JUNE 2004

Report from the Legislative Relations Chair
Clark Aldridge

The House Education & the Workforce Committee chaired by Congressman John Boehner, released its long awaited reauthorization bill “The College Access & Opportunity Act” on May 5, 2004. The Senate is expected to release its bill later this month. However, most observers believe that reauthorization in 2004 is unlikely. More likely, is that Congress will extend the current law for one year in September.

Factors influencing reauthorization are limited legislative time remaining on the Congressional calendar, election year politics, and budget issues.

The House bill executive summary list areas that the Committee indicates will expand access to higher education. Those areas are:

  • Strengthening Pell Grants, student aid, student access, and serving institutions.
  • Reducing loan cost, fees and red tape for students and graduates.
  • Removing barriers for non-traditional students.
  • Empowering consumers through “sunshine” and transparency in college cost and accreditation.

Strengthening Pell Grants, Student Aid, Student Access & Minority Serving Institutions

Major components of this bill impacting higher education provides for:

  • Additional Pell Grant aid for high-achieving first and second year students. This additional grant of up to $1,000 was outlined in the President’s earlier budget message.

  • Provide for year around Pell Grants for students who are accelerating their studies.

  • Remove the Pell Grant tuition sensitivity provisions contained in the current legislation.

  • Simplify the financial aid application process by expanding the “simplified needs test” for those families that qualify for free lunch, food stamps or other means-tested programs.

  • Permits dependent students to earn additional funds without negatively impacting illegibility to receive federal funds.

  • Phase out the unfair advantages in campus-based student aid. This would be accomplished by phasing out the current campus-based aid formula and the fair share concept that has typically favored northeastern universities.

  • Strengthen federal college access programs (TRIO and GEAR UP). The bill would increase the minimum grant levels for TRIO and provide more flexibility for institutions to serve different populations at multiple campuses. Also, assures that the unique needs of working adults are served. The Act also clarifies that the GEAR UP grants are provided for six years.
    Strengthen minority serving institutions to include HBCUs, HBGIs , Tribal Controlled Colleges and Hispanic Serving Institutions. The bill would make it easier for these institutions to use technology to improve education by providing flexibility in the use of federal funds to improved internet and other distance learning facilities. They may also, use grant funds to build endowments.

Reducing Loan Cost, Fees & Red Tape for Students and Graduates

  • Over a period of years, reduce loan origination fees to 1%.

  • Increase annual loan limits for first and second year students from $2,625 to $3,500 for first year student and from $3,500 to $4,500 for second year students. Graduate loan limits would increase to $12,000 per year. The overall life-time loan limits would not be changed. Perkins loan limits will be increased as well.

  • The bill would ensure that the variable rate structure would remain in effect beyond the 2006 year when rates are scheduled to be pegged at a fixed 6.8%.

  • Consolidation loans interest rates would change from the current fixed rate to a variable rate with an 8.25% cap.

  • The “single holder rule” would be eliminated, allowing students to shop for the best deals on Consolidation loans.

  • Protect borrowers’ credit history by requiring lenders to report to all national credit bureaus.

  • Improve repayment options by allowing borrowers to make interest only payments.

  • Require that consolidation borrowers be provided with comprehensive information about the total interest they will be repaying, the repayment terms they are agreeing to, the benefits they will be eligible for, and other important consumer disclosures.

  • Reform the current law that allows some lenders to receive higher than market-value subsidies.

  • Reform federal income guarantees for lenders by specifying that excess interest earnings must be returned to the government.

  • Reinstitute the lapsed provisions allowing schools with low default rates to be exempt from the 30 day hold rule and the one term multiple disbursement rule.

  • Preserve the balance between the FFELP and Direct Loan programs.

Removing Barriers for Non-Traditional Students

  • Repeal the “90-10” rule that requires that proprietary schools demonstrate that 10% of their revenue is derived from sources other that federal student aid.

  • Allows all eligible institutions to compete for available funding as long as they are two-year degree-granting institutions.

  • Repeal the “50 percent rule” as it pertains to instruction by telecommunications.

  • Ensure colleges and universities are able to enroll home-school students without losing eligibility for participation in federal student aid programs and clarify that home-schooled students are eligible to enroll in a college or university.

Empowering Consumers (Parents and Students) Through "Sunshine" & Transparency in College Costs & Accreditation

  • The bill would require the U.S. Department of Education to use certain data provided to the Department to create a “College Consumer Profile” and make this information available to the public.

  • Publicly identify institutions that repeatedly engage in excessive tuition hikes, giving consumers an index they can use to track tuition increases and make more informed decisions in their college spending. Institutions that increase tuition more than twice the rate of inflation over a three year interval will be identified.

  • Make accrediting agencies more accountable by making information about their accreditation process more transparent by giving students, parents and the public direct access to information. The bill ensures that credits are not unfairly and arbitrarily denied based on the accreditor of a college or university where credits being transferred were earned, so long as the U.S. Secretary of Education recognizes the accreditor.

Additional Features

  • The bill would allow greater opportunities for cancellation of Perkins loans for military personnel, placing members of the Armed Services in the same category for loan cancellation as teachers, full-time law enforcement personnel and nurses. The bill would also treat members of the military as independent students.

  • Clarify federal student aid rules related to drug offenses. The bill states that the law applies only to students who are currently enrolled, receiving federal Title IV Aid, and convicted of a drug related offense.

  • Repeal nine current programs previously authorized under the Higher Education Act that are duplicative and/or unnecessary or have expired and are no longer needed.

  • Provide for an IRS data match to prevent Pell Grant fraud.

  • Reduce red tape for schools by making technical corrections and improvements to the current law as requested through the FED UP project.

  • Expand loan forgiveness for teachers from the current $5,000 to $17,500.

Senate Status
The Senate’s budget bill includes funding for a number of areas that are part of the House’s reauthorization bill. These items include a $5 billion reserve fund for a phase out of loan origination fees, and increased loan limits. In addition, the bill provides funding for variable interest rates for Consolidation Loans.

Senator Judd Gregg (R-NH) has indicated that he will introduce a reauthorization bill in the Senate shortly. However, many observers believe that a bill will not be acted on by the Senate this year because of the limited legislative time remaining before the election year recess, as well as issues with partisan politics.

If President Bush wins re-election this year, the work that has taken place on reauthorization this year should provide a blueprint for the bill in 2005. However, if Senator Kerry wins, a lot of the current work will be scraped.


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