With the majority of 2020 disrupted by the ongoing pandemic caused by the coronavirus, the financial aid community’s attention quickly turned to issues and obstacles students were facing. The pandemic had an impact on virtually every aspect of higher education, and financial aid was no exception. Financial aid offices were on the front lines of administering and implementing the higher education portion of the Coronavirus Aid, Relief and Economic Security (CARES) Act. As part of the CARES Act, and subsequently extended through executive orders, borrowers saw their student loan payments and interest accrual paused as a means of relief due to the pandemic. Meanwhile, the presidential election dominated the news cycle for the better part of the year, with major implications for higher education policy hinging on the outcome.
To add to the eventful year, the Department of Education (ED) moved forward with its efforts to roll back and rewrite the Obama-era borrower defense regulations, facing lawsuits along the way that culminated in a settlement. Throughout the year, ED also increased its scrutiny of institutions’ ties with foreign entities, publishing a report in October alleging billions of dollars in gifts have gone unreported over the course of several decades. FAFSA simplification drew the attention of lawmakers late in 2020, with Sen. Lamar Alexander (R-Tenn.) championing the cause during his final weeks in Congress, spearheading the passage of the FAFSA Simplification Act as part of a massive year-end government spending and coronavirus relief package.
Here is a look back at some of the biggest financial aid news from 2020:
CARES Act Passage and Implementation
Congress passed the CARES Act in March to provide relief from the pandemic, with about $14 billion allocated to higher education to be split evenly between institutions and students. Financial aid offices were largely tasked with allocating the funds in the form of emergency aid grants to students, and from the outset the task proved difficult, with multiple rounds of confusing and at times contradictory guidance from ED that changed the eligibility criteria and ultimately slowed the process of distributing aid.
After facing heavy criticism from the higher education community and Democratic lawmakers, ED pulled an about-face and said it would not enforce previous guidance restricting the emergency aid grants to only students who are eligible to receive Title IV aid, which would have cut out not only international students, those enrolled in the Deferred Action for Childhood Arrivals (DACA) program, and undocumented students, but also U.S. citizens who haven’t registered with Selective Service, or have a prior drug conviction, among other things. ED in June, however, went forward and issued an interim final rule that contained the eligibility restrictions, doubling down on its position that only Title IV-eligible students can receive the funding. While ED noted that enforcement of the Title IV eligibility interpretation would not be retroactive, it reminded institutions of its prior guidance regarding funds issued to individuals living in the country illegally, those enrolled in the DACA program, and international students.
Two lawsuits were filed against ED — one from the California Community Colleges System and another from Washington’s attorney general — alleging the guidance would unnecessarily exclude otherwise eligible students from crucial emergency aid amid the pandemic. Following the issuance of the interim final rule, federal judges in both states issued preliminary injunctions on all or part of the rule. Both the Washington decision and the California decision became effective immediately, though ED appealed the rulings. Conclusions to the cases were still pending as the year came to an end, with final decisions expected in 2021.
Student Loan Debt Payment and Interest Pause
One of the first actions in response to the pandemic made by President Donald Trump was to issue a pause of payments and interest accrual for federal student loans, through an executive order. The relief was later codified in the CARES Act and extended through subsequent executive orders, with an overwhelming majority of borrowers taking advantage of the forbearance period. The administrative forbearance period is not without its own obstacles though, as Federal Student Aid (FSA) and its loan servicers will face a significant burden in attempting to convert millions of borrowers back into repayment all at the same time once the automatic forbearance period comes to a close, FSA said in a recent report.
Recent surveys have shown a majority of borrowers utilizing the pause in payments feel unprepared to resume making payments on their student loans when the forbearance period comes to an end. The relief is now set to expire Jan. 31, 2021, likely leaving it up to President-elect Joe Biden to provide borrowers further relief. While Congress recently passed a massive Omnibus spending bill including another coronavirus relief package, it did not include an extension of student loan debt relief measures, leaving it up to the incoming administration to extend relief to borrowers.
Hopes of FAFSA simplification getting accomplished in 2020 grew in the final months of the year, as outgoing Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-Tenn.) made it a goal of his as he closed out his final year in the Senate. The bill — a version of which NASFAA endorsed last year — greatly reduces the number of questions that applicants would need to answer on the FAFSA and made significant changes to the need analysis formula, among other things. Simplification of the lengthy federal financial aid application has long been one of Alexander’s top priorities. He was widely known for unfurling the paper application containing more than 100 questions at committee hearings. Without a legitimate attempt at a comprehensive Higher Education Act (HEA) reauthorization, the bill was attached to a year-end omnibus spending package.
