April 24, 2006

• Congressional Update

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Congressional Update

The Congress returns this week from a two week long Easter recess for about 20 days of in session work before recessing for another week long Memorial Day recess with the majority party and its leadership trying to decide exactly what this final session of the 109th Congress will be able to achieve and take credit for leading up to the November 2006 elections.

The Iraq/Afghan/terror wars, immigration, and ethical lapses are impacting their polling numbers. These coupled with the inability — it appears — to, once again, reauthorize the federal Higher Education Act and make college more affordable are all driving a congressional agenda that seems stuck because of a lack of enough votes in either the House or Senate — even among the Republican caucus — to pass substantive legislation, including a FY 2007 budget and appropriations bills.

In February, the Republican congress voted to reduce spending on student loan programs by nearly $12 billion. The administration's most recent budget submission and the House budget resolution, again propose to freeze annual spending caps for federal need-based student financial aid programs for the sixth straight year, leaving the maximum Pell Grant at $4,050 — well below the $5,100 promised by the administration in 2003 and the current authorized maximum of $5,800.

These developments come at a time when, according to the College Board and federal Advisory Committee on Student Financial Assistance, the typical student borrower graduates with $17,500 in loan debt and tuition at four year public colleges have increased by 40 percent since 2001, and 200,000 students are unable to attend college at all this year because of the costs.

Against this backdrop, Representative George Miller (D-CA), and Senator Richard Durbin (D-IL) have introduced HR 2573/S 5150 — The Reverse the Raid on Student Aid Act of 2006. Considering the lateness of the current shortened congressional session and the possibility that the Democrats may retake the majority in the House or Senate in November, and the distinct possibility that the Higher Education Act will not be reauthorized this year, this legislation can be viewed as a preview of the Democrats — House or Senate — Higher Education reauthorization bill to be refilled when the 110th Congress convenes in January 2007.

Under HR 2573/S 5150:

1. The fixed interest rates on subsidized student loans and PLUS loans scheduled to go into effect on July 1st are proposed to be halved to 3.4 percent and 4.25 percent, respectively. Under this proposal, according to its sponsors, the typical undergraduate borrower with $17,500 in student loan debt would save $5,600 over the life of the repayment period.
2. The maximum annual authorized and appropriated Pell grant is proposed to increase from the current $4,050 to $4,500 in 2007, $4,800 for 2008, $5,200 for 2009, $5,600 for 2010, and $6,000 for 2011.
3. Section 458 funds for the administration of the FFELP and FDLP are proposed to revert back to an entitlement appropriation.
4. The "single holder rule" governing student loan consolidation is proposed to be repealed.

In addition to this legislation, a second "below the radar" activity to be aware of is the report to be issued in August 2006 on the findings and recommendations of the Secretary of Education's Commission on the Future of Higher Education. This Commission was fast-tracked into implementation last year with a scheduled completion of its study in less than a year. The study will make sweeping recommendations to the Department of Education and, presumably, the Congress on federal policies concerning higher education accountability, accreditation, affordability and costs, matriculation, student financial aid, program quality, and outreach and awareness.

The Commission has published several preliminary papers on these topics and they are available at www.ed.gov/about/bdscomm/list/hiedfuture/reports.html.

The student financial aid paper is especially intriguing, short, concise, and to the point in recommending a single grant, work-study, and student loan program.

If the current Congress does indeed not reauthorize the Higher Education Act, the Secretary's Commission on the Future of Higher Education and HR 2573/S 5150 may very well have a significant impact on next year's reauthorization efforts and FY 2008 budget debates, and will bear close monitoring.

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