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The Guarantor of Choice SM |
TG's Legislative Report
March 12, 2004
- Texas Student Aid Community Endorses the 2004 Coalition for Better Student Loans and Administration's Initial Higher Education Act Reauthorization Proposals
- The Coalition for Better Student Loans Reauthorization Recommendations
- The Administration's Reauthorization Recommendations
Texas Student Aid Community Endorses the 2004 Coalition for Better Student Loans and Administration's Initial Higher Education Act Reauthorization Proposals
March 12, 2004
TO: |
Members and Staff, Texas Congressional Delegation |
FROM: |
Milton G. Wright, President and CEO Linda Gonzalez-Hensgen, 2003-2004 President Ronny Barnes, 2003-2004 President |
RE: |
Texas Student Financial Aid Community Updated Position on the Reauthorization of the Federal Higher Education Act |
The Texas student financial aid community — representing virtually every college and university in Texas, the student lending community, and the state Federal Family Education Program guarantor — wishes the 34 Texas congressional offices to know that we endorse at this time the attached Higher Education Act (HEA) reauthorization recommendations already submitted to the Congress by the Coalition for Better Student Loans and initial recommendations proposed by the Administration in its FY2005 budget submission.
We do feel, however, that the Administration's proposal concerning student loans funded through the issuance of tax exempt securities, on page 365 of the Administration's submission, needs further clarification, discussion, and deliberations before action is taken. We look forward to providing information concerning this issue as it relates to providing borrower benefits to Texans as the reauthorization process unfolds.
The higher education reauthorization proposals included in the Administration's FY2005 budget submission to the Congress represent a good first step in the process of developing a better response to the needs of students through the HEA reauthorization. With respect to the student loan programs, specifically, there should be every attempt to avoid provisions that tip the scales in favor of either of the two loan programs or that cause competitive advantages within the FFELP based on structure of participating guarantors, lenders, or servicers. We look forward to the more complete list of the Administration's proposals referenced in its budget submission.
This endorsement of the Coalition proposals and the Administration proposals as a good first step is made, at this time, under the assumption that the HEA reauthorization may be completed this year. If the process is not completed this year, continues into the 109th Congress, and additional proposals are submitted, the Texas student financial aid community may update this endorsement.
In endorsing the passage of these proposals, the Texas community recognizes that there is much more to be done, in addition to these recommendations, to improve the HEA in terms of improving access to postsecondary education for underrepresented populations and strengthening the administration of the Title IV programs However, given the obvious constraints imposed by a short congressional session, a general election cycle, and budget considerations, the Texas student financial aid community believes that the recommendations included in these two submissions target those issues which are achievable this year, and represent a good start that will, in part, improve and strengthen the Title IV programs.
As the process unfolds, new recommendations are offered, and /or circumstances change, the Texas student financial aid community may take a similar position with respect to those that benefit Texas students and families, and will not hesitate to inform the Texas offices. For the time being, with all things considered, the Texas student financial aid community encourages the Texas Congressional Delegation to support the Coalition's and Administration's higher education reauthorization proposals.
Attachments: The Coalition for Better Student Loans Reauthorization Proposals
The Administration's Reauthorization Proposals
The Coalition for Better Student Loans Reauthorization Recommendations
A unique coalition of financial aid administrators, parents, loan providers and organizations representing more than 2,000 colleges and universities today proposed a five-part plan to increase access to higher education by bolstering the federal student loan program.
The group, The Coalition for Better Student Loans, has sent its proposal to Congress, which is beginning debate on the reauthorization of the Higher Education Act. The recommendations include increasing Stafford loan limits, providing relief from origination fees, offering more flexible repayment options, maintaining a viable loan consolidation program and extending loan forgiveness to borrowers in certain occupations.
"Getting a college degree is today's ticket to the American dream," said Jim Boyle, president, College Parents of America. "Our coalition has banded together to support a single common goal — to ensure that every student who dreams of pursuing a college degree has the financial tools they need, regardless of their personal financial circumstances."
"We all recognize that the ideal option would be to increase grant aid to all students who have a financial need," said Dallas Martin, president, National Association of Student Financial Aid Administrators. "However, limited federal budget resources will mean a continued need for federal student loans. Fortunately, we have a vibrant and successful program."
"Today we recommend some important steps to bolster that program."
The Coalition's Recommendations
Increase Stafford loan limits
Borrowing limits on federal student loans have not changed since 1992 and freshman loan limits have essentially been unchanged since 1972. The result of these outdated limits is considerable evidence that students are increasingly forced to take other measures to fund their education, including working longer hours and taking out other types of loans that offer less favorable terms.
The Coalition proposes increasing loan limits in each of the first two years of postsecondary education and creating "flexible borrowing accounts" for the remainder of undergraduate study.
