year,

The year-round Pell Grant program was initially put in place by President Bush in 2008 but was cut in 2011 as a budget-saving measure. While the effort to reinstate the program will likely face significant Congressional opposition, there is some bipartisan support. Senator Lamar Alexander (R-LA), Chair of the Senate education committee, and Democratic Senator Michael Bennet of Colorado are cosponsoring legislation to reintroduce year-round Pell Grants. “We have long supported providing students a more flexible Pell Grant program and hope this is one of many areas Congress and the administration can work together to strengthen higher education,” a Republican education committee spokesman Even with this bipartisan support, however, the administration faces a difficult task in getting the legislation through a very budget-conscious Congress.

The $300 bonus, dubbed 鈥�15 to finish鈥� by education non-profits, is also somewhat controversial, though the division is between a different set of stakeholders than the Pell Grant expansion. Many college completion non-profits support 15 to finish, saying that encouraging 15 credit semesters is an important tool in incentivizing Pell recipients to graduate on time. The plan has drawn criticism, however, from community college leaders and adult student advocates, who contend that 15 credits is too many for students who are busy working or who have come into higher education unprepared for college-level work.

See the for further information on the Pell Grant proposal.

Perkins Loan Program Temporarily Revived

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Last week, Congress passed a bipartisan bill to extend the , which had expired in September.

The bill authorizes new undergraduate applicants to join the program through September 2017, but only if they have exhausted all other federal borrowing options first.听 New graduate students will not be able to join the program, but those who already have Perkins loans can continue to receive them through September 2016.

In the current academic year, over 3,200 91探花 students听have received听approximately $12 million in Perkins loans.听听These low-income, high-need students, rely on Perkins loans to cover any financial gap that remains after grants and scholarships have been applied to their tuition.

More information on the Perkins extension is available at听and .

Final Gainful Employment Rule Removes Default Rate Metric

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The Education Department鈥檚 (ED) final 鈥済ainful employment rule,鈥� which was released yesterday, will hold vocational programs accountable to just one of the two outcome metrics that were proposed in the .听 Cohort default rates (CDRs) were eliminated from the legislation, meaning that debt-to-earnings ratios will be the only听criteria upon which individual career education programs are evaluated to determine听federal aid eligibility.

Community colleges had for the change on the grounds that a relatively small number of their students take out federal loans and, thus, cohort default rates are 鈥渕aterially and statistically unrepresentative of all the students in a program.鈥�

Student and consumer advocates, however, have contended that the change weakens the rule and doesn’t do enough to protect students and taxpayers. Pauline Abernathy 鈥� Vice President for The Institute for College Access & Success (TICAS), a consumer advocacy group 鈥� issued a yesterday saying:

鈥淲e and more than 50 student, civil rights, veterans, consumer, and education organizations urged the Obama Administration to strengthen its draft gainful employment regulation, but instead this final regulation is even weaker. The final rule also does not provide any financial relief to students who enroll in programs that lose eligibility; lets poorly performing programs enroll increasing numbers of students, right up to the day the programs lose eligibility; and even passes programs in which every student drops out with heavy debts they cannot pay down.鈥�

For-profit colleges with the outcome either, arguing that the legislation does nothing to fix a proposal they see as being “fundamentally flawed.”

Arne Duncan, the education secretary, estimates that 1,400 programs鈥�99 percent of which are at for-profit colleges鈥攚ill fail the rule in the first year. However, that number is 500 less than it would have been under the March version of the rule. Unfortunately, of those 500 programs, 15 are ones where students are more likely to default than they are to graduate. 听See the for more information.

Since programs will only become ineligible for federal aid after they fail the debt-to-earnings tests twice in a three-year period or are 鈥渋n the zone鈥� for four consecutive years, institutions will not face penalties for at least three more years. Therefore, it is possible that the gainful employment rule will be revised yet again before its effects are truly felt.

91探花Cohort Default Rate Remains Very Low Relative to National Average

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The U.S. Department of Education (ED) recently released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although the UW鈥檚 CDR rose while the national CDR declined, the UW鈥檚 rate still remains well below that of the nation.

ED is in its first year of using only the听more accurate three-year CDR measure 鈥� as opposed to the two-year CDR. Thus, this year鈥檚 report only includes the FY2011 three-year CDR, which represent the percentage of student borrowers who entered into repayment in FY2011, but failed to make loan payments for a 270-day period within three years of leaving school.

