Prominent Federal Student Aid Official Resigns

Posted By Marisa Sanfilippo on June 1, 2017 at 7:15 pm
Prominent Federal Student Aid Official Resigns

There’s more upheaval in federal student aid. James Runcie, the chief operating officer of the U.S. Department of Education’s Office of Federal Student Aid, has resigned.

In his resignation he said, “I cannot in good conscience continue to be accountable as chief operating officer given the risk associated with the current environment at the department.” He’s offered little explanation other than that, though others have cited disagreements with his boss, Education Secretary Betsy DeVos. Critics say Runcie resigned to avoid testifying before Congress, but he has denied this.

Higher education in general has received increased scrutiny under the Trump administration, and federal aid has been a source of constant attention. The Office of Federal Student Aid administers $150 billion in grants, loans and work-study funds that help about 13 million students finance their educations. The latest development appears to be a direct result of many of the changes implemented by the new administration.

Runcie was appointed for a five-year term by previous Education Secretary Arne Duncan in December 2015. The job generally is not considered a political position. This means Runcie would have held the position until 2020 regardless of administration changes unless he was removed from the post for cause.

Federal student aid in the proposed 2018 budget

The proposed federal budget for fiscal year 2018 was released shortly before Runcie’s resignation. The Department of Education received a reduction of more than $9 billion, or 13.5 percent, of its previously allocated budget.

The federal student loan program, part of Runcie’s purview, has several proposed changes. One much-criticized change would reduce the number of income-driven repayment plans from five to one. Existing procedures allow students to repay 10 percent of their discretionary income for 20 years followed by federal forgiveness for the remainder of the loan.

The new budget calls for new students to repay at 12.5 percent. Those who received loans for an undergraduate degree would be eligible for forgiveness after 15 years while those with loans for a graduate degree would not be eligible for 30 years.

Other changes include the elimination of the Public Service Loan Forgiveness program and the ability for lenders to charge interest on loans while students are still in school.

It is important to remember that the budget plan at this point is only a proposal. It must be approved by Congress to transition into law and impact federal funding in higher education and other areas.

Controversial secretary

Betsy recently completed her 100th day in office. She was a controversial pick for the post. With the recent budget proposal and her subsequent testimony before the House appropriations subcommittee, DeVos is again in the spotlight.

U.S. Sen. Elizabeth Warren, D-Mass., recently launched DeVos Watch on her official senate page. In a lengthy Op-Ed published by CNN, Warren explains her reasons for narrowly focusing on DeVos going forward.

Reasons include:

  • A delay in enforcing rules targeting For-Profit Colleges.
  • The hiring of Taylor Hansen and Robert Eitel, both of whom have ties to for-profit colleges, for roles with the Departmnet of Education.
  • Policy reversal that had protected students from predatory debt collectors.
  • The resignation of Runcie, which will allow DeVos to appoint a new head of the office of federal student aid.

Previously, DeVos was caught in the center of the public outcry when the Data Retrieval Tool used by students applying for federal student aid was taken offline in March. At the time, bipartisan concern was expressed about the reasons behind the withdrawal of the tool which have yet to be fully answered.

Future of federal student aid debt

In addition to the proposed changes in the federal budget, there are other upcoming changes that have the power to drastically change the landscape of federal financial aid.

The contract for servicing federal student loans is up for renewal in 2019. There are currently nine loan servicers who can service federally held loans. DeVos recently withdrew previous memorandums which created this system of oversight and announced the intention to change this to a single loan servicer.

The stated purpose of these acts was to streamline the process and decrease the cost of servicing the loans. However, critics have noted it will also reduce protections for borrowers. Specifically, one of the revoked memorandums instructed the head of the FSA to take past performance of servicers into consideration when awarding future contracts.

Previously, when there was only one loan servicer, that company had an inordinate amount of power and there were numerous reports of customer service failures and possible mismanagement.

The resignation of Runcie – he has been replaced in the short term by Deputy COO Matthew Sessa – highlights the challenges the Office of Federal Student Aid has faced historically and more recently under the Trump administration. The future of many programs remains unclear.

Marisa Sanfilippo
Marisa is an award-winning marketing professional who loves to write. During the day, she wears her marketing hat in her marketing director role and at night she works as a freelance writer, ghost writing for clients and contributing to publications such as Huffington Post and Social Media Today.

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