February 7, 2005

• Update — TEXAS Grant Program, FY 2006-2007 Appropriations
• State Legislative Update
• Congressional Update
• TG Sunset Advisory Commission Review Update

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Update — TEXAS Grant Program, FY 2006-2007 Appropriations

The initial FY 2006-2007 appropriations bill draft developed by the Legislative Budget Board includes a provision that proposes to decrease appropriations for the TEXAS Grant program from the current biennium's $326 million to $194.5 ($121 million in 2006 and $73.5 million for 2007). Proposed appropriations for the B-On Time Programs are $29 million in 2006 and $129.6 in 2007. This is an increase for this program because the $55 million for the current biennium is generated through refinancing of Coordinating Board student loan bonds. In speaking with legislative staff, the general opinion is that this proposed reduction and shifting of appropriations is the initial step toward a proposed phasing out the TEXAS Grant program by 2011.

Proposed appropriations for the TEG program total $127.8 million, down from $141.4 million for the current biennium.

Proposed appropriations for the College Work-Study program total $9.4 million, up from $8.8 million for the current biennium.

Proposed appropriations for the TEXAS Grant II program total $8.8 million, down from $9.8 million for the current biennium.

Proposed appropriations for the Teach for Texas program total $9 million, down from $10 million for the current biennium.

Proposed appropriations for the Early High School Graduation program total $8.6 million, up from $4.6 million for the current biennium.

Proposed total appropriations for student financial aid for the 2006-2007 biennium equals $509.5 million, down from $512 million for the current biennium.

The higher education part of the appropriations bill can be accessed at www.lbb.state.tx.us/Bill_79/1_Recommend/79-1_Art03-b_0105.pdf.

Student financial aid appropriations begin on page III-45.

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State Legislative Update

The 79th Regular Session of the Texas Legislature convened on January 11, 2005. The Session will last for 140 days.

The following higher education/student financial aid related bills have been pre-filed for consideration during the Session.

Full background and details of each bill can be accessed at Texas Legislature Online (www.capitol.state.tx.us).

HB 19 — Relating to tuition and fee rebates for timely completion of degree programs offered by general academic teaching institutions.

HB 20 — Relating to a pilot program to provide reduced undergraduate tuition during a summer term or session at Texas A&M University.

HB 37 — Relating to automatic admission of undergraduate students to a general academic teaching institution that is a component institution of a university system.

This bill proposes to allow students admitted under the state's "Top 10 percent" law to an institution that is a part of the University of Texas System, Texas A&M University System, Texas State University System, Texas Tech University System, University of Houston System, and University of North Texas System to be enrolled by the system at any component institution within that system.

HB 40 — Relating to tuition assistance granted to certain members of state military forces attending public or private institutions of higher education.

HB 64 — Relating to the automatic admission to public institutions of higher education of certain undergraduate transfer students.

This bill proposes to require public general academic institutions to automatically admit graduates of the state's public community colleges who receive a degree with a 3.0 GPA.

HB 133 — Relating to the award of academic credit to a student at an institution of higher education for the completion of certain military training.

This bill proposes to allow certain public institutions of higher education to award credit toward completion of a degree program for certain military training that satisfies the institution's requirements for a course.

HB 328 — relating to promoting the importance of higher education in public schools.

This bill proposes to require each school district and charter school to designate one week during the year "Education. Go Get It Week", during which each student would receive information concerning higher education opportunities and benefits, student financial aid, academic requirements, automatic admission criteria, etc. Also, each venue would be required to have at least one speaker to present on the importance of obtaining a postsecondary education.

HB 397 — relating to providing for a student who qualifies for automatic admission to an institution of higher education to maintain that status for transferring between institutions in certain circumstances.

This bill proposes to allow a student who was granted automatic admission to an institution under the state's "top 10 percent law" to maintain that status if he/she transfers to another institution and has maintained at least a 3.25 GPA while satisfactorily progressing through a "core curriculum".

HB 503 — relating to tuition and fee exemptions for certain military personnel and children of those personnel.

