This morning Senators discussed student loans in two simultaneous committee hearings.
The Senate Budget Committee, which is chaired by Washington State’s Senator Patty Murray, held a full committee hearing titled, “Impact of Student Loan Debt on Borrowers and the Economy.” Key witnesses in the hearing included representatives from the Consumer Financial Protection Bureau, the Student Virginia Education Association, and the Contemporary History Institute at Ohio University. A video of the hearing and written testimony can be found here.
Over in the Senate Banking, Housing and Urban Affairs Committee, the Subcommittee on Financial Institutions and Consumer Protection held a hearing titled, “Student Loan Servicing: The Borrower’s Experience.” Scheduled witnesses included representatives from the Student Veterans of America, the American Federation of Teachers, the Heritage Foundation, and the Denison University director of financial aid. A webcast of the hearing along with written testimony can be viewed on the Committee’s website here.
Today, the Department of Education (ED) announced a timeframe for rolling out the Administration’s proposed College Ratings system. In a post by Deputy Under Secretary Jamienne Studley entitled, “Making it Easier to Pick and Pay for College through Ratings“, the Administration announced that the college ratings system will be ready this Fall and a final version will be ready before the 2015-16 school year.
You can read the post here.
Today, Congressman Rick Larsen (D-WA) introduced the Bereaved Student Borrowers Act. The bill is designed to protect grieving students and students facing family hardship from auto-defaulting on their private student loans and to get better access to information about cosigner release requirements. The bill also prohibits lenders from reporting an auto-default as a result of cosigner death or bankruptcy to credit reporting companies and stops these companies from including this information on their reports.
This issue was brought to light by the Consumer Financial Protection Bureau, which identified significant issues facing private student loan borrowers in a recent quarterly report. As of 2011, approximately 90 percent of private student loans had cosigners, and many of these loan contracts contain clauses allowing the loan to be accelerated into default upon death or bankruptcy of a cosigner, often a parent or grandparent, even when students are making loan payments on time.
The bill has eight original cosponsors, including Reps. Eleanor Holmes Norton (D-DC), Niki Tsongas (D-MA), Suzan DelBene (D-WA), Pedro Pierluisi, Denny Heck (D-WA), André Carson (D-IN), William Enyart (D-IL), Peter Welch (D-VT), and James Moran (D-VA).
A fact sheet on the bill can be found here.
House Budget Chairman Paul Ryan unveiled the House FY15 Budget today. The measure proposes to cut $5.1 trillion over a decade in a bid to erase the federal deficit, while calling once again for dramatic changes to Medicare, Medicaid, and the tax code.
The House proposal would significantly reduce federal support for college access. The Ryan Budget would eliminate the interest subsidy for all subsidized undergraduate student loans — based on a CBO estimate last year,that would increase loan costs to students by some $50 billion over ten years. The proposed budget would eliminate all mandatory funding for Pell, shifting it totally to discretionary funding, while freezing the maximum Pell grant for the next decade. That 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.
Additionally, the Ryan Budget proposes to cut Non Discretionary Defense (NDD) funding by $761 billion below the current caps, and more than doubles down on the sequester cuts by shifting all of the cuts scheduled for defense starting in FY16 to NDD funding. In FY 16, the NDD cap would be cut from $492 billion to $450 billion, an 8.5% cut. By the end of the ten year window, NDD would be cut by 22%.
The nearly 100-page blueprint is likely be the last formal budget proposal from Ryan, the Republican chairman of the Budget Committee who wants to move to the more powerful Ways and Means Committee next year.
The House Budget Committee is expected to mark up the legislation Wednesday in a session expected to last well into the night.
The Office of Federal Affairs is continuing to review the legislation and will provide updates as the measure changes in the legislative process.
Yesterday the Congressional Budget Office (CBO) released their Budget and Economic Outlook: 2014 to 2024. The deficit is expected to fall this year as the economy gains steam, but CBO also anticipates that increasing health care costs and higher payments on the national debt mean that those gains will not last. The deficit estimate sets the new baseline that CBO will use to assess the impact of legislative proposals this year. The agency now projects the cumulative deficit for 2014 to 2023 will total $7.3 trillion, which is about $1 trillion more than the $6.3 trillion estimate in May.
This new report provides a good analysis of Pell Grant funding. Last year we were all surprised to find a surplus in the Pell program after worrying that we would be facing a shortfall. The good news from the CBO report is that the surplus is still here and it’s trending larger. The CBO sees Pell Grant costs coming in about $1.7 billion lower than originally expected for fiscal year 2014. It also revised costs in future years lower than what it projected last year by about $1 billion a year. All of those figures assume that Congress keeps the current eligibility rules for the program, including the maximum grant, as they are today. Based on the CBO report, the Pell program may not see a shortfall until FY2017. EdCentral provides a great analysis of the Pell Grant surplus and what it means for future years.
This is good news for the Pell Grant program and the students who rely on it to fund their education. Closing the Pell shortfall has been a priority agenda item for UW for the past couple of years and we will continue to advocate for fund funding.