April 17, 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 is in the final stages of approving a FY 2008 budget resolution by the end of April. After that, both chambers appropriations committees will begin crafting their eleven FY 2008 appropriations bills. Either as a part of this process, or through stand-alone legislation, the reauthorization of the Higher Education Act will also begin in earnest.

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 451/S 565 — Next Generation Hispanic-Serving Institutions Act — establishes a program of competitive grants to eligible HSIs that offer graduate degrees and authorizes appropriations to both the existing Title V program for four-year and two-year programs, and the proposed new program.

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.

HR 1608/S 939 — College Aid Made EZ Act and the Financial Aid Form Simplification and Access Act — proposes to implement the federal Advisory Committee on Student Financial Assistance's recommendations to simplify the FAFSA by establishing a FAFSA-EZ form that reduces the FASFA by 50 percent; establish a "pre-FAFSA to allow students and parents to apply for financial aid early, encourages ED to coordinate with the IRS and SSA to supplement the new FAFSA with tax information, and improve on-line access to the FAFSA.

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, and 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, and 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, and 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, and includes methodology to be used to assess the cost of the FFELP and FDLP.

S 938 — The Accessing College through Comprehensive Early Outreach and State Partnerships (ACCESS) — which propose to implement the federal Advisory Committee on Student Financial Assistance's recommendations to create a national public-private federal-state partnership to increase access and persistence through early assurances of student financial grant aid and academic support for low income students, create a comprehensive system of early information about financial aid eligibility, and increasing access to need-based financial aid.

S 945 — proposes to make several changes to the way college textbooks and materials are marketed and sold to institutions and students.

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. While most of the Administration's submission was "dead on arrival", this part has been of interest to the House and Senate education committees as a way to dramatically increase funding for the federal need-based student financial aid 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 and will report the bill to the full Senate by early summer. If for some reason this does not occur, the Committee will move on to move legislation to reauthorize the No Child Left Behind, Head Start, and Workforce Investment Acts. 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.

However, as more is learned through disclosures to state attorneys general and to the Senate HELP and House Education and Workforce Committees about "preferred lender lists" and related activities within the lender and school communities, the longer the HEA reauthorization may take. Multiple committee hearings are sure to occur on this area of interest and inquiry into the summer with legislation similar to HR486/S890 and/or state legislation to address the lack of enforcement by the federal Department of Education in this area.

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 importance 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 four or five years (depending on the length of the degree program). If any of the conditions are 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 direct the THECB to develop a statewide standard for computing a student's grade point average using a four point scale. HB 3828/SB 1029 propose 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.

On April 16th, a Committee Substitute for SB 1699 was considered by the Senate Subcommittee on Higher Education. The Committee Substitute bill is very different than the Governor's original student aid proposal.

The bill proposes to establish a pilot program for the Texas Technology Grant program to be funded after the TEXAS Grant program is fully funded.

The bill would require the THECB to use TG's EFT system for disbursing B-On Time Loans.

The bill revives the legislative Oversight Committee for Student Financial Aid, rather than the TEXAS Grant program.

The bill directs the THECB, in conjunction with the state student financial aid and higher education communities to study 1) the impact of imposing a 3.0 GPA on the state's grant programs, 2) the feasibility of expanding the disbursal of TEXAS Grant funds to students over a period of time, 3) the feasibility of using a debit card as a student aid delivery vehicle.

These studies are in addition to those directed in HB 2979 that 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, and in the FY 2008-2009 appropriations bill, that 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.

Appropriations currently included in the House (HB 1) and Senate (SB 1) FY 2008-2009 appropriations bills propose to increase funding for the TEXAS Grant program by $122 million (HB 1) and $67 million (SB 1), TEOG by $4 million (HB 1), College Work-Study by $5 million (HB 1), and the B On Time Loan program by $72 million (SB 1) and $24.4 million (HB 1).

Of interest to the Texas student financial aid community is a recent report published by Senator Rodney Ellis (D-Houston). The report, titled Speeding Down a Dead End Street makes the case for fully funding the TEXAS Grant program and rejecting the Governor's proposal for restructuring the state programs from need-based to merit-based programs. It draws heavily from TG's Ready, willing, and unable and State of Student Financial Aid in Texas reports. Speeding Down a Dead End Street is available at www.senate.state.tx.us/75r/senate/members/dist13/dist13.htm.

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