Final FY 2020 Funding Bill Increases Maximum Pell, Addresses Issues With Loan Servicers, Foreign Gift Reporting

By Joelle Fredman, NASFAA Staff Reporter

President Donald Trump signed a bill finalizing funding for the government for fiscal year (FY) 2020 Friday, narrowly avoiding a government shutdown and putting an end to the series of continuing resolutions that have maintained funding levels since October. The bill — which differs significantly from the president’s original budget proposal — includes a $150 increase to the maximum Pell Grant award, and addresses ongoing issues with federal loan servicers and foreign gift reporting requirements.

The bill provides $72.8 billion in discretionary funding for the Department of Education (ED), a $1.3 billion increase from FY 2019. The bill boosts the maximum Pell Grant award to $6,345, though it relies on a $500 million recession from the program’s reserve fund. In Trump’s FY 2020 budget proposal, he suggested level funding for the maximum award and rescinding $2 billion from the reserve fund. 

With final funding levels set and ED now having all the information it needs to create Pell Grant payment and disbursement schedules, NASFAA will continue monitoring the release of award year 2020-21 schedules. The master calendar requires ED to publish the schedules no later than February 1, but they could be published earlier now that the appropriations process is complete.

The bill also increases funding for the Federal Supplemental Educational Opportunity Grant (FSEOG) program by $25 million (to $865 million) — which Trump proposed to cut entirely — and allocates $1.2 billion for the Federal Work-Study (FWS) program, a $50 million increase from FY 2019. In Trump’s proposal, he suggested slashing funding for FWS in half. 

The bill report also includes language in support of the data-sharing agreement between ED and the Internal Revenue Service (IRS) included in the Fostering Undergraduate Talent by Unlocking Resources for Education (FUTURE) Act, which was supported by NASFAA and signed by Trump Thursday. 

“I am proud that we were able to come together, negotiate our differences, and reach a bipartisan agreement that makes investments to strengthen our nation and give every American a better chance at a better life,” said House Appropriations Committee chairwoman Rep. Nita Lowey (D-N.Y.), in a statement.

The bill allocates almost $1.8 billion to support the administration of federal student aid and includes new language to protect federal student loan borrowers — who the administration has been criticized for neglecting to safeguard against loan servicers. Specifically, the bill directs ED to “hold servicers accountable for high-quality outcomes, noncompliance with Federal Student Aid (FSA) guidelines, contract requirements (e.g., an understanding of federal and state law), and applicable laws, including misinformation provided to borrowers.” The bill also mandates FSA do the same with its contractors.

For the third year in a row, the bill also includes language requiring ED to include multiple servicers in its “NextGen Financial Services Environment” — aspects of which the administration said it is currently implementing —  and to evaluate loan servicers and allocate new accounts based on performance.

“A lot of hard work brought this appropriations process back from the brink,” said Senate Majority Leader Mitch McConnell (R-Ky.). “This legislation touches all 50 states. This is why full-year funding bills are better than chronic [continuing resolutions].”

In addition, the bill includes language to address issues with the requirement that institutions disclose foreign gifts to ED, detailed in section 117 of the Higher Education Act (HEA). ED has recently been investigating a handful of institutions for misreporting gifts, while the higher education community has been pleading for more guidance so schools can better comply with the requirements. ED in September issued proposed rules for foriegn gift reporting, which were criticized by higher education groups — including NASFAA — for an increased burden and cost to schools. Most recently, after collecting public comment, ED sent updated reporting requirements to the Office of Management and Budget (OMB) for emergency approval and another short comment period, the haste of which concerned higher education groups, including NASFAA

The budget bill specifically directs ED to engage with schools to “ensure requirements under section 117 are clear and to provide guidance to [institutions] to ensure they are aware of their responsibilities,” as well as allow adequate time for institutions to comply with reporting requirements as ED issues more guidance. Congress wrote that ED should — within 45 days of the bill being enacted — brief lawmakers on “efforts to engage with the stakeholder community, efforts to provide greater guidance and clarity on reporting requirements, and any additional information on agency efforts to comply with such section.” 

The bill also repeals language within the Tax Cuts and Jobs Act of 2017 (TCJA) related to what’s known as the “kiddie tax” — a change welcome to higher education groups, including NASFAA. NASFAA earlier this month signed on to a letter sent by the American Council on Education (ACE) that warned that the tax can “inadvertently cause harm to many low- and middle-income students who rely on scholarship aid to pay for their college education” by increasing the tax rates for those funds.

The bill also includes language that would allow students to use up to $10,000 from their 529 education savings accounts to pay down their student debt. POLITICO reported that experts say students may opt to take out low-interest loans instead of their tax-advantaged funds in certain situations such as during a market meltdown, which could temporarily diminish the balance in a 529 account.

For more information on the federal budget process, see NASFAA’s Federal Budget and Appropriations page and NASFAA’s budget FAQs.

 

Publication Date: 12/23/2019


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