June 21, 2005

• Congressional Update

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Congressional Update

The first Session of the 109th Congress is scheduled to adjourn on September 30, 2005. The calendar for the remainder of the Session includes another week-long recess (July 4th - July 10th) and a 36 day recess (August 1st - September 5th). The only required legislation the Congress must pass by that date — if continuing resolutions are to be avoided — are the eleven FY 2006 appropriations bills. To date, the House has passed five and the Senate zero.

In addition to having to pass the appropriations bills, the remaining several weeks left in the current session will be occupied with approving presidential nominations, passing an energy bill, passing a transportation bill, passing (and considering a vote to override a veto) a stem cell research bill, and several reauthorization bills, including intelligence, defense, welfare, Head Start, agriculture, defense, and higher education.

The House Education and Workforce Committee and Senate Health, Education, Labor, and Pensions Committee are working on HEA reauthorization bills. This week both Committees will push toward producing a House reauthorization bill and Senate reauthorization bill by early July. No more committee hearings are scheduled, nor may there be any more until legislation is filed. The Senate HELP Committee is still set on producing a bipartisan bill that the entire Committee can live with which will incorporate proposals to achieve budget reconciliation savings from Title IV of the HEA.

With, or without, final passage of the HEA reauthorization, the budget reconciliation process will require changes to the HEA that will produce budgetary savings of several billions of dollars, which will, in effect, at least partially, reauthorize parts of the HEA.

The FY 2006 budget resolution calls for $2.6 trillion in spending (including $843 billion in discretionary spending), $106 billion in new tax cuts, and $35 billion in reconciliation savings. The FY 2006 appropriation ceiling, or cap, for education, health and human services, labor, and pension programs is $142.5 billion ($20.8 less than the current appropriation).

Of the targeted reconciliation savings, the resolution calls for $12.7 billion to come from programs under the jurisdiction of the House Education and Workforce Committee and $13.7 billion to come from the same programs under the jurisdiction of the Senate Health, Education, Labor, and Pensions Committee. The Committees will decide which laws to amend (including the Higher Education Act) to achieve their savings targets. Student loans will probably bear the brunt of the savings through increased risk sharing amendments to the HEA.

The House version of the Labor, Health and Human Services, and Education appropriation bill was reported from the Appropriations Committee last week and is expected to be debated by the full House late this month. The bill, while proposing to eliminate funding for 49 programs (estimated to save $2.3 billion), rejects the Administration's submission proposals to de-fund the Perkins Loan, LEAP, GEAR UP, TRIO Upward Bound and Talent Search programs. The bill proposes a $1 billion increase for FY 2006 Pell Grant funding to achieve a $4,100 maximum annual grant and earmarks $4.3 billion to permanently retire the program's accumulated shortfall.

The bill proposes to fund for FY 2006:

• SEOG — $778.7 million (no increase);
• Work-Study — $990.3 million (no increase);
• Perkins Loan — $0 ($66.1 million decrease);
• LEAP — $65.6 million (no increase);
• Title III and Title V — $394 million (an increase of $3.1 million;
• TRIO — $836,543 million (no increase);
• GEAR UP — $306.5 million (no increase);
• Student loan 458 administrative funding — $124.8 million ($5 million increase);
• Community college job training initiative — $125 million (new program).

The Committee's bill also reduces FY 2006 appropriations for the Corporation for Public Broadcasting by 25 percent, rejects the proposal to de-fund completely by earmarking $400 million for the Corporation for future years.

The bill may still undergo further changes when it is considered by the full House

and the Senate Appropriations Committee and full Senate.

The Administration's FY 2006 appropriations submission can be accessed at www.omb.gov.

The Congressional Budget Office's annual Budget Options report to the Congress identifies $31.5 billion in potential savings over ten years from the student loan programs to be gained from changes targeted at borrowers and FFELP lenders ($2 billion from repealing the 9.5 percent guaranteed yield on FFELP loans, $7.7 billion from excluding access to subsidized loans for graduate students, $2.9 billion from raising the borrower interest rate, and $18.9 billion from repealing the guaranteed interest rate floor for FFELP lenders.)

