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Notes from the FSA Conference Day 1

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy

Patricia V. Edelson

As usual, the it is a well attended conference Federal Student Aid (FSA) Conference here in Las Vegas is well attended.  It is nice to catch up with so many friends from schools and the Department of Education.  It is also a great opportunity to here about the upcoming initiatives for FSA and what FSA thinks schools should be focusing on.

The first day of the conference opened with a General Session and welcome.  The presenters for this session were FSA COO Jim Runcie, Jeff Baker, and Lynn Mahaffie.   They provided various updates concerning Department of Education’s Title IV activities and initiatives.  They also mentioned that there will be an experimental site announcement in an upcoming federal register.  Also, FSA encouraged schools to adopt the Shopping Sheet that was introduced last year.  While it is still not a requirement except for military students, currently 19,000 schools have signed up to use it.

One hot topic was the impact of the unconstitutionality of the Defense of Marriage Act (DOMA) on student aid. As you may recall, last term, the Supreme Court overturned DOMA and, as a result, the federal government must recognize marriages between same sex couples for federal benefit purposes.  For aid purposes, this means that if a student (or parent of a dependent student) is legally married they would file the FASFA as married, regardless of gender. This is effective in the current year and appropriate language will be included in the 2014/2015 FAFSA. Students (or parents) who are in a same sex marriage, but who already filed their 2013/2014 FAFSA, but could have filed married at the time they filed, may now correct their ISIR and file married. They may correct marital status, but are not required to. New filers must file married and a DCL will be coming out early next week with guidance. “Legally married” applies regardless of State of current residence. Conversely, if parents aren’t married but living together they will be required to report both incomes.

New on the verification horizon, the Department has eliminated the verification group V2, which required verification of SNAP benefits and added a new Group V6 that will require verification of income in cases where income and household size are inconsistent.

The upcoming negotiated rulemaking sessions were also discussed, and special note was made of the upcoming sessions related to VAWA and the Clery Act regulations, as well as the use of third parties to disburse Title IV aid.


On December 3rd, House Subcommittee to Discuss Proposals to Strengthen Pell Grant Program

Posted in Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

On Tuesday, December 3rd at 10:00 a.m. in room 2175 of the Rayburn House Office Building, the Subcommittee on Higher Education and Workforce Training, chaired by Rep. Virginia Foxx (R-NC), will hold a hearing entitled, “Keeping College Within Reach: Strengthening Pell Grants for Future Generations.”  The hearing will be webcast for those not able to attend.

The witnesses for the hearing will be:

Mr. Justin Draeger
President and CEO
National Association of Student Financial Aid Administrators
Washington, D.C.

Dr. Jenna Ashley Robinson
Director of Outreach
John W. Pope Center for Higher Education Policy
Raleigh, North Carolina

Mr. Michael Dannenberg
Director of Higher Education and Education Finance Policy
The Education Trust
Washington, D.C.

Mr. Richard C. Heath
Director, Student Financial Services
Anne Arundel Community College
Arnold, Maryland

The Department of Education Announces More Negotiated Rulemaking

Posted in Credit Hour, Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, State Authorization

Dennis Cariello

It will be a very busy year for the U.S. Department of Education (Department).  Already engaged in a controversial negotiated rulemaking on “gainful employment,” and having announced a rulemaking on the implementation of the Violence Against Women Reauthorization Act of 2013, the Department published a notice in the Federal Register of its Intention To Establish a negotiated rulemaking committee to discuss topics for “Program Integrity and Improvement.”  The committee meetings will be held at the Department’s offices at 1990 K Street NW., Eighth Floor Conference Center, Washington, DC 20006.  The committee will meet from 9am -5 pm on the following days:

  • Session 1: February 19-21, 2014
  • Session 2: March 26-28, 2014
  • Session 3: April 23-25, 2014

The “Program Integrity and Improvement” rulemaking will likely focus on six topics:

  • Cash management of funds provided under the title IV Federal Student Aid programs, including the use of debit cards and the handling of title IV credit balances.
  • State authorization for programs offered through distance education or correspondence education.
  • State authorization for foreign locations of institutions located in a State.
  • Clock to credit hour conversion.
  • The definition of “adverse credit” for borrowers in the Federal Direct PLUS Loan Program.
  • The application of the repeat coursework provisions to graduate and undergraduate programs.

