DC Shuttle: Obama Admin Cuts Pell Grant Overpayments, New Eye on Private Student Loans

As part of the Campaign to Cut Waste, the Obama administration cut erroneous Pell Grant payments to 2.7% in 2011, the lowest it has been since 2005. White House officials estimate that reform measures saved $300 million in overpayment through the Pell Grant student aid program. The 2011 payment errors totaled $1 billion, approximately the same as the payment errors for 2010, but an increase in the volume of the Pell Grant program resulted in the decrease from 3.1%  to 2.7%. Administration officials said that a Department of Education reform undertaken in 2010 which permitted students applying online for federal student financial aid to transfer their income information directly from the Internal Revenue Service’s (IRS) website reduced errors and simplified the application process. Additional reductions in improper payments are expected as more students use the online system.

The Consumer Financial Protection Bureau (CFPB) put out a request for information from students, lenders and institutions of higher education on private student loans. Created by the 2010 financial regulatory reform law, the CFPB has jurisdiction to oversee consumer lending, and is currently collecting information for a report for Congress on private student loans. Special adviser to the Secretary of the Treasury and de facto head of the CFPB Raj Date said that “the private student-loan market is one of the least-understood consumer-credit markets. … It has been operating in the shadows for too long.” Areas of inquiry within the study include how and where students find information on private loans, how they decide between loans and how much to borrow, and what resources are available to reduce the chances that a student incur an unsustainable amount of debt or default on their loans.

The House Education and Workforce Committee’s Subcommittee on Early Childhood, Elementary and Secondary Education held a hearing on setting standards for effective research programs in the context of reauthorizing the Elementary and Secondary Education Act (ESEA). In his opening statement, Subcommittee Chair Duncan Hunter (R-CA) applauded the Institute of Education Sciences (IES), the research arm of the Department of Education, for its What Works Clearinghouse, which provides “a central and trusted source of scientific evidence of what works in education.” He added that education research helps identify programs which are not helping students to succeed, and which may not merit continued federal funding. Congressman Rush Holt (D-NJ) said that he plans to reintroduce legislation that he originally submitted during Congress’ last session to improve data and instruction at the school-district level. Several education advocates suggested that holding a hearing on research best practices–instead of a more divisive issue within the ESEA reauthorization discussion like teacher accountability and evaluations–signals that the House is in no hurry to move toward a comprehensive reauthorization bill as the Senate has done.


From the New England Council’s Weekly Washington Report Higher Education Update, Nov. 21, 2011. NEBHE is a member of the Council and publishes this column each week.

Founded in 1925, the New England Council is a nonpartisan alliance of businesses, academic and health institutions, and public and private organizations throughout New England formed to promote economic growth and a high quality of life in the New England region. The Council’s mission is to identify and support federal public policies and articulate the voice of its membership regionally and nationally on important issues facing New England. For more information, please visit www.newenglandcouncil.com.


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