New Federal Loan Counseling Experiment

The Department of Education Thursday announced an experiment to find the best loan counseling services for student borrowers.

The department asked 35 public two-year and 14 public four-year institutions to test the effectiveness of required loan counseling for student borrowers. The announcement follows remarks from Under Secretary Ted Mitchell over the summer that the department was considering giving a handful of institutions the ability to require loan counseling using its experimental sites authority. Mitchell told attendees at the National Association of Student Financial Aid Administrators conference that the department wants to understand not just whether required loan counseling is effective but what kind of counseling is most effective -- whether that means in-person counseling or regular electronic communication.

The department has advised colleges and university financial aid offices that after completing entrance counseling they cannot require students to receive further guidance as a condition of taking out additional federal direct student loans.

Half of the 100,000 students participating in the experiment at the invited institutions will be placed in control groups, while another half will be assigned to receive additional forms of counseling chosen by the institution, according to a release from the department.

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Activists and borrowers call on Obama administration to provide debt relief to defrauded students

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Education Department officials say they will work through Jan. 20 to review claims of defrauded students, but borrowers and advocates call for more urgency.

Education Secretary Drops Recognition of Accreditor

In an expected move, John King Jr., the U.S. secretary of education, on Monday made the Education Department's final decision to terminate its recognition of the Accrediting Council for Independent Colleges and Schools (ACICS). The council is a national accreditor that oversees 245 institutions, many of them for-profits, which enroll roughly 600,000 students and collectively received $4.76 billion in federal aid last year.

ACICS had accredited many Corinthian College locations as well as ITT Technical Institute. King, citing "pervasive compliance" problems, followed through on a federal panel's decision to nix the council for failing to protect students and taxpayers from fraudulent and underperforming colleges. The council had appealed that decision, which the department backed previously and confirmed with King's decision this week. In a written statement, ACICS said it would "immediately file litigation seeking injunctive and other relief through the courts."

The colleges accredited by the council have 18 months to find a new accreditor or risk losing access to federal aid. Many have been scrambling to be accredited by other agencies, particularly by the Accrediting Commission of Career Schools and Colleges.

In the meantime, the department on Monday said it was adding new conditions for ACICS-accredited colleges to remain aid eligible. Those measures include monitoring, transparency, oversight and accountability requirements. The department said the conditions "establish triggers tied directly to milestones in the accreditation process to ensure that institutions not on track to receive accreditation from a federally recognized accrediting agency within 18 months are subject to progressively stronger student and taxpayer protections."

Council-accredited colleges have 10 days to agree to the new conditions or they will no longer be able to receive federal aid. The colleges must submit teach-out plans as part of the department's terms.

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Feds Announce New Debt Collection Contracts

The U.S. Department of Education last week announced the seven companies it awarded new contracts for the collection of debt from federal financial aid. The seven companies, listed below, were selected from 48 bids, according to the publication insideARM.

Last year the department said five debt-collection companies had misrepresented borrowers in an attempt to get loans out of default. None of those five companies were awarded new contracts. The seven that did are Financial Management Systems Investment Corp., GC Services Limited Partnership, Premiere Credit of North America, the CBE Group, Transworld Systems, Value Recovery Holding and Windham Professionals.

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Summer Pell Left Out of Congressional Spending Bill

A House appropriations bill released this week leaves out new funding to restore summer Pell Grants, disappointing advocates who made that item a priority heading into the lame-duck session.

Congress must approve a new stop-gap spending bill by Friday to avoid a government shutdown.

Restoring year-round funding of Pell Grants has been a goal of both parties since an agreement in 2011 to cut summer Pell over funding shortfalls. Students can receive up to $5,815 annually in Pell funding. With a $7.8 billion surplus in the program, higher education stakeholders and congressional Democrats had called on appropriators to use the lame-duck session to increase the value of the grants and restore funding for summer semesters.