The Coalition also recommends increasing loan limits for graduate and professional students. To minimize unnecessary borrowing, the Coalition proposes giving schools flexibility to set lower loan limits for entire groups of students.
Provide origination fee relief
The origination fee was established as a temporary measure in 1981, yet 20 years later it is still being charged to students.
The Coalition proposes providing relief for all students from this education tax, but at a minimum the group recommends targeting such relief to subsidized Stafford loan borrowers.
Provide more flexible repayment options
Student loan borrowers generally have 10 years to repay their student loans under federal law. The current repayment options can result in unmanageable monthly payments for some borrowers first entering the workforce.
The Coalition proposes three options for these borrowers:
- Targeted assistance to these borrowers through an interest-only plan (borrowers pay only the amount of accruing interest for two years);
- A partial interest plan (borrowers with high debt and modest income would pay only 50 percent of the interest for two years); and
- Expansion of the current extended repayment concept.
Maintain a viable loan consolidation program
Loan consolidation was originally created by Congress to simplify the process of loan repayment for borrowers with multiple lenders and to help lower monthly payments for borrowers in difficult financial circumstances.
The Coalition supports use of consolidation loans for those original purposes. Student loan consolidation was never intended to be a refinancing mechanism. The Coalition opposes proposals to permit consolidated loans to be refinanced because it would drain crucial federal resources needed for incoming or current students.
The Coalition proposes:
- Creating a consolidation interest rate structure that tracks the Stafford loan program;
- Retaining the single holder rule;
- Closing the Perkins loan consolidation loophole to prevent circumvention of the single holder rule (Perkins Loans should continue to be included in consolidation loans. However, some consolidation firms treat the school as a separate "loan holder" to get around the single holder rule. Congress needs to clarify the existing law.); and
- Charging a fee to consolidation borrowers, if necessary, to offset the cost of student loan improvements.
Extend loan forgiveness to those working in certain highly needed occupations
Borrowers leaving school with significant debt should have some relief if they enter lower paying, high-need career fields such as teaching in low-income areas.
The Coalition proposes Congress provide $1 billion in funds for such loan forgiveness programs.
Fuller summaries of the legislative proposals and the survey are available at http://www.betterstudentloans.org.
The Coalition for Better Student Loans is a group of financial aid administrators, parents, loan providers and organizations representing more than 2,000 colleges and universities which are working together to improve the federal student loan program and increase access to higher education for more students. The group is composed of the American Council on Education (ACE), Association of American Universities (AAU), College Parents of America (CPA), Consumer Bankers Association (CBA), Education Finance Council (EFC), National Association of Independent Colleges and Universities (NAICU), National Association of State Universities and Land-Grant Colleges (NASULGC), National Association of Student Financial Aid Administrators (NASFAA), National Council of Higher Education Loan Programs (NCHELP), and Sallie Mae.
The Administration's Reauthorization Recommendations
Enhancing Opportunities for Higher Education
Pell Grants
President Bush has proposed increasing Pell Grant funding to $12.9 billion — an $856 million increase. The increase would fully fund the cost of maintaining the $4,050 maximum award for more than 5.3 million students in 2005-06 and support increased Pell Grants for State Scholars.
Student Loan Reauthorization
President Bush's 2005 budget request includes several proposals for the upcoming reauthorization of the Higher Education Act of 1965.
Specifically, the proposals would:
- Increase loan forgiveness for mathematics, science and special education teachers serving poor communities;
- Reduce interest rates for most borrowers under the current interest rate environment, by retaining the variable interest rate structure after July 1, 2006;
- Increase loan limits for first-year students from $2,625 to $3,000 (current loan limits have remained essentially unchanged since the early 1970s);
- Broaden the availability of extended repayment options;
- Phase out higher special allowance payments to lenders for loans funded with the proceeds of certain tax-exempt securities;
- Allow low-default schools more flexibility in disbursing loan funds;
- Clarify that student aid applicants who are convicted of a drug-related offense are ineligible for federal student aid only if the offense was committed while they were attending school;
- Strengthen the financial stability of the federal student loan system by requiring guaranty agencies to collect the currently optional 1-percent insurance premium on all loans guaranteed or disbursed after October 1, 2004;
- Reserve $3 billion in future years for additional student benefits;
- More support for minority institutions: President Bush's 2005 budget request includes $419 million — an $18.8 million or 4.7 percent increase — to assist higher education institutions with a large proportion of minority and disadvantaged students, including Historically Black Colleges and Universities and Historically Black Graduate Institutions. The president also has proposed $96 million — a $1.9 million increase — to maintain support for institutions that serve large percentages of Hispanic students.
TG Congressional and Legislative Relations
(512) 219-4503
P.O. Box 83100
Round Rock, TX 78683-3100
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© 2008 Texas Guaranteed Student Loan Corporation |
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