A Year in Review: The Biggest Financial Aid News of 2021
By Hugh T. Ferguson, NASFAA Staff Reporter
Throughout the year the pandemic continued to impact the higher education sector. And with the vaccine rollout and the return to in-person and hybrid operations for instruction, the financial aid community continued to address student needs in the ever-changing landscape imposed by the health crisis. Financial aid offices were once again impacted by a host of federal actions and altered guidance aimed at quelling the pandemic and bolstering resources for students to both begin and continue their higher education pursuits.
With the onboarding of a new administration, shifting communication over relief for student loan borrowers, and the drafting of a social spending plan subject to arcane congressional maneuvers, financial aid professionals had their work cut out for themselves in navigating the nearly two-year anniversary of the pandemic’s onset.
Here is a look back at some of the biggest financial aid news from 2021:
Pandemic Aid
The administration’s top priority at the outset of President Joe Biden’s presidency was enacting the American Rescue Plan, the third pandemic relief bill which initially sought bipartisan support but ultimately relied on a budgetary maneuver to ensure a more speedy pathway.
The initial package was unveiled prior to Biden’s inauguration in early January and took advantage of congressional Democrats' narrow majority by utilizing the reconciliation process, which enabled the administration to rely solely on a party-line endorsement of the proposed policies.
Once enacted, the law allocated roughly $40 billion in funding for higher education with at least half of the funds required to go directly to students in the form of emergency financial aid grants. The measure also included a provision that would close the so-called 90/10 loophole, although the required negotiated rulemaking process and master calendar requirements would mean that a new rule would not be effective until July 1, 2023 at the earliest.
New Leadership at ED
With Biden’s inauguration came new leadership at the Department of Education (ED).
Following the fallout from the January 6 insurrection and the resignation of former Education Secretary Betsy Devos, who faulted the violence as a breaking point, the incoming administration looked to swiftly fill the post previously occupied by one of former President Donald Trump’s longest serving cabinet officials.
The nomination process for Miguel Cardona, who was selected as Biden’s nominee to lead ED, went through committee hearings in early February and received bipartisan accolades throughout the confirmation process, with the Senate ultimately approving his post by a vote of 64-33 in March.
James Kvaal was then nominated to serve as under secretary. He also received praise for his work in the higher education sector, having worked as president of The Institute for College Access & Success (TICAS) and previously under the Obama administration as the deputy domestic policy adviser focusing on economic opportunity, which included work on higher education initiatives. His nomination process was beleaguered by a hold placed on his nomination by Sen. Elizabeth Warren (D-Mass.) due to her concerns over ED’s handling of the student loan program. Warren eventually withdrew her objections to the nomination, saying she had engaged in productive conversations with Kvaal, ED, and the administration and was "glad they have committed to making substantial reforms to the administration of the student loan program.”
Ultimately, Kvaal was not approved until September.
NASFAA also reported on the role of chief operating officer (COO) of the Office of Federal Student (FSA) and how the agency’s turnover of four COOs in the past five years has impacted the agency.
While Kvaal was held up in the nomination process, ED was able to install Richard Cordray as the new COO at FSA, which did not require Senate confirmation. Cordray previously served as the director of the Consumer Financial Protection Bureau (CFPB) and the attorney general of Ohio.
In his selection to oversee the nation’s federal student loan portfolio, along with a new strategic operating plan at FSA, among other things, Cordray was largely celebrated by progressives who called for significant reform to the student loan landscape.
Throughout a variety of congressional hearings the leadership at ED has been questioned on all things higher education, ranging from implementation of pandemic aid, updates on federal aid related to the pandemic, the student loan landscape, the moratorium on student loan repayment, the expiration of the pause on student loan payments and interest accrual, debt cancellation, and more.
Regulatory Flexibility and Other Waivers
For ED, a long-term challenge that began to peak during the previous administration was the Public Service Loan Forgiveness (PSLF) program, which had recorded an extremely high denial rate for borrowers who were likely expecting relief, along with significant documented problems with servicing these loans.
ED in October issued a temporary opportunity, “a limited PSLF waiver” to give borrowers credit for prior payments they made that would not otherwise count toward PSLF. Any prior payments made while working for a qualifying employer would then count as a qualifying payment, regardless of loan type or repayment plan.
The use of this emergency authority from ED aims to reimagine the program and how it operates for those working in the public service sector.