The Department is seeking nominations for this committee.  All nominations should be received by December 20, 2013.  The nominees  should fill one of the following constituencies that “are significantly affected by the topics proposed for negotiations”:

  • Students.
  • Legal assistance organizations that represent students.
  • Consumer advocacy organizations.
  • State higher education executive officers.
  • State attorneys general and other appropriate State officials.
  • Business and industry.
  • Institutions of higher education eligible to receive Federal assistance under title III, Parts A, B, and F, and title V of the HEA, which include Historically Black Colleges and Universities, Hispanic-Serving Institutions, American Indian Tribally Controlled Colleges and Universities, Alaska Native and Native Hawaiian-Serving Institutions, Predominantly Black Institutions, and other institutions with a substantial enrollment of needy students as defined in title III of the HEA.
  • Two-year public institutions of higher education.
  • Four-year public institutions of higher education.
  • Private, non-profit institutions of higher education.
  • Private, for-profit institutions of higher education.
  • Regional accrediting agencies.
  • National accrediting agencies.
  • Specialized accrediting agencies.
  • Financial aid administrators at postsecondary institutions.
  • Business officers and bursars at postsecondary institutions.
  • Admissions officers at postsecondary institutions.
  • Institutional third-party servicers who perform functions related to the title IV Federal Student Aid programs (including collection agencies).
  • State approval agencies.
  • Lenders, community banks, and credit unions.


What the Budget Showdown Means for Higher Education

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

Well, it’s September 30th and that means is the end of the Federal Government’s fiscal year.  Before anyone bites into the cake, however, Congress still needs to pass a new budget (or continuing resolution.  Otherwise, the government will shut down.  Happily, the Department of Education (Department) updated the playbook for when the government shuts down.

As an aside, as we are also heading to a standoff over raising the debt ceiling, I humbly suggest the Department (assuming it has staff to do) offer information on what would happen if Congress does not raise the debt ceiling (in case you are interested, the Congressional Research Service put out a number of helpful reports we highlighted earlier this year).  The lack of information when this happened two years ago caused confusion and worry among students, parents and schools over what would happen to loans and grants, among other things.

As for the shut down, the Department’s memo explains there will not be very many folks working at the Department during a shutdown:

the Department would furlough over 90 percent of its total staff level [the Department has 4,225 full and part-time employees] for the first week of such a lapse.  During this first week, we would maintain only those excepted functions related to the discharge of the duties of Presidentially-appointed, Senate-confirmed individuals; those employees charged with the protection of life and property; and, as appropriate,  the obligation, payment, and support of student financial aid as well as other authorized payments and obligations.

For a longer shutdown, “at most, a total of not more than 6 percent of the total staff would be called back” to perform “excepted activities to prevent significant damage to the underlying activity.”  In short, 212 employees will be working during the first week and, if the lapse lasts more than 1 week, 242 employees will work at some point during the shutdown [approximately 3,983 employees would be furloughed].

In higher education, loans and Pell grants will continue as normal.   Further, staff and contractors associated with these programs will continue to work, although “only skeletal program operations would continue under the ‘significant damage’ standard.”  While it’s not clear what level of loan servicing is provided for with skeletal program operations, the memo notes “student financial aid services should continue  in order to avoid the potential loss of federal assets and to maintain the delivery of student aid.”

Campus-Based aid programs, however, will not be so lucky.  Indeed, “FSA employees working in areas not directly related to Pell Grants or Direct Student Loans, such as the Campus-Based Programs of College Work-Study and Supplemental Educational Opportunity Grants, customer service activities, administrative functions not related to providing student aid to schools and students, and development of new programs or activities, would not be excepted.”  Thus, if you are awaiting funds from the government out of these programs, you will be out of luck.

In addition, as a general matter, grants awarded by the Department previously (not student aid) should continue as normal for the first week.  “For a lapse of more than a week, Department staff would be needed as excepted employees to monitor the contractors and resolve any issues.”  In addition, grants awarded by the National Institutes of Health and the National Science Foundation will also be affected.  Under contingency plans authored by the Department of Health and Human Services and the National Science Foundation, grantees working on existing grants could continue their work to the extent funds are available and grantees do not require assistance from agency staff.  Neither agency will take any actions on new grant applications or awards.

Compliance Focus: New FSA Handbook Prohibits Discounts to Students Who Pay in Cash or Who Pay Before the Start of Class

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy

Dennis Cariello

As many of you know, the new Federal Student Aid Handbook were released this summer.  There are a number of new items in the handbook and I encourage you all to review it.  We will be discussing these new items in future posts (so make sure you do the reading, or else you won’t be able to participate!)

One new note that comes a bit out of the blue this year relates to tuition discounts: many of them are prohibited:

Charging variable tuition
Schools may not charge students who receive federal student aid a different tuition from those who don’t receive federal student aid for the same program. Moreover, giving a discount to students who pay in cash or who pay their tuition in full before the start of class is not allowed. This, of course, does not prevent schools from having different costs for other categories of students, such as having a different tuition for in-state and out-of-state students.