This bill proposes to grant tuition and fee exemptions to all Texas residents who are honorably discharged veterans extending from the Spanish Civil war to any future "national emergency".

HB 609 — relating to tuition rebate incentives for persons who complete certain degree and certificate programs without excessive credit hours.

This bill proposes to allow tuition rebates to graduates of public community colleges who graduate with no more than three semester hours in excess of the sixty hours need for a degree.

HB 656 — relating to the eligibility of a high school graduate for automatic admission to an institution of higher education.

This bill proposes to replace the current "top 10 percent automatic admission law" with a requirement that begins in 2008, automatic admission to a university will be contingent on a student completing the recommended or distinguished curriculum and have graduated in the top 10 percent of his/her high school class if graduating before 2009, and in the top 5 percent of his/her class in graduating in 2009 and beyond. The bill allows for exemptions for students who graduate from high schools that do not offer all of the recommended curriculum courses.

SB 30 — Relating to tuition and fee exemptions for students contracting to graduate in a timely manner from public institutions of higher education.

This bill proposes to allow a student to enter into a contract with the institution to receive an exemption for payment of tuition and fees in return for the student graduating within the prescribed time for the degree and maintaining a 15 credit hour per semester course load.

SB 31 — Relating to requiring students receiving certain financial aid at institutions of higher education to meet timely graduation and academic progress requirements.

This bills proposes to substitute "30 hours" for the" 75 percent completion" satisfactory academic progress requirement in the TEXAS Grant and Tuition Equalization Grant programs after the freshman year, and apply the same requirements as those for the Texas B-On Time loan program.

SB 32 — Relating to certain special tuition rates at institutions of higher education.

This bill proposes to allow institutions to charge lower tuition rates for summer sessions.

SB 33 — relating to graduate stipends awarded as part of the Texas B-On Time loan program.

This bill proposes to allow graduate students who received B-On Time loans as undergraduates to qualify for $2,500 graduate stipends.

SB 34 — Relating to the tuition rebate program for certain undergraduates at certain public institutions of higher education.

This bill proposes to allow a tuition rebate for undergraduates who graduate within the prescribed time for their degree as required for a Texas B-On Time loan.

SB 71 — Relating to the prohibition of certain disclosures of a consumer's financial information.

This bill is the same as SB 76, except it does not include the consumer "opt-in" provisions.

SB 76 — Relating to a consumer's option to prevent the disclosure of the consumer's financial information by a financial institution and providing a civil penalty.

This bill proposes to prohibit financial institutions from sharing consumers non public financial information for marketing purposes with another party unless the consumer is first provided a written privacy notice stating that the financial institution may not disclose the information unless the consumer opts-in (agrees). Under the bill, financial institutions may share the information with affiliates, but the affiliates may not, in turn, share the information without going through the "opt-in" process.

SB 79 — Relating to tuition exemptions granted by public institutions of higher education to children of certain classroom teachers.

This bill proposes to provide tuition exemptions to children of school teachers who are certified by the National Board of Professional Teaching Standards and have taught in a critical teaching shortage field shortage area for 10 years.

SB 80 — Relating to the percentage of certain tuition set aside to fund financial assistance for resident undergraduate and graduate students at public institutions of higher education.

This bill proposes to increase the percentage of the set aside from public university tuition charged above $46 per credit hour from 20 percent to 40 percent for resident undergraduate student aid, and from 15 percent to 20 percent for resident graduate student aid.

SB 302 — relating to reports of strategies for increasing minority participation in higher education.

This bill proposes to require each institution of higher education to report annually to the Coordinating Board its strategies for increasing the number of undergraduate and graduate students from racial and ethnic groups that are underrepresented in the institution's student body. The bill states that "underrepresented" is defined as members of a racial or ethnic group within a student body that is less than that of Texas' population.

SB 320 — relating to admission to certain public institutions of higher education.

HB 750 — This bill proposes to amend the state's statutory policy of granting automatic admission to public universities to graduates in the top 10 percent of high school graduating classes by including the top 10 percent factor with the other 18 criteria to be considered for admission.

