studentaid

Moving Student Loans to Treasury Gets Little Traction

The Trump administration has held internal discussions about relocating some functions of the Department of Education to other federal agencies, including moving its $1.4 trillion student loan portfolio to the Treasury Department, according to media reports. But that idea, which has periodically resurfaced for years, hasn't found serious interest among members of Congress.

And key Democrats indicated serious opposition to the idea after those reports last week.

Senator Elizabeth Warren, a Massachusetts Democrat, said the federal student loan system desperately needs reform, but there is no evidence that Treasury would be any better at advancing student interests. "Disruptive organizational changes that do not address this basic concern will be at best meaningless and at worst harmful for the millions who struggle daily with these loans," Warren said.

Representative Bobby Scott, the ranking Democrat on the House education committee, said that Treasury's focus is on collecting money, not access to higher education. And Treasury's record administering the Earned Income Tax Credit does not suggest it views outreach and customer service as core parts of its mission, he said.

Representative Virginia Foxx, the Republican chairwoman of the committee, said the idea should be considered by Congress in light of what she called a history of inefficiency and mismanagement at FSA.

“Having a debate on ideas to ensure our federal financial aid system serves the best interests of students, families and taxpayers is a debate worth having," Foxx said.

The Department of Education declined to comment directly on whether those talks had taken place. Liz Hill, a department spokeswoman, said Secretary Betsy DeVos looked forward to replacing Runcie with someone qualified who will restore public trust in the Office of Federal Student Aid.

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New York Approves Free Tuition Regulations

The New York State Higher Education Services Corporation Board of Trustees approved regulations for the state’s new tuition-free public college tuition program Thursday, including some key regulations that would seem to address concerns about residency and credit-completion requirements.

Several provisions address a requirement that students complete 30 credits in a year in order to remain eligible for the program or risk having to pay their tuition back. One of the new provisions would allow students to count college credits earned in high school toward the 30-credit requirement. Another would apply to students who enrolled in the last two years but fell six or fewer credits short of the 30-credit-per-year requirement. It would allow them the chance to catch up on credits and be eligible for 2018-19 academic year and afterward.

Other provisions apply to requirements that students live and work in New York State for the same number of years they received program grants or have their grants turned into loans. One allows for the residency obligation to be waived for military service requirements. Another would prorate repayment of awards if residency and work requirements are not met.

The regulations also address the possibility of repayment waivers and postponements for cases of extreme hardship, allow students to interrupt study for military obligations and authorize students with disabilities to attend college part-time and receive prorated awards.

Students from New York families with annual incomes of up to $100,000 per year will qualify for the program in its first year, and it will scale up over the next two years to cover students from families with incomes of up to $125,000 annually. The program, called the Excelsior Scholarship, functions as a last-dollar program, enabling such students to attend two- and four-year institutions in the State University of New York and City University of New York systems without paying tuition.

Estimates show 940,000 families qualifying for the scholarship program when it is fully in place. Applications are expected to be available June 7.

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As lawmakers examine improper payments, record of former FSA chief under scrutiny

Republicans in Congress press issue of improper payments by Department of Education and suggest possible subpoena of former student aid chief.

Congressional Hearing on Student Data

The Committee on Education and the Workforce of the U.S. House of Representatives held a hearing Wednesday about data on student outcomes and the performance of colleges and academic programs. The hearing was related to recently introduced bipartisan bills that would eliminate a federal ban on student-level data collection.

Members from both sides of the aisle made supportive comments about dropping the ban during the well-attended event. For example, Representative Jared Polis, a Colorado Democrat and co-sponsor of the House bill, said better data would help student decision making while also preserving taxpayer investment in higher education. He cited broad support for the student-level data from associations that represent community colleges and land-grant universities as well as the U.S. Chamber of Commerce and veterans' groups.

"Why isn't this happening?" Polis said.

However, the committee's chairwoman, Virginia Foxx, a North Carolina Republican, did not appear to waver in her support for the ban on student-level data. She cited privacy concerns and the need to balance risks with rewards in data collection, while also arguing that expanded state databases might be a better solution.

The federal government has a "pretty lousy record" keeping data private, said Foxx. "When does a person's right to be left alone get waived for the need for better information," she said, adding that the committee would continue to debate the issue.

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DeVos says Education Dept. will provide relief to students promised loan discharge

Education secretary finally responds, without detail, to Democratic lawmakers who sought answers on status of promised student loan discharge claims for defrauded borrowers.

Federal Student Aid Chief Resigns

Jim Runcie, the chief operating officer of the Department of Education's Office of Federal Student Aid, resigned Wednesday, the day before he was set to testify at a House of Representatives oversight subcommittee hearing.

A leaked copy of Runcie's resignation memo obtained by BuzzFeed indicated he did not agree with the direction of the department under Education Secretary Betsy DeVos or with orders for him to testify to the subcommittee. Republican lawmakers, meanwhile, issued statements attacking his record of handling the government's $1.4 trillion student loan portfolio after news of his resignation.

