Northwest Education Law Blog : Northwest Education Lawyer & Attorney : Williams Kastner Law Firm : Tacoma, Seattle, Portland

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The New York Times reports that during a February 17, 2010 conference call with the media, Secretary of Education Arne Duncan rallied in favor of legislation, currently stalled in the Senate, which would reform student lending. Under the Student Aid and Fiscal Responsibility Act, H.R. 3221, all new federal student loans would originate by direct government loan, putting an end to federal subsidies to private lenders in the federally-guaranteed student loan program. The plan has been met by significant resistance from lenders and trade groups.

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More than 220 colleges have long-term student loan default rates so high that they would lose all federal student financial assistance under the terms of a new law that eventually will measure those rates over a three-year time scale, according to new Education Department figures.

Student-loan defaults are more common at for-profit colleges and other institutions that serve lower-income populations, and the move toward a stiffer default-rate measure has left many of those institutions warning of a growing harm to the students most in need.  "The only thing that explains default rate is the socioeconomic background" of the student, said Harris N. Miller, president of the Career College Association, which represents for-profit institutions. "By using that as the metric of quality, you will always be discriminating against low-income students."

Most students are required to begin paying back federally subsidized loans six months after they graduate or otherwise leave school. A college can lose eligibility for both grants and loans if its default rate exceeds 40 percent among its former students in the first year after they're due to begin repayment. Colleges also can lose eligibility if the rate of borrowers defaulting within two years of their scheduled start of repayment is 25 percent or greater for three consecutive years.

A new law, the Higher Education Opportunity Act (HR 4137), approved last year by Congress, will change that last measure, effective in 2012, to begin counting borrowers who default within three years of their scheduled repayment. Using that three-year window, colleges would be ineligible if their borrower default rate is 30 percent or greater for three consecutive years. [Chronicle of Higher Education]

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The chairmen of Congress's education committees on Thursday disputed a report that a proposed lender alternative to President Obama's student loan restructuring proposal would save nearly as much money as the administration's plan. Rep. George Miller and Sen. Tom Harkin were responding to news reports indicating that the Congressional Budget Office had "scored" an alternative put forward by Sen. Robert Casey on behalf of lender groups as saving $75 billion, within striking distance of the amount projected to be saved by President Obama's plan to end lending through the guaranteed loan program. The higher level of savings would be achieved through a series of budget gimmicks, the Democratic lawmakers wrote. [Inside Higher Ed]

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As Democrats in the House of Representatives joined the Obama administration in urging college leaders to prepare for the government's seemingly likely switch to 100 percent direct student lending, Congressional Republicans issued a challenge of their own, introducing legislation (with the support of one key Democrat) that would extend a stopgap 2007 law that sustained the lender-based guaranteed loan program with a massive infusion of federal funds. That legislation, the Ensuring Continued Access to Student Loans Act, made the federal government the backstop for federal student loans issued by banks and other lenders. Education Department officials have cited the June 30 expiration of the law as a major reason why the administration's plan to shift all student lending to the direct loan program must proceed apace, and Reps. George Miller and Ruben Hinojosa sent a letter to college presidents Wednesday urging them to get their campuses ready for the switch, even though the legislation has passed only the House and faces a fight in the Senate. But by proposing an extension of ECASLA, Republicans are essentially giving lawmakers uneasy about pushing ahead with a massive change in federal policy a potential alternative. [Inside Higher Ed]
 

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Rep. John Kline of Minnesota, the top Republican on the House education committee, is accusing the Education Department of improperly lobbying colleges to support legislation to overhaul student loans. He says the department has pressed institutions to switch to its direct-loan system before Congress votes to terminate the bank-based system of student lending. [The Chronicle of Higher Education]

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The U.S. Department of Education has released a template that colleges can use to create the net-price calculators they are required to offer on their Web sites in two years.

The calculators, which are required under a provision of the Higher Education Opportunity Act, will allow prospective students and their families to estimate their personal out-of-pocket expenses at a particular college.