SB 333 — relating to the eligibility of a high school graduate for automatic admission to an institution of higher education.

This bill requires a student seeking admission to an institution under the state's "top 10 percent automatic admission law" to have graduated with the recommended high school curriculum. The bill allows exemption from this new requirement for graduates from high schools that do not offer all of the recommended courses as long as the graduate took all of those offered.

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Congressional Update

The First Session of the 109th Congress convened on January 4, 2005.

Congressional legislation can be accessed at thomas.loc.gov.

School as Lender Reform Act
This bill proposes to amend and clarify the school as lender program to require revenues generated to a participating institution are to be used to supplement need based grants already in existence; that contracts between schools and lenders by awarded through competitive bidding; and that participating schools offer lower amounts loan aid to their student aid recipients.

Direct Loan Reward Act
This bill originally filed last year during the 108th Congress is a bipartisan bill that proposes to provide financial incentives to institutions if they switch participation from the FFELP to the FDLP. Any savings to the federal government resulting from the switch would be split 50/50 between the school and the federal government for use in other student financial aid. The Congressional Budget Office has estimated the bill could generate a federal savings of up to $12 billion over 10 years. The intent of the bill is that this savings would be used to double the appropriation for the Pell Grant program by almost 100 percent over this period.

On a related matter, the Administration is proposing in its FY2006 budget submission to congress that the Pell Grant program be sufficiently funded over the next five years to achieve a $100 annual increase in the annual maximum grant in order to have a maximum grant of $4,550 by 2010 and to retire the $4.3 billion shortfall in the program. Some of the increased appropriations ($34 billion over ten years) would come from reforms in the student loan program that would change the formulas under which subsidies and fees are paid to lenders and guaranty agencies that propose to more accurately reflect the actual costs to lenders and guaranty agencies of originating and servicing student loans and administering the loan program, and from a proposal to repeal, or decrease, interest rate benefits for out-of-school borrowers.

For the student loan programs, the Administration's submission proposes to:

• Increase the maximum annual loan amounts for first and second year borrowers to $3,500 and $4,500;
• Extend the Direct Loan program income based repayment plan applicable to the FFELP;
• Make the variable interest rate permanent;
• Loser the lender guarantee rate from 98 percent to 95 percent and the rate for guaranty agencies from 95 percent to 92 percent;
• Establish a .25 percent annual holder fee based on non-consolidation outstanding loan balance;
• Require guaranty agencies to collect the optional 1 percent guaranty fee on loans guaranteed after July 1, 2006;
• Lower guaranty collections retention from 23 percent to 16 percent;
• Extend the variable interest rate to consolidation loans;
• Allow multiple loan consolidation with a 1 percent borrower transaction fee;
• Increase the .5 percent lender consolidation fee to 1 percent.

These changes are proposed to save $19 billion over ten years.

The Administration's proposed FY 2006 budget proposes to hold the growth of discretionary spending to 1 percent below the rate of inflation (this includes all student financial aid programs), makes the 2001 and 2003 tax reductions permanent, and cuts the annual deficit by 50 percent (from $521 million) over five years.

The Administration is proposing to establish a new program ($33 million) to offer additional Pell Grants to high school graduates who are in a State Scholars program; a new program ($250 million to provide grants through the president's High Growth Job Training Initiative to community colleges; and, an increase of $12 million to encourage students to enroll in a State Scholars program.

The Administration's budget submission proposes to abolish the Perkins Loan, GEAR UP, Leveraging Educational Partnerships, and TRIO Upward Bound and Talent Search programs and to hold the other Title IV student aid programs, other than Title III and Title V funding, to current year levels.

The Administrations FY 2006 appropriations submission can be accessed at www.omb.gov.

HR 507 — College Access and Opportunity Act of 2005
This bill is the initial House Republicans' Higher Education Reauthorization bill to be introduced during the 109th Congress. It is, essentially, a refilled HR 4283 from the 108th Congress, which had the same title (with the exception of the year).

