vasfaa legislative update
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VASFAA Legislative update. Vice President, Government Affairs and Services. Scott Buchanan. 5/21/2012. The most important number. 168. November 6, 2012. The 2 nd most important number. Major Political Issues. Jobs and the economy College costs and student loans Debt and the deficit - PowerPoint PPT PresentationTRANSCRIPT
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Vice President, Government Affairs and Services
VASFAA LEGISLATIVE UPDATEScott Buchanan
5/21/2012
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2
The most important number
168
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3
November 6, 2012
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4
The 2nd most important number
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20124%
5%
6%
7%
8%
9%
10%
11%
Unemployment Rate
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5
Major Political Issues
► Jobs and the economy–College costs and student loans
► Debt and the deficit–Investment in higher education
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6
America’s Investment in Higher Education is Sizable and Growing
Sources: College Board, 2011 Trends in Student Aid, McKinsey & Company
29 31 32 34 36 39 44 51 56 60 63 71 88 102 10626 29 32 35 38 42 46 51 55 58 63 6977
96 107
1 2 4 5 5 6 67 7 7 8
812
1616
71 76 83 88 9199
109121
131 137145
155
168
167175
1.62.0
2.5 3.5 4.05.0
7.09.4
13.016.0
19.021.1
10.3
6.86.0
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11
Total Postsecondary Education Spend
State and Federal LoansGrantsOtherFamily ContributionPrivate Student Loans
$129$140
$410$387
$213$190
$263$239
$174$165
$153
$324
$355
$298$279
Distribution %Family Contribution 55% 54% 54% 53% 53% 52% 51% 51% 50% 49% 49% 48% 47% 43% 43%Grants 20% 21% 21% 21% 22% 22% 22% 21% 21% 21% 21% 21% 22% 25% 26%State and Federal Loans 23% 22% 21% 21% 20% 20% 21% 21% 21% 21% 21% 22% 25% 26% 26%Other 1% 2% 3% 3% 3% 3% 3% 3% 3% 3% 3% 2% 3% 4% 4%Private Student Loans 1% 1% 2% 2% 2% 3% 3% 4% 5% 6% 6% 7% 3% 2% 1%
+236%
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7
85% of All Loans Outstanding are Federal Student Loans
Source: Department of Education Annual Performance and Accountability Reports, FY 2006 to FY 2011, Notes to the Principal Financial Statements, Credit Programs note; Federally-owned FFELP is calculated based on receivables in purchase program and participated loans sold to the Department; private education loan volume estimate based on SLM outstanding and estimate of market share
0
100
200
300
400
500
600
700
800
900
1,000
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
Federal Student Loans
Private Education Loans
($ in billions)
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8AY 08-09 AY 09-10 AY 10-11
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$7.7
$8.9
$10.5
Parent PLUS
+37%
AY 08-09 AY 09-10 AY 10-11$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$4.3
$5.8
$6.8
Grad PLUS
+57%
PLUS Programs Growing at Double Digit Rates
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9
$119 Billion New Loans Forecast for 2013
$21 Billion Expected to Default
(in millions)
FY 13 Net
Disbursements
Lifetime Default
Rate
Expected Defaults
over Life of Loans
Stafford Sub 31,842 24% 7,760 Stafford Unsub 65,189 17% 10,841
PLUS 21,869 10% 2,119
Total 118,900 20,720
Administration Expects to Originate $119 Billion New Loans in 2013Forecasts that $21 Billion Will Default
Source: Budget of the U.S. Government, Fiscal 2013; Federal Credit Supplement, and Appendix
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10
Budget Challenges
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
-$400
-$200
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
(in b
illio
ns)
Expiring TaxCuts/Medicare
Payments
Forecast
2012 to 2021$10.6 Trillionadditional deficits
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11
College Degree Greatly Enhances Likelihood of Employment for Young Adults
Source: Bureau of Labor Statistics. Current Population Survey, March 2012
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2007 2008 2009 2010 2011 2012
Unemployment Rates for 20-24 Year Olds
College graduates (B.A. or more) High school diploma or less
45.7%51.1%
71.4% 75.1%
15.2%
21.7%
12.9%13.1%
15.6%
11.5%
5.7%4.8%
23.5%15.7%
9.9% 6.9%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
No college Some college, no degree
Associate degree College graduates
Status for All Non-Enrolled, 20-24 year olds
Employed Full-time Employed Part-time
Unemployed, Looking Not in Workforce
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12
► Changing the debate – Increasing spending to reducing debt– Last year recommendations from fiscal commissions