The Department provides breakdowns of its data by , and . Here are some key findings:

  • The national three-year CDR declined from 14.7 to 13.7 percent overall.
  • The three-year rate decreased over last year鈥檚 rates for all sectors:
    • Public institutions decreased very slightly from 13.0 to 12.9 percent,
    • Private nonprofits decreased from 8.2 to 7.2 percent, and
    • For-profits鈥� whopping 21.8 percent rate decreased to 19.1 percent.
  • The UW鈥檚 three-year CDR increased slightly from 3.9 to 4.3 percent, but this is still nearly 10 percentage points below the national average.听

While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The 91探花reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them.听Former 91探花students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (osfa@uw.edu, 206-543-6101). Students can also visit to explore their repayment options.

Ryan Budget Would Hurt Pell Grants and Student Loans

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Representative Paul Ryan, the House Budget Chairman, released his FY15 on Tuesday. The proposal would remove the in-school interest subsidy for all subsidized undergraduate student loans, eliminate mandatory funding for Pell Grants, and freeze the maximum Pell Grant award at $5,730 for the next 10 years.

As Office of Federal Relations put it in their , 鈥淭hat essentially means that $870 in the maximum grant would have to be funded by increased discretionary funds or the maximum be cut from $5,730 to $4,860.鈥�

Please see the Federal Relations for more information, and check out articles by , , and .

President Obama Releases His FY2015 Budget

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Yesterday, March 4th, President Obama submitted his fiscal year 2015 budget request to Congress.听 has published their听analysis听of the budget as has .

TICAS states that the President鈥檚 proposal 鈥渢akes important steps towards making college affordable for Americans by reducing the need to borrow and making federal student loan payments more manageable.鈥� Specifically, his budget:

  • Invests in Pell Grants and prevents them from being taxed. 听The budget provides funds to cover the scheduled $100 increase in the maximum Pell award, raising it from $5,730 in 2014-15 to $5,830 in 2015-16. TICAS notes that although this increase will help nearly 9 million students, 鈥渢he maximum Pell Grant is expected to cover the smallest share of the cost of attending a four-year public college since the program started in the 1970s.鈥�
  • Makes the American Opportunity Tax Credit (AOTC) permanent. 听TICAS supports making the AOTC permanent as they note research suggests the AOTC is the most likely of the current tax benefits to increase college access and success.听 New America, however, recommends the administration convert the tax credit to a grant program as they state researchers have found grants to be a more effective way to deliver aid to low-income families.
  • Improves and streamlines income-based repayment (IBR) programs. Under the President鈥檚 budget, more borrowers would be eligible to cap their monthly payments at 10 percent of their discretionary income and have their remaining debt forgiven without taxation after 20 years.听The budget also adjusts the IBR programs to prevent debts forgiveness for high-income borrowers who can afford to pay their loans.
  • Requests funding for the College Opportunity and Graduation Bonuses.听 The budget proposes establishing College Opportunity and Graduation Bonuses, which would reward schools that enroll and graduate low-income students on time. Both TICAS and New America note that, unless this proposal is thoughtfully designed, it could incentivize schools to lower their academic standards in order to make it easier for Pell students to graduate. Further, as this proposal is one of several different efforts to reward colleges that provide affordable, quality educations, it is unclear how its goals and formulas would interact with those of initiatives like the Postsecondary Education Ratings System.

The UW鈥檚 notes that the budget also proposes $56 billion for an 鈥淥pportunity, Growth and Security Initiative,鈥� which 鈥渁ims to effectively replace the remaining FY2015 sequestration cuts for nondefense discretionary programs 鈥� the programs we care about the most.鈥� Please stay tuned to their blog for more information and updates.

ED Begins Negotiating New Gainful Employment Rule

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On Monday, the U.S. Education Department (ED) began formal negotiations on the draft language of a . The rule, originally published in 2011, was designed to enforce a requirement of the Higher Education Act that states career education programs鈥攏on-degree programs at all colleges and most degree programs at for-profit colleges鈥攎ust 鈥減repare students for gainful employment鈥� in order to participate in federal student aid programs. The rule was meant to discourage these programs from misusing federal aid dollars and leaving students with debt burdens they are unable to repay. However, in 2012 a federal judge rejected major provisions of the rule, requiring that ED rethink its strategy.

