A Year in Review: The Biggest Financial Aid News of 2017

By Joelle Fredman, Communications Staff

The past year was anything but dull for the higher education community, as the Trump administration found its footing in the first year of President Donald Trump’s term and Education Secretary Betsy DeVos took the helm at the Department of Education (ED).

The year was filled with many setbacks for the higher education community, including resignations, regulatory delays, and proposed cuts to aid programs in budget proposals. But perhaps the most anticipated news came as a mixed bag at the tail end of 2017 — the long-awaited release of the bill to reauthorize the Higher Education Act.

Here is some of the biggest financial aid news from 2017:

HEA Reauthorization Kicking Off

The much-anticipated House bill to reauthorize the Higher Education Act was released by Republicans on the House Committee on Education and the Workforce, coming in at 542 pages on the first Friday of December. The bill — dubbed the PROSPER Act — included many provisions that NASFAA supported, such as eliminating student loan origination fees and instituting a “Super Pell” to incentivize students to graduate sooner. It also included intentions to move to a “one grant, one loan, one work-study” system, and proposed to eliminate items such as the Perkins Loan program, the Public Student Loan Forgiveness (PSLF) program and income-driven repayment plans, which was met with much concern from the higher education community. After a 13-hour markup into the wee hours of the night the following week, the House education committee voted along party lines to move the bill to the floor for a vote.

Higher Education Cuts in Budget Proposals

On the heels of an abbreviated budget outline released in March that alluded to damaging cuts to the federal student aid programs, which NASFAA President Justin Draeger said “would close the door for countless students around the country who rely on federal student aid programs to pay for college,” President Donald Trump released his expanded budget proposal in May, providing a full glimpse into the Trump administration’s funding priorities for the federal student aid programs. Overall, the Trump budget proposal would cut about $150 billion from federal student aid programs over 10 years, and included taking $3.4 billion out of the Pell Grant reserves, cutting Federal Work-Study (FWS) in half, and eliminating programs such as the federal Supplemental Educational Opportunity Grant (FSEOG) program and the PSLF program entirely. The House budget proposal was largely non-specific and did not mention cuts to programs, only intentions to streamline federal aid. It was, however, based on the House GOP budget blueprint that would reduce non-defense discretionary spending —the pot of funds that include many higher education and federal student aid programs — and would further reduce this spending by $1.3 trillion over the next decade. The House appropriations bill is moving separately and would reduce funding for ED by $2.4 billion, and cut $3.3 billion from the Pell Grant reserve fund. The Senate Appropriations Committee bill included a $2.6 billion cut from the Pell Grant reserve funds, but with a $100 increase to the maximum Pell Grant award, as well as a provision restoring Pell eligibility for students who are defrauded and students whose schools have closed. As of right now, no proposal has taken effect, as lawmakers continue to work toward a final funding bill.

IRS Data Retrieval Tool Outage

The financial aid community was thrown for a loop when ED and the Internal Revenue Service (IRS) deactivated the IRS Data Retrieval Tool (DRT) — which millions of college students use each year to transfer data to their FAFSA application — without warning due to security concerns. It was nonfunctional for about a week in March before either federal agency acknowledged the sudden outage, and remained offline the rest of the 2017-18 FAFSA cycle. NASFAA called on ED to help struggling students, to which it responded by allowing institutions to accept signed paper copies of the 2015 IRS tax return as acceptable documentation used in verification. The tool was back online in June for borrowers applying for or recertifying their income-driven repayment plans, and ED announced that it would be accessible for the 2018-19 FAFSA cycle with new security provisions.

