Higher Education & Tax Policy


Situation

Nonprofit and state agency student loan organizations operate as student loan servicers, alternative student loan originators, and the go-to sources in their states for college planning. These entities have the statutory authority in the Internal Revenue Code to originate and refinance certain student loans utilizing tax-exempt bond financing. The tax-exempt nature of these loans provide lower costs and lower interest rates, making them an attractive option for qualifying borrowers.

However, a narrow interpretation by the Internal Revenue Service restricted these entities from refinancing student loans issued by another lender. As such, borrowers would be denied a cost-effective alternative to refinancing and/or consolidating their student loans.

A national trade association representing the nonprofit and state agency student loan organizations sought to clarify its members’ ability to refinance higher education loans regardless of the original lender.


Strategy & Implementation

Working closely with the trade association, Prime Policy Group developed a comprehensive strategic plan to accomplish the association’s goal. Recognizing a solution could be delivered either through administrative guidance or statutory clarification, Prime’s strategic plan incorporated education and advocacy campaigns focused on the Treasury Department and U.S. Congress. The dual-track approach provided the best opportunity for success, and was synchronized to deliver maximum impact.

To begin, Prime identified and initiated a series of discussions for the client with the appropriate decision maker at Treasury. The aim was to convince Treasury to issue administrative guidance addressing the refinancing issue. During initial deliberations, Treasury expressed an appreciation for the validity of the request but offered skepticism about its ability to render a timely clarifying decision. Due in large measure to the substantial number of priority cases already under review by the Department, Treasury could not commit to taking action.

Anticipating Treasury’s reluctance, Prime’s strategy called for a coordinated campaign to engender support from Congress for Treasury action. Applying the constituent relationships maintained by the association’s members, a substantial number of letters to Treasury encouraging administrative action were sent by Members of Congress and Senators. Pressure from Congress highlighted the issue’s widespread bipartisan support, and enabled Treasury to prioritize its review of the case.

Prime’s comprehensive strategy also incorporated a legislative component that would attempt to make the needed clarification through a statutory change to the tax code. Concurrent with the Congressional letter campaign, Prime and the client secured a bipartisan, bicameral group of legislators – primarily serving on the House and Senate tax writing committees – to introduce legislation. The efforts to draft legislative language caught the attention of Treasury officials, further emphasizing Congressional interest and intent.


Results

The twelve month advocacy campaign ended in success for the client. The Treasury Department ultimately issued a clarifying interpretation of the statute enabling student loan organizations the ability to refinance nearly all higher education loans.

By adhering to Prime’s strategic plan, Prime and the client were able to execute successfully a complex, coordinated campaign to influence Treasury and Congress, achieving a major success for the association and its members.