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HearingStartDate: 12/8/98 HearingEndDate: 12/9/98 HearingDate: 12/9/98 HearingTitle: Transcript of Public Hearing on HEA of 1998 UNITED STATES OF AMERICA DEPARTMENT OF EDUCATION IN RE: PUBLIC HEARINGS ON HEA AMENDMENTS OF 1998 Regal Knickerbocker Hotel 163 East Walton Place 14th Floor - Towers East Chicago, Illinois Wednesday, December 9, 1998 9:40 a.m. PANEL MEMBERS: HAROLD JENKINS JEFF BAKER BRIAN KERRIGAN DIANE ROGERS LISA ASERKOFF DAVID BERGERON P R O C E E D I N G S MR. KERRIGAN: Good morning. We're going to go ahead and get started here. We, so far, have one speaker scheduled to address us and if anyone else wants to have any comments after that, we will certainly listen to those. And, without further ado, we'll just start. Judy Flink will be our presenter this morning. Do you want to sit at the table back there? You can stand up, if you wish, Judy. MS. FLINK: Well, good morning. I understand I'm the only testimony today, but I'll try and stretch it out so you have something to do for a couple of hours. My name's Judith Flink, and I'm the Director of Student Financial Services and Cashiering Operations at the University of Illinois at Chicago. Today I'm here testifying on behalf of the Coalition of Higher Education Assistance Organizations, or commonly known as COHEAO. COHEAO was formed in 1981 as a unique partnership of educational and commercial members with a shared interest in fostering access to postsecondary education. Our diverse membership of over 350 colleges, universities, and commercial entities has always been actively involved in issues relating to student loan collections, default prevention, and effective campus management of student loan funds. The educational institutions that belong to COHEAO have disbursed over $3 billion to nearly 2 million students, and our commercial members have serviced $11 billion in student loans. We've tried to be the leading voice of improved financing of higher education through the Perkins Loan program. As you know, the Perkins Loan program is a cost-effective partnership between the Federal government and institutions of higher education. We've worked closely with our colleagues in the higher education community to ensure that the Perkins Loan program remains, as it has for nearly 40 years, a strong, viable financing option to enable needy students to achieve a postsecondary education. We have also worked closely with the Department in recent years to clarify and improve the requirements for refunds and repayments of Federal student financial assistance. I believe that we are all in agreement that the previous refund and repayment requirements were overly complicated, extremely confusing and burdensome to administer. However, the new law simplifies this process and should result in easier implementation of regulations. Guided by the expertise and diverse professional background of our members, COHEAO has undertaken a comprehensive review of the changes made in the Higher Education Amendments. Following are some of the highlights of our priorities and concerns. However, we will present a more detailed discussion of these issues in a written submission by December 15th. COHEAO was an active participant during the consideration of the HEA, and we're pleased that many of the changes made in the legislation reflect amendments that our members advocated. Many of the changes in the new law will go far toward improving the management of the student financial assistance programs, reducing student loan defaults, and improving the overall service that students receive from their institutions. COHEAO members are also pleased by the open and collaborative approach that the Department has taken thus far to quickly implement the changes made in the HEA. We believe that the improvements made to the negotiated rulemaking process in the legislation, coupled with changes in Departmental policy that reflect lessons learned from prior negotiations, can significantly improve the development of regulations for administering the student aid programs. We endorse the concept of associate membership on committees for associations with specific regulatory interests, as well as the use of subgroups, to work out details of highly technical regulations such as refunds and repayments. The Perkins Loan program provides students with the lowest interest rate and most extensive borrower benefits available under any Federal student loan program. Institutions make an investment in the Perkins Loan program, matching 30 percent of the Federal Capital Contribution. As a result, defaults in the Perkins Loan program remain low. COHEAO believes that it's important to focus on two key areas in negotiated rulemaking for the Perkins Loan program, administrative simplification and default aversion. A number of changes in the law are designed to reduce the administrative burden associated with administering the Perkins Loan program. We believe that these changes will make the Perkins Loan program even more cost-effective as well as enable institutions to improve the service we provide to our borrowers. With regard to deferments and cancellation, we believe that additional clarification is