March 15, 2007

• Congressional Overview — First Session of the 110th Congress
• Legislative Overview — 80th Regular Session of the Texas Legislature

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Congressional Overview — First Session of the 110th Congress

The First Session of the 110th Congress continues until its two week Easter recess beginning April 2nd. Both chambers are currently focused on the FY 2008 budget and appropriations process, which may take in other legislative topics like the HEA reauthorization if the leadership decides to go through another round of budget reconciliation.

To date the following major Higher Education Act reauthorization bills have been introduced.

HR 5/S 282 – College Student Relief Act — reduces interest rates for subsidized federal loans by 50 percent. The HR also reduces FFELP subsidies and reinsurance to offset the cost of the interest rate reductions.

HR 990/S 707 – Pell Grant Equity Act of 2007 — repeals Section 401(b) (3) of the HEA requiring tuition sensitivity in the awarding of Pell Grants to students for 2007-2008. The cost is offset by a reduction in the FFELP guarantor collection rate to 23 percent and 22 percent.

S 301 – Nontraditional Student Success Act — increases annual maximum Pell Grant award; allows for two Grants per award year; excludes EITC from need analysis; authorizes a Nontraditional Students Demonstration Program to test the effectiveness of providing expanded financial aid to less than half-time students; increases appropriations for TRIO and title V; reauthorizes and expands the Early Intervention and College Awareness program; increases the percentage of Lifetime learning income tax credit for higher education expenses and makes a portion refundable.

S 359 – Student Debt Relief Act — includes S 282; increases annual maximum Pell Grant program to $5,100 this year to $6,300 in 2011; establishes the Fair Payment Assurance Program which caps loan repayment at 15 percent of a borrower's income for low income borrowers; allows reconsolidation of loans; reduces FDLP origination fee to zero; extends tuition tax credit.

S 486/HR 890 – Student Loan Sunshine Act — establishes "transparency" in the student loan lending and marketing arena; requires reporting of any special arrangements between schools and lenders; requires reporting, and banning of certain, gifts more than $10, including travel, entertainment, and in-kind services; requires reporting and written policies concerning preferred lender lists; encourages borrowers to make full use of the federal student loan programs before taking out private alternative loans.

S 511 – Student Loan Bill of Rights — requires lenders to report loan information to credit bureaus; caps monthly payments to an amount based on a borrower's income and status; requires ED to conduct a study on interest rates and fees charged on private loans; caps the collection fees on defaulted loans to 7.5 percent for consolidated loans, 13.5 percent for rehabilitated loans, and 18 percent for other loans; requires ED to set a cap on the total amount that can be charged to a borrower of a federal student loan, as a percentage of the original loan balance.

S 572/HR 1010 – Student Aid Reward Act — proposes to establish a program whereby institutions will be encouraged to participate in the federal student loan program (FFELP or FDLP) that is most cost-effective for taxpayers; proposes to share the savings generated by the choice of the most cost-effective program between the institution and federal government on a 50-50 basis; the institution's share would be required to be used to supplement need-based grants; includes methodology to be used to assess the cost of the FFELP and FDLP.

On February 14, 2007, the Congress finally passed an omnibus continuing resolution to fund the federal government for the remainder of the current fiscal year. Included in the bill is a provision to fund the Pell Grant program for this year in an amount sufficient to increase the maximum annual grant from $4,050 to $4,310. This is the largest increase since 2000 when the maximum was increased from $3,750 to $4,000.

The Administration submitted its proposed FY 2008 budget to the congress on February 5th. In it, the Administration proposes lender reductions and fee increases in the FFELP for all lenders, collection retention reduction for guarantors, and changing the guarantor account maintenance fee payment from a portfolio-based fee to a unit cost basis. The Administration's budget also proposes abolishing the SEOG, Perkins Loan, and LEAP programs. The total estimated savings of $19 billion over a five year period is proposed to increase the funding for the Pell, SMART, and Academic Competitiveness Grant programs.

The president's budget also proposes to de-fund the Voluntary Flexible Agreement program authorized under Section 428A of the Higher Education Act, while the congress is considering expanding the program as a part of an effort to reform the federal student loan programs.

At this time, the consensus is that the Senate HELP Committee will have before it a comprehensive HEA reauthorization bill that includes the above listed bills by mid to late March, and will report the bill to the full Senate by early summer. The House may not have a bill out of the Education and Labor Committee until late this year. The House Committee may convene as many as 20 hearings in Washington, DC, as well as in several locations, including Texas, around the country.