Volume Three of the Handbook, at 3-36.  Now, this comes from section 472(1) of the Higher Education Act which talks about “tuition and fees normally assessed a student carrying the same academic workload…”  Internally, the Department of Education has interpreted this to mean that all students–aided as well as unaided student–in the same program are charged the same tuition.  This is to prohibit schools from charging different tuition based on whether a student receives Title IV funding (and presumably charge those students more).  However, given the explicit language, schools should strongly consider ending discount programs covered by this note even if all students are eligible for the discount. Continue Reading

HELP Subcommittee Hearing on Financial Literacy on April 24, 2013

Posted in Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

On Wednesday April 24, 2013, the Senate Committee on Health, Education Labor and Pensions (HELP) Subcommittee on Children and Families will hold a hearing entitled “The Economic Importance of Financial Literacy Education For Students.”  The hearing will be held at 2:30 PM in room 430 of the Dirksen Senate Office Building.  The witness list is after the jump.

Continue Reading

Compliance Focus: An Update on Sequestration and Title IV Programs

Posted in Complaince Focus, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy

Patricia V. Edelson

On August 2, 2011, Congress passed the Budget Control Act (“BCA”) of 2011, which put into place an automatic process of “across-the-board” Federal budget cuts, known as the sequester, to take effect if Congress failed to enact legislation to reduce the Federal deficit. Congress failed to act by March 1, 2013, and the budget cuts went into effect.

On March 1, 2013, David A. Bergeron, Acting Assistant Secretary published an Electronic Announcement outlining the impact of sequestration on the Title IV Student Financial Assistance Programs. The Electronic Announcement provided the financial aid community with general information on how the sequester will impact Title IV programs.

On March 13, 2013, a second Electronic Announcement provided an update on the impact of sequestration on the Title IV programs.

The Federal Pell Grant Program is exempt from the effects of the sequester. Therefore, there will be no changes for the current Award Year and the 2013-2014 Award Year Pell Grant Payment Schedule that was released on January 30, 2013 in “Dear Colleague Letter” GEN 13-06 will be unchanged under the sequester.

Federal Work Study (“FWS”) and Federal Supplemental Educational Opportunity Grant (“FSEOG”) Programs for the 2012-2013 award year are unaffected by the sequester.

However, under the sequester, Award Year 2013-2014 funding for FWS and FSEOG would be reduced by approximately $86M. Final FWS and FSEOG institutional allocations are expected to be released later this spring. You should not rely on any estimates of allocation amounts until official amounts are released by the Department.

The sequester does not change the annual or aggregate loan limits for Federal Direct Loans, or student’s (or parent’s) eligibility. However, certain loan fees paid by borrowers will be increased during the time the sequester is in effect.

  • The loan fee for Direct Subsidized and Unsubsidized Loans is increased from 1.0 percent to 1.051 percent. For example, the fee on a $5,500 loan will increase by $2.80 from $55.00 to $57.80.
  • The loan fee for Direct PLUS Loans (for both parent borrowers and graduate and professional student borrowers) is increased from 4.0 percent to 4.204 percent. For example, the fee on a $10,000 PLUS Loan will increase by $20.40 from $400.00 to $420.40.

The Department began sending email (and where necessary, paper) notifications on March 9, 2013 to student and parent borrowers who, based on origination records submitted by institutions to the Common Origination and Disbursement (“COD”) System, have a Direct Loan with a first disbursement after March 1, 2013. The text of the notifications for borrowers was provided in attachments to the March 13th Electronic Announcement. Continue Reading

House Education and Workforce Subcommittee to Hold Hearing on Federal Aid Programs on April 16, 2013

Posted in Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

On April 16, 2013, at 11:00 a.m., in room 2175 of the Rayburn House Office Building, the House Committee on Education and the Workforce Subcommittee on Higher Education and Workforce Training will hold a hearing to entitled: “Keeping College Within Reach: The Role of Federal Student Aid Programs.”  This is part of a series of hearing looking at ways to keep college accessible to students. You can view the hearing here. We have the witness list after the jump.

Continue Reading

Department of Education Posts New Schedule for Release of Draft Cohort Default Rates

Posted in Cohort Default Rate, Department of Education, Financial Aid (Loans & Grants), Higher Education News

Dennis Cariello

Earlier today, the Department of Education issued a electronic announcment notifying the public of the new schedule for releasing the Draft Cohort Default Rates. On March 18, 2013, the Department will release the FY 2011 2-year draft cohort default rates. On March 25, 2013, the Department will release the FY 2010 3-year draft cohort default rates. These rates are released to institutions of higher education (as well as lenders and guaranty agencies). Final rates are released in September.  On February 3, 2013, the Department announced dates in February for the release of the Draft Cohort Default Rates.  On February 20, 2013, however, the Department postponed the release of the Draft Rates.