needed regarding deferment and cancellation eligibility in order to ensure that borrowers receive the broader deferment and cancellation options that Congress intended, as well as simplifying the processing of deferments and cancellations. We believe that the law is relatively clear regarding the changes in the definition of cohort default rates, and eliminates some of the more prescriptive and unnecessary requirements that did little to actually reduce defaults in the program. The new law allows institutions to employ more innovative strategies to reduce defaults.However, we do believe that some additional clarification is necessary regarding which loans are excluded from an institution's cohort default rate. COHEAO recognizes a number of new provisions in the new law that will help institutions work with borrowers to avoid loan defaults. One way of doing this is by providing incentives for borrowers to repay their loans on time. These types of incentives have been effectively used in the Federal Family Education Loan program for several years. However, COHEAO believes that some of the requirements in the Incentive Repayment Program authorized under the new law need clarification in order for institutions to effectively utilize this new authority. Likewise, the loan rehabilitation provision can be an effective tool for institutions to get students who have defaulted on their loans back on track and into good repayment patterns. Additionally, by regulating only when necessary and relieving institutions of unnecessary administrative burdens, the Department can allow institutions to focus more on averting defaults through counseling borrowers while they're in school, helping them develop an understanding of their repayment obligations and working with them to ensure that they repay their loans. In the area of refunds and repayments, we believe that the changes made in the Higher Education Amendments represent a significant shift in Federal policy. The new law essentially establishes a Federal earning schedule for the receipt of Federal student financial aid funds, moving away from the previous policy which was based on institutional refund policies. These legislative changes have a significant impact on the current regulations and will require major revisions. COHEAO would like to be an active participant in that discussion. COHEAO is grateful for this opportunity to present our thoughts and concerns on the new law and the negotiated rulemaking process. We look forward to working with the Department and the rest of our colleagues in the community to develop the regulatory changes that will implement the letter and spirit of the new law, and provide institutions with the flexibility to effectively administer the Federal student aid programs but, more importantly, help benefit the students who deserve it. MR. KERRIGAN: Thank you. At this time, since we have no more scheduled speakers, I would ask if there's anyone in the audience who wishes to make any presentations or ask any questions? If not, we certainly will be around here for a while and if anyone else shows up to make a presentation or if any of you wish to come up and talk with any of us, we will be here for that purpose. The next hearing that we have, of course, is scheduled for Los Angeles on the 11th and 12th, and after that, we will continue to receive comments that people want to send in until December 15th. At which time we will have had you seen and heard and issue a report. Thank you. (Off the record from 9:50 a.m. to 10:18 a.m.) MR. KERRIGAN: I'd like to get everyone's attention, we do have another speaker who has signed up, a Mr. Patroklos Benatos, and he will repeat his name. I probably do not do it justice. And he is a scheduled speaker at this time. MR. BENATOS: So hello, everybody. My name, it was pronounced well. My name is Patroklos Benatos, and I'm representing here the National Association of Graduate-Professional Students which is abbreviated -- I'm going to be rather fastidious, but I'm going to review another chart. The chief things I would show you, I'd like to express here, are two kind of general in nature and -- The general thing is that we believe that graduate education is a very important part of this country's potential, and we would like to see some kind of structure for this according to the Department of Education. Something which will say, okay, this education in this country in general, this K1 through 12 is high school, and there is college education, and then there is another thing called graduate education. We believe that would be an important thing. Now, the second thing which would, actually which is connected to this wish, is that, referring to the recent suicide at Harvard University, we believe that there might be a chance of working together with the Department of Education and coming up with some kind of rules of advising. Or, not rules maybe, but sort of guidelines for advising. Now, we have to hit the balance between not hurting the University's economy, the research's economy but, on the other hand, having a recommendation about graduate student advising guidelines. I believe that would be a useful thing. I think the recent Harvard suicide warrants