Billions pour into Education Department as student loans restart

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Sep 18, 2023 View in browser   By Michael Stratford Presented by Sallie Mae® QUICK FIX CASH FLOWS INTO EDUCATION DEPARTMENT AS STUDENT LOANS RESTART: Billions of dollars of payments are flooding into the Education Department as the agency begins turning on the federal student loan system that’s largely been frozen since March 2020. — A POLITICO analysis of federal financial data shows a huge spike in the Education Department’s daily deposits of operating cash to the Treasury General Fund over the past several weeks. — Borrowers aren’t required to make their first monthly payment until some point in October, depending on their individual due date. But at least some number of borrowers appear to be getting a jump on those payments — or at least trying to avoid interest accrual, which began at the beginning of September. — On Sept. 1, the Education Department recorded a deposit of more than $1 billion — the agency’s largest, single-day inflow of cash since 2009. And it’s the third-largest going back to at least 2005, the earliest Treasury records that are available online. — The daily deposits of operating cash — which the Treasury Department releases each business day for agencies across the government — are a good proxy for incoming federal student loan payments. But it’s worth noting that while student loans typically comprise a big chunk of the cash the Education Department typically receives, the daily Treasury data also includes money that the agency takes in from other sources, too. — The Education Department’s large influx of cash, which began in the second half of August, was unusual compared to similar periods of time before the pandemic pause on federal student loans began. The Education Department’s cash inflow for the last ten business days of August was 67 percent higher compared to the same stretch of 2019. And so far in September, the agency has raked in $4.5 billion, more than 70 percent more than what it recorded for the same period in 2019. — “Some borrowers have already begun making payments,” James Kvaal, the undersecretary of education, told reporters last week. “In other cases, there will be borrowers who will take some time to work student loans back into their household budgets.” — More than 28 million borrowers will owe payments in October, according to Kvaal. That’s five times more than the typical number of borrowers who enter repayment during an entire year. — The Biden administration is promoting its new income-driven repayment plan that lowers monthly payments for most borrowers and caps interest accrual in some cases. The Education Department is also planning special outreach for borrowers “who are high-risk or those who become delinquent after payments resume,” an agency spokesperson said. — Some economic analysts are watching closely the unprecedented return of student loan payments as millions of Americans potentially have to cut back on their consumer spending to cover new monthly student loan obligations. — The Biden administration has set up a safety net for federal student loan borrowers who fall behind on their payments for the next year. The Education Department won’t report borrowers as delinquent to credit bureaus during that time, though interest will continue to accrue. — It’s not yet clear if the early influx of payments is an indicator of the extent to which borrowers will end up paying in the coming months or avail themselves of that safety net flexibility. IT’S MONDAY, SEPT. 18. WELCOME TO MORNING EDUCATION. Please send tips and feedback to the POLITICO education team: Michael Stratford (mstratford@politico.com), Mackenzie Wilkes (mwilkes@politico.com), Juan Perez Jr. (jperez@politico.com) and Bianca Quilantan (bquilantan@politico.com). Follow us on Twitter: @Morning_Edu and @POLITICOPro. A message from Sallie Mae®: Students and families borrow nearly $100 billion in federal student loans each year but that should never be the first option. We need to connect more students to scholarships and grants and simplify financial aid offers to limit overborrowing and help families make informed decisions about paying for college. Learn more about common sense reforms to the federal higher education financing system.   Education Department BIDEN ADMIN DROPS TRANSGENDER QUESTION FOR NEW FAFSA: The Education Department said in a regulatory notice posted on Friday that it no longer plans to ask applicants for federal student aid whether they’re transgender on the new aid application that’s launching in the coming months. — An earlier draft of the Free Application for Federal Student Aid for the 2024-25 school year, which is set to be released by the end of the year, had included a question asking whether a student is transgender, with an option to decline to answer the question: A screenshot of question 11 on the Education Department's March 2023 draft of the new FAFSA. — But following public comments on that draft form earlier this year, the Education Department now says it won’t include the question. — One commenter said the question could put members of the transgender community at risk if the information were misused or accidentally released. Another commenter who works in a rural area said the question would “likely be received poorly by parents already skeptical about the college experience.” Responding to those comments, the Education Department wrote in the notice published Friday that it “has revised the demographic questions.” — The latest draft of the new FAFSA keeps a question about the student’s gender, allowing applicants to respond: “male”, “female”, “nonbinary”, or “prefer not to answer”. The question now instructs transgender students to “select the gender with which they identify at the time this form is completed.” A screenshot of question 11 on the Education Department's latest draft, released Friday, of the new FAFSA. — The department also added new language to the form explaining that a student’s answer to the gender question would not be shared with any of the schools to which the student is applying. The earlier draft of the form had already noted that the question does not affect a student’s aid eligibility and was being collected for research purposes