Compliance Focus: Academic Plans for Students that Fail Satisfactory Academic Progress

Posted in Complaince Focus, Department of Education, Financial Aid (Loans & Grants)

Patricia V. Edelson

The final regulations published October 29, 2010 included a number of changes to the Satisfactory Academic Progress (“SAP”) rules. These rules became effective July 1, 2011. Over one year later, one change that continues to generate questions concerns the development of an Academic Plan for students who fail SAP.

Under the SAP regulations, a student who fails SAP is no longer eligible for Title IV funds. An institution may permit the student to appeal that determination, and if the appeal is successful, the student may be placed on probation as long as the institution determines that the student should be able to make SAP during the subsequent payment period.

A student on financial aid probation for a payment period may not receive Title IV funds for the subsequent payment period unless the student makes SAP. However, if the student has an Academic Plan, and has met the requirements specified in the Plan, the student may continue to be eligible for Title IV funds beyond the subsequent payment period.

An Academic Plan (“Plan”) is simply a plan developed by the the institution, together with the student, to help that student meet SAP by a specific point in time. The student on a Plan doesn’t necessarily have to regain SAP at the next payment period as long as the student is meeting the requirements of his or her Plan.

The point in time specified in the Plan may be for more than one term and can even take the student through to completing the program. So, although the maximum time frame for undergraduate programs of study remains at no longer than 150 percent of the published length of the program, in some cases, a Plan could extend the maximum timeframe past 150 percent of the program. As long as the student continues to meet the terms of the Plan, and the student’s progress is measured at each payment period to ensure the student is meeting the requirements of the Plan, the student continues to be eligible for Title IV funds.

It is important to remember that allowing a student to exceed the maximum time frame of 150 percent of his or her program must be part of the student’s Plan and does not apply to a student who is merely on probation. Exceeding the maximum time frame of a program can’t be applied to all students but is only acceptable when it is part of a Plan.

The Department provided guidance on the new rules for SAP in an Electronic Announcement, on June 6, 2011. Further guidance specific to the development of an Academic Plan was provide as part of a Q&A  related to SAP program integrity issues.

Compliance Focus: Department of Education Releases Suggested Text for Verification Worksheets

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News

Patricia V. Edelson

The final program integrity regulations published October 29, 2010 made changes to Part 668 Subpart E, Verification and Updating of Student Aid Application Information. Among the changes, the Department is required to publish an annual Federal Register announcing information that an institution may be required to verify for an applicant selected for verification. These changes were effective July 1, 2012.

On July 12, 2012, the Department published the required notice in the Federal Register and additional information was published in the Dear Colleague Letter (GEN 12-11), July 17, 2012.  An Electronic Announcement  published on November 1, 2012 stated that, among the changes for the 2013-2014 award year, the Department would not provide sample verification worksheets for the 2013-2014 award year as it has done in the past. This change is part of the Department’s multi-year effort to develop a customized approach to verification, which limits the items most students must verify. The Department would, however, provide suggested text institutions may use to complete verification.

For the 2013-2014 award year, the Central Processing System (“CPS”) is adding a process that will place each applicant selected for verification into one of five Verification Tracking Groups. The applicant’s ISIR will use the Verification Tracking Flag field to indicate the applicant’s Verification Tracking Group.  V1 – record is selected for “Standard Verification,” V2 – record is selected for verification of Supplemental Nutritional Aid Program (“SNAP”) benefits only, V3 – record is selected for verification of child support only, V4 – record is selected for verification of identity criteria only, and V5 – record is selected for “Standard Verification” plus identity criteria.

As promised, on January 18, 2013, the Department published an Electronic Announcement that provided the suggested text for verification items that institutions may use to collect verification information for 2013–2014. Appendix A  to that announcement provides the suggested verification text. The announcement also includes Appendix B, a table of 2013-2014 verification items, Appendix C, details of the verification tracking groups, and Appendix D, an example institutions may use for verification purposes for the 2013-2014 award year.

While use by an institution of the suggested text in Appendix A fulfills the regulatory verification requirements, institutions are not required to use the Department’s suggested text. Instead, institutions may develop and use their own text that is specific to the items required to be verified for a particular student or group of students. The one exception is that institutions must use the exact language provided in the “Statement of Educational Purpose” in APPENDIX A for students who are placed in Verification Tracking Groups V4 or V5.