some kind of work in this area. Now the third and very concrete thing I would like to talk about is the Department of Graduate Students. Recently, after the Higher Education Act has been authorized, I think the Department got enough money, even more than before, but two graduate grants didn't get funded, we believe, because of a mistake. Because of a simple mistake. These two grants are the Graduate GAANN, Graduate Assistanceship in the Areas of National Need, and the other one is JAVITZ Fellowships. These two things didn't get funded because of a mistake from the Department of Education. We believe that these should be funded and the Department can do the programming for these funds. And, in the worst case, they can go back to Congress and ask for reappropriation. So, my question is, regarding this very concrete thing is that has anything been done with this problem. And, in general, I believe that graduate education is, I mean, like five years ago, about 60,000 students was funded. Right now there are about 10,000 students. So the funding is dropping throughout the years. I mean, that's all what I'm saying. MR. KERRIGAN: I have a question. The second point you made talked about guidelines for advising. Could you explain a little more what you're talking about there? MR. BENATOS: Okay. So the thing is that there is a situation that's a PhD or a Master's student and there's an advisor of faculty. Now, there are no sort of, there is no accepted standards or whatever, guidelines, regarding how this relationship, the ethics or whatever this relationship. Generally, what's happening is that the graduate student is completely at the disposal of his or her advisor. Okay? There are no guarantees, nothing really. And what I was really thinking about, and some schools have already done this individually, is that they sort of sat down with faculty or, I don't exactly know how it happened, but we do have the National -- . We do have the resources for this. They sat down and sort of agreed or wrote up some kind of guidelines or important elements of advising of faculty to graduate students. And then they sort of, well, it kind of says that well, suppose somebody was going to advise a graduate student, then he gets a little brochure saying that, well you're going to be in this situation, therefore, how about thinking about this. This is an important or critical period of your graduate student's life and there are certain things that you might want to keep an eye on this -- to just keep doing research and things like that. So, this is what we meant. MR. KERRIGAN: All right. Thank you. MR. BENATOS: We make kind of a recommendation which would be a useful thing, I believe, just from the nothing that exists right now. MR. KERRIGAN: All right. Thank you. David, do you know anything about the status of the JAVITZ Fellowship and the other? MR. BERGERON: As a matter of fact, I do. I spent a lot of time over the last couple of weeks dealing with this issue. The Congress appropriated $31 million for graduate assistance in Areas of National Need program and the JAKE JAVITZ Fellowship program. We need something in excess of $30 million for the continuation awards. So we have something less than $1 million to run competitions or in some way use that funds for new fellowship awards. Our estimates have been pretty consistent that that's how much money we needed for continuation awards, and the Congress, in appropriating the money, knew that and said that they wanted us to do a new competition for funds, which is, with that limited amount, difficult to justify. Competition in either of the programs costs us something in excess of $100,000. So, we're using a lot of that money to compete the funds. We are looking at trying to see what we can do to increase the amount of money. In general, supplementals are only included in the areas where there's an emergency. It's hard to argue there's an emergency with the Congress who knew when it appropriated, how much money we needed in continuation awards. But what we're in the process of doing now, and the Department is finalizing in through negotiations with the office management budget, the present budget request. And, in that request, we'll have to deal with this issue of funding for graduate fellowships. That'll be released in early February, the budget. MR. BENATOS: So, as I understand, you're saying about supplemental budgets that is request? MR. BERGERON: Yes. Supplemental budget requests would be included in that budget when we submit to Congress in February. If we make a determine, if there is a case that we can make for it being an emergency. MR. BENATOS: So, let me just try to understand. So, as far as I know, that the money was available for these fellowships. Wasn't it? MR. BERGERON: There's $31 million available for fellowships. We need something over 30 million for continuation awards. People who have already gotten commitments of fellowships is something less than $1 million. MR. BENATOS: Yes, so that's continuation of them that there are new competitions for this year. MR. BERGERON: Right. MR. BENATOS: And new competitions, so what's the, what's entering the new competitions? If the continuation is 30 million, a new