Ed Policy Watch

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The Department of Education recently approved the State Fiscal Stabilization Fund (SFSF) applications of five more states - Alaska, Nebraska, North Dakota, New Mexico, and New Hampshire. These states join the 31 states/territories that have already begun to receive funds. As of June 26th, nearly $6.2 billion in SFSF monies have been disbursed to states. (Previous posts analyzing the applications of the first 31 states/territories can be found here, here, here, here, and here.)

The full table of all 31 states/territories can be access here.

[In recent months we have cast a critical eye on federal student loan guaranty agencies by taking a closer look at a few specific agencies to show how concerns about conflicts of interests and misaligned financial incentives operate in practice. Previous entries can be found here, here, here, here, and here. Today, our series continues with a look at the actual amount of subsidies and payments provided to these agencies.]

Guaranty agencies are paid to perform three basic functions within the Federal Family Education Loan (FFEL) Program: provide default insurance for lenders; work with delinquent borrowers to help them avoid default; and collect on or rehabilitate defaulted student loans. Though each individual purpose is important; entrusting a single agency to carry out all of these functions creates opportunities for conflicts of interest. Even worse, the financial payment structure provides guaranty agencies with the greatest compensation for letting a student loan default -- the worst possible outcome for borrowers and taxpayers.

According to the U.S. Department of Education, guaranty agencies received $1.57 billion from the federal government in fiscal year 2008 for dealing with defaulted student loans and working with borrowers. Guaranty agencies also ended the 2008 fiscal year with an additional $1.63 billion worth of federal assets held in trust to reimburse lenders for losses on defaulted loans.

A breakdown of the distribution of federal payments to guaranty agencies reveals why taxpayers and policymakers should be concerned about these companies' financial incentives. As the table below shows, 60.5 percent, or $948.8 million, of the federal payments guaranty agencies received in the 2008 fiscal year were for the collection and rehabilitation of defaulted student loans. (The Department of Education does not separate these payments out so we don't know how much agencies got for each function.) By contrast, they received only $177.3 million for helping keep borrowers out of default. In addition, guaranty agencies received $203.9 million to cover the cost of processing and issuing the initial default guarantee on new loans and another $237.9 million for maintaining existing loan accounts.

In 2007, Congress created two new programs aimed at making it easier for students to repay their federal student loans and encouraging them to pursue careers in the public service. As we wrote yesterday, one of those programs -- Income-Based Repayment -- goes into effect today. The other one -- Public Service Loan Forgiveness -- is already up and running but may not live up to its full potential unless changes are made to the regulations governing it.

Under the loan forgiveness program, which Congress included in the College Cost Reduction and Access Act, the federal government will forgive the remaining debt of Direct Student Loan borrowers who have made 120 payments on their loans while working in a public service occupation. Borrowers with loans through the Federal Family Education Loan (FFEL) program can take advantage of this benefit by consolidating their debt into Direct Lending.

Lawmakers created the program in reaction to reports that student loan borrowers were increasingly shying away from pursuing public-service careers, such as teaching and social work, because of their heavy debt loads. By providing loan forgiveness, the bill's authors hoped to provide incentives to college graduates to enter these fields and reward them for their service.

Sounds pretty straightforward, right? Unfortunately, the program is not operating in the way lawmakers envisioned. That's because the U.S. Department of Education, under its previous leadership, decided to keep people in the dark about whether their chosen jobs qualify them for the benefit. Under regulations the Department issued in October, student loan borrowers will not know whether they qualify for the loan forgiveness until after they have made all 120 required payments.

Today our younger neighbors to the north will be celebrating their nation's birthday with parades and fireworks and maple-leaf flags. This year, kids in Ontario have something else to celebrate: the province is embarking on an ambitious strategy to expand early education access and better align child care, pre-k and elementary programs.

With Our Best Future in Mind, a new report commissioned by Ontario Premier Dalton McGuinty and written by Early Learning Advisor Dr. Charles Pascal, maps out a major reorganization and expansion of early education services in the province. The report calls for expansion of full-day junior kindergarten (pre-k) and senior kindergarten classes (most are currently half-day programs). It also calls for Ontario to integrate day care for children up to age 4 , junior and senior kindergarten, and primary education from grades 1 through 6 in order to create a "continuum of services for children from birth to age 12." It encourages early educators to develop a "common programming framework for all of Ontario's early childhood settings," so that children experience similar curriculum and quality standards regardless of where they are served. And it recommends expanded parental leave, quality child care, support programs for the youngest children, and optional extended day programs for school-age children. Most of these programs could go into effect as soon as 2010, but with a longer timeline for expanding parental leave: the move would require significant changes in legislation, which Pascal expects by 2020.

