Education Week - April 24, 2013 - (Page 18)

18 EDUCATION WEEK n APRIL 24, 2013 n GOVERNMENT & POLITICS Obama’s Proposed Fix on Student Loans Ruffles Allies Some say move to market-based rates could dampen college access By Alyson Klein The Obama administration has found itself at odds with a key voting block—college students and their advocates—as well as many of its Democratic allies in Congress, because of an important, if technical, budget proposal that could have significant implications for college access. In a move intended to stave off a doubling of interest rates on federally backed Stafford Loans over the summer, the administration is seeking to shift those interest rates from the current predictable, fixedrate system to a market-based rate at the time of the loan. Right now, interest rates on subsidized Stafford Loans are set at 3.4 percent, but they’re slated to jump to 6.8 percent in July, unless Congress and the administration act. Cap Off The shift to a 6.8 percent fixed rate could cost a student with $20,000 in debt— roughly the national average—an additional $12,000 over the life of their loan, according to an analysis by the Institute for College Access and Success, a nonprofit organization in Oakland, Calif. The administration and some Democrats in Congress have very different ideas about how to head off that potential rate increase. Advocates for students agree that under current interest rates, which are at historic lows—for instance, the rate was 1.73 on April 17—President Barack Obama’s fiscal 2014 budget proposal offers a better deal for borrowers than they’re getting right now. But the proposal doesn’t place any cap on the interest rate, leaving students open to much more expensive loans if interest rates soar in the future, critics argue. Just hours after the Obama administration released its budget blueprint April 10, a coalition of student-advocacy groups including the National Campus Leadership Council, U.S. pirg, Our Time, Rock the Vote, and the Young Invincibles put out a joint statement disparaging the loan plan. “Students have never taken out federal student loans without a cap on how high interest can go,” they wrote. “The president stood with us by investing in higher education during his first term, and we’re concerned that his budget does not deliver the same investment this time around.” Key members of Congress are on their side. U.S. Sen. Tom Harkin, D-Iowa, the chairman of the Senate Health, Education, Labor, and Pensions Committee, said during an April 16 hearing on college costs that he has “serious concerns” about the proposal. “Shifting all federal student loans from a fixed rate to an unrestricted market-based rate will increase the vulnerability of middle-class students and families struggling to afford a higher education,” Sen. Harkin said. However, congressional Republicans—including the top gop lawmakers in Congress on education issues, Sen. Lamar Alexander of Tennessee and Rep. John Kline of Minnesota—are on roughly the same page as the administration. They like the idea of moving to a market-based interest rate. In fact, Sen. Alexander said at an April 17 hearing that he would like to get started on legislation sooner rather than later. “Today’s students shouldn’t be paying more than they should, and then, in the future taxpayers wouldn’t be subsidizing more than they should,” Sen. Alexander said. Implications for Access? Under the president’s proposal, studentloan interest rates would be tied to the prevailing rate of the 10-year Treasury note at the beginning of the academic year in which the loan is taken. Students would be protected to some degree from a big spike in interest rates in the future, thanks to another provision in the budget request that would expand socalled income-based repayment plans for federally subsidized borrowers. The proposal would ensure that graduates don’t have to spend more than 10 percent of their income on loan repayment, no matter how much they owe in federally backed loans, or where interest rates stood when they borrowed the money. Expanding income-based repayment plans is a “more effective insurance policy” for borrowers than placing a cap on studentloan interest rates, said Carmel Martin, who at the time was the U.S. Department of Education’s assistant secretary for plan- ning, evaluation, and policy development in an April 10 conference call with reporters. “In order to have a cap, we would have to charge students more in order to hedge against the possibility that rates would go up to unmanageable levels in the future,” she explained. But Lauren Asher, the president of the Institute for College Access and Success, which works on college-access issues, said that income-based repayment plans are “no substitute” for a cap on student loans. An interest-rate formula like the one the president is proposing could ultimately hinder college access, Ms. Asher said. According to recent projections by the Congressional Budget Office, interest on the 10-year Treasury note could rise to roughly 5 percent by fiscal 2017. And under the president’s proposal, the federal government would add an additional percentage for different types of loans, including 0.93 percent for subsidized Stafford Loans, which tend to help low- and moderate-income borrowers and 2.93 percent for unsubsidized Stafford Loans, another type of federally backed loan for students. That means some students could be paying about 8 percent in interest rates in just a few short years, Ms. Asher said. But others argued that it’s tough to gauge how big a role