competition -- MR. BERGERON: Would be for something less than 1 million. If we ran a competition in both of those programs, we would spend about $200,000 of that, something less than $1 million, for those competitions. MR. BENATOS: And what's keeping you from doing that? MR. BERGERON: Well, we're going to hold competitions in one or both of the programs. The question is, how can we most effectively use those funds to make the most fellowship awards as possible? MR. BENATOS: Oh, I see. MR. BERGERON: We would rather spend more money on fellowships and less on administration, and so we're trying to maximize the number of fellowships that we make. And we're trying to adopt a strategy that results in the, that maximizes the number of fellowships. The problem is, part of the cost of running the competition has to be, come out of program funds. The cost of paying people to evaluate proposals, by law, comes out of that program appropriation. So that comes off the top. It's, that leaves something around $800,000 for fellowships. That's not much money for fellowships when your average fellowship is about $27,000 a year. And so every, you know, for every $100,000 we spend on evaluating proposals, for example, that results in four fewer fellowship awards. We'd rather find a way to make four more, not four fewer. MR. BENATOS: So, as I understand, you're going to ask for a supplementary budget? MR. BERGERON: I can't tell you we're going to ask for a supplemental budget. Supplemental appropriations are in cases of emergencies. Emergencies are floods, hurricanes, I mean, additional needs for peacekeepers in some country that we don't anticipate. Those are classically emergencies. As I said, it's hard to just say that this is an emergency when the... MR. BENATOS: So, what's exactly happening? Are you going to the program or are you going to ask for money, or what? Or are you going to reorganize? MR. BERGERON: This is what is occurring now within the administration is negotiated with the Office of Management budget to come up with the most money we can for graduate fellowships. It's where we are in the process. So, no one's in a position to make commitments to say this is what we're going to do. I'm just saying, this is where we are in the process and the goal is to maximize the number of fellowships we get to award. MR. BENATOS: Okay. Thank you. MR. KERRIGAN: Thank you very much. Again I would ask if there's any other people who have any comments at this time? If not, we are still waiting, there will be one more scheduled speaker a little bit later this morning. Thank you. (Off the record from 10:30 a.m. to 11:22 a.m.) MR. KERRIGAN: All right. We will just take about one minute for everyone to kind of compose themselves. We've been anxiously waiting for what we think is going to be the last piece of testimony this morning. Larry Matejka is here and he will take this opportunity to speak to us. MR. MATEJKA: Thank you. I apologize for making you wait this long. And, as you well know, sometimes when that phone umbilical cord gets attached to your ear, especially when you're going through a transition of Governor's in the state, it consumes a lot of time. So I apologize. MR. KERRIGAN: We're happy you're here and it's not a problem at all. MR. MATEJKA: Okay. As indicated, my name is Larry Matejka and I'm the Executive Director of the Illinois Student Assistance Commission, a state agency that awards upwards of $1 billion annually in student aid through a broad array of grant, scholarship and student loan programs. In my testimony today, however, I will be providing comments in my capacity as Chairman of the caucus of the 36 guaranty agencies that developed and initiated those provisions of the recently enacted Reauthorization bill that fundamentally altered the manner by which guaranty agencies are financed. Our work as a caucus was nearly two years in the making. Among the 36 agencies represented were state agencies, such as mine, and private not-for-profit organizations, agencies that limit their area of service to an individual state, and agencies whose operations are either regional or national in scope. Our group consisted of multipurpose bundled agencies, such as my own, that offer a diverse array of state and federal programs and services, and agencies that function exclusively as federal student loan guarantors. Individually, while we brought countless differences to the table, it was our core similarities that brought us together and, ultimately, made our efforts successful. As guaranty agencies, we support the Federal Family Education Loan Program through a variety of key administrative functions that include loan processing and guarantee services, training and outreach, regulatory oversight and compliance and, default prevention/debt counseling and collections. We strive to provide the value-added role of local one-stop shopping for student borrowers, acting as a central resource for them through their postsecondary borrowing experience. In developing its proposals for guarantee agency financing reform, the caucus conferred regularly with other segments of the student loan community, the members of Congress and their staffs and, representatives of both the