Johns Hopkins Gazette: October 30, 1995

Student Aid Rules Get Some Relief

Steve Libowitz

     It may seem like rearranging the chairs on the Titanic, but
to university financial aid administrators, the Department of
Education's recently announced regulatory relief program is at
least some sign that their institutional voices are being heard
in Washington. 

     And that's something to be grateful for at a time when
Congress is poised to slash the federally funded student loan

     Last week, the DOE announced that 100 colleges and
universities, including Hopkins, have been selected for a
five-year project to reduce federal student loan regulations.
Their goal is to try to relieve regulations which were initially
enacted to address student loan default issues. The schools
selected for the experimental program were chosen from among
those having a proven track record of delivering federal student
financial assistance without risk to taxpayers. 

     "There's no doubt we're getting closer to a train wreck in
Congress," Student Financial Services director Ellen Frishberg
says about the impending congressional cuts to the student loan
program, "but the Department of Education is there for us in ways
we haven't seen before." 

     The Clinton administration is touting the program as another
example of its efforts to reinvent the federal government by
cutting more federal red tape. 

     Whether the program is an institutional reward or a feather
in the federal government's cap, the action is most welcome in an
otherwise hostile financial aid environment.

     "We're pleased to have been chosen," says dean of enrollment
management Robert Massa. "This is recognition of the superb
record that our graduates have in repaying their loans. And as a
result, regulatory relief will allow us to provide better service
to currently enrolled students."

     At Hopkins, about 50 percent of all undergraduates--
approximately 2,100 students--receive some form of financial
assistance, including loans, grants and campus jobs. While
Frishberg is understandably distressed about the consequences
attending any reduction in federal financial aid support, she is
buoyed by the government's recognition of the full range of their

     What's happened over time, she says, is that financial aid
has grown as a percentage of the federal budget, and there has
been an increase in for-profit schools. Along with the growth of
these schools, loan default rates have increased, which has
resulted in Congress passing a lot of new laws and the Department
of Education writing a lot of new regulations, she says. 

     "So we started with a book of regulations with 70 pages to a
500-page document," Frishberg says, many of which didn't apply to
Hopkins students or  students at our peer institutions.

     "The DOE says they can't separate schools out, so the
regulations were dumped on all of us, in effect saying if you
want our money, you have to play by our rules. Some of them made
no sense to our student population," Frishberg says.        
"We've been grousing for years about all the rules that had to be
followed, regarding the dispensing of financial aid," Frishberg

     Last April, Frishberg joined a consortium with 29 of her
colleagues to put together a proposal that listed 23 items they
wanted deleted from the rules. The proposal included items that
made sense for schools, such as Hopkins.

     "They pulled six of the 23," she says and smiles. "It's some
regulatory relief."                

     All six exempted regulations, Frishberg says, have existed
to try to protect the government against loan defaults, which are
less than 2 percent at Hopkins. Still, she says, her office will
continue to send materials to students and parents explaining the
provisos of the student loan program to reinforce the idea that
these are loans that the students are obliged to repay.

     The regulatory relief program--which went into effect July 1
even though the schools were notified just last week--exempts the
university from having to conduct in-person entrance interviews
for every student when they first get their loan. We now just
have to target those students where there might be a risk for
default," Frishberg says.

     Students will no longer have to endure an exit counseling
session upon graduation, during which they have to sign a form
attesting to their future plans and intended whereabouts. 

     The school will no longer have to hold on to freshman funds
for 30 days, a common practice based on statistics saying
students struck out in the first 30 days.    

     "But our students don't," Frishberg says. "In the last two
years, we have not had a single freshman student drop out with a
student loan," she says. 

     Students graduating in December, or in their ninth semester,
if they needed an extra term to graduate, were only allowed to
take half the maximum loan amount--$2,750 rather than $5,500 per
year. The government felt this halving of the loan lessened the
students' debt burden, but Frishberg believes it just adds
unnecessarily to their stress at a time when they most likely
need the money the most.

     The university is no longer required to include the 4
percent loan fee in its computation of everyone's cost to attend
Hopkins. If the student did not borrow any money, the 4 percent
fee had to be backed out of their bill, which created a lot of
tedious, unnecessary paperwork, Frishberg says.

     Finally, the experiment eliminates what Frishberg considers
a rather arcane rule that required the student to sign a waiver
authorizing the university to pay allowable student fees beyond
tuition each time one of those bills had to be paid.

     Frishberg believes the DOE selected the six regulations from
the original 23-item proposal because they thought they could
manage them the best and could most effectively evaluate--through
annual institutional reports to the DOE--whether or not the
relief actually is doing no harm to the default rate, Frishberg

     These measures in and of themselves will not resolve the
bigger picture regarding student loans. The budget is still
lashed to the chopping block with no sign of a heroic rescue. But
Frishberg remains optimistic.

     "This program gives us a lot more administrative
flexibility," she says. Regarding the reduction of federal
funding, Frishberg and Massa agree that the university will
remain committed to helping students afford Hopkins, and they
will work to preserve aid programs.

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