National Journal, one of the most important sources of policy and politics journalism for D.C. insiders, just launched a new education blog featuring dozens of education policy experts, D.C. education policy insiders, and even a few elected officials(!). Good stuff. National Journal has long offered really excellent--if unfortunately difficult for most ordinary folks to access--coverage of education policy issues and the political debate around them in Washington.

Just one thing's missing--none of the blog's current, long list of contributors focuses on early childhood education. Only Checker Finn has written extensively on the subject. Not surprisingly, the contributors are primarily K-12 experts, but the blog also includes some very strong higher education voices--including ACE's Terry Hartle and NAF's own MaryEllen McGuire and Michael Dannenberg. Not so for early childhood. Considering that the Obama administration has proposed significant new early education initiatives, this seems like a major oversight.

Some big changes are coming to the federal student aid programs tomorrow that will save students money and make it easier for struggling borrowers to repay their government-backed student loan debt.

Most of these changes are the result of three pieces of legislation that have been enacted over the last several years: the Deficit Reduction Act of 2005, the College Cost Reduction and Access Act of 2007, and the American Recovery and Reinvestment Act of 2009. All contain provisions that go into effect on July 1. These include:

• A $619 increase in the maximum Pell Grant, to $5,350 for the 2009-10 academic year.

• A 0.4 percentage point reduction in the fixed interest rate charged on new federally subsidized Stafford loans to 5.6 percent.

• A one-half percentage point decrease in the origination fees that borrowers must pay on their federal student loans to 1.5 percent of total amount borrowed.

Meanwhile, borrowers with variable-rate Stafford Loans originated before July 1, 2006 will see their rates drop to 2.48 percent on Wednesday. That's two percentage points lower than the current 4.21 rate on these loans. Members of the Class of 2009 can lock in an even lower rate of 1.88 percent if they consolidate their variable rate loans during the sixth month grace period before they enter repaym

Something funny is happening in Pennsylvania. Last Friday, Pennsylvania Governor Ed Rendell submitted the state's State Fiscal Stabilization Fund (SFSF) application to the U.S. Department of Education. Although the application allocates funds to K-12 education, community colleges, a college of technology, and the state university system, it purposely leaves out the state's four "state-related universities."  These four institutions - Pennsylvania State University, University of Pittsburgh, Temple University, and Lincoln University - expected to receive more than $41.9 million under the state's original SFSF application.

Words are good. Conversation is better. That's the message of a study released today in the journal Pediatrics that links young children's language skills to the amount of time that adults engage them in back-and-forth exchanges.

Past research, particularly the acclaimed Hart & Risley study, has shown that children's cognitive abilities are strongest among those whose parents use many words in speaking to them. That study emphasized the importance of exposing children not only to directions or comments about their behavior ("drink your milk") but also to new vocabulary words and descriptions of the world around them ("did you see that hummingbird?"). Today's study builds on those findings, showing what many child development experts have stressed for years -- that some of the strongest learning moments happen in interactions between caregivers and young children.

While vocabulary is important, "we find that the effect of the conversation is six times as great as the words," said Frederick J. Zimmerman, the study's lead author and associate professor in the school of public health at the University of California at Los Angeles.

If you read an article about an audit of Georgia's pre-k program in the Atlanta Journal Constitution over the weekend, you probably thought you were reading bad news. According to the article, a recent state audit found that "the state has spent more than $216 million on a program to help low-income children get kindergarten-ready, without any concrete proof it's working." But the news is not as bad as it may sound.

The program in question is not the Georgia pre-k program, Bright from the Start, but a part of that program, the Resource Coordination (RC) Program, which provides grants to pre-k providers to provide enhanced services such as home visits and parent counseling. Pre-k directors are already responsible for the provision of these services, but the grant helps 227 programs across the state employ 484 dedicated resource coordinators to enhance these services in communities with greater need. Granted, the AJC article pointed out this distinction but did not mention that the $18.5 million spent on the RC program represents only 5.7 percent of the state's total pre-k expenditures.