Frustration with the Feds

At annual gathering, financial aid administrators say they are exasperated by the constantly changing regulatory environment of recent years.
July 19, 2011

BOSTON -- In a tough budgetary environment for federal financial aid, with even the bedrock Pell Grant Program on the chopping block, anxiety is omnipresent at the National Association of Student Financial Aid Administrators’ annual convention, beginning with the conference’s name: “Uniting for Financial Aid’s Future."

But there is another emotion as well: frustration. In sessions on diverse topics here Sunday and Monday, the college administrators who have assembled to talk loans, grants and legislation said they are fed up with a regulatory environment that seems perpetually in flux, from the recent gainful employment and program integrity rules to plans announced in May for another round of rule making on the direct lending program.

In a few cases, Education Department officials turned the frustration back on college officials. The financial aid administrators accused the federal government of asking for input after the fact, when rules have already been decided; department officials said they have tried to work with higher education administrators to find solutions that work, but that no rule will ever please everyone.

The tensions were most apparent at an open forum with Education Department officials Monday, where those attending applauded administrators who spoke up about their complaints. But they have run throughout the conference, which follows a year of nearly constant change for federal financial aid programs.

Most notable, of course, was the shift from a mix of bank-based and government lending to 100 percent government lending last summer, which changed the way the majority of student loans were issued. But the past year has also brought the end of the summer Pell Grant, the controversial rules on program integrity and the fight over the “gainful employment” regulation. Many new regulations will take effect in the coming months, including new measures of default rates and the hefty disclosure requirements for institutions that sponsor vocational programs subject to the gainful employment regulations.

The result, many administrators said, is regulatory whiplash.

“Sustainability is one thing," NASFAA's president, Justin Draeger, said, speaking of the future of financial aid programs. “Predictability is another. Congress is failing us when it comes to predictability.”

Administrators’ frustration, which boiled over during sessions on student debt and on federal regulation, seemed to spring from at least two sources: the recent and frequent changes in regulation, and the fact that they feel held responsible for factors they cannot control.

“Many of us are weary of the number of changes that are going on,” one audience member said during the Education Department forum. When another expressed concern about the end of the year-round Pell Grant, others in the audience spontaneously applauded. "I wish you would ask us first, before you made changes, to see what we think," another participant said.

Complaints dealt with all of the government’s recent changes. The shift to the direct loan program, which kept lenders as loan servicers although the government now originates the loans, has led to confusion on some campuses where students’ loans are serviced by as many as three different companies, several session participants said. The increased scrutiny of colleges' default rates has frustrated administrators who say they are doing all they can, but cannot force students to pay back their loans and fear their colleges might be penalized as a result.

Others say they are in limbo on the state authorization rule, which would require distance education providers to seek authorization in every state in which they operate and was recently struck down by a judge.

“I appreciate your frustration,” said Dan Madzelan, director of forecasting and policy analysis staff at the department’s Office of Postsecondary Education. “We are not without it from time to time back in Washington.”

In some cases, officials said, the department knew that the rules would add to the regulatory burden on colleges but felt they were worth pursuing anyway. ““I think it’s fair to say that we knew on [gainful employment] going in,” said Jeff Baker, director of policy implementation and liaison for the Office of Federal Student Aid. “It was going to be more burden and we’d just have to wrestle with that.”

But in other cases, new regulations will streamline policy, he said. Some participants seemed to see the department’s plans for rule-making on the Direct Loan program, announced in May, as the last straw. But those regulations will change rules that formerly applied to the bank-based Federal Family Education Loan program and no longer make sense, he said.

“It seemed to us at some point, and probably sooner rather than later, we should create freestanding direct loan regulations to guide the administration of the student loan program,” Baker said. “We felt strongly we ought to be addressing any concerns people had.”

But until that round of rule-making is complete, the concern about keeping up with changing regulations will have to wait.


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