ED has granted more than 10,000 borrowers roughly $715 million in relief through the temporary waiver. An additional 20,000 borrowers are expected to receive an additional $1.2 billion in student loan forgiveness via the waiver in the near future. In total, over 30,000 borrowers will receive an estimated $2 billion in loan forgiveness as a result of the PSLF waiver.
In a Federal Register notice published in September, the department did not extend the waiver of verification of most Free Application for Federal Student Aid/Institutional Student Information Record (FAFSA/ISIR) information currently in place for the 2021-22 award year for 2022-23, although the announcement stated that they “continue to consider additional flexibilities to the verification process for the 2022-23 award year to help institutions and applicants deal with the ongoing challenges resulting from the novel coronavirus disease (COVID–19) pandemic.”
“Not extending these waivers for 2022-23 will have serious negative consequences for both students and schools. Low-income and vulnerable students have borne the brunt of this pandemic, and it shows in lower FAFSA completions and lower college enrollments,” NASFAA President Justin Draeger said in a statement following ED’s announcement. “Adding back this burdensome verification process — which results in very few actual changes to aid offers — will make the college going process that much more difficult.”
Additionally, ED unveiled new guidance on the Higher Education Emergency Relief Fund (HEERF) grants authorized by Congress in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and later supplemented in the Coronavirus Response and Relief Supplemental Appropriations Act, 2021 (CRRSAA) and in the American Rescue Plan (ARP).
ED in its March announcement addressed three significant outstanding questions in the guidance. First, it clarified that HEERF grants may be used for institutional coronavirus-related costs and student expenses dating back to March 13, 2020, a change from previous guidance. Second, it clarified that that all students enrolled in an institution of higher education during the COVID-19 national emergency, including DACA, undocumented, and international students, are eligible to receive HEERF emergency grants. Third, it addressed issues surrounding lost revenue as an allowable use of institutional funds.
Student Loan Debt Payment and Interest Pause
At the outset of his presidency, Biden signed an executive order that extended the federal student loan administrative forbearance period, the pause in interest accrual, and the suspension of collections activity through Sept. 30, 2021, indicating that a further extension could be possible.
Throughout the months leading up to the new repayment date, ED pledged an active communication campaign to help inform borrowers and comply with requirements outlined in previous rescue packages that required targeted outreach for the payment resumption, as the new end date began to approach. During this period, NASFAA joined a handful of other higher education groups detailing recommendations so borrowers would be smoothly and successfully transitioned back into repayment and laid out several concrete ways ED and FSA could use the next seven months before payments resume to ensure a smooth transition process.
Consumer advocates have said returning to repayment could be premature, as monthly student loan payments pose a significant hurdle for borrowers that could be exacerbated by the economic impact of the pandemic.
Advocates and congressional Democrats began to pressure the administration to be more forthcoming with what the department was doing to inform borrowers and prepare for the return to repayment, and urged ED to offer a further extension of the benefit due to the administrative burden and potential impact on the well-being of borrowers still navigating the economic factors of the pandemic.
As the October resumption date approached, Republicans began urging ED to not allow for another extension, arguing that the benefit, while needed at the sudden onset of the pandemic, was now wasting resources and making the transition more difficult for borrowers to manage with changes to the expiration date.
As the deadline approached, ED took action in August and announced what was announced as a final extension of the pause that would extend the benefit through the end of January 2022 and allow for both borrowers and the department to better prepare for the process of returning to repayment.
One of the significant challenges with reentering repayment concerned student loan servicing contracts, all of which were slated to expire at the end of 2021. With a pair of servicers announcing their exits in partnering with ED, and a third announcing its initial exit (but then reworking a short-term extension), the department was then challenged with having to reassign affected borrowers to new servicers.
Following those exits and continued contract negotiations, ED announced an extension of six student loan servicing contracts with new performance standards, creating more clarity for how the repayment process would operate.
All the while, with progressives calling for debt cancellation, and varying analyses, articles, and papers highlighting the potential impact of differing forms of loan cancellation, the department announced a host of targeted debt forgiveness by automatically discharging the debts of borrowers with severe disabilities.
As things currently stand, 2022 will begin with the administration still sorting through the return to repayment, which by all accounts will be one of the most challenging logistical hurdles for ED, following the White House’s announcement of another extension of the payment pause for federally-held student loans slated to last through May 1, 2022.
Negotiated Rulemaking
The Biden administration's regulatory agenda kicked off with a slew of negotiated rulemaking activity. The process got underway with public hearings conducted in June — for the first time done virtually.