interest rates play when it comes to college access. “There’s not much evidence that [college] choices are being made by people acting as human spreadsheets,” said Kevin Carey, the director of the education policy program at the New America Foundation, a think tank in Washington. Student loans are different from, for example, car loans, for which bor- Head Start Officials Tight-Lipped on Which Centers to Lose Aid By Christina A. Samuels Despite the announcement earlier this month that dozens of lowperforming Head Start centers would lose grants after recompeting for the federal preschool funds, the Office of Head Start still refuses to specify which—leaving advocates to scrutinize the agency’s statements for details as the process grinds forward. “We don’t want to say yet that there are any ‘losers,’ ” said Yvette Sanchez Fuentes, the director of Head Start, which is part of the U.S. Department of Health and Human Services and serves about a million disadvantaged children younger than 5. “Officially, we are issuing the notice of award July 1. Until then, anything can happen.” Earlier this month, the department announced that of the first wave of 125 grantees asked to recompete for their funding, 80 would continue to get their full grants, 25 would lose the aid, and 14 would have their grant money split among multiple recipients. Six are still operating, but Head Start wants to have another competition in those areas because no applicant met the department’s standards. But instead of naming those that failed the make the cut, the agency has released a list of 160 potential grantees going forward—prompt- strate why they deserved to keep their money. Previously, money generally was taken from a provider only in the case of fiscal mismanagement or serious health and safety issues. said Johnnie Cain, the center’s director. He confirmed that the program had been told it would not be receiving its Head Start grant after June 30, and that the money is slated to be parceled out among “ Right now, there is so little that we know. This is a new experience, and the system is working to find out how things should be.” KOSTAS KALAITZIDIS Los Angeles County Board of Education ing interested parties to try their own cross-matching to determine which providers were on the list to compete but did not make it to the list of potential grantees. Every provider’s contract must be negotiated, and some programs slated to lose money may yet come back from the brink, Ms. Sanchez Fuentes said. The competition marked the first time providers in the 48-year-old program that distributes $7.6 billion yearly were asked to demon- The Head Start office is also poring over a second wave of 122 centers that were told in January that they would also have to compete for funds. three different organizations in the city, so that no current family should lose access. Mr. Cain told Education Week in an interview that he had no further comment, but he was slightly more forthcoming in an article in On the Hit List? the Seattle Times, in which he said Some centers are already mak- he had “no idea” why the program ing plans to close. They include the was losing its funding. First African Methodist Episcopal But federal regulators have Child Development Center in Seat- warned First ame since at least tle, which serves 264 children and 2011 about noncompliance issues, has been in operation for 33 years, the Seattle Times said. For exam- ple, the newspaper said, the center did not ensure that children received required medical examinations, a majority of its board failed to attend seven of the eight board meetings between December 2009 and February 2011, and the program was charging the government above-market rates for office and parking space. Robert Radford, the director of the 148-child United Indians of All Tribes Head Start, also in Seattle, said that the center was told it would not have its grant renewed. Mr. Radford said that the center will struggle to maintain staff morale and parent involvement, but that ultimately he felt the evaluation was done fairly. He said that the center could continue to exist if it is selected by a grantee as a subcontractor, also known in Head Start as a “delegate agency.” Large and Small The competition also brought major changes to huge programs, such as the one run by the Los Angeles County board of education. That program received more than $200 million a year from the federal government and, through

Table of Contents for the Digital Edition of Education Week - April 24, 2013

Education Week - April 24, 2013
Union Sues Over Basis of Appraisal
In San Antonio, Pre-K Initiative Sets Steep Goals
New Teachers Search for Place in New Orleans
FOCUS ON: CAREER READINESS: States Seek High School Pathways Weaving Academic, Career Options
News in Brief
Report Roundup
PARCC Proposes Common-Core Test Accommodations
Some States Seek GED Alternative as Test Price Spikes
Blogs of the Week
DIGITAL DIRECTIONS: Online Socialization Is Hot Topic Among Researchers
Overhaul of the E-Rate Seen as a High Priority by FCC Commissioner
Comments Weighed on Vending Machine, ‘A La Carte’ Proposals
Corralling Local Support Still a Challenge
FOCUS ON: CAREER READINESS: Swiss Academic, Career Paths Designed to Cross
Obama’s Proposed Fix on Student Loans Ruffles Allies
Head Start Officials Tight-Lipped on Which Centers to Lose Aid
Policy Brief
Legislative Briefs
School Safety Legislation: A Tally by State
LAUREN BLAIR ARONSON: Advice to TFA From a Former Insider
TopSchoolJobs Recruitment Marketplace

Education Week - April 24, 2013