Jonathan Fansmith, director of government relations at the American Council on Education, said the group supported restoring summer Pell but wasn't surprised to see it left out of the continuing resolution posted by House appropriators. And he said because the bill approves spending through April 28, it won't preclude lawmakers from adding money for summer Pell Grants in another spending bill next year.

The continuing resolution also includes $872 million for the 21st Century Cures Act, including $352 million for the National Institutes of Health Innovation Account. Higher ed groups including the Association of Public and Land-grant Universities and the Association of American Universities praised the passage of the Cures Act for its support of research and innovation.

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USA Funds to End Student Loan Guarantee Business

USA Funds, which was one of the country's largest guarantors of federal student loans when banks originated most such loans, announced Wednesday that it would transfer its guarantor operations to Great Lakes Higher Education Corporation and focus fully on its newfound role as a funder of college completion-related initiatives. Great Lakes will take over management of the nearly $50 billion in federally guaranteed student loans that remained in USA Funds' portfolio since a 2010 law effectively ended the bank-based Federal Family Educational Loan Program. Great Lakes has absorbed the portfolios of several other loan guarantors who have sought to wind down their involvement in lending.

As part of the new arrangement, Great Lakes will make grants to USA Funds to help support its advocacy work, which focuses on student completion, college value and other topics. Like other former guarantors, USA Funds has a sizable pot of money from borrower fees that it amassed during its time in the loan program, which consumer advocates have criticized.

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Education Department Blocks Aid for 2 For-Profits

The U.S. Department of Education said Tuesday it would block for-profit colleges Globe University and the Minnesota School of Business from receiving additional federal student aid.

As of Dec. 31, students will no longer be able to use funds from Pell Grants or federal direct loans at those institutions, which are jointly owned. The Federal Student Aid Enforcement Unit found that the programs committed fraud involving Title IV funds and misrepresented their criminal justice programs as well as the ability to transfer their credits to other colleges.

Globe enrolls about 1,000 students at 10 locations across the Midwest, and Minnesota School of Business enrolls about 700 students in Minnesota.

“Globe and MSB preyed upon potential public servants -- targeting those with a sincere desire to help their communities,” Under Secretary of Education Ted Mitchell said in a written statement. “These institutions misrepresented their programs, potentially misleading students, and abused taxpayer funds, and so violated federal law, which is why we removed them from the federal student aid program. This is a sober reminder that not all institutions deliver on their advertised promises.”

The department blocked access to Title IV aid for new students enrolling at ITT Technical Institutes in August -- a serious blow that was followed the next month by an announcement that the for-profit would close its doors at campuses across the country.

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GAO report finds costs of loan programs outpace estimates and department methodology flawed

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GAO report faults Education Department for serious ‘shortcomings’ in estimating cost of income-based repayment programs, giving new ammunition to congressional Republicans.

FAFSA Completion Rates Vary Widely by City

The percentage of graduating high school seniors who completed the Free Application for Federal Student Aid in 2015 varied widely by city, according to a new analysis from the National College Access Network. The group looked at numbers from 68 cities, finding that a high of 68 percent completed the FAFSA in Memphis, Tenn., compared to a low of 25 percent in North Las Vegas. The 68-city average was 48 percent, according to the group, which is close to the nationwide rate of 44 percent in 2014.

"Exemplar cities of all sizes show us that it is possible to have a high percentage of high school seniors complete the FAFSA," the report said.

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Use of Private Student Loans Declines

After reaching a peak of 14 percent in 2008, the number of undergraduates nationwide who used private student loans declined by roughly half by 2012, to 6 percent, according to a new data report from the U.S. Department of Education's National Center for Education Statistics. During the same time period, the percentage of undergraduates borrowing from the federal government through the Stafford Loan program increased to 40 percent from 35 percent.

"The decline in private education borrowing could potentially be attributed to a number of factors that include a tightening of lending standards; increases in the annual and aggregate unsubsidized Stafford Loan limits; a reduction in the number of private lenders in the education loan market; and the elimination of the Federal Family Education Loan Program, which made private lenders ineligible to make federal loans," the report said.

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