Following those hearings, ED solicited nominations for its Affordability and Student Loans negotiated rulemaking committee and established a resource page that detailed all of the regulatory language and documents needed to conduct the virtual sessions.
Ultimately the Affordability and Student Loans committee reached consensus on four of 12 topics: total and permanent disability discharge, eliminating interest capitalization for nonstatutory capitalization events, false certification discharge, and Pell Grant eligibility for Prison Education Programs. Negotiators failed to come to agreement on the remaining eight topics.
Those remaining eight topics were: closed school discharge; creating a new income-driven repayment plan; improving the PSLF application process; PSLF employer eligibility and full-time employment; borrower defense to repayment adjudication process; borrower defense to repayment post-adjudication; borrower defense to repayment recovery from institutions; and pre-dispute arbitration.
With negotiations completed, the next step in the process is for ED to draft a Notice of Proposed Rulemaking (NPRM), which will be subject to a public comment period. On the four areas where negotiators reached consensus, ED is obligated to use the consensus language in the NPRM. On the areas where consensus was not reached, ED is free to draft proposed regulations as it sees fit, although ED typically does not make substantive changes to areas where the group was largely in agreement even if ultimate consensus was not reached.
After the NPRM comment period, ED will issue final regulations, which would become effective July 1, 2023 if they are published prior to Nov. 1, 2022, unless ED exercises its statutory authority to provide for early implementation.
In late January of 2022 ED intends to conduct another negotiated rulemaking session with the Institutional and Programmatic Eligibility Committee that would address seven topics, including the “90/10 loophole," gainful employment, financial responsibility, administrative capability, and more.
Build Back Better and Budgetary Developments
Following the enactment of Biden’s American Rescue Plan Act, attention turned to the administration’s second reconciliation package and social spending policy proposal, dubbed the Build Back Better plan.
The $3.5 trillion budget plan initially contained increased funding and expanded eligibility for the Pell Grant program, grants for tuition-free community college, tuition assistance for historically Black colleges and universities (HBCUs), minority-serving institutions (MSIs), and tribal colleges and universities (TCUs), new retention and completion grants, and a change to PSLF eligibility for active duty members of the military.
Following committee work and breakneck negotiating, a dialed back version of the legislation, which noticeably scrapped free community college, was eventually passed by the House as the White House sought more buy-in from a pair of moderate Senate Democrats who could sink the bill.
In its latest iteration the bill calls for $40 billion in higher education investments, down from the $111 billion previously slated for the sector. At the conclusion of 2021 the bill awaits action from the Senate and could be nearing its finalized form, though Democratic leaders are still working to secure the support within their own party necessary for the bill to pass along party lines.
Meanwhile, lawmakers also had to grapple with the annual budgeting process. House Democrats met Biden’s budget request, resulting in a proposed overall 41% increase above the fiscal year 2021 enacted level for ED programs, with $102.8 billion in discretionary appropriations for ED.
The spending plan was able to pass the House and contained a $2.6 billion increase for student aid programs, including a $400 increase in the maximum Pell Grant that would boost the 2022-23 maximum award to $6,895. This $400 increase in discretionary funding is the same as the increase included in Biden’s discretionary budget request.
However, the appropriations process stalled in the Senate, which led to the enactment of a continuing resolution to keep the government funded through mid-February when leaders will have to decide how to handle the annual budget while at the same time getting started on the next fiscal year priorities.
Double Pell Campaign
NASFAA has also been a partner in advocating for Congress to double the maximum Pell Grant award, which has been a topic of significant interest among lawmakers.
Back in July, members of the Double Pell Alliance — a coalition of higher education associations, organizations, and advocacy groups — launched a national campaign to double the maximum Pell Grant to $13,000. DoublePell.org, which NASFAA helps maintain along with other members of the Double Pell Alliance, is a one-stop advocacy shop for institutions, students, and other stakeholders to learn more about the campaign and the importance of doubling Pell, obtain advocacy resources and information, and take action by using the Contact Congress tool to write lawmakers and communicate via social media.
NASFAA has also continued its #DoublePell advocacy, calling on Congress to Double the maximum Pell Grant to $13,000 to restore its purchasing power for low-income students struggling to meet college costs and making the case for how middle-income families also benefit when the maximum Pell award is increased. Doubling the Pell Grant would make up for necessary investments in federal student aid that have been pushed off for decades.
Publication Date: 1/3/2022
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