Colleges have two years, until October 29, 2011, to have their calculators up and running, but they have been encouraged to take action sooner, and some already have made calculators available. [The Chronicle of Higher Education]
 

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A Congressional panel voted today to expand federal oversight over private student loans, but refused to clarify that institutional "gap loans" would be covered.

By a vote of 33 to 35, the U.S. House of Representatives Financial Services Committee rejected an amendment to legislation (HR 3126) to create a new Consumer Financial Protection Agency that would have put loans made by for-profit institutions under the agency's purview. Consumer advocates have warned that the loans, called gap loans because they cover the difference between federal aid and the cost of college, could be exempt under language that was added to the bill to protect small businesses.

"This is a clear case of a solution in search of a problem," said Harris N. Miller, president of the Career College Association. "Our schools should not be saddled with additional compliance requirements simply because they are attempting to help those in financial need get the education necessary to build better, more successful lives."

Before approving the overall legislation, on a vote of 39 to 29, the committee also rejected an amendment by Rep. Tom Price, a Republican of Georgia, that would have exempted all student-loan providers from the agency's oversight. [The Chronicle of Higher Education]

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The economic slump has not slowed the upward spiral of college costs, the College Board reported Tuesday. Tuition and fees now average $26,273 at private colleges and $7,020 at public four-year institutions, with prices rising faster in the public sector. Compared with the past school year, tuition and fees rose 6.5 percent at public four-year colleges and 4.4 percent at private, nonprofit, four-year institutions, according to the report. Those were steeper rates of increase than in previous years, after adjusting for inflation. Over the past decade, annual increases have averaged 4.9 percent at public colleges and 2.6 percent at private colleges.

The companion report, "Trends in Student Aid 2009," shows that financial assistance is rising at a similar clip, contributing to a widening gap between the published price of college and the amount students actually pay. [The Washington Post]

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The U.S. Department of Education has ordered the Iowa Student Loan Liquidity Corporation, a private nonprofit lender, to repay $15.7-million to the federal government after finding that the organization used illegal cash inducements to drum up more loan business, The Des Moines Register reported. The lender disputes the department's calculations, however, and says it believes the repayment amount should total only $1.7-million. The department's findings involved payments made to the Iowa State University Alumni Association under an agreement that ended in May 2007 and that was the subject of legislative hearings that year. Last fall, the lender was the subject of a scathing report by the state's attorney general, who accused it of giving false and misleading information to borrowers. [The Chronicle of Higher Education]

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Thousands of veterans who returned to school this semester under the Post-9/11 GI Bill and have yet to receive tuition, housing and textbook payments from the Department of Veterans Affairs will each be eligible for $3,000 in emergency aid, agency officials announced Friday. "Students should be focusing on their studies, not worrying about financial difficulties," Secretary of Veterans Affairs Eric K. Shinseki said in a statement.

The agency has been overwhelmed by a flood of applications. Of the 251,000 students who have submitted claims this year, 24,186 -- less than 10 percent -- have received checks, according to Veterans Affairs officials. They point out, however, that not all of those students intend to use the benefits this year. Although many universities are deferring tuition payments, the delays have forced students to take out loans, rack up credit card debt and consider dropping out of school in order to meet living expenses, according to veterans and groups that advocate on their behalf.

Now, starting Oct. 2, veterans can request a $3,000 advance on their housing and book allowances by bringing a photo ID, course schedule and eligibility certificate to one of the agency's 57 regional offices, including in the District and Baltimore. The agency said it would also send officials to some college campuses and help coordinate transportation to regional offices. [The Washington Post]

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As Congress and the White House move to alter bankruptcy code to make it more equitable to consumers, a House subcommittee began a reconsideration Wednesday of how bankruptcy law treats private student loan debt. Rep. Steve Cohen (D-Tenn.), chair of the House Judiciary Subcommittee on Commercial and Administrative Law, held a hearing to initiate legislation reversing a 2005 change in federal bankruptcy law that, he said, gave private student loan lenders a “favorable, unusual” advantage over borrowers, as well as in comparison to the issuers of most other kinds of consumer loans.

