Inside Higher Ed: Obama's Final Two Years

January 21, 2015

The White House has highlighted a range of higher education policy ideas in the days and weeks leading up to President Obama’s penultimate State of the Union address on Tuesday evening.

Some of the proposals — like the free community college plan — are brand-new.

But others are not. The White House, for instance, previously has asked Congress to exempt from taxation the student loan balances that the federal government forgives under its income-based repayment programs.

And still other higher education proposals, such as the college ratings system, went unmentioned in Tuesday’s speech. But they nonetheless remain a priority for the administration.
Below is a guide to the Obama administration’s higher education priorities and legislative proposals as the clock ticks on its final two years in office:

Tuition-Free Community College

The most ambitious of the proposals, which President Obama first announced earlier this month in Tennessee, is a plan to eliminate two years of tuition for some community college students nationwide.

The White House plans to pay for program, which it says will cost $60 billion over the next decade, by raising taxes on wealthy Americans and financial institutions.

Unlike the Tennessee program on which it is based, the Obama plan, is a "first-dollar" scholarship program, White House officials reiterated on Tuesday.

“You would eliminate tuition entirely at community colleges for all students, regardless of whether or not they receive a Pell Grant now,” a senior administration official told reporters. “Students receiving federal financial aid could use those resources for books, supplies, transportation and any other cost of going to college."

In addition, the White House confirmed that the program would be open to any student regardless of when he or she finished high school.

“We aren't contemplating any type of age-eligibility requirement,” the official said.

The administration is proposing to distribute funds under the program through grants to states that are “conditioned on offering free tuition and ensuring the quality of institutions," a White House official said in an email Tuesday. If states have excess grant money after eliminating tuition, they can spend those funds on "expanding quality community college offerings, improving affordability at four-year public universities, and improving college readiness," according to a fact sheet released Tuesday.
Some conservative higher education observers have said they are concerned about how the conditions on those block grants could give the federal government more control over locally run community colleges.

Simplifying the FAFSA

The White House on Tuesday firmly backed simplification of the federal student aid application, known as the FAFSA. The administration said in a fact sheet that it wanted to eliminate 27 of the "most burdensome and difficulty-to-verify" questions on the form, which currently has more than 100 questions.

Obama would axe questions about untaxed veterans’ benefits and clergy pay, for instance, but continue to ask about parental income and a student's college choices.

FAFSA simplification has been a major priority of Sen. Lamar Alexander, the Republican who chairs the Senate education committee. Alexander's proposal, however, would go much further, gutting the current form completely and asking students only two questions to determine their eligibility for aid.

Expanding and Reforming Income-Based Repayment

Obama plans to use his executive power to make all existing federal direct student loan borrowers eligible for the federal government’s most generous loan repayment plan. He had, two years in a row, asked Congress to make such a change, but the plan didn’t go anywhere.

The Education Department next month will kick off negotiations over how to carry out the proposed changes to the “Pay As You Earn” repayment plan. The program caps borrowers' monthly payments at 10 percent of their discretionary income and forgives any remaining debt after 20 years.
The White House is also calling on Congress to exempt from taxation the student loan balances that are forgiven under any of the federal government’s repayment plans. The change was previously proposed in the administration’s budget request and recently appears to have some traction in Congress.

A bipartisan group of U.S. Senators, led by Sen. Richard Burr, a Republican, and Sen. Angus King, an Independent, introduced legislation last week that would stop counting the loan forgiveness benefit under income-based repayment programs as taxable income. The bill also would streamline existing income-based repayment programs and cap some benefits for high-income, high-debt borrowers. Some of those proposed reforms overlap with what the Obama administration has previously recommended.

Alexander has said he wants to include the proposed changes to income-based repayment in the student aid simplification bill he hopes to bring to a full Senate vote this spring.

Changing Higher-Ed Tax Benefits

As it has in previous budgets, the White House is calling on Congress to make permanent the American Opportunity Tax Credit, which currently provides up to $2,500 in partially refundable tax credits for tuition. The administration also wants to change how the tuition tax credit treats Pell Grants, so that more recipients would either see a reduction in their taxes or an increased tax credit.

The Republican-led U.S. House of Representatives last year approved similar education tax changes.
A new part of the administration’s plan is to consolidate a series of education tax breaks and to expand the benefits for the American Opportunity Tax Credit. Under the plan, families would be able to claim the credit for up to five years as opposed to the current four-year maximum.

The White House also has a new proposal to reap savings by cutting some higher-education tax benefits that it believes are not well-targeted.

The administration wants to raise taxes on 529 college-savings plans. It is seeking to roll back a tax cut signed by President George W. Bush that exempts the earnings on those plans from taxation.
“Earnings on existing contributions will continue to be tax-exempt, but earnings on new contributions will be counted as taxable income,” a senior administration official told reporters Tuesday.
The 529 savings plans “overwhelmingly benefit higher-income Americans,” the official said. About 80 percent of the tax benefits of 529 plans go to families earning more than $250,000, according to the White House.