NASFAA over the summer of 2020 commissioned a paper series on ways to enhance FAFSA efficiency, which served as an update to its 2015 FAFSA simplification proposal. Through the paper series, NASFAA enlisted other subject-matter experts to both assess the current validity of previous work done on FAFSA efficiency and explore new simplification concepts. A special episode of “Off the Cuff” in December did a deep dive on the history of FAFSA simplification legislation and the impact NASFAA’s involvement and advocacy on the issue has had on legislation and movement on Capitol Hill.
2020 Presidential Election
The 2020 presidential election served as the backdrop to an unprecedented year, with the democratic primaries bringing several higher education policy debates to the forefront. While Sen. Bernie Sanders (I-Vt.) originally championed the idea of free college during his presidential run in 2016, the idea was picked up by even more candidates in the 2020 primaries and eventually incorporated into President-elect Joe Biden’s campaign platform.
Biden in October released an updated plan for higher education, which included doubling the maximum Pell Grant award, automatically enrolling borrowers into income-driven repayment plans, and restructuring Public Service Loan Forgiveness (PSLF) to allow for borrowers to receive $10,000 in debt relief "for every year of national or community service, up to five years." Biden also proposed allowing students of all income levels to attend public community colleges in their state of residence tuition-free and to cover tuition at four-year public colleges and universities for students hailing from families with incomes under $125,000, in addition to $10,000 of student loan debt forgiveness for all borrowers. Biden also proposed that, after 20 years of student loan repayment, any remaining federal student loans would be forgiven without any tax burden. Though Trump did not include any specific higher education policy proposals in his campaign platform, he did extend the relief originally offered by the CARES Act for student loan borrowers.
With Biden’s win in November, attention turned to what is next for his higher education priorities, with particular interest in what his administration would do with regard to the student loan debt held by millions of borrowers and what relief measures he may put in place to help borrowers still reeling from the impact of the pandemic.
Borrower Defense Saga and Lawsuits
Significant developments regarding the borrower defense to repayment regulations occurred in 2020, with Education Secretary Betsy DeVos’ attempt to roll back and rewrite the Obama-era policy facing more political and legal challenges. While the battle over borrower defense rules was not new in 2020, this year saw a settlement that would have cleared the way for ED to process a backlog of more than 170,000 borrowers claims, following a spate of denials. However, a federal judge in October determined that a settlement reached over ED’s slowdown of processing loan forgiveness claims could not be agreed to due to ED’s blanket denials to ongoing applications, rebuking DeVos and the department in the process. Litigation over the settlement is now expected to continue, further delaying relief for thousands of student loan borrowers.
ED also faced accusations in October from Democratic lawmakers who alleged the department purposefully derailed an online tool meant to assist defrauded borrowers. The next month lawmakers again demanded that ED reinstate the tool, following concerns that the White House was interfering in the process of reinstating the tool.
Meanwhile, in March Congress voted to overturn the Trump administration’s borrower defense regulations, which were set to go into effect on July 1, 2020. However, President Donald Trump subsequently vetoed the measure in May, and in June the House of Representatives failed to override the president’s veto, paving the way for DeVos’ rules to go into effect. DeVos’ rewrite of the rule creates a higher bar for borrowers subjected to fraud by their colleges to have their loans forgiven than the previous regulations. Biden has said he will seek to reimplement — if not strengthen — the Obama-era rules when he takes the White House.
Foreign Gifts Reporting Requirements
ED made enforcement of Section 117 reporting requirements as it relates to foreign gifts and influence a priority in 2020. In June, ED unveiled a portal to facilitate institutional compliance with the law for schools to report foreign gifts and contracts valued at $250,000 or higher. A report published in October alleging that billions of dollars in gifts have been underreported over the course of several decades served as the culmination of ED’s efforts over the last several months to increase its scrutiny of institutions’ ties with foreign entities.
In November, ED published a Notice of Interpretation (NOI) tying institutional eligibility to participate in the Title IV student aid programs to compliance with the Section 117 foreign gifts reporting requirement.
NASFAA and the higher education community had previously urged ED to establish a rulemaking process for foreign gift reporting to allow higher education stakeholders to offer advice and feedback on the best ways to provide institutions with clear information on the foreign gifts reporting process.
Publication Date: 1/4/2021