Bankruptcy law bars virtually all borrowers from discharging their private student loan debt, even as most other forms of consumer debt -- including auto loans, credit card debt and mortgages -- can be discharged through bankruptcy proceedings. The only exceptions are made in cases of “undue hardship.”

The only chance borrowers have to discharge their private student loans during bankruptcy proceedings comes by being able to demonstrate “undue hardship,” a term that has not been concretely defined by Congress and is up for varied interpretations by bankruptcy judges. Rafael I. Pardo, an associate professor at the Seattle University School of Law who has done extensive studies on student loans and their discharge in bankruptcy, called on Congress “to clarify the undue hardship standard.” [Inside Higher Ed]

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WASHINGTON -- The House of Representatives on Thursday approved sweeping legislation to overhaul the student loan programs and redirect tens of billions of dollars to student aid and other education programs, brushing aside Republican opposition and handing President Obama a significant legislative victory. The House's approval of the Student Aid and Fiscal Responsibility Act of 2009, which had been a foregone conclusion for months, shifts the action to the Senate, where the outcome is slightly less predictable.

The student aid bill, a top domestic priority for the Obama administration, would cease all lending from the bank-based Family Federal Education Loan Program and use the savings the government derives from lending more cheaply for a wide array of purposes, only some of which, to the dismay of some college officials, are in higher education. Among other things, the legislation would:

• Provide $40 billion over 10 years to increase the maximum Pell Grant to $5,550 and ensure that it would increase annually by the rise in the Consumer Price Index plus 1 percent.
• Greatly expand and alter the criteria for the Perkins Loan Program.
• Pour $10 billion into community colleges in support of President Obama's American Graduation Initiative, designed to produce 5 million more two-year college graduates by 2020.
• Spend $8 billion over 10 years to strengthen early childhood education.
• Create a College Access and Completion Fund that would give grants to states and institutions with innovative approaches to increasing college going and graduation.
• Provide $4.1 billion to modernize and repair school and college facilities, including those damaged by Hurricanes Katrina and Rita.
• Make the interest rates on federal student loans variable beginning in 2012, when they are set to rise back to 6.8 percent.
• Simplify the federal financial aid form. [Inside Higher Ed]
   

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On its face, it would seem to be a gift to Barack Obama's conservative critics, who have spent the summer painting the new Democratic President as a socialist who is eager to nationalize the entire health-care system. After all, the Administration's proposal to restructure the student-loan industry is, in many respects, much closer to an actual government takeover than its relatively tame market-driven health-reform plan. But as the House holds hearings and looks likely to pass a student-loan bill this week, it's clear that the education overhaul is not going to be the high-pitched battle that opponents and the White House once expected it to be.

His plan is to do away with a system in which the Federal Government subsidizes banks and other private finance companies like Sallie Mae to lend money to students. The Administration essentially wants to cut such companies out of the game and run the system itself. Democrats claim the move will save $87 billion over 10 years, which can be used for a laundry list of education priorities, including increasing the maximum amount of Pell Grants, expanding Perkins Loans and investing in community colleges and other programs.

Still, the bill could have a hard time in the Senate, where the Administration will need to cobble together 60 votes to prevent the threat of a filibuster. And those in the loan industry certainly aren't giving up. "Ultimately, what they are trying to create here is the Post Office of student lending — you've got no choice," says Jack Remondi, vice chairman and CFO of Sallie Mae, the nation's largest lender, referring to Obama's Aug. 11 comments that questioned the efficiency of American letter carriers. "And this is the President's initiative on health care: if you create competition, that should drive down costs and save people money."