Obama is also looking to eliminate a tax provision that allows student loan borrowers to deduct from income taxes the interest they pay on their loans.

The student loan interest deduction, which Congress made permanent in 2013, is too confusing and not many taxpayers take advantage of it, the White House official said.

“We think it is better to put that money back into strengthening the Pay As You Earn program and making sure that loan forgiveness at the end of the Pay As You Earn period is tax-free,” the official said, adding that the administration's college tax package is a net tax cut.
“We will be reducing taxes for families paying college tuition by tens of billions of dollars over the next decade," the official said.

Finalizing College Ratings
Although Obama did not mention it Tuesday night, the college ratings system remains a priority for the administration. Obama himself touted the plan as recently as two weeks ago, when he unveiled his free community college plan in Tennessee.

“We’re creating a new college ratings system that will give parents and students the kind of clear, concise information you need to shop around for a school with the best value for you,” he said, adding that the ratings would provide “the capacity to recognize schools that offer a great education at a reasonable price.”

Education Department officials are currently soliciting public feedback on their draft outline of the ratings system. The deadline for comments is Feb. 17, and officials have said they will produce ratings for the first time by the beginning of the 2015-16 school year.

Congress, meanwhile, has declined to provide the administration the $10 million it requested for the task of creating the ratings. And some lawmakers have also sought to block the department’s power to create a ratings system altogether.

Tangling With For-Profits on Gainful Employment
The administration will continue to fight with for-profit colleges in court over regulations aimed at clamping down on that industry. Government lawyers last week handed over to the Association of Private Sector Colleges and Universities thousands of pages of records relating to how the department developed its “gainful employment” regulation.

In the next few months, both the administration and the for-profit college association each will formally ask a judge to rule in their favor without having a full trial. The judge has scheduled a hearing for late May. The rule will take effect July 1, barring judicial or Congressional intervention. Republicans have previously sought to block the regulation, though a White House official last year expressed confidence about the future of the regulations.

Prodding States to Boost Oversight
Concerned that some states have been too lax in regulating colleges and universities, the Obama administration has pushed new “state authorization” rules aimed at prodding states to bolster their oversight of higher education.

One of those rules, which is already on the books, will take effect this July, after being twice delayed by the department amid concerns that it is too confusing. That rule applies only to colleges with physical locations.

Separately, the administration has pursued a state authorization requirement for online programs. But after a negotiated rulemaking panel failed to agree on the language for that rule last year, Undersecretary of Education Ted Mitchell said officials were temporarily pausing the effort.
The department has told some consumer advocates that it plans to eventually return to the rule. It is controversial because it would force distance education programs to seek approval from regulators in every state in which they enroll students. Some state regulators also haven’t been keen on the proposal.

Promoting Competency-Based Education
The Obama administration has said it wants colleges to try offering competency-based education as an innovation that can help lower costs and improve college completion. It is in the process of granting regulatory waivers so that scores of institutions can allow students to receive federal student aid as they experiment with the emerging form of higher education.

Holding Teacher Training Programs Accountable
The White House will move ahead this year with a controversial plan to cut off some federal funding for poorly performing teacher preparation programs. The plan would tie TEACH Grant funding for teacher preparation programs, in part, to the rate at which their graduates get jobs and how well they perform at the schools where they are hired.

Many higher education groups oppose the proposal, on which public comments are due by Feb. 2.
The department has said it plans to finalize the regulation by September. Although teacher preparation programs and states would have to start publishing a host of new information over the next few years, the earliest a program would lose TEACH Grant eligibility is 2020.

New Rules for Campus Credit Cards
The department plans to move ahead with efforts to tighten regulations on student debit cards, which may include a ban on certain fees. Negotiators failed to reach a consensus on the regulatory language last year.

Financial institutions have lobbied against the regulations.

A department spokeswoman last week said officials did not yet have a time frame for when they would publish the proposed regulations.

Reauthorizing the Higher Education Act
The Obama administration will likely come up with a set of proposals for rewriting the Higher Education Act, as Congress gears up this year to reauthorize the sweeping law that governs student aid and colleges and universities.

In his final months in office, Sen. Tom Harkin, the Iowa Democrat who chaired the Senate education committee, last year produced a rewrite of the law that read largely as a wish-list of Democratic priorities. The White House and Education Department now will have to work with a Republican-controlled Congress on rewriting the law. Alexander, the Republican who now heads the Senate education committee, has said he wants to begin work on reauthorizing the Higher Education Act later this year after Congress finishes work on revamping the main law governing K-12 education, No Child Left Behind.