When an institution develops an institutional verification document, the Department suggests that each page include appropriate headings and numbering that identify the item(s) being verified. Institutional verification documents should collects the student’s name, ID number, and other identifying information, and that each page is identified as belonging to that student. Also, the institutional verification document should contain any special instructions for where, when, and how documents are to be submitted to the institution.

Risk Management and Student Loan Defaults

Posted in Cohort Default Rate, Department of Education, Financial Aid (Loans & Grants), Student Loans

Dennis Cariello

As I’ve written previously, institutions of higher education must monitor the performance of their student’s loans.  Analyzing the former students that make up their loan portfolio and tailoring default prevention efforts to meet their needs is a critical step in the process.  In fact, institutions would be wise to manage their loan portfolio like a bank and step in at the first sign of delinquency.  Last October, with my friends Judith Witherspoon and Jonathan Loony of Edfinancial Services, we discussed these topics at the 2012 Annual Conference of the Association of Community College Trustees.  I hope this presentation is helpful – and please, let me know if you have any comments.

Department of Education Delays Release of Draft Cohort Default Rates

Posted in Cohort Default Rate, Department of Education, Financial Aid (Loans & Grants)

Dennis Cariello
On February 4 we reported that the Department of Education issued a electronic announcement notifying the public of the schedule for releasing the Draft Cohort Default Rates.  On February 15, the Department updated the eletronic announcement to notify the public that it would delay the release of the draft rates to an undetermined date in the future:

Note: Federal Student Aid has postponed the release of the FY 2011 2-Year and FY 2010 3-Year Draft Cohort Default Rates to a later date.  Please monitor the Information for Financial Aid Professionals (IFAP) Web site for a forthcoming communication that will announce the rescheduled release dates of the draft cohort default rates.

We will let you know more as we learn the information.

Looking at the Changes in Subsidized Loan Limits

Posted in Department of Education, Financial Aid (Loans & Grants), Student Loans, Uncategorized

Patricia V. Edelson

During the Federal Update session at the Federal Student Aid (“FSA”) Conference this past November, we heard about Public Law 112-141, published July 6, 2012, and how the law would impact future borrowers of Subsidized Federal Direct Stafford Loans. The changes to the law have caused a fair amount of confusion for borrowers and institutions offering the loan programs.

The law established a lifetime limit on subsidized loans for “new borrowers” on or after July 1, 2013.  The limit is dependent solely on the student’s current program; when a student has received Subsidized Stafford Loans for 150 percent of the published length (time) of the program the student is currently enrolled in, the student may not receive any additional subsidized loans, and the subsidized loans received from July 1, 2013 on lose their subsidy.

For example, consider a student in a four year Bachelor’s Degree program – the student is eligible for six years’ subsidized loans in that program. The same student in a two year Associates Degree program is eligible for three years’ subsidized loans and in a one year certificate program that student is only eligible for one and one half years’ subsidized loans.

If a student received three years of subsidized loans while enrolled in a four year BA program changes his or her career goal and enrolls in a two year degree or certificate program, that student is now limited to 150 percent of their new program, or three years of subsidized loans. Because this student already received three years subsidized loans while in the four year program, the student is not eligible for any additional subsidized loans in their two year program.

Conversely, a student in a two year program who maximized their subsidized loan limits in that program by receiving a full three years’ subsidized loans, and then transferred to a four year program, would be eligible for an additional three years’ subsidized loans.

The impact will be felt most directly by students who have attended some years of a traditional four year college and find that they really would benefit more by attending a vocational program that will train them for the career they may have aspired to all along, or they may simply discover the real academic direction for which they are best suited.

As of right now, the plan is for FSA to track, calculate, and inform students and institutions of subsidized loan limits. There will likely be codes and comments on SARs and ISIRs and COD will be editing and enforcing these limitations. Institutions will need to provide program information that includes the length of each program and that will probably be part of COD reporting requirements.

Students may still receive any Unsubsidized Direct Stafford Loans for which they were otherwise eligible.

Dennis Cariello Will be Speaking at SASFAA on February 12, 2013

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News, Program Reviews and Audits

Dennis Cariello

If you are in Atlanta next week, I hope to see you at the annual conference for the Southern Association of Student Financial Aid Administrators (SASFAA).  I will be speaking with William “Bill” Spiers, Jr., the Director of Financial Aid for Tallahassee Community College on “Responding to a Department of Education Program Review.”  This discussion will be moderated by Jamey Palmieri of Ferrilli Information Group.  It will be an informative session where we hope to answer questions about the process and how to better position your institution to achieve a favorable review.  If you can’t make the event, you can get the PowerPoint presentation on the web site after the session.