The loan industry estimates that up to 35,000 jobs might be lost by the transfer from FFEL to direct-loan. But the Department of Education (which would run the new and expanded program) maintains that because Sallie Mae and several other companies would be kept on as contractors to "service" the loans — performing administrative tasks such as answering student inquiries and collecting payments — the total amount of jobs lost will actually be much less. [Time]

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The Federal Reserve Board has published final rules governing private student loans. The "Truth in Lending" rules, which take effect in February 2010, add a series of new disclosure requirements to private loans; give consumers up to three days to cancel a consummated loan; and prohibit lenders from using colleges' names, mascots, or logos in their marketing materials. [The Chronicle of Higher Education]

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Zakiya Williams had found a perfect fit at Spelman College. But when the tough economy hit the sophomore and her family hard, she packed her bags, ready to drop out.

"I was not able to get loans, nor were my parents," she said. "It became really difficult because I felt all my avenues were exhausted."

"Every college and university is asking the question, 'What will our enrollment be next year?' not because of a change in institution, but because families are really being hit by the economy every day," Spelman College President Beverly Tatum said.

Since 2004, $238 million in federal funding has been earmarked annually for historically black colleges. In the last two years, those institutions benefited from an extra $85 million each year under the College Cost Reduction and Access Act. When that program ends in May 2010, the institutions may feel the squeeze even more.

The White House budget office says Obama's proposed budget calls for a 5 percent increase in permanent funding for historically black colleges. But many in the black college community wanted more. [CNN]

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The push to simplify the process of applying for federal financial aid has been steadily building momentum, with federal officials (in both of the last two administrations) joining advocates for students and financial aid experts in a show of near unanimity on the idea that procedures and documents (like the Free Application for Federal Student Aid) should not be discouraging students from seeking financial help for college.

The National Association of State Student Grant and Aid Programs, which represents officials who oversee the awarding of state-based financial aid, released a survey of its members on Tuesday that might be seen, at the extreme, as trying to put the brakes on the simplification runaway train; at the least, it's a call for their needs and those of their students to be considered as policies evolve.

But problems emerge in the eyes of state aid officers when talk turns -- as it has in proposals from financial aid experts and a College Board-organized panel of researchers and policy makers -- to dramatically altering the types of financial information collected about aid applicants. The most aggressive simplification proposals have recommended basing the awarding of federal Pell Grants on adjusted gross income and family size, wiping out other aspects of the current federal methodology used to calculate a student's expected family contribution.

Going that direction "would have financial, administrative, statutory and regulatory consequences to state need-based financial aid programs," because almost all states use the expected family contribution to allocate their own need-based aid, the state aid group says in its survey.

"A technological solution that reduces appropriately the basic FAFSA to a minimum, but also provides a means for obtaining data needed by individual states, would be ideal," the NASSGAP report concludes.  [Inside Higher Ed]

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Although about a third of the students who earned bachelor’s degrees in 2007-8 graduated with no debt, nearly the same as four years earlier, the average amount students borrow has increased, according to a policy brief released Tuesday by the College Board.

For bachelor’s degree recipients who did borrow, the median loan debt was $19,999, up 5 percent from $18,973 four years earlier, adjusted for inflation. The data, the latest available, come from the federal Department of Education’s National Postsecondary Student Aid Study, which is conducted every four years.

About 6 percent of those who completed a degree or certificate — and 10 percent of those who received a bachelor’s degree — borrowed more than $40,000, the brief said.

But the brief does not include parents’ borrowing, credit-card debt, informal loans from relatives or friends, or loans for graduate school.

Over all, the median student loan debt of borrowers in 2007-8 was $15,123, up 11 percent from $13,663 in 2003-4. But debt levels rose far more sharply for students at for-profit colleges, and those earning certificates and two-year degrees.

For example, students who received certificates in a for-profit program carried a median debt load of $9,744 in 2007-8, a 30 percent increase from 2003-4. And bachelor’s degree recipients in for-profit institutions had a median debt load of $32,653, up 23 percent four years earlier.