On one key issue, accreditation, the department has already tasked its accreditation advisory committee with developing some recommendations for changing the law.

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APSCU Blog: A Preview of Higher Education and the State of the Union

16 Jan 2015 /
By APSCU Communications 
President Obama, through his ambitious 2020 college attainment goal, new community college tuition proposal, and comments on educational enrollment, has made postsecondary education a cornerstone of his economic strategy.

The President’s objective is to have the highest proportion of college graduates in the world by 2020, while also placing emphasis on high-demand “middle skills” development, attainment for new traditional students, and the benefits obtained after one year of post-high school education.

These goals are the embodiment of higher education for all – a goal that private sector institutions wholeheartedly share. While we share the President’s vision for higher education access and attainment, the policies advanced by the Administration to date fail to meet these goals. Although the Administration claims to want to increase student access and opportunity, its regulatory agenda actually restricts both.

Higher education policy cannot simply be about one provider. Rather, there must be a collective discussion about how federal, state, and local governments, in partnership with the private and philanthropic sectors, work with all of higher education to achieve positive outcomes for all students.

Administration Goals
Enrolling in postsecondary programs of all types already brings individual and societal benefits, including better pay and lower risk of unemployment. The President’s focus on improved workforce training, increased postsecondary enrollment, and a globally competitive proportion of graduates clearly show that President Obama is looking to prepare the U.S. for a globalized and knowledge-based economy. These cornerstone beliefs have long guided private sector institutions.

However, the Administration’s actions show they are only addressing the needs of a narrow segment of traditional students in higher education, not creating new opportunities. Many of the Administration’s recent initiatives unjustifiably disadvantage students attending private sector institutions and fail to account for the needs of new traditional students – a growing and often underserved segment of higher education. These actions are limiting progress toward the Administration’s goals for higher education, as well as cutting off the supply of qualified workers for employers.

The Administration has acknowledged the vital role that private sector institutions play in achieving the President’s goal. Department of Education Secretary Arne Duncan said, “Those colleges … are critical to helping the nation achieve President Obama’s goal of making the United States the nation with the highest portion of college graduates by 2020.”

Unfortunately, the Administration has taken aggressive steps that harm student access and opportunity, and ultimately work against some of the President’s own higher education goals. The Department of Education’s gainful employment regulation is one such measure that does not align with the President’s stated goals for higher education.
Presidents 2020 goal
Losing Access chart
The private sector plays a critical role in educating Americans and preparing our workforce to be competitive in the future in ways that are critical to the U.S. economy. However, the President’s recent community college tuition proposal ignores these benefits of private sector institutions. While community colleges “are an essential component of higher education’s delivery system in America…they are also an incredibly diverse system of postsecondary education, where they must meet a vast array of educational demands of their communities,” says APSCU President Steve Gunderson. “Private sector institutions are uniquely focused on equipping students with career skills and preparing them for in demand careers. That is our mission and we work hard every day to ensure that we fulfill it.”

Private sector institutions currently play a major role in achieving higher educational attainment in high-demand fields, but due to shortsighted regulations, this positive impact is being limited. Rather than developing policies that pit one sector of higher education against another, we should be working together to educate America’s workforce for the 21st century.

The Role Of Private Sector Institutions
Private sector institutions all across the nation are already hard at work accomplishing the President’s higher education goals. Specifically, private sector institutions are leading in the following ways:
  • Enrolling, educating and graduating new traditional students. Expanding access to higher education new traditional students is essential to achieving the President’s 2020 goal, and educating these new traditional students will help to maintain a sufficiently skilled workforce that will also expand the middle class.
New Traditional Students chart
  • Private sector institutions provide students with flexible educational options that other sectors of higher education cannot match. Many students, especially new traditional students, at private sector institutions have busy schedules to balance. Private sector institutions are best suited to meet students where they are, e.g. through distance education opportunities.
Distance Education chart
  • Private sector institutions lead the way in educating active duty military and veterans. Over 325,000 veterans and their families choose private sector institutions for their career oriented programs with flexible schedules and credit transfer rules, among other reasons.
  • Private sector institutions save taxpayers money. Without private sector institutions, states would either need to contribute significantly more taxpayer dollars each year to satisfy the demand for postsecondary education, or deny access to individuals seeking to continue their educations.
Jorge chart
  • Private sector institutions also provide job-ready graduates to thousands of employers in high demand fields. Employers in both the private and public sectors value private sector educations.
High Demand Fields chart
  • Students who receive credentials from private sector institutions experience significant earnings gains after graduation.
Earnings Boost chart
  • Students who choose private sector institutions are looking for a quality career-oriented education that fits their goals and lives. Employers with high demands for middle-skilled workers in their field look to private sector institutions to provide graduates that are job-ready. As a result, students who graduate from private sector institutions are more likely to work in their degree field than the average student.
LinkedIn Chart
  • Private sector institutions are meeting a critical need for the US higher education system. Since 2000, they have played a major role in increasing enrollment and attainment. Between 2000 and 2012, they experienced over 300 percent growth in enrollment, accounting for 26 percent of the total increase nationwide. Without their contribution to the system, President Obama’s goals would be far out of reach.
Growth in sector
Private sector institutions provide quality education and training to students, a worthwhile goal that the President has supported through his rhetoric on higher education. However, actions by the Administration run counter to these values and limit student access and success.
Does Not Equal Chart
We need higher education policy in this country that values the contributions made by all segments of higher education and acknowledges the complexities of educating America’s workforce while fostering collaboration and cooperation among all postsecondary education providers.