Changes at FSA: New Leadership, New FAFSA

James Runcie, who had served as the chief operating officer of ED’s Office of Federal Student Aid (FSA) since 2011, resigned in May after a reported dispute with Education Secretary Betsy Devos, who insisted that he testify before the House Committee on Oversight and Government Reform on the handling of improper payments. He was slated to serve until 2020, but said he chose to leave the position due to mismanagement within ED. While Democrats claimed that this incident illustrated abuse in ED under Devos, Republicans argued that Runcie was the one responsible for the inaction on borrowers’ claims. Runcie’s deputy, Matthew Sessa, stepped into the position temporarily until Devos appointed A. Wayne Johnson, the former CEO of a payment card tech company with a background in finance, to lead FSA in June. Another shakeup at FSA was the introduction of a mobile FAFSA app, which Johnson unveiled at the most recent FSA Training Conference. The app, called myStudentAid, will allow students and parents to fill out the FAFSA on their phones, and includes features such as a mobile debit card to track where aid money is spent. Johnson said he planned to release it by spring 2018.

Regulatory Reset: Gainful Employment and Borrower Defense

ED recalled a pair of contentious consumer protection regulations put forth by the Obama administration, which are currently in the midst of being rewritten in the negotiated rulemaking process. The borrower defense regulation and a central disclosure requirement of the gainful employment regulation were set to go into effect July 1, 2017 until Education Secretary Betsy Devos in June announced that the Trump administration intended to rewrite both provisions due to concern from postsecondary institutions. The delays came amid a lawsuit to block the borrower defense rule, as well as complaints about an apparent delay in processing borrower defense applications. Devos said the motivation behind a second rulemaking process on gainful employment was a concern that reporting requirements included in the regulation were too burdensome on institutions.

NASFAA Advocacy: Improper Payments, FAFSA Simplification

NASFAA President Justin Draeger testified before Congress twice this year on the topics of improper payments and FAFSA simplification. The day after Runcie resigned in May, Draeger sat before the House Subcommittee on Government Operations and the Subcommittee on Intergovernmental Affairs and said that while FSA has made progress in recent years in preventing improper payments, more can be done to address the issue in a way that eases the burden placed on students and institutions. Draeger urged lawmakers to find a better solution to recent changes to the verification process which require borrowers to obtain documentation from the IRS verifying they did not file taxes via traditional mail, such as the creation of an electronic database match between the agencies. Draeger also testified before members from both sides of the aisle on the Senate Health, Education, Labor, and Pensions (HELP) Committee on ways to simplify the FAFSA process, as part of a larger reauthorization of the HEA. Draeger suggested that lawmakers consider NASFAA’s proposed three-level application process which would rely on an expanded DRT that would include all line items of the 1040 and W-2 tax forms and would allow the tool to include information on other forms of income, such as business and investment income, without requiring the applicant to submit that information manually.

Loan Servicing Developments

DeVos in May announced her intent to amend the existing solicitation for a student loan servicing revamp – first released under the Obama administration – to seek out just a single loan servicer, but then scrapped the plan after consumer protection advocates and Democratic lawmakers suggested it could decrease accountability. Instead, ED said it would move forward with a new approach that may result in one or more servicers working with borrowers. The new servicing environment would provide a single platform for borrowers to access their account information and could also open the doors to more companies through separate acquisitions for database housing, system processing, and customer account servicing. FSA Chief Operating Officer A. Wayne Johnson promised it would be comparable to a customer support system in the private sector. ED said the new system would be in place before contracts with the agency’s current nine loan servicing companies expire in 2019.

ED Terminates Partnership With CFPB

ED quietly ended its data-sharing partnership with the Consumer Financial Protection Bureau (CFPB) via a letter to then-Director Richard Cordray, claiming that the CFPB’s actions "undermined" ED’s mission to oversee the student loan program and protect borrowers. ED terminated two Memoranda of Understanding (MOUs) enacted under the Obama administration, claiming the CFPB had handled complaints related to the federal student loan program, rather than directing them to ED within 10 days, as outlined. ED said the CFPB expanded its jurisdiction into “areas Congress never intended,” which confused borrowers and servicers. Lawmakers said that they feared that this would leave borrowers vulnerable to potential abuse by servicers.

 

Publication Date: 12/18/2017


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