Department and Administration. We look forward to continuing that collaborative approach in the negotiated rulemaking, and welcome the opportunity to work with you to implement the various changes that were ultimately incorporated into the Higher Education Amendment. We are firmly in agreement with the four principles that Department officials have put forward that will guide the negotiated rulemaking process, and applaud the development of these principles. And I list them: * To regulate only when it improves the quality and equality of service to customers; * regulate only when absolutely necessary,and then in the most flexible, most equitable, and least burdensome way possible; * regulate to solve an existing problem that can only be resolved through regulation; * regulate to provide a legally binding interpretation to resolve an ambiguity. The caucus feels that it is essential for us to participate in the student loan panels of the negotiated rulemaking process. Throughout the reauthorization process, we functioned as the principle incubator for proposals concerning guaranty agency financing reform. Individually and collectively we will be on the front line of implementing those specific provisions of the amendments, and other key student loan provisions as well. As a consequence of the lengthy and painful negotiations we conducted with our own caucus, we are acutely aware of the operational and financial challenges that we will face as a community in implementing these reforms, and have had extended discussions about how to best handle these issues. Central to our efforts as we developed our reform proposals, and now as we prepare to implement them, has been a strong commitment to improved customer service. In seeking to be part of the negotiating rulemaking process, we hope to ensure that implementation proceeds in a manner that does not compromise or disrupt service levels. Notably, we have established a companion caucus of guaranty financial officers which will work closely with the CEO caucus in the months ahead to develop improved administrative and operational analysis processes. The resulting methodologies are aimed at achieving continuous service improvements. From our perspective, our work as a caucus committed to program improvement did not stop when the reforms we advanced were adopted. On the contrary, we feel it has only just begun. While the challenges that we face with regard to implementation are formidable, we are genuinely excited about the opportunities that they present to us, and confident that the changes to be implemented will yield a stronger, more efficient, more service-oriented student loan program. In conclusion, I applaud the steps that the Department has taken to date, in that they promise an unprecedented level of partnership and cooperation, as evidenced in the guiding principles that have been set forth. The caucus would welcome and appreciate the opportunity to be an active contributor to that partnership. I thank you for listening to me this morning. I am pleased to respond to questions. MR. KERRIGAN: We do have at least one question. Thank you for your presentation. MR. BAKER: Thank you for coming and we're anxiously awaiting for -- I have a question. Some of your colleagues, I was in Washington last week and, I didn't get a chance to chat with anybody like -- but, the caucus had participating negotiated -- clearly -- Are we talking about, you may not be prepared to answer this, are we talking about you as a Chair or a Representative of the caucus? Because what I'm concerned about is, how we're going to accommodate what appeared to me you request that almost...the Representative last week made it clear, and I think rather than settle that -- agencies are very similar and the functional possibility are very different. The organization and the structure of government services --, you mentioned that. But I don't think we -- because ordered on how government agencies should be represented and -- MR. MATEJKA: Yes. Thirty-six would be the minimum challenge I would concur with that, and I don't think I'd want to be a part of that process. Yes, we have talked about it, as a matter of fact, and I know you see testimony from different groups. Our caucus would, if we and will have a Representative as a negotiator and, in fact, I anticipate submitting a letter as, Chair of the caucus, naming the negotiator, because that will be determined either yet today or tomorrow because the caucus is, we need to have that discussion. We did have some discussion in Washington along that line and the testimony you received, I think it's important that you pay attention, close attention to what has been said, because there is great diversity. However, that diversity, I think, is consumed in the commonality that we have in providing the -- service through the programming service. MR. BAKER: Thank you. MR. KERRIGAN: I thank you again and, once again, if anyone else has any comment, you're free to make them, and/or ask any questions. Thank you very much. I think that probably we'll be wrapping things up this one time, then. I don't anticipate that there are any more speakers. I thank you all for coming. (Off the record at 11:35 a.m.) |