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Forbes (Blog): Department Of Education's 'Gainful Employment' Rule: An Excessive And Ideologically-Driven Regulation

Guest post written by Lanny J. Davis
Mr. Davis is an attorney, an EVP of Levick Communications, and has represented the for-profit sector in past years and still does today.

Suppose a Republican administration’s Department of Education enforced a regulation that cut off federal student loans only for those students who attend colleges that predominantly serve lower income, minority and working class families. Can you imagine the cries of outrage that would be heard from liberal members of the Congress? Class discrimination? Hard-hearted conservatives targeting the most vulnerable students in our society?

So, how and why did this happen in a progressive Democratic administration—one whose policies I have supported over the last six years? To put it another way, is there a better example of excessive and ideologically-driven regulation by liberal government, fact-free and producing the opposite consequences of what is usually the goal of liberalism: protecting the underserved and providing them greater economic and educational opportunities?

Some factual background
For the last four years, the Administration has targeted students who attend for-profit “career” colleges to be subject to the “gainful employment” regulation. This regulation sets limits on debt-to-income ratios almost entirely for those students who are enrolled in for-profit career college programs. The first version of this regulation, issued about three years ago by the Department of Education, was declared illegal by a federal court. The latest version was published in October of 2014, and has already been challenged in federal and state court for being arbitrary and capricious.

For-profit career college students are primarily from lower-income, minority or working middle-class families and are often the first in their families to pursue higher education. The Department of Education estimates that about 1,400 programs serving 840,000 students—of whom 99 percent attend for profit institutions—would not pass the gainful employment regulation.

How does a purportedly progressive Democratic Department of Education justify this discriminatory treatment of the most vulnerable students in our society? The answer is: By relying on false and misleading data to support the inflammatory headline in its press release describing the gainful employment regulation as necessary to “protect Americans from predatory and poor-performing career colleges.”

Debunking the Education Department’s claims
Start with the false assertion contained within the press release announcing the gainful employment regulation that “72 percent [of career college programs]…produced graduates who on average earned less than high school dropouts.” Glenn Kessler, in his widely respected “Fact Checker” column in the Washington Post, gave this statement “two Pinocchio’s” for being misleading because of flawed statistical methods. Kessler reported that Department of Education officials confirmed that, using these same methods, “graduates of 57% of private institutions—a list that includes the Harvard Dental School—earn less than high school dropouts.” That admission to Kessler, which proves the absurdity of the 72 percent statistic, was not included in the Education Department’s press release.

Second, the Department of Education claims there are abuses in marketing and recruitment at for-profit schools driven by recruiters, supporting the inflammatory “predatory” word in the headlines. It should be self-evident that a minority of bad apples don’t justify targeting the entire barrel. And, there already are stringent Education Department regulations and federal and state consumer protection laws that prohibit such tactics and require transparency to all prospective students.

Third, the  Education Department misleadingly asserts that for-profit students have higher tuition costs than public community colleges, which are not covered by the gainful employment regulation. But the opposite is true: When you take into account the substantial taxpayer funds from state and local governments used to reduce the cost of tuition at community colleges, tuition actually costs taxpayers $25,000 more per graduate at public community colleges than at for-profits.
Fourth, community colleges not effectively covered by the gainful employment regulation have graduation rates that are one-third that of for-profits (63 percent vs. 20 percent)—another inconvenient truth that was omitted.

Ideology is trumping the facts
Nor do Department of Education policymakers explain where these 800,000 plus career college students will go, given how over-crowded community colleges and state-subsidized public universities already are—or how taxpayers will afford subsidizing their tuition.

It is clear that behind the flawed statistics of the gainful employment regulation is ideology that views the words “for-profit” as per se evil, inevitably leading to fraud and abuse. I would urge the Education Department to hit the reset button, enforce the consumer protection regulations and laws against any school allowing fraudulent recruitment, and support measures to relieve students of crushing debt burdens instead of bailouts to banks “too big to fail.”

It is time for facts to trump ideology—not the other way around.

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