While TG is working with its partners and the full Texas Congressional Delegation and Committee staffs, we will focus our reauthorization efforts on the House Education and Labor Committee's Subcommittee on Higher Education, Lifelong Learning, and Competitiveness on which Congressman Ruben Hinojosa (D-TX) serves as Chair.

Copies of bills before the congress can be accessed at thomas.loc.gov.

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Legislative Overview — 80th Regular Session of the Texas Legislature

While there are several bills proposing to impact access to higher education in Texas through amending the top 10 percent law, tuition deregulation, changing the definition of "resident" student for purposes of assessing tuition and accessing state student financial aid, of most import to the Texas student financial aid community is the governor's proposal for restructuring the way higher education is funded by the state legislature, including state student financial aid programs.

The student financial aid part of the proposal seeks to combine the state grant programs into a single Tuition Assistance Grant program, require recipients to have a high school GPA of 3.0 with the Recommended Curriculum, maintain a 3.0 college GPA, and to graduate in 4 or 5 years (depending on the length of the degree program). If any of the conditions is not met, the grant turns into a no interest loan which the recipient must repay.

The state's B On Time Loan Program remains as is under current law and receives a $400 million increase in state appropriations. Those students who do not qualify for a grant may receive a B On Time loan.

The result of this proposed restructuring is that appropriations for "grant aid" is reduced from the current year level, while appropriations for "loan aid" is dramatically increased (in a state in which two-thirds of the direct student aid awarded annually is in the form of student loans).

The proposal also seeks to transfer the administrative function for the state's programs from the Texas Higher Education Coordinating Board (THECB) to TG under a state contract, and add a new function of eligibility determination to TG. This function is currently carried out on each of the institutional campuses. This proposed change would apply to only the state programs, leaving the eligibility determination for the federal and institutional programs (85 percent of all of the aid awarded annually) at the campus level.

To date, six bills have been filed to implement specific parts of the proposal. HB 2372/SB 1145 directs the THECB to develop a statewide standard for computing a student's grade point average using a 4 point scale. HB 3828/SB 1029 proposes to implement the bulk of the governor's proposal to restructure the state's formula funding system for higher education.

SB 1699 was filed on March 9th as a placeholder bill to implement the student financial aid part of the proposal. It is a one sentence bill which simply "relates to the administration, organization, amount, structure and delivery of financial aid programs…" No House companion bill was filed before the constitutional 60 day rule went into effect at midnight March 9th.

To file a bill after March 9th (60th day of the Session), a member must obtain 80 percent of the House (120) or Senate (25) (depending on which chamber the bill is filed) to suspend Article 3, Section 5 of the constitution, requiring a four fifths vote to suspend the constitutional provision that limits the filing of bills to the first 60 days of a Regular Session.

Amendments proposing to implement parts of the governor's proposal can also be attached to any of the bills filed so far that deal with higher education.

HB 2979 directs the THECB and Legislative Budget Board to conduct a study on the feasibility of combining the TEXAS Grant and B-On Time Loan Programs.

Additionally, HB 1, the FY 2008-2009 appropriations bill, includes a rider on page III-61 that directs the THECB to conduct interim studies on the impact of requiring completion of the Free Application for Federal Student Aid as a condition for enrollment in a Texas public college or university; converting the TEXAS Grant Program into a direct grant program; using the tuition deregulation set-aside and TPEG set-aside to fund the TEXAS Grant Program; changing the TEXAS Grant index from the average tuition and fees to the average of room and board and providing tuition and fees waivers to students who attend institutions with tuition and fees above the statewide average; and, delivering TEXAS Grants as a stipend-based award to allow students to access federal higher education tax credits.

TG is working with the CB and the student financial aid community to identify issues and questions for the governor's office and to develop a contingent implementation plan. At this time, the governor's office is gathering additional information for the governor's staff to consider as this process moves forward.

At this time, TG's position is that we will carry out whatever we are assigned to do by the legislature, but we want to have a hand in developing the plan, want to remain a public nonprofit entity, want to have the authority to recommend improvements to the legislature, and want the end result to be an improvement for students, parents, institutions, and the taxpayers over what is already in place. The governor's staff seems to be in agreement with our positions, as does the THECB.

The Texas Association of Student Financial Aid Administrators (TASFAA) will be submitting a response and position statement to members of the legislature concerning the proposal when legislation is introduced.

Copies of bills before the state legislature can be accessed at www.capitol.state.tx.us.

The governor's higher education proposal can be accessed at www.governor.state.tx.us/divisions/press/highered_reform.

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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