Department of Education Announces Schedule for Release of Draft Cohort Default Rates

Posted in Department of Education, Education Data & Statistics, Financial Aid (Loans & Grants), Higher Education News

Dennis Cariello

Earlier today, the Department of Education issued a electronic announcment notifying the public of the schedule for releasing the Draft Cohort Default Rates.  On February 19, 2013, the Department will release the FY 2011 2-year draft cohort default rates.  On February 25, 2013, the Department will release the FY 2010 3-year draft cohort default rates.  These rates are released to institutions of higher education (as well as lenders and guaranty agencies).  Final rates are released in September.


Ninth Circuit Grants En Banc Rehearing on Decision Affirming Use of Arbitration Agreements in Private Student Loan Documents

Posted in Arbitration, Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, Litigation News

Dennis Cariello

On September 21, 2012, the Ninth Circuit Court of Appeals granted Plaintiffs-Appellants’ petition for en banc rehearing in Kilgore v. KeyBank National Assn., No. 09-16703 (9th Cir.).   The case is to be calendared the week of December 10, 2012.  The original decision (Kilgore v. KeyBank National Assn., 673 F.3d 947 (2012)), which we discussed previously, held (among other things) that, pursuant to the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion 563 U.S. __, 131 S. Ct. 1740 (2011), the Federal Arbitration Act (“FAA” or “Act”) preempts California’s state law rule prohibiting the arbitration of claims for broad, public injunctive relief  (the “Broughton-Cruz” rule, see Broughton v. Cigna Healthplans of California, 988 P.2d 67 (Cal. 1999), and Cruz v. Pacificare Health Systems, Inc., 66 P.3d 1157 (Cal. 2003)).  This review comes at a time when arbitration clauses in the education sector are under political attack.


The New CFPB Paying for College Cost Comparison Tool

Posted in CFPB, Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy

Dennis Cariello

The Consumer Finance Protection Board (CFPB) has released its beta version of a college cost comparison tool to help students and families with selecting a college.  The tool allows you to compare three schools at the undergraduate level (two or four year) and tries to predict, on average, what the net cost for going to the school will be (net of non-loan financial aid) and what the monthly payment associated with any debt from the school will be.

While I have concerns about this tool — and I imagine I will more concerns as I continue to play with it — I can see how this data can be helpful.  A net calculator can be very helpful for families looking at universities and the ability to compare institutions on one page would be a nice additional feature.  In that spirit I plugged in three New York State schools — a public university, a proprietary university and a private non-profit university — to see what would happen.  While some of the data was helpful – particularly having the net price in a understandable format – there are a few areas for improvement.

The CFPB characterizes the estimated debt as, presumably, “low”, “medium”, and “high”.  I say presumably because all of the schools in question were rated as “high” ($11,000 for the public school, $30,000 for the proprietary school and $31,000 for the private school).   This characterization is “based on your estimated debt and the average national salary for Bachelors graduates, not school specific.” Unsurprisingly, according to the CFPB the average private and public university also leave students with a debt level of “high.”  Given this, a reasonable student would likely walk away thinking the government was telling her that she shouldn’t go to a four-year school, lest she graduate with high debt levels.  This is clearly a problem that must be fixed in version 2.0 of the program.  While we shouldn’t pretend that paying loan bills is easy, we also shouldn’t be discouraging students from going to a four-year school by labeling the debt in this manner.  Moreover, given that this does not take into account the school location (and regional salary differences) or the program being considered (and the salary differential for that program), students and families are very likely to get the wrong idea about this data.

The other comment relates to the CFPB’s attempt to equate the estimated monthly debt payment to something the would-be student borrower would understand.  To be sure, there are numbers that are beyond most people’s ability to conceptualize.  While a trillion, billion or even a million might be tough to fathom, the debt payment for the schools in question were in the hundreds.  I sincerely hope it is not beyond the understanding of potential college students to understand what $600 or $900 means without breaking this number down into a function of “$50 textbooks” the student could purchase each month.  It seems to me that $600 or $900 has enough relevance as a dollar figure to the average college freshman that it need not be broken into a smaller unit.  Many – not all, but many – have seen that much money before.  Moreover, the opportunity cost associated with $900 is apparent to most high school seniors – $900 is a computer, an iPad, a first car, or, I’d imagine, about a month’s pay before taxes.  Breaking $900 down into a function of $50 textbooks is more likely to confuse the audience than than clarify what that payment means to them.  Note, I am not advocating saying the loan payment “is like buying an iPad a month” either. Doing so is likely to drive them away from school even more.  All I am saying is that the number is readily understandable and needs no further explanation.