Here鈥檚 a summary of the changes:

  • The proposed rule applies to programs with as few as 10 students, whereas the old rule counted only career-focused programs with 30 or more students. Because of this change, ED estimates that the new rule could cover 11,359 programs at for-profit and nonprofit colleges鈥攏early twice as many as the old rule covered鈥攁nd that 974 of those programs (9 percent) could fail to meet the proposed standards.
  • The draft regulation omits loan repayment as a criterion for federal student aid eligibility. The old rule severed federal aid to programs where too few students were repaying their loans or where graduates’ debt-to-earnings and debt-to-discretionary-income ratios were too high. The new rule removes the loan repayment standards, which the courts deemed “arbitrary and capricious,鈥� and relies only on the latter two measures.
  • Debt-to-earnings calculations would be based only on students who receive federal aid, rather than students who complete the program. The old calculations were based on all students who completed the program, whereas the proposed calculations are based on any students who receive federal student loans and Pell Grants, regardless of whether they complete the program. As the rule is designed to ensure that federal aid is used effectively, this seems a more appropriate approach.听
  • Schools would have fewer chances to improve their performance before losing federal aid eligibility. Under the previous rule, programs that failed the measures in 3 out of any 4 years would be ineligible for federal student aid. However, the new rule only lets programs fail in 2 out of any 3 years before they lose eligibility.

For details, see a prepared by the Education Department.听 Please continue to follow our blog as well as the for updates on this topic.

91探花Ranks 1st among Public Schools and 2nd Overall for Federal R&D Funding

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Of the nearly 900 schools that received federal money for research and development (R&D) in FY 2011, the 91探花ranks first among public institutions and second overall in terms of federal research funding. According to a study by the National Science Foundation (NSF), approximately 20 percent of all federal R&D support went to just 10 universities. reviewed those universities, Table 1 summarizes their findings.

Johns Hopkins University, a private institution, topped the list with nearly $1.9 billion鈥攎ore than doubling what any other university received that year. The majority of Johns Hopkins鈥� federal funding came from the Dept. of Defense and NASA. The university also听brought in billions via fundraising efforts.

The 91探花came in second with almost $950 million in federal R&D funding鈥攖he most of any public school. The majority of the UW鈥檚 money came from the Dept. of Health and Human Services; however, the University was the top beneficiary of NSF funding, receiving more than $145 million in 2011.

Year after year, the same schools consistently receive the most money, said Ronda Britt, a survey statistician with the NSF. 24/7 Wall St. quotes her as saying, these universities 鈥渉ave big research programs that receive a lot of support year after year, and have a lot of infrastructure that helps them keep the money stable.鈥� This holds true for the UW, which has ranked first among public schools since 1974. Having large endowments was another commonality of the top 10 schools, yet federal funding covered the bulk of R&D expenditures in all cases.

As these universities rely heavily on the federal government to support their research, many are concerned about the sweeping cuts of sequestration. The 91探花and other universities are preparing for a range of possible impacts. As described in our , the sequester could reduce the UW鈥檚 federal grant and contract support by an estimated $75M to $100M during FY13. The 91探花community is encouraged to remain cautious and conservative in spending federal awards and in planning for future federal funding.

March Washington State Revenue Forecast Remains Relatively Stable

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On Wednesday, March 20, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of State General Fund Revenues.听Revenue from an anticipated increase in Washington housing permits and real estate excise tax receipts is expected to offset higher federal tax rates and spending cuts than were previously assumed. Overall, revenue projections for both the 2011-13 and 2013-15 biennia remain relatively stable, with a slight net gain of about $40 million across the two biennia.听However, this net gain is negated by the roughly $300 million in additional Medicaid caseload costs. The state and its lawmakers now face a $1.3 billion deficit along with court-mandated funding for K-12 education, which could cost another $1 billion. Their upcoming budget proposals will have to reconcile these demands on the state purse.

We anticipate that the Senate Majority Caucus Coalition will release its operating budget proposal sometime next week, while the House will likely release its budget by early next month. Until that time, any specific impact on the 91探花cannot be assessed.听 Please see the full for more information.

 

Sequestration Goes Into Effect at Midnight

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Sequestration will take effect tonight at midnight. While the cuts will be smaller than originally mandated ($85 billion instead of $109 billion), the impact in federal FY13 will be higher since the cuts must now be applied to only seven months instead of nine. Immediate and long-term impacts on the 91探花and Washington State are difficult to predict. However, during the remaining months of federal FY13, we estimate that the sequester could reduce the UW鈥檚 federal grant and contract support by an estimated $75 million to $100 million and cut Build America Bonds (BABs) subsidy payments by $500K to $700K. Additionally, the 91探花is projected to lose about $33,000 in work study funds for 2013-14. The potential impact on Washington State includes $11.6 million less for primary and secondary education, $11.3 million less for education of children with disabilities, and 1,000 fewer children receiving Head Start services.

Please see听the prepared by the Offices of Federal Relations, Planning & Budgeting, and Research听and be sure to visit at the UW’s for regular updates.