For-profit colleges acquire much of their revenue from federal aid. The authors of the brief say for-profit colleges had about 7 percent of the nation’s undergraduates in 2006, but received about 19 percent of the federal Pell grants. [The New York Times]

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TUI University inappropriately gave out an estimated $923,000 in financial aid funds to students who either were ineligible for the money or did not earn it because they withdrew from the institution, the U.S. Education Department's inspector general said in an audit released Thursday.

The inspector general's audit recommended that the Education Department's Federal Student Aid office require the for-profit university, which was the online arm of Touro University until its sale to private equity investors in 2007, to repay a minimum of $200,000 to the government and lenders for the money that it has already found should not have been distributed -- a figure that could climb if its recommendations are upheld by department leaders. The IG's office also suggests that the department "consider" taking much more serious action, to "fine, limit, suspend or terminate" TUI's ability to participate in the federal student aid programs.

University officials vigorously disputed the audit's findings and its recommendations, saying they were based on the misinterpretations of federal laws and rules by the inspector general itself. "The university believes that it has properly accounted for all of its Federal student financial aid funds, is taking steps to resolve issues raised in the OIG report, and does not anticipate there will not be any significant repayment liability or adverse impact on the institution upon resolution of this matter," Tom Finally, the vice president for administration, said via e-mail. [Inside Higher Ed]
 

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Sallie Mae, the nation's largest student-loan company, spent $2-million on lobbying in the first half of this year in an effort to persuade lawmakers to consider alternatives to President Obama's plan to end bank-based lending to students and replace it with direct lending, according to an analysis by The Huffington Post.

The lender, which is pushing a counterproposal that would allow student-loan companies to originate loans before selling them to the government, has hired several Washington-based lobbying firms, including a group led by Tony Podesta, a top Democratic fund raiser with longstanding ties to members of Congress. But its key hire was Jamie Gorelick, a deputy attorney general in the Clinton administration and partner in the law firm of Wilmer, Cutler, Pickering, Hale and Dorr. The firm billed Sallie Mae $270,000 for its work in the first half of 2009, according to the analysis.

Sallie Mae spent $3.4-million lobbying last year, according to the Center for Responsive Politics. It also showered campaign contributions on individual members of Congress, including $26,150 for Rep. Paul Kanjorski of Pennsylvania, chairman of the House Financial Services Committee and a key Democratic ally, and $10,000 on moderate "Blue Dog" Democrats. Among Democrats, the Blue Dogs have been the most vocal in their opposition to the president's plan, warning of job losses that could result from a switch to 100-percent direct lending. [The Chronicle of Higher Education]

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By now, everyone knows that the Obama administration's stimulus bill is designed to get the economy moving again. However, you may not know that most of the bill's $70 billion for education will go to low- to middle-income individuals.

A major part of the bill is a $13.8 billion tuition tax credit boost called the American Opportunity Tax Credit. This tax credit reimburses 100 percent of the first $2,000 of educational expenses for lower income students. For the next $2,000, students will receive a 25 percent reimbursement. In short, lower income students will receive $2,500 in education reimbursements per year.

The bill also features other benefits for low-income students. Families that do not earn enough to pay income taxes can receive a $1,000 education refund. [Career College Central]

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A majority of colleges plan next year to continue using a bank-based student-loan program that President Obama hopes to do away with the following year, according to survey results released on Monday by Student Lending Analytics, an independent research and advisory firm.

Mr. Obama has said the federal government will save billions of dollars each year by eliminating the federal guaranteed-loan program and switching all colleges to the government-run direct-lending program. But 56 percent of the 453 survey respondents will continue to use the guaranteed-loan program next year, and only 8 percent said they planned to switch to direct lending.

One out of five colleges that responded to the survey plan to use the direct-lending program in the 2009-10 academic year, and 7 percent are unsure which program they will use. [The Chronicle of Higher Education]

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More than 75,000 members of the U.S. National Guard will not be eligible for benefits under the Post-9/11 GI Bill unless Congress passes corrective legislation, the independent military newspaper Stars and Stripes reported today.