Again, I do think the idea is not a bad one and I congratulate the CFPB on this first attempt  – as they admit, it is a beta version.   I do hope they consider these thoughts, however, which I hope will make it a more useful tool for students and families in choosing a college.

Facilitating a DIY Education

Posted in Accreditor News, Department of Education, Education Technology, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, News from the Hill

Dennis Cariello

Anya Kamenetz’s DIY U: Edpunks, Edupreneurs, and the Coming Transformation of Higher Education has been the source of debate since is was published in 2010.  As Academically Adrift caused the community to look at issues of quality, DIY U has caused the community to look at the use of open education and the necessity of linking the learning aspect of education with credentialing.  You may recall, at the US-India Higher Education Conference last November, Sam Pitroda, the Adviser to the Indian Prime Minister on Public Information, Infrastructure & Innovations, raised similar concerns, “question[ing] the need for diplomas and certificates and endors[ing] a model where students can take courses from different universities as part of learning.”  Last week, Bob Shireman, the former Deputy Undersecretary of Education at the US Department of Education, suggested that the California Student Aid Commission “develop ideas for ways the state could encourage methods of credentialing for learning outside of the traditional colleges.”   Even today, Campus Technology has an interesting discussion among three open source learning leaders about DIY U and how it might work.

On the other side, you have regulatory hurdles that present serious obstacles to decoupling learning from credentialing.   Federal laws and regulations mandate, for example, the accreditation of institutions, rather than of programs, making DIY degrees difficult to navigate – and more so given complex transfer credit rules.  Then you have commentatorsstates, and the Obama Administration trying to reward students and institutions based on success measures like graduation rates.  Coming full circle, even some accreditors are considering incorporating graduation-proficiency assessments.

Although there can and will always be a place for brick and mortar institutions, it would be surprising if higher education could stave off DIY degrees.  The advent of online education has allowed students to pursue more and more student-centric educational options.  It is only a short step from taking classes at times and places of a student’s choosing to having a student demand to be taught by specific professors or designing the elements of their personal education.  Such models can have great value.  If sufficiently rigorous, it seems likely that students will be more engaged in their education and, presumably, get more from their classes.

Of course, so long as education policy and regulation forces students to work within specific institutions — either as a quality control (via accreditation) or to protect the government’s investment in student aid (via success metrics) — students will not be able to effectively design their education or, at least, will face significant hurdles to doing so.  Degree-seeking students taking courses at multiple institutions would be at the mercy of, what is often, Byzantine credit transfer policies.  Further, as students move from school to school, the government will be less able to track success — however defined — and thus student aid could be at risk.

One solution would be, as Mr. Shireman suggests, for states to develop competency tests that could provide the sought-after credential.  Such an idea has merit as far as it goes.  Students could theoretically take classes from a variety of sources and achieve the desired degree.  While there are practical issues that complicate this proposal — would each major have its own test? — there may be ways to incorporate this idea for certain disciplines.

Another solution would be for schools to create uniform transfer of credit policies, perhaps for schools with the same accreditors.

Perhaps another would be to create an institution that exists to, in essence, pass judgment on courses from various formats to determine if such courses are worth of credit towards a degree.   Such an institution would confer the degree and, in the process, act as an “accreditor” of sorts, for individual courses.  Of course, with necessary changes, you could create such an accreditor — similar to the American Council on Education’s College Credit Recommendation Service.

While there are more ideas to be explored in the future – massive online consortia, perhaps? –  the DIY degree is likely to be a feature of higher education from some time.  With Higher Education Act re-authorization around the corner, lawmakers will hopefully be looking at ways to foster this concept rather then destroy such innovation through burdensome regulations.

Appropriations Bill Released – Changes to Pell Grants, Loan Subsidies

Posted in ATB, Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy

Dennis Cariello
So, the Labor-HHS-Education Appropriations bill is out.  Here is a summary from the House Committee on Appropriations.  Our understanding is that this was largely the result of a bipartisan compromise, so these provisions are likely to be sent to the President, notwithstanding what happens with other issues (such as the Keystone project) that may result in revisions.

There are a few interesting things for higher education.  The bill:

  • Limits student Pell Grant eligibility to a maximum of six years or twelve semesters (Section 309(a)(2), page 123);
  • “Reduc[es] the income level below which a student will automatically receive the maximum Pell Grant from $30,000 to $23,000″ (Section 309(b), page 123);
  • Eliminates the Pell Grant for Ability to Benefit Students starting July 1, 2012 (Section 309(c), starting on page 123) ;
  • Temporarily (from July 1, 2012 to July 1, 2014) eliminates the interest subsidy on Stafford loans during the grace period (Section 309(d)); and
  • Revises the special allowance calculation to eliminate the CP-LIBOR mismatch (Section 309(e), starting on page 124).