CBO Budget Options can be accessed at www.cbo.gov.

The education options begin on page 12.

Summaries of the House and senate Budget Resolutions and support documents are available at www.house.gov/budget/ and www.senate.gov/~budget/republican/.

Higher education related legislation of interest filed during the First Session of the 109th Congress. Congressional legislation can be accessed at thomas.loc.gov.

HR 507 — College Access and Opportunity Act of 2005 (Replaced by HR 609)
This bill is the initial House Republicans' Higher Education Reauthorization bill to be introduced during the 109th Congress. It is, essentially, a re-filed 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;
• reauthorize and amend the loan guaranty VFA provision by repealing inducement waiver provision;
• 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 508 has one cosponsor.

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 legislation 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 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.

HR 555 — School as Lender Reform Act
This bill proposes to:

• amend and clarify the school as lender program authorized under Section 435(d)(2) of the HEA;
• 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 of loan aid to their student aid recipients.

HR 609 — College Access and Opportunity Act of 2005
Substitute for HR 507. HR 609 differs from HR 507 with respect to the Pell Grant provision. This bill has four cosponsors.

HR 625
This legislation proposes to amend the IRS Code to prohibit the use of Pell Grant and SEOG as offsets to the Hope Scholarship Tax credit.

HR 670 — Teacher Recruitment and Retention Act of 2005
This bill proposes to make the student loan forgiveness increase $17,500 included in the last two appropriations bills permanent.

HR 1009
This bill proposes to allow student loan borrowers who have consolidated their loans to reconsolidate with their choice of lender or consolidator.

HR 1030
This legislation requires institutions to enter into agreements with for profit organizations for participation in the federal Work-Study program.

HR 1032
This bill proposes to extend the single disbursement for student loans for low default rate schools.

HR 1033
This bill proposes to eliminate the limitation of the deduction of student loan interest on income tax returns.

HR 1293 — Access and Equity in Higher Education Act
This is the re-filed HR 4102 from the 108th Congress which did not pass. It is the Coalition for Better Student Loans HEA reauthorization bill which proposes to increase annual and aggregate student loan limits, reduce loan fees, make all student loans subject to a variable interest rate, and extends the FDLP income sensitive repayment plan to the FFELP. HR 1293 has 33 cosponsors.

HR 1338 — College Loan Assistance Act
This bill proposes to allow borrowers with consolidated student loans to reconsolidate their debt. The bill also proposes to increase the annual maximum Pell Grant to $7,000.

HR 1380 — The Higher Education Affordability Act
This bill proposes to:

• allow certain student loan borrowers to deduct the full amount of their student loan interest from their taxes;
• add the amount of scholarship aid to tuition and fees for tax deduction purposes;
• increase the annual maximum amount of annual contributions to ESAs to $5,000; and
• expand the use of Hope Scholarship tax credits to books and supplies.

HR 1425/S. 754 — Student Aid Reward Act (STAR) of 2005
This legislation, originally introduced during the last Congress as the Direct Loan Reward Act (HR 4370) proposes to provide financial incentives to institutions if they switch participation from the higher cost of the two major student loan programs to the lower cost program (FFELP and 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 ten 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. HR 1425 has 33 cosponsors, the most of any HEA reauthorization-related bill. The Senate companion has three.

HR 1617
This bill proposes to allow student loan borrowers to consolidate their loan debt one time and choose a variable or fixed rate, amends Section 438 of the HEA, and repeals the single holder rule.

HR 1766/HR 2666
This legislation proposes to allow the treatment of student loan origination fees as tax deductible interest and simplify the treatment of student loan interest and allocation of loan interest, fees, and principal payments.

HR 2132 — Higher Education Relief Opportunities for Students Act of 2005 (HEROES)
This bill proposes to continue to allow the Secretary of Education to waive student loan obligations of active duty military personnel.