Guard members called to active duty since September 11, 2001, in Iraq and Afghanistan do qualify for the benefits. But Guard members called to active duty within the United States do not qualify, the newspaper reported.

Members of the National Guard with domestic assignments include those who responded to Hurricane Katrina and those who have been deployed to the United States-Mexico border. [The Chronicle of Higher Education]
 

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A hot topic in Washington this week is the Obama administration's student-lending plan that could eliminate the need for guarantee agencies. While Congress is set to being debates on the plan, a new report from the New American Foundation calls the 35 guarantee agencies that currently administer student loans inefficient middlemen that waste taxpayer money. An overview of the report appearing in the Chronicle of Higher Education can be found here.

While many are critical of the current system, some smaller schools have concerns about the new program. It could cost some institutions hundreds of thousands of dollars, adding to demands for resources as colleges are already grappling with a bad economy. Retraining of staff, acquiring new software, and hiring new employees are just some of the costs that colleges could incur if the plan is passed. Click here to read more about the impact on smaller colleges and universities.

While many in Congress, including Rep. George Miller of California, the Democratic chairman of the education committee in the U.S. House of Representatives, support the plan, others haven’t given up on the guaranteed-loan program. Read more here about Rep. Miller's proposed legislation and here about opposition to the new plan. [The Chronicle of Higher Education]

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Washington — Congress has yet to decide whether to adopt President Obama’s proposal to end the bank-based guaranteed-loan program and move all colleges to direct lending by the 2010-11 academic year. But the U.S. Education Department is already preparing for just such a transition.

Mr. Obama has said the government would save $4-billion annually by eliminating the guaranteed-loan program — which provides government subsidies to banks that issue the loans — and moving all colleges to the direct-loan program, under which the Education Department issues loans directly to students through their colleges. The president plans to use the savings to bolster the popular Pell Grant program, which provides money to low-income students.

On Wednesday the department began sending letters to colleges outlining steps it is taking to ease the switch to direct lending.

Congress is set to decide on the president’s proposal this month. Several Republicans have voiced strong opposition to the plan, saying it would cost thousands of jobs and prevent colleges from choosing among competing loan programs. [The Chronicle of Higher Education]

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When the new GI Bill kicks in Aug. 1, the government's best-known education program for veterans will get the biggest boost since its World War II-era creation. But the benefit is hardly the "Government Issue," one-size-fits-all standard the name implies.

In fact, depending on where service members and veterans decide to attend college, they could receive a full ride, or very little.

An Associated Press review of state-by-state benefits under the new bill shows huge discrepancies in the amount veterans can receive.

For example:

Veterans attending New Hampshire colleges like Dartmouth might get $25,000 from the government each year, and in Dartmouth's case essentially a free ride, thanks to an additional grant from the Ivy League school. But in neighboring Massachusetts, it is a different story. At that state's numerous private schools — many just as expensive as Dartmouth — the government's baseline tuition benefit is only about $2,200 a year.

Veterans who choose a private school in Texas could get close to $20,000 a semester from the government for a typical course load. Those picking schools in California will get nothing for tuition.

The explanation stems from the formula the government created, as well as a much-criticized decision by the Department of Veterans Affairs on how to implement the law. The new GI Bill covers full in-state undergraduate tuition and fees at any public college. That's far more generous than the old GI Bill, which provides a monthly stipend that is the same from state to state. But Congress also wanted to help veterans attend often pricier private schools. So the new bill offers them an amount equal to the tuition at the most expensive public college in the same state. That penalizes veterans going to private colleges in states that have kept their public university tuition low.

About 80 percent of veterans tapping the new bill are expected to attend public institutions. But some of the remaining 20 percent — those planning to attend private colleges, graduate schools, and the for-profit institutions that are hugely popular with veterans — are angry. [San Francisco Chronicle]

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Washington — Dozens of student-loan entities today proposed an alternative to President Obama’s plan to overhaul the federal student-loan system and move to 100-percent direct lending. The groups include banks, nonprofit state agencies, state-based guarantee agencies, and Sallie Mae, the nation’s largest provider of student loans, among others.