Thoughts from the FSA Conference

Posted in Department of Education, Financial Aid (Loans & Grants)

Dennis Cariello

Last week, the Department of Education’s Office for Federal Student Aid held their annual conference at the MGM Grand in Las Vegas.  I’ve attended the conference a number of times and I’m always struck at how large it has gotten.  While only having one conference (rather than an east coast and west coast conference) makes that inevitable, it still seems like it grows every year.

I had the chance to attend a few sessions and talk with some of the 6,700 plus attendees.  It seems some of the choicest words were reserved for the new credit hour and gainful employment rules, as well as the state authorization rule as it applies to distance learning.  Also, some schools have discovered a number of issues related to gaps in servicing of loans put to the Department under the Ensuring Continued Access to Student Loans Act programs.  While the Department is working towards addressing servicing issues going forward, there’s no telling the impact that it has had on last year’s cohort default rates.

Also, I expressed my reservations about the new experimental projects (more on that in another post) – namely that it did not offer 90/10 relief.  My understanding is that the Department received a fair amount of push back – presumably from the Hill and from interest groups – that prevented them from offering the needed relief.  Worse is that the Department could have structured the relief in a way to lower tuition for students — say, offering $1.25 in 90/10 relief for every $1.00 in tuition reduced (which can be capped if need be).

Dennis Cariello’s Speaking Engagements – November 18 in Ellenville, NY

Posted in ATB, Credit Hour, Department of Education, Financial Aid (Loans & Grants), Gainful Employment, Higher Education News, Misrepresentation

Dennis Cariello

Please join me at the annual meeting of the Coalition for New York State Career Schools.  The meeting is from November 16-18 at the Honor’s Haven Resort and Spa, and I will be part of a panel at 10:00 on November 18 that looks at various compliance issues for postsecondary institutions that accept Title IV funds.


Dennis Cariello’s Speaking Engagements – November 17 in Boston

Posted in ATB, Credit Hour, Department of Education, Financial Aid (Loans & Grants), Gainful Employment, Higher Education Policy, Incenitve Compensation, Misrepresentation

Dennis Cariello

Although it won’t be as warm as being in Puerto Rico, Boston has a great conference this week as well.  I will be speaking at the Wunderlich Securities – Signal Hill Education Conference on Thursday at The Taj Hotel, Boston.  While the full schedule looks great, I encourage you to get  up at 7:20 in the morning and hear me, along with my esteemed co-panelists – Nancy Broff of Dickstein Shapiro, Doug Lederman of Inside Higher Ed and Teddy Downey of TJ Strategies — discuss the regulatory and legislative initiatives affecting the sector with our moderator, Trace Urdan of Wunderlich Securities.  Sure it will be a mix of the here and now (gainful employment, various enforcement issues, increasing prominence of the office of the inspector general, etc.) and the future (90/10 and the GI Bill, the future of providing financial aid, accreditation agencies of the future, etc).   I imagine we will also wade into topics like job placement reporting and the work of the state attorneys general.

Of course, I encourage you to stay for the rest of the day, for which you will be rewarded with a great mix of public and private company presentations and talks about substantive policy issues and market trends.


Pat Edelson’s Speaking Engagements – November 17 in Puerto Rico

Posted in Department of Education, Financial Aid (Loans & Grants), Higher Education News, Higher Education Policy, Incenitve Compensation, Misrepresentation, Office of the Inspector General (OIG), State Authorization


Dennis Cariello

If you are lucky enough to be in Puerto Rico on Thursday, November 17, Pat Edelson – a regulatory specialist with the firm (and a 20+ year veteran of the New York Federal Student Aid office, and before that 10 years with a beauty school) – will be speaking at “The First Forum of Title IV Regulations for Postsecondary Institutions in Puerto Rico,” sponsored Nexia Cardona, Co. She will be discussing a number of topics including:

  • How did I get picked for a program review?
  • What do I do now?
  • What does a program review consist of?
  • How do I avoid an Inspector General review?
  • What do I do if the Inspector General’s office wants to conduct a review? and
  • How do I lower my cohort default rates?

If you can peel yourself away from the beach, head over to the Four Points by Sheraton Caguas Real in Caguas, Puerto Rico. Pat’s experience having done program reviews from inside and out provides her with a unique perspective that has helped many clients.