Among the bill's provisions, HR 507 proposes to revise the definition of higher education institution that brings proprietary schools under the definition, repeal provisions that apply to proprietary schools, move all student loans to a variable interest rate, reduce student loan origination fees, increase student loan annual limits, revise the campus-based allocation formula, reinstate student loan provisions for low default schools to allow quicker disbursement of loan funds to students, increase Pell Grant funding, strengthen funding for Title III and Title V institutions, increase accountability, transparency, and access to cost and consumer information, and expand teacher loan forgiveness programs.

HR 508 — The FED UP Higher Education Technical Amendments Act
This bill was filed as HR 12 during the 108th Congress and HR 4866 during the 107th Congress. Among the bill's provisions, it proposes to extend the provisions concerning exemptions from the 30 day delayed disbursements of student loan funds to first time borrowers and multiple disbursements of loan funds for low default schools; clarifies return of Title IV fund regulations; allow student loan forbearances to be requested in writing.

HR 509 — International Studies in Higher Education Act This bill is HR 3077 filed during the 108th Congress. It proposes to reauthorize Title VI of the HEA and establishes a program to support and promote international studies for students who pursue careers in international relations. HR 3077 was passed by the House last year.

HR 510 — Graduate Opportunities in Higher Education Act This bill was filed during the 108th Congress as HR 3076 and was passed by the House. The bill proposes to reauthorize Title VII of the HEA and adds a new provision that that promotes graduate teacher education programs in K-12 shortage areas.

HR 511 — Pell Grant Plus Act This bill was introduced last year as HR 3894. The bill proposes to award an additional Pell Grant of $1,000 for two years to Pell recipients who graduate from high school with a postsecondary education preparatory diploma.

S. 9 — Lifetime of Education Opportunities Act of 2005
This is one of the Senate Republican HEA reauthorization bills. It is, for the most part, legislation that expresses "the sense of the Senate" concerning a host of K-16 education issues. Included among these are that during the reauthorization process, the Senate should address:

• "the rising costs of higher education";
• "promote student academic preparation";
• "encourage efforts to increase the availability of financial aid information";
• "simplify the student aid application process";
• "improve the level of accountability in the federal student aid programs";
• "address the Pell Grant shortfall";
• "reduce the time to graduation";
• "support stronger partnerships between businesses and higher education".

The bill includes "sense of the Senate" clauses concerning minority serving institutions.

S. 15 — Quality Education for All Act This is another of the Senate Republican HEA reauthorization bills. Among its higher education-related provisions, this bill proposes to reauthorize and increase the authorized appropriations for the TRIO and GEAR UP programs; hold certain Pell grant recipients harmless when the annual tax table updates are made; a "sense of the Senate " provision that states the maximum annual Pell Grant for 2006-2007 should be $5,100; to exempt payment of tuition and fees and increase student loan forgiveness (to be paid for through diversion of FFELP special allowance payments authorized under Sec. 438(b ) for students planning to teach mathematics, science, and special education; expand the income tax deduction for higher education expenses.

S.Res. 8 — Expressing the sense of the Senate regarding the maximum Federal Pell Grant This senate resolution states the sense of the senate is that the maximum Pell Grant for 2005-2006 should be $4,500 and for 2010-2011, $9,000.

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TG Sunset Advisory Commission Review Update

The final report by the Texas Sunset Advisory Commission was adopted by the Commission on December 16th and can be accessed at www.sunset.state.tx.us/79.htm under "Decisions".

TG is fully supportive of the findings and recommendations included in the report will be working with the Sunset staff and eventual Senate and House sponsors of the legislation to continue TG for 12 years.

We also greatly appreciate the support exhibited by our customers during this process.

TG's Sunset legislation is one of 29 Sunset bills, which includes those to reauthorize the Texas Education Agency, Lottery Commission, Cosmetology Commission, Board of Medical Examiners, Alcoholic Beverage Commission, Public Utility Commission, Public Utility Counsel, Workers' Compensation Fund. Passage of the bills must be attained by the legislature before the end of the 140 day Regular Session.

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For more information, contact:

TG Congressional and Legislative Relations
(512) 219-4503
P.O. Box 83100
Round Rock, TX 78683-3100