HR 2340/S. 117 — Loan Forgiveness for Head Start Teachers
This bill proposes to extend student loan forgiveness (Perkins, FFELP, and FDLP) to Head Start teachers who have taught in the program for five or more years.

HR 2564 — Tuition Deduction Permanency act of 2005
This legislation proposes to make the annual $4,000 student loan income tax deduction enacted in 2001 permanent.

HR 2739 — College Affordability and Accountability Act
This bill proposes to reward states that implement effective higher education cost containment plans with additional Pell Grant funds.

HR 2815 — College Access and Affordability Act
This bill proposes to expand the HOPE and Lifetime learning Credits and provide student loan forgiveness for public employees.

HR 2949 — College Opportunity Act for All Act of 2005
This legislation proposes to:

• double the maximum authorized Pell Grant and make it a year round program;
• encourage state's to control higher education costs;
• make a fixed or variable student loan interest rate an option; double the TRIO and GEAR UP authorized appropriation;
• increase funding for Title III and Title V;
• allow refinancing of consolidated student loans;
• simplify the student aid application; and
• repeal Section 438(b)(2)(B)(ii) special allowance provision.

S. 9 — Lifetime of Education Opportunities Act of 2005
This is a "sense of the senate" Republican omnibus education bill that includes HEA reauthorization provisions. 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"; and
• support stronger partnerships between businesses and higher education".

The bill includes "sense of the Senate" clauses concerning minority serving institutions. S. 9 has two cosponsors.

S. 15 — Quality Education for All Act
This is the Senate Democrat "sense of the senate" education bill that includes HEA reauthorization provisions. 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; and
• expand the income tax deduction for higher education expenses.

S. 371 — The College Quality, Affordability, and Diversity Improvement Act of 2005
This is the refilled S. 1793, the Senate Democrat's HEA reauthorization bill from the last Congress. Among the bill's provisions, the bill proposes to:

• raise the annual authorized levels for the Pell Grant, TRIO, GEAR UP, LEAP, Title III and Title V programs;
• increase the student loan forgiveness amounts for certain teachers;
• increase the amount of earnings exempted from the need analysis process;
• eliminate the student loan origination fee;
• index each state's share of Pell Grant funding to the state's effort in providing student aid;
• allow reconsolidation of student loans into the FDLP;
• establish a comprehensive program to increase recruitment, retention, and graduation of low income students; and
• create a competitive grant program to fund initiatives to reduce college costs.

S. 371 includes provisions from HR 1425 — the Student Aid Reward (STAR) Act 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. S. 371 has 7 cosponsors.

S. 697 — Higher Education Opportunity through Pell Grant Expansion Act of 2005
This legislation proposes to increase the annual maximum Pell Grant to $5,100 and index the grant amount to inflation. The increase would be paid for by changes to section 438 of the HEA.

S. 1029 — Accessing College through Comprehensive Early Outreach and State Partnerships Act
This bill proposes to expand the LEAP program and to establish a new program to provide matching grants to states to establish partnerships within each state to develop and delivery programs and services that increase postsecondary education enrollment.

S. 1030 — Financial Aid Form Simplification Act
This bill proposes to implement the Federal Advisory Committee on Student Financial Aid's recommendations outlined in its latest report "The Student Aid Gauntlet".

S. 1098 — Student Loan Abuse Prevention Act
This legislation proposes makes and retroactive changes made to Section 438 of the HEA by the last Congress and uses any savings to encourage student loan borrowers with 9.5 percent student loans to consolidate, increase appropriations for the Teacher loan Forgiveness Act and Pell Grants.

S. 1183 — 21st century Federal Pell Grant Plus Act
This bill proposes to allow students pursuing engineering, mathematics, science, and foreign language degrees to receive additional Pell Grant assistance.

S.Res. 8 — Expressing the sense of the Senate regarding the maximum Federal Pell Grant
This 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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