"I cannot in good conscience continue to be accountable as chief operating officer given the risk associated with the current environment at the [Education] Department," Runcie said in the memo obtained by BuzzFeed.

Runcie also said in the memo that the diversion of resources from Federal Student Aid hindered his ability to do his job, the site reported.

He was among several career professional employees from the Department of Education and the IRS who were grilled by lawmakers at a hearing this month over the security issues that led to the suspension of the IRS data retrieval tool, a key website for students applying for financial aid. Rep. Virginia Foxx, the chairwoman of the House education committee, said in a statement after Runcie's resignation that he had been at the center of mismanagement at the Office of Federal Student Aid for years.

"Secretary DeVos has an important opportunity to instill new leadership and a new direction within the agency. I urge the secretary to seize this opportunity and work to ensure FSA is efficient, effective and accountable to students, families and hardworking taxpayers," Foxx, a North Carolina Republican, said.

Foxx had promised during that hearing on the data retrieval tool that she would seek to pin the blame for the debacle on officials hired by the Obama administration.

Rep. Jason Chaffetz, the chairman of the House Oversight and Government Reform Committee who soon plans to leave Congress for Fox News, said it was disappointing that Runcie would resign rather than testify to the subcommittee.

"Under his leadership federal student aid systems are less secure, performance has suffered, and improper payments have increased," Chaffetz said. "For years, the inspector general and this committee have warned the Department of Education of vulnerabilities to its $1.1 trillion federal loans program. Appointing new leadership is the first step to righting the ship. I encourage Secretary DeVos to appoint a new COO who values security and competency over politics."

Sen. Patty Murray of Washington, the senior Democrat on the Senate education committee, said the reporting around the resignation was a troubling sign that civil servants do not feel they can adequately do their jobs under DeVos.

"This kind of chaos, mismanagement and undue political interference is not a surprise, but it is still deeply disappointing," Murray said.

Matthew Sessa, the deputy COO at FSA, will take over Runcie's role until further notice, according to a press release from the Department of Education.

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Feds: 234,000 Borrowers Could Be Stuck in Default

About 234,000 defaulted student loan borrowers with debt valued at $4.6 billion will be stuck in limbo and unable to get out of default if a judge's order is not lifted this week, the Department of Education said in a court filing Friday.

James Runcie, the chief operating officer of the Office of Federal Student Aid, provided those figures in a court filing that was part of an ongoing legal dispute over the awarding of new debt collection contracts last year. Last month, a U.S. Court of Federal Claims judge overseeing the case issued a restraining order preventing the government from assigning newly defaulted borrowers to debt collectors -- a key step for those borrowers to eventually rehabilitate their loan debt.

"The delay in providing [private collection agency] services to borrowers has significant negative impacts on both the government and on borrowers and their families," Runcie wrote.

Collection on student loan accounts increases significantly when assigned to collection agencies and many borrowers are able to access rehabilitation programs, he said. After a successful loan rehabilitation, borrowers can have the record of a default removed from their credit reports and return to regular servicing with fewer collection costs.

If the judge's order is not lifted, the government will lose out on collecting $2.4 million in payments by the end of June, Runcie said in the filing.

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Analysis of Indiana’s 15 to Finish finds positive effects

In Indiana, encouraging students to pursue a full credit load is having a positive impact on students when the financial incentive is significant, according to a new analysis.

Update Sought on Relief for Defrauded Students

Massachusetts Attorney General Maura Healey in a letter Friday sought a commitment from the Department of Education that it would follow through on providing debt relief for students who attended the now-defunct for-profit American Career Institute.

In January, just before the transition to the Trump administration, the department announced that all 4,500 student borrowers with outstanding loans from attending the Massachusetts-based for-profit chain would have their debt discharged. It was the first time the department had granted automatic relief to all students who attended an institution without requiring individual applications.

But in her letter to Acting Undersecretary of Education Jim Manning, Healey said her office has been contacted by hundreds of former ACI students in recent weeks regarding the status of their federal loans.

"These communications revealed that no ACI borrowers appear to have received a discharge of their federal loans pursuant to the borrower defense to repayment rule," Healey wrote.

She noted that previous informal attempts by her office to receive an update on the status of those loans from the department had gone unanswered. Healey sought from Manning an explicit statement affirming that the department would inform those borrowers' servicers of the status of their loans as well as a date by which those borrowers could expect resolution of the issue.

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Education Department Alters Loan Servicing

The Department of Education announced Friday that it plans to select a single student loan servicer that borrowers will interact with on a single platform, a departure from the current system where four major servicing companies handle borrowers' payments of their federal student loans.

The announcement came just over a month after Secretary of Education Betsy DeVos rescinded guidance from the Obama administration that would have included new protections for borrowers in the next round of servicing contracts.

The Obama guidance had also called for the creation of a single online platform that all borrowers would use to make payments, regardless of which servicer they were assigned. Under the amended solicitation issued by the department, the government would select a single servicer that would use subcontractors to collect student loan payments. In a conference call Friday, department officials said the new system would create efficiencies in oversight by holding the primary servicer accountable.

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