generally ignored and President’s 2012 budget had no deficit reduction
– Since then massive $2 trillion reduction package► Not all spending the same
– Discretionary spending—i.e. annual appropriations—easier to target
– Pell Grants protected so far…but at the expense of other higher education programs
Debt Ceiling and Deficit Politics
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13
Budget Control Act of 2011
10-year savings
Discretionary SpendingEstablishment of caps -756Program integrity 15 Subtotal -741
Mandatory SpendingProgram integrity -16Pell Grants 17Student Loans, etc. -22 Subtotal -20
Debt Service -156Total Effect -917Joint Committee Target -1,200Total Deficit Reduction -2,117
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14
Budget Control Act Requires $43B Cut from Discretionary in 2012
Net Interest; 221; 6%
Mandatory/Entitlement
spending, $2,213, 58%
Non-defense spending; 650;
17%
Defense spend-ing; 703; 19%
Includes all education spendingexcept student loans and small Pell Grant add-onPell Grants needs $24b
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15
Will Cuts Come From Entitlements?
Social Security; $726
Medicare/Medicaid/
Health, $852
Unemploy-ment, $120Other income security; $284
Federal/Military Re-
tirement, $144
Other; $88
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16
► Reductions in fiscal discretionary limits from fiscal 2013 to 2021, could by up to $100 billion a year
– 50% of the cuts from the Department of Defense – 48% of the cuts from all other non-defense programs (not listed below) – 2% of the cuts from Medicare
► The sequester cannot touch the following programs (from the Balanced
Budget and Emergency Deficit Control Act of 1985 as amended): – Pell Grants – Social Security – The Postal Service – Class Act (Voluntary long-term health care benefits created in ObamaCare) – Most unemployment benefits, veterans benefits and low income payments– All "emergency designations“, "unanticipated circumstances,” disaster relief
► Not exempt: – Department of Education, administrative money and other higher ed– Special rule for student loans, origination fees increased by sequester percentage
Sequester if Congress Takes no Action…
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17
► 2011 Full Year Continuing Resolution– Additional $5B in appropriations (equivalent to
$50B over 10 years)– End Summer Pell Grants
• Reducing program costs by $35B over 10 years• $8.8B in mandatory Pell savings added to
appropriations► Budget Control Act
– Added $17B in 2012 and 2013 to Pell from savings due to elimination of grad students’ in-school interest
Pell in the Past
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18
Pell Grants Need $77 Billion to Maintain Current Grant Levels
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Current appropriation Prior year funding Mandatory funding Cost to Fully Fund Pell Grants
$77 billion shortfall
Source: Congressional Budget Office, March 2012 Baseline Projections for the Student Loan and Pell Grant Programs
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19
► Costs of Pell continue to rise► Costs of higher education rise beyond even
unfunded Pell Maximum► Tough and painful choices are evidenced by
House and Senate appropriations:– House – Reduce cost of Pell by more effectively
targeting the neediest with more constraints– Senate – Increase investment in Pell by reducing other
education subsidies like interest subsidy while in grace► The deficits could make these choices even
tougher
Pell in the Future
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20
► Interest rate was always scheduled to return to 6.8%
► Both federal loan rates are arbitrary► Rate, Pell, and IBR share the same
problem► No impact to students seeking jobs today► All say they want it, but disagree on how to
pay for it
The Interest Rate
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21
► Looming election will cripple Congress► Clock is ticking► Past legislative gimmicks have come
home to roost► Impossible to be able to spend enough► Overeducated and underskilled► Lack of proper market forces means
resistance to correction► Occupy vs. “Entitlements for the Entitled”
Legislative and Public Policy Realities
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22
► Pell Grants: What’s the right approach?► Loan subsidies: Coming or going? Or neither?► Spending cuts: What programs may be on the
chopping block? What needs to be protected?► Defaults on the Rise: What will be Washington
reaction and enrollment impacts?► American family reaction to economy: How will
changes in savings, borrowing, cost decisions impact your campus?
Key Issues Impacting Schools