The groups’ consensus proposal would preserve a significant role for private and nonprofit lenders and guarantors in the federal system. It is being released as the U.S. House of Representatives education committee prepares to consider the president’s student-loan plan, action that could be scheduled as soon as this week. In recent weeks a number of lenders and guarantors have been furiously circulating various counterproposals to the president’s idea.

Instead, it would create a fee-for-service system to pay providers for originating, servicing, and collecting on student loans. The plan would allow colleges to pick the providers they want to originate and service federal loans for their students. [The Chronicle of Higher Education]

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Washington — A total of 1,165 colleges have joined the Yellow Ribbon Program, a federal effort to help military veterans attend college, a spokesman for the Department of Veterans Affairs told The Chronicle today.

Under the Yellow Ribbon Program, the government matches the amount of financial aid pledged by participating colleges above the base educational benefits provided in the new GI Bill. Qualifying veterans receive an amount equal to the cost of attending an in-state, public four-year college.

The number of participating colleges has more than doubled since June 11, when the department announced that 573 colleges had committed to the program.

Participating colleges can limit the aid they offer. Last week two student-veteran advocates criticized institutions that had limited the number of veterans they will support through the program to only a portion of their overall student-veteran population. [The Chronicle of Higher Education]

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Washington — Congress has approved a bill to patch holes in the Higher Education Act, including a glitch that would have forced thousands of veterans to return federal student aid they had been awarded for the coming academic year.

The House passed the measure for a second time yesterday because the Senate version of the bill added a scholarship program providing the maximum Pell Grant award to any student who had a parent die while on active military duty in Iraq or Afghanistan. Both the House and Senate approved the measure unanimously.

The legislation, which President Obama is expected to sign, would allow loan-guarantee agencies to sell rehabilitated student loans to the Education Department, a policy that had appeared in the version of the bill the House passed in March. The change would allow thousands of borrowers who have been stuck in default to escape from their debt and clear their credit histories.

The bill also would ensure that the Education Department’s “experimental site” program will continue for another year. The program allows participating financial-aid offices to use experimental approaches when awarding aid to students, with a goal of identifying innovative approaches that would work for the entire federal student-aid program. [The Chronicle of Higher Education]

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June 25, 2009

WASHINGTON -- Like many a politician, Education Secretary Arne Duncan is at his best when he's talking off the cuff.

"This damn form was killing us," Duncan said to a small group of reporters after a more formal presentation Wednesday to the White House press corps about the Obama administration's plan to simplify the Free Application for Federal Student Aid. He was talking about how big a deterrent the federal form was to getting students from low-income families to apply to college, when Duncan, as superintendent of Chicago's public schools throughout this decade, was trying to increase the district's college-going rates.

As Duncan and the Education Department trumpeted the proposal Wednesday with the high-profile appearance at the White House, along with IRS Commissioner Doug Shulman, the information they provided left many details to be determined. It seems clear, though, that as with many policy initiatives important to Obama, the administration seems intent on making forward progress even if it can't go as far as some think it should. "Don't let the perfect be the enemy of the good," Obama has taken to saying about health care and other matters, and the administration's approach on FAFSA simplification seems to follow that approach, too.

As Duncan laid out the plan Wednesday, the Education Department will, right now, make several changes that do not require Congressional approval. This summer, the department will take advantage of existing technology on the Web-based FAFSA to allow married or independent students to skip questions about their parents, among others. In January, the department will stop requiring students with low incomes to answer questions about their financial assets, and only returning students will be asked about prior drug convictions, since the question does not affect first-year students. Department officials said they would work closely with state officials to set up the electronic form to "make it easier to answer questions that the states need but the federal government does not."