only. — Over the past financial aid cycle — for the 2023-24 year — the Education Department has already been asking financial aid applicants whether they are transgender and collecting information about their gender identity and race and ethnicity. Those questions were part of a voluntary survey accompanying the FAFSA, not directly on the form. — The White House touted the gender identity question as part of its support for transgender Americans in a fact sheet last year. “This privacy-protected information would help to inform the Department about possible barriers students, including transgender and nonbinary students, face in the financial aid process,” the White House said. — The Education Department is in the process of implementing a massive overhaul of the FAFSA that Congress passed in December 2020. That law, the FAFSA Simplification Act, which was signed by President Donald Trump, requires the Education Department to collect on the FAFSA information about a student’s sex and race, among other things. — The proposed race and ethnicity question for the 2024-25 FAFSA remained unchanged from the earlier draft. — After some delays, the Education Department is planning to have the new, simplified FAFSA and associated technology upgrades go live for students and families at some point in December.   JOIN 9/19 FOR A TALK ON BUILDING THE NEW AMERICAN ECONOMY: The United States is undergoing a generational economic transformation, with a renewed bipartisan emphasis on manufacturing. Join POLITICO on Sept. 19th for high-level conversations that examine the progress and chart the next steps in preserving America’s economic preeminence, driving innovation and protecting jobs. REGISTER HERE.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. On the Hill ON THE HILL THIS WEEK: The House on Monday is expected to take up, under a suspension of the rules, legislation that’s aimed at boosting oversight over federal GI Bill funding that flows to colleges and universities. — The bill, H.R. 3981, would require schools that enroll students using GI Bill education benefits to notify Veterans Affairs or state regulators within 30 days if they’re hit with an adverse action by another agency. That includes things like getting placed on heightened cash monitoring, level 2, by the Education Department, or facing a possible loss of accreditation. — On Tuesday, the House education committee’s K-12 education subcommittee will hold a hearing titled “Academic Freedom Under Attack: Loosening the CCP’s Grip on America’s Classrooms.” Witnesses include Michael Gonzalez, senior fellow at the Heritage Foundation; Gisela Perez Kusakawa, executive director of the Asian American Scholar Forum; Nicole Neily, president of Parents Defending Education; and Ryan Walters, Oklahoma’s state superintendent.   A message from Sallie Mae®:   Higher Education BIDEN ADMIN ASKS COURT TO TOSS DESANTIS COLLEGE ACCREDITOR LAWSUIT: The Biden administration on Friday asked a federal judge in Miami to dismiss Gov. Ron DeSantis’ challenge to longstanding federal rules that govern college accreditation. — “Florida challenges writ large the constitutionality of the accreditation system that has existed for decades and seeks sweeping relief that would mandate the federalization of education standards,” the Justice Department wrote in its motion to dismiss the lawsuit. — Florida’s lawsuit, which was filed in June, also claimed that the Biden Education Department is illegally impeding efforts by universities in the state to switch accreditors. That’s become a significant priority for Republicans in the state, including DeSantis, who argues that accreditors have too much power over schools. — The Biden administration said in its filing on Friday that five public universities in Florida are in the process of pursuing new accreditation and it hasn’t so far denied any school approval to change accreditors. The administration said it had approved requests from two schools that wanted to change accreditors. Education Department EDUCATION DEPT. INSPECTOR GENERAL ORDERS BODY CAMS: The Education Department’s independent watchdog is in the market for body-worn cameras for its special agents as they carry out arrests, search warrants and other activities, according to a federal procurement notice posted this month. The Inspector General’s office is ordering 80 body-worn cameras to comply with a government-wide directive for federal law enforcement agencies that was signed by President Joe Biden last year. — The Inspector General’s office finalized a policy last year governing when those cameras would be used and how any footage would be released. A spokesperson said they don’t have a specific date yet for when the cameras will be put into operation.   JOIN US ON 9/20 FOR A TALK ON TRANSFORMING HEALTHCARE BILLING: Bipartisan legislation in the House and Senate would align costs for services across hospitals and doctors’ offices and reduce out-of-pocket spending that could potentially save the federal government billions of dollars. Can this legislation survive a polarized Congress? Join POLITICO on Sept. 20 to explore this and whether site-neutral payments and billing transparency policies could help ease health care costs. REGISTER HERE.     Syllabus — Student-loan restart threatens to pull $100 billion out of consumers’ pockets: The Wall Street Journal. — Discover considers possible sale of its student-loan arm: Bloomberg. — ‘We’ve lost our advantage on education’: Democrats grasp for wins on public schools: POLITICO. A message from Sallie Mae®: The federal higher education system does too much for too many and not enough for those who need the most assistance. Some federal lending programs allow students and families to borrow virtually unlimited amounts to pay for higher education, a policy that has driven up both student loan debt and the cost of tuition. In fact, federal debt for graduate students has reached an all-time high, according to the U.S. Department of Education. Read more about solutions for limiting overborrowing and reducing federal student debt.     Follow us on Twitter Delece Smith-Barrow @DeleceWrites Michael Stratford @mstratford Bianca Quilantan @biancaquilan Juan Perez Jr. @PerezJr Mackenzie Wilkes @macwilkes   Follow us

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