Other changes the department seeks would require Congressional approval. Department officials said they would ask Congress to eliminate a total of 29 questions about students' and families' finances that are not on the federal tax form. Several of those relate to families' assets ("As of today, what is the net worth of your (and spouse’s) investments, including real estate (not your home)?"), and eliminating the consideration of assets for most students by abandoning those questions would be among the more controversial steps the Obama plan calls for. [Inside Higher Ed]

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Washington — The U.S. Education Department’s Internet-security features fail to protect confidential, personal information held on its Web sites, says the department’s Office of Inspector General in an audit report released today.

The portion of the report that is available to the public does not name specific departmental Web sites, so it is unclear whether those holding confidential student information are properly secured. For instance, the student-aid Web site has password-protected records of student finances that are used to determine eligibility for federal grants. [The Chronicle of Higher Education]

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Washington — Rep. Howard P. (Buck) McKeon of California will give up his post as the top Republican on the House education committee to become the senior Republican on the Armed Services Committee, Congress Daily reports.

His departure will create a vacancy at the top of the education committee at a time when the panel is considering legislation to overhaul the federal student-loan programs and make Pell Grants an entitlement.

While a successor for the education post has not been picked, the next in line for the job, in terms of seniority, is Rep. Thomas E. Petri of Wisconsin, an avid supporter of direct lending. Mr. Petri has been a member of the committee since 1979 and helped create the direct-loan program in the 1990s.

If Mr. Petri replaces Mr. McKeon, the committee’s Democrats could face less opposition from Republicans to President Obama’s proposal to eliminate the guaranteed-student-loan program. Congress has until mid-October to decide whether to abolish the bank-based program or make less drastic changes in student lending. [The Chronicle of Higher Education]

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Seniors at for-profit colleges are more than twice as likely to have accumulated dangerous amounts of education loans as seniors at other kinds of four-year colleges, according to a new report.

Almost 30 percent of seniors at for-profit universities in 2008 owed at least $40,000 in college loans, an amount that could be excessive, according to a new analysis of the latest federal data by Mark Kantrowitz, publisher of Finaid.org and Fastweb.com. For comparison, only about 11 percent of seniors at private nonprofit colleges—many of which charge higher sticker prices than typical for-profits—graduate with excessive debt, Kantrowitz found. And excessive debt was a problem for only about 6 percent of seniors at public universities, which are typically comparatively lower priced. That means new graduates of for-profit schools are about five times as likely to have borrowed heavily as new graduates of public universities.

Robert Cohen, a spokesman for the Career College Association, which represents many for-profit colleges such as DeVry University, ITT Technical Institute, and Kaplan University, said there are several reasons why their students tend to borrow more. Their students tend to be older and thus don't have parents willing to contribute to tuition. And for-profit schools generally serve lower-income students, who are more reliant on federal grants, most of which haven't been keeping pace with inflation. But, Cohen added, "the vast majority of career college students are able to manage their loans and to pursue better, more professionally rewarding careers." [U.S. News & World Reports]

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Washington -- It’s the end of free pizza as we know it, and consumer advocates feel fine.

The U.S. House passed a bill Wednesday that will place limits on credit card companies' marketing to students, preventing them from handing out free food and T-shirts on college campuses, and requiring many students to have a co-signer before they receive a card.

The Credit Card Act of 2009, which passed the Senate Tuesday and is now headed to President Obama, who is expected to sign it, was heralded by those who say students have been exploited by credit card companies. But some fear that students, in having their access to credit cards limited, will be denied a chance to build up credit in college and barred from accessing a viable -- albeit vexed -- tool for financing their educations.

Colleges and universities have taken their own share of criticism for getting overly cozy with credit card companies, offering the industry entrée to students and alumni in exchange for sometimes lucrative deals. Michigan State University, for instance, had an $8.4 million contract with Bank of America, granting it access to students’ names and addresses and allowing use of the university’s logo, The New York Times reported last December.

The federal legislation passed this week won’t end colleges’ relationships with credit card companies, but it will make the agreements more transparent. Creditors will be required, for instance, to issue annual reports regarding their business relationships with colleges, alumni organizations or